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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-K
(Mark One)
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to ___________.
Commission File No. 1-13729
R&B FALCON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 76-0544217
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
901 Threadneedle, Houston, TX 77079
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 281-496-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Common Stock, $.01 par value New York Stock Exchange
Series A Junior Participating
Preferred Stock Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NONAFFILIATES ON MARCH 23, 1998 - $4,461,232,007
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
ON MARCH 23, 1998 - 165,016,297
DOCUMENTS INCORPORATED BY REFERENCE
1) Proxy Statement for Annual Meeting of Stockholders to be held on May
19, 1998 - Part III
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TABLE OF CONTENTS
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PART I
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Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
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Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
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Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
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Item 14. Exhibits, Financial Statements and Reports on Form 8-K
Signatures
________________________________________
FORWARD LOOKING STATEMENTS AND ASSUMPTIONS
This Annual Report on Form 10-K 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 prices, the exploration and development programs of the Company's
customers, the actions of the Company's competitors and economic conditions
generally.
PART I
Item 1. Business and Item 2. Properties
The Company
R&B Falcon Corporation ("R&B Falcon"), a Delaware corporation, was
incorporated in July 1997. Prior to December 31, 1997, R&B Falcon did not
own any material assets or conduct any business. Effective on December 31,
1997, pursuant to an Agreement and Plan of Merger dated as of July 10,
1997, Falcon Drilling Company, Inc. ("Falcon"), a Delaware corporation
incorporated in 1991, and Reading & Bates Corporation ("R&B"), a Delaware
corporation incorporated in 1955, became wholly owned subsidiaries of R&B
Falcon (the "Merger"). In the Merger, each outstanding share of common
stock of Falcon was converted into one share of common stock of R&B Falcon
and each outstanding share of common stock of R&B was converted into 1.18
shares of common stock of R&B Falcon. The above transaction has been
accounted for as a pooling of interests and the consolidated financial
statements for the periods presented have been restated to include the
accounts of Falcon and R&B. Unless the context otherwise indicates, the
term "Company" herein refers to the total business conducted by R&B Falcon
and its subsidiaries.
Falcon is a provider of contract drilling and workover services for the
domestic and international oil and gas industry. Falcon was formed in
1991. Falcon's fleet consists of barge drilling rigs, barge workover rigs,
jack-ups, submersibles and drillships. Falcon's barge rig fleet is the
largest in the world. Falcon also owns tugboats, crewboats and utility
barges, which are primarily used in conjunction with its barge drilling and
workover operations. Falcon's fleet operates in the U. S. Gulf Coast and
Gulf of Mexico, Brazil, Indonesia, Southeast Asia, Venezuela and West
Africa.
R&B is a provider of contract drilling and other related services in
major offshore oil and gas producing areas worldwide. R&B began as one of
the first offshore contract drillers in 1956. R&B's fleet consists of
semisubmersibles, a semisubmersible support vessel, drillships, jack-ups,
drilling tenders and a floating production vessel. R&B's fleet is
internationally diversified with drilling units located in the U. S. Gulf
of Mexico and in various parts of the world, including in waters offshore
Angola, Australia, Egypt, Indonesia, Italy, Nigeria, United Arab Emirates,
and the United Kingdom.
Business - General
The Company's primary business is providing marine contract drilling
and ancillary services on a worldwide basis.
The Company provides the equipment and personnel for drilling wells and
conducting workover operations on wells in marine environments. Drilling
operations essentially involve the boring of a hole in the earth's crust
with the objective of locating hydrocarbon reservoirs. Workover operations
involve efforts to repair damage to, or stimulate production from, an
existing well. Drilling operations in general require heavier and more
powerful equipment due to the weight of the drillpipe and downhole
equipment involved and the potential pressures that may be encountered
while drilling through rock formations. Most of the Company's rigs are
capable of providing both drilling and workover services, although certain
of such rigs are limited in the depth of wells that they can drill, and as
a result engage primarily in workover operations.
The Company owns and operates power vessels and barges used to
transport and store equipment, material and personnel. These assets are
primarily deployed in the barge rig business, for example, moving barge
rigs to and from their operating location, transporting materials and
personnel to barge rigs, and providing storage adjacent to barge rigs for
equipment, materials, and drill cuttings. The Company also engages to a
minor extent in providing such equipment for ocean transportation of
materials and in connection with marine construction projects.
In February 1996, the Company and Intec Engineering, Inc., formed a
joint venture named Total Offshore Production Systems (TOPS). TOPS
provides complete field development engineering services on a turnkey basis
to operators desiring to contract field developments through a single
provider. TOPS utilizes a pre-approved group of preferred contractors and
manufacturers to meet its contractual commitments on time and within
budgeted limits.
The Company, primarily through its subsidiary Reading & Bates
Development Co. ("DEVCO"), engages in exploration for oil and gas. In
March 1998, the Company decided to divest itself of this business, and
intends to complete this divestiture prior to March 1999. The Company's
oil and gas business has been accounted for as a discontinued operation in
the financial statements included in this report. See Note L of Notes to
Consolidated Financial Statements.
Strategy
Contract Drilling and Related Services. The Company's overall strategy
is to enhance its competitive positions in markets that generate superior
long term returns.
A major element of the Company's strategy involves the expansion of its
deepwater fleet. The Company believes that the major oil companies of the
world will continue to increase their exploration efforts in deepwater
areas for two reasons. First, improvements in technology have made
production of hydrocarbons from these areas more economically viable.
Second, the number of significant reservoirs remaining undiscovered in
shallow waters continues to dwindle, leading operators to move into deeper
waters in their efforts to find hydrocarbon reserves. The Company's
deepwater fleet consists of eight semisubmersibles and five drillships that
are currently operating. In addition, the Company has two semisubmersibles
and seven drillships undergoing construction or upgrade. The Company's
focus on deepwater equipment also allows it to obtain long-term contracts
that serve as a balance to the short-term contracts prevalent in the
shallower water markets.
A second element of the Company's strategy involves the refurbishment
and return to operational status of non-operational barge rigs in response
to increasing demand. The Company returned four barge rigs to service in
1997, and anticipates activating an additional five barge rigs during 1998.
The Company seeks opportunities to provide services related to its core
drilling business. In 1997, the Company entered the inland marine
transportation business, purchasing tugs and utility barges that it uses
primarily in conjunction with its barge rig fleet. The Company also owns a
floating production storage and shuttle vessel.
The Company has from time to time in the past engaged in preliminary
discussions with other industry participants with respect to business
combinations that would potentially strengthen its competitive position in
the marine drilling industry. The Company will also continue to consider
the selective acquisition of drilling rigs and other assets.
Hydrocarbon Exploration. DEVCO engages in the acquisition of working
interests in offshore oil and gas properties pursuant to which it shares in
reservoir and oil and gas price risks and thus profits and losses from such
properties. The Company is able, from time to time, to acquire such
interests as a result of being able to provide access to the Company's rigs
and to the services provided by TOPS. The Company expects to divest its
oil and gas business during 1998 and this business is treated as a
discontinued operation in the Company's financial statements.
Significant Developments During 1997
The most significant development for the Company during 1997 was the
business combination of R&B and Falcon to create the Company. As a result
of the Merger, the Company is one of the largest marine drilling
contractors in the world.
The following are the other significant developments that occurred in
1997:
1. The construction of the dynamically positioned drillship "DEEPWATER
PATHFINDER" continued on schedule. This drillship is owned by a
limited liability company which is in turn owned 50% by the Company
and 50% by an affiliate of Conoco, Inc. The estimated cost of the
drillship is approximately $ 235.0 million plus capitalized interest.
Immediately following delivery of the drillship from the shipyard,
which is expected to be in the fourth quarter of 1998, the drillship
is contracted for five years to Conoco.
2. The Company and an affiliate of Conoco, Inc. formed a limited
liability company (owned 60% by the Company) to build and operate a
dynamically positioned drillship (the "DEEPWATER FRONTIER"). The
estimated cost of the drillship is approximately $240.0 million plus
capitalized interest. Immediately following delivery of the
drillship from the shipyard, which is expected to be in the first
quarter of 1999, the drillship is contracted for five years. During
the initial five years, the drillship will be contracted to an
affiliate of Conoco Inc. for an aggregate of 2.5 years and to the
Company for operations for its own account for the remaining 2.5
years.
3. The Company commenced construction of a dynamically positioned
drillship (tentatively called "DRILLSHIP III"). The estimated cost
of the drillship is approximately $245.0 million plus capitalized
interest. Immediately following delivery of the drillship from the
shipyard, which is expected to be in the third quarter of 1999, the
drillship is committed for a minimum of 2.5 years over a five year
period with Statoil. Statoil has an option, exercisable by May 1998,
to increase its commitment from the 2.5 year minimum up to the total
five year period.
4. The Company commenced construction of a new generation ultra
deepwater moored semisubmersible, the "RBS-6". The estimated cost of
the unit is approximately $280.0 million plus capitalized interest.
Immediately following the delivery of the unit from the shipyard,
which is expected to be in the first quarter of 2000, the unit is
committed under a letter of intent for five years to Shell.
5. The construction of the dynamically positioned drillship "PEREGRINE
IV" continued satisfactorily. The estimated cost of the drillship is
approximately $160.0 million plus capitalized interest. Immediately
following delivery of the drillship from the shipyard, which is
expected to be in the fourth quarter of 1998, the drillship is
contracted for six years to Petrobras.
6. The Company purchased an oil/bulk/ore carrier (renamed "PEREGRINE
VI") for $7.5 million and commenced the conversion of this vessel to
a drillship. The conversion is estimated to cost approximately
$192.5 million plus capitalized interest. Immediately following the
delivery of the drillship from the shipyard, which is expected to be
in the first quarter of 1999, the drillship is contracted for three
years (with two one-year extensions) to Mobil/Phillips.
7. The Company purchased a drillship (renamed "PEREGRINE VII") for $33.8
million and commenced the upgrade and refurbishment of the drillship.
The upgrade and refurbishment is estimated to cost approximately
$120.0 million plus capitalized interest. Immediately following the
delivery of the drillship from the shipyard, which is expected to be
in the fourth quarter of 1998, the drillship is contracted for three
years (with five one- year extensions) to Amoco.
8. The Company purchased an oil/bulk/ore carrier (renamed "PEREGRINE
VIII") for $9.2 million and commenced the conversion of this vessel
to a drillship. The conversion is estimated to cost approximately
$190.8 million plus capitalized interest. Immediately following the
delivery of the drillship from the shipyard, which is expected to be
in the third quarter of 1999, the drillship is contracted for three
years to Texaco.
9. The Company commenced the upgrade and refurbishment of the
semisubmersible rig "FALCON 100" which is estimated to cost
approximately $65.0 million plus capitalized interest. Delivery is
expected to be in the fourth quarter of 1998. The Company has
entered into a letter of intent with Petrobras for a four-year
contract for the rig following delivery.
10. The Company refurbished and returned to active service four barge
rigs that had previously been cold stacked.
11. In a series of transactions, the Company acquired 68 tugs and 44
utility barges for an aggregate cost of $49.0 million.
12. The Company purchased a 200 foot cantilevered mat-supported jack-up
(renamed "PHOENIX VI") for $22.0 million.
13. The Company purchased a semisubmersible accommodation unit (renamed
"RIG 82") for $34.2 million. "RIG 82" was originally built as a
drilling unit, but was converted to an accommodation vessel in
1978. Prior to commencing any upgrade, the unit will be marketed to
operators for conversion back to a full drilling mode.
The Company's Fleet
The Company's active fleet at March 23, 1998 consisted of eight
semisubmersibles, five drillships, 31 barge drilling rigs, 15 barge
workover rigs, 26 jack-ups, three submersibles, two drilling tenders and
one floating production vessel. In addition, at such date the Company had
seven drillships and two semisubmersibles under construction or upgrade,
one cold stacked semisubmersible being marketed for upgrade and return to
service, two cold stacked barge drilling rigs being refurbished for active
service, 11 cold stacked barge drilling rigs, and one barge workover rig
under construction. The following sets forth a brief description of the
types and capabilities of the rigs operated by the Company. Rigs shown as
"operating" are under contract (including rigs being mobilized under
contract). Rigs shown as "available" are ready for service and are being
actively marketed. Rigs shown as "cold stacked" are in need of substantial
refurbishment to be activated.
Semisubmersible Rigs. Semisubmersible rigs are floating platforms
which, by means of a water ballasting system, can be submerged to a
predetermined depth so that the lower hulls, or pontoons, are below the
water surface during drilling operations. The rig is "semi-submerged",
remaining afloat, in a position in which the lower hull is about 60-80 feet
below the water line and the upper deck protrudes well above the surface.
The upper deck is attached to the pontoons by columns. These rigs maintain
their position over the well through the use of an anchoring system or
computer controlled thruster system. Some semisubmersible rigs are designed
to work in water depths up to 6,000 feet. Some are self-propelled and move
between locations under their own power when afloat on the pontoons;
however, most semisubmersible rigs are relocated with the assistance of
tugs. Some semisubmersible rigs are capable of operating in the
"submersible" mode, sitting on the bottom in water depths of approximately
40 to 50 feet.
Semisubmersibles are frequently classified into four generations, based
primarily on rig capabilities. The fourth-generation classification
generally refers to semisubmersibles that have been built since 1984, and
have large physical size, harsh environment capability, high variable
loads, top drive units, 15,000 psi blowout preventers and superior motion
characteristics. There are currently 13 fourth-generation semisubmersibles
worldwide. These drilling units are the best choice for operators in
deepwater and/or harsh environments or for drilling that requires larger
variable loads and the ability to handle large pieces of subsea equipment.
There are limited markets for this type of drilling unit and a relatively
small group of users. The principal markets are the North Sea/Norway, the
Gulf of Mexico, the Far East and offshore Brazil.
The Company currently operates eight semisubmersibles, one of which it
leases (with an option to purchase). In addition, the Company has two
semisubmersibles undergoing construction or upgrade and one being marketed
for upgrade and return to service. (See "Liquidity and Capital Resources"
under Item 7.) The following table provides certain information regarding
the Company's semisubmersible fleet as of March 23, 1998:
Water Drilling
Year Depth Depth
Rig Name Built Capability Capability Location Status
-------- ----- ---------- ---------- -------- ------
(expressed in feet)
Fourth-Generation Semisubmersibles
JACK BATES 1986 4,500 30,000 Italy Operating
HENRY GOODRICH (1) 1985 2,000 30,000 United Kingdom Operating
PAUL B. LOYD, JR. (1) 1987 2,000 25,000 United Kingdom Operating
RBS-6 - 8,000 25,000 Korea Under
Construction
Third-Generation Semisubmersibles
JIM CUNNINGHAM 1982 4,600 25,000 Nigeria Operating
M. G. HULME, JR. (2) 1983 4,000 25,000 U.S. Gulf Operating
IOLAIR (3) 1982 2,000 - United Kingdom Operating
Second-Generation Semisubmersibles
C. KIRK RHEIN, JR. 1976 3,300 25,000 U. S. Gulf Operating
J. W. McLEAN 1974 1,500 25,000 United Kingdom Operating
FALCON 100 1974 2,450 25,000 Brazil Under
Upgrade
RIG 82 (4) 1975 3,800 - Norway Cold
Stacked
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(1) Unit is owned by Arcade Drilling AS ("Drilling"), a majority owned
subsidiary of the Company. The Company is a party to an agreement
with Transocean Offshore, Inc., the largest minority shareholder of
Drilling, which subjects the Company to certain restrictions on
engaging in transactions with Drilling. Such agreement will expire no
later than September 1, 1998.
(2) The "M. G. HULME, JR." is accounted for as an operating lease as a
result of the sale/lease-back in November 1995. See Note D of Notes to
Consolidated Financial Statements.
(3) The "IOLAIR" is designed for field support and living accommodations
and is expected to be upgraded in 1999 to include a derrick floor and
ancillary workover equipment.
(4) "RIG 82" was originally built as a drilling unit, but was converted to
an accommodation vessel in 1978. Prior to commencing any upgrade, the
unit will be marketed to operators for conversion back to a full
drilling mode.
Drillships. A drillship is a self-propelled ship specifically
outfitted for drilling operations. Many of the drillships built after 1975
feature a dynamic positioning system which allows the ship to position
itself over the well site through the use of thrusters controlled by a
satellite navigation system. The prior generation of drillships, often
called conventionally moored drillships, are anchored over the well site
and thus are generally more limited in terms of water depth than
dynamically positioned drillships. Drillships typically have greater load
capacity than semisubmersible drilling rigs. This enables them to carry
more supplies on board, which makes them better suited for drilling in
remote locations where resupply is more difficult. However, drillships are
limited to calmer water conditions than those in which semisubmersibles can
operate, and thus cannot compete with semisubmersibles in areas with harsh
environments, such as the North Sea.
The Company currently operates five drillships, four of which it owns
and one of which it leases (with an option to purchase). In addition, the
Company has seven drillships undergoing construction or upgrade. See
"Liquidity and Capital Resources" under Item 7 for further discussions of
the seven drillships. The following table provides certain information
regarding the Company's drillship fleet as of March 23, 1998:
Year Water Drilling
Built or Depth Depth
Rig Name Converted Capability Capability Location Status
-------- --------- ---------- ---------- -------- ------
(expressed in feet)
PEREGRINE I 1982 7,500 25,000 Brazil Operating(1)
PEREGRINE II 1979 3,300 25,000 Brazil Operating
PEREGRINE III 1976 4,200 25,000 West Africa Operating
FALCON DUCHESS 1975 1,500 20,000 Indonesia Operating
FALCON ICE 1975 1,500 20,000 Indonesia Operating
DEEPWATER
PATHFINDER (2) - 10,000 30,000 Korea Under
Construction
DEEPWATER
FRONTIER (3) - 10,000 30,000 Korea Under
Construction
DRILLSHIP III - 10,000 30,000 Korea Under
Construction
PEREGRINE IV - 9,200 30,000 Singapore Under
Construction
PEREGRINE VI - 10,000 30,000 Portugal Under
Construction
PEREGRINE VII - 8,200 25,000 United Kingdom Under Upgrade
PEREGRINE VIII - 10,000 30,000 Portugal Under
Construction
__________________________
(1) Subsequent to March 23, 1998, the "PEREGRINE I" sustained damages
during operations and will be undergoing repairs for an indeterminable
period.
(2) Unit is being constructed for a limited liability company in which
the Company owns a 50% interest.
(3) Unit is being constructed for a limited liability company in which
the Company owns a 60% interest.
Floating Production Vessels. Floating production vessels are equipped
for oil production, processing and storage. The oil produced is discharged
either to tankers by means of an offloading facility on the vessel as on a
floating production storage and offloading (FPSO) vessel or the vessel is
deployed to a shore terminal for discharge as on a floating production
storage and shuttle (FPSS) vessel. These vessels hold their position
through the use of either a computer controlled thruster system or an
anchoring system and can operate in various water depths. The moored
vessels may be spread moored or be equipped with a mooring turret,
depending on the environmental conditions.
The Company currently owns and operates one FPSS vessel, the
"SEILLEAN". The Company purchased the vessel in September 1996. The
vessel was built in 1990 and was designed for extended well testing, early
production and life of field production. This dynamically positioned
vessel has an oil storage capacity of approximately 310,000 barrels and
process capacity of 20,000 barrels of oil per day and can operate in up to
650 feet of water. As of March 23, 1998, the "SEILLEAN" was not operating;
however, negotiations are in progress for potential work offshore Brazil.
Drilling Tenders. Drilling tenders are usually non-self-propelled
barges or semisubmersibles which are moored alongside a platform and
contain the quarters, mud pits, mud pumps, power generation, etc. Thus,
the only equipment on the platform is the derrick equipment set consisting
of the substructure, drillfloor, derrick and drawworks. Drilling tenders
allow smaller, less costly platforms to be used for development projects.
Self-erecting tenders carry their own derrick equipment set and have a
crane capable of erecting it on the platform, thereby eliminating the cost
associated with a separate derrick barge and related equipment. Older
tenders frequently require the assistance of a derrick barge to erect the
derrick equipment set.
The following table provides certain information regarding the Company's
drilling tenders as of March 23, 1998:
Water Drilling
Year Depth Depth
Rig Name Built Capability Capability Location Status
-------- ----- ---------- ---------- -------- ------
(expressed in feet)
Self-Erecting Drilling Tenders
CHARLEY GRAVES 1975 400 20,000 Egypt Operating
W. D. KENT (1) 1977 400 20,000 Malaysia Shipyard
_______________
(1) Under repair. The platform set is being replaced as a result of a
casualty.
Jack-Up Rigs. Jack-up rigs are mobile self-elevating drilling platforms
equipped with legs which can be lowered to the ocean floor until a
foundation is established to support the drilling platform which is then
jacked further up the legs so it is above the highest expected waves. The
rig hull includes the drilling rig, jacking system, crew quarters, loading
and unloading facilities, storage areas for bulk and liquid materials,
helicopter landing deck and other related equipment. The rig legs may be
independent or may have a lower hull ("mat") attached to the bottom of them
in order to provide a more stable foundation in soft bottom areas.
Independent leg rigs are better suited for harder or uneven seabed
conditions while mat rigs are better suited for soft bottom conditions.
Jack-up rigs may be designed to operate in a maximum water depth of
approximately 400 feet (however, most jack-up rigs have a lesser water depth
capability). Some jack-up rigs may drill in water depths as shallow as ten
feet. The water depth limit of a particular rig is determined by design
limitations, the length of the rig's legs and the operating environment.
Moving a rig from one drill site to another involves jacking the hull down
into the water until it is afloat and then jacking up its legs with the hull
floating on the surface of the water. The hull is then towed to the new
drilling site by tugs and the legs are then jacked down to the ocean floor.
The jacking operation continues until the hull is raised out of the water to
a level that provides a final air gap above the effects of the sea.
Drilling operations are then conducted with the hull in its raised position.
A cantilever jack-up has a feature which allows the drill floor to be
extended out from the hull, allowing it to perform drilling or workover
operations over pre-existing platforms or structures. Certain cantilever
jack-up rigs have "skid-off" capability, which allows the derrick equipment
set to be skidded onto an adjacent platform, thereby increasing the
operational capability of the rig. Slot type jack-up rigs are configured
for the drilling operations to take place through a slot in the hull. Slot
type rigs are usually used for exploratory drilling, in that their
configuration makes them difficult to position over existing platforms or
structures.
The following table provides certain information regarding the Company's
jack-up fleet as of March 23, 1998:
Water Drilling
Rig Year Depth Depth
Rig Name Description Built Capability Capability Location Status
- -------- ----------- ----- ---------- ---------- -------- ------
(expressed in feet)
Cantilevered Independent
Leg Jack-up
Rigs
F.G. McClINTOCK MLT 53-C 1975 300 25,000 United Operating
Kingdom
RON TAPPMEYER MLT 116-C 1978 300 25,000 Australia Operating
C. E. THORNTON MLT 53-C 1974 300 25,000 United Arab Operating
Emirates
RANDOLPH YOST MLT 116-C 1979 300 25,000 Angola Operating
D. R. STEWART MLT 116-C 1980 300 25,000 Italy Operating
HARVEY H. WARD(1) F&G L780 1981 300 25,000 Singapore Shipyard
ROGER W. MOWELL F&G L780 1982 300 25,000 Indonesia Operating
GEORGE H. GALLOWAY F&G L780 1985 300 25,000 U.S. Gulf Operating
J. T. ANGEL F&G L780 1982 300 25,000 Under tow to Operating
S.E. Asia
Slot type Mat-Supported
Jack-up Rigs
FALRIG 17 Bethlehem JU- 1974 250 25,000 U.S. Gulf Operating
250MS
FALRIG 18 Bethlehem JU- 1978 250 25,000 U.S. Gulf Operating
250MS
FALRIG 19 Bethlehem JU- 1978 250 25,000 U.S. Gulf Operating
250MS
FALRIG 20 Bethlehem JU- 1982 250 25,000 U.S. Gulf Operating
250MS
FALRIG 82 (2) Baker Marine BMC 1978 200 25,000 U.S. Gulf Operating
250
FALRIG 83 Bethlehem JU- 1978 250 25,000 Nigeria Operating
250MS
FALRIG 84 Bethlehem JU- 1975 250 25,000 U.S. Gulf Operating
250MS
ACHILLES Baker Marine BMC 1981 250 25,000 U.S. Gulf Operating
250
SEA HAWK Bethlehem JU- 1976 250 25,000 U.S. Gulf Operating
250MS
TAURUS Bethlehem JU- 1976 250 25,000 U.S. Gulf Operating
250MS
Cantilevered
Mat-Supported
Jack-up Rigs
PHOENIX I Bethlehem JU- 1981 200 25,000 U.S. Gulf Operating
200MC
PHOENIX II Bethlehem JU- 1982 200 25,000 U.S. Gulf Operating
200MC
PHOENIX III Bethlehem JU- 1981 200 25,000 U.S. Gulf Operating
200MC
PHOENIX IV Bethlehem JU- 1981 200 25,000 U.S. Gulf Operating
200MC
FALRIG 85 Bethlehem JU- 1979 200 25,000 U.S. Gulf Operating
200MC
FALRIG 86 Bethlehem JU- 1980 200 25,000 U.S. Gulf Operating
200MC
PHOENIX VI (3) Bethlehem JU- 1981 200 25,000 Mexico Operating
200MC
_____________________
(1) Under repair as the unit's legs, jacking system and hull were damaged
as a result of a casualty.
(2) Operated by the Company under a lease with an option to purchase.
(3) The Company has bareboat chartered this rig to another contractor for
one well. It is estimated such charter will expire in November 1998.
Submersible Rigs. Submersible rigs are somewhat similar in
configuration to semisubmersible rigs, but the lower hull of the rig rests
on the sea floor during drilling operations. A submersible rig is towed to
the well site where it is submerged by flooding its lower hull until it
rests on the sea floor, with the upper hull above the water surface. After
completion of the drilling operations, the rig is refloated by pumping
water out of the lower hull and it is towed to another location.
Submersible rigs typically operate in water depths of 12 to 70 feet,
although some submersible rigs are capable of operating at greater depths.
The following table provides certain information regarding the Company's
submersible rig fleet as of March 23, 1998:
Water Drilling
Rig Year Depth Depth
Rig Name Description Built Capability Capability Location Status
- -------- ----------- ----- ---------- ---------- -------- ------
(expressed in feet)
Rig 203 Pace 85G 1983 85 30,000 U.S. Gulf Operating
FALRIG 77 Donhaiser Marine 1983 85 30,000 U.S. Gulf Operating
DMI85
FALRIG 78 Donhaiser Marine 1983 85 30,000 U.S. Gulf Operating
DMI85
Domestic Barge Drilling Rigs. Barge drillings rigs are mobile drilling
platforms that are submersible and are built to work in eight to 20 feet of
water. They are towed by tugboats to the drill site with the derrick lying
down. The lower hull is then submerged by flooding until it rests on the
sea floor. The derrick is then raised and drilling operations are
conducted with the barge in this position. There are two basic types of
barge rigs, "conventional" and "posted". A posted barge is identical to a
conventional barge except that the hull and superstructure are separated by
10 to 14 foot columns, which increases the water depth capabilities of the
rig.
The following table provides certain information regarding the
Company's domestic barge drilling fleet as of March 23, 1998:
Maximum
Horsepower Year Drilling
Rig Drilling Equipment/Main Power Rating Built Depth(feet) Status
- --- ---------------------------- ------ ----- ----------- ------
Conventional Barges
1 Skytop Brewster/Caterpillar 2,000 1980 20,000 Operating
3 Mid-Continent/Caterpillar (1) 3,000 1981 25,000 Operating
4 Oilwell/Caterpillar 3,000 1981 25,000 Cold Stacked
6 Mid-Continent/Caterpillar 3,000 1981 25,000 Cold Stacked
11 Gardner Denver/Caterpillar 3,000 1982 30,000 Operating
15 National/EMD 2,000 1981 25,000 Operating
21 Oilwell/Caterpillar 1,500 1982 15,000 Operating
25 Continental Emsco/Caterpillar 3,000 1976 25,000 Cold Stacked
28 Continental Emsco/Caterpillar 3,000 1979 30,000 Operating
29 Continental Emsco/Caterpillar 3,000 1980 30,000 Operating
30 Continental Emsco/Caterpillar 3,000 1981 30,000 Shipyard (2)
31 Continental Emsco/Caterpillar 3,000 1981 30,000 Operating
32 Continental Emsco/Caterpillar 3,000 1982 30,000 Operating
37 National/EMD 3,000 1965 20,000 Cold Stacked
38 National/EMD 3,000 1965 20,000 Cold Stacked
Posted Barges
2 Skytop Brewster/Caterpillar 2,000 1980 20,000 Cold Stacked
5 National/Caterpillar 3,000 1981 25,000 Cold Stacked
7 Oilwell/Caterpillar 2,000 1978 25,000 Operating
8 Oilwell/Caterpillar 2,000 1978 25,000 Cold Stacked
9 Oilwell/Caterpillar 2,000 1981 25,000 Operating
10 Oilwell/Caterpillar 2,000 1981 25,000 Operating
16 National/EMD 3,000 1981 30,000 Operating
17 National/EMD 3,000 1981 30,000 Operating
27 Continental Emsco/Caterpillar 3,000 1978 30,000 Operating
39 National/EMD 3,000 1970 30,000 Cold Stacked
41 National/EMD 3,000 1981 30,000 Shipyard (3)
44 Oilwell/Superior 3,000 1979 30,000 Cold Stacked
45 Oilwell/Superior 3,000 1979 30,000 Cold Stacked
46 Oilwell/EMD 3,000 1981 30,000 Operating
47 Oilwell/EMD 3,000 1982 30,000 Operating
48 Gardner Denver/Caterpillar 3,000 1982 30,000 Operating
49 Oilwell/Caterpillar 3,000 1980 30,000 Operating
52 Oilwell/Caterpillar 2,000 1981 25,000 Operating
54 National/EMD 3,000 1970 30,000 Operating
55 Ideco/EMD 3,000 1981 30,000 Operating
56 National/Caterpillar 2,000 1973 25,000 Operating
57 National/Caterpillar 2,000 1975 25,000 Shipyard (3)
61 Mid-Continent/EMD 3,000 1978 30,000 Operating
62 Mid-Continent/EMD 3,000 1978 30,000 Operating
63 Mid-Continent/EMD 3,000 1978 30,000 Operating
64 Mid-Continent/EMD 3,000 1979 30,000 Operating
____________________
(1) This rig is leased to the Company.
(2) This rig is undergoing routine maintenance.
(3) These are previously cold stacked rigs that are undergoing
refurbishment.
Lake Maracaibo Barge Rigs. Rigs designed to work in Lake Maracaibo,
Venezuela, require modification to work in a floating mode in up to 150
feet of water. The typical domestic barge is modified by widening the hull
to 100 feet, installing a mooring system and cantilevering the drill floor.
Three of the Company's barge rigs have been so modified and are currently
operating in Lake Maracaibo, pursuant to contracts with Maraven. After such
modifications, these rigs generally are not suitable for deployment to
other locations.
The following table provides certain information regarding the Company's
Lake Maracaibo barge rigs as of March 23, 1998:
Maximum
Drilling Equipment/ Horsepower Year Year Drilling
Rig Main Power Rating Built Rebuilt Depth(feet) Status
--- ----------- ------ ----- ------- ----------- ------
40 Oilwell/EMD 3,000 1980 1994 25,000 Operating
42 National/EMD 3,000 1982 1994 25,000 Operating
43 National/EMD 3,000 1982 1994 25,000 Operating
Barge Workover Rigs. Barge workover rigs typically differ from barge
drilling rigs both in the size of the hull and the capability of the
drilling equipment. Because workover operations require less pulling power
and mud system capacity, a smaller, lower capacity unit can be used. In
addition, workover rigs, which are equipped with specialized pumps and
handling tools, do not require heavy duty drill pipe. Operating costs for
workover rigs are lower because the rigs require smaller crews, use less
fuel and require less repair and maintenance. Certain workover rigs can
also be utilized to drill shallow wells to depths ranging to 16,000 feet
depending upon the rig's capabilities.
The following table provides certain information regarding the
Company's workover fleet as of March 23, 1998:
Maximum Maximum
Mast Workover Drilling
Capacity Year Depth Depth
Rig Drawworks (Pounds) Built (feet) (feet) Status
- --- --------- -------- ----- ------- ------ ------
SD-1 Ideco H-30 250,000 1990 (1) 15,000 - Available
4 IRI 1287 250,000 1981 15,000 - Available
5 IRI 2042 300,000 1981 15,000 - Available
6 Ideco H-35 450,000 1978 20,000 - Operating
7 IRI 1287 250,000 1996 (1) 15,000 - Available
12 Wilson 75 369,000 1991 (1) 20,000 - Available
14 Wilson 75 400,000 1996 (1) 20,000 - Operating
15 Wilson 75 400,000 1997 (1) 20,000 - Operating
16 Mid-Continent U36A 550,000 1979 25,000 - Available
17 Gardner Denver 800 800,000 1972 25,000 - Operating
Blake 18 Skytop Brewster N75 530,000 1980 25,000 12,000 Available
Blake 19 National 80UE 750,000 1996 (1) 25,000 14,000 Operating
Blake 20 National 80UE 750,000 1998 (1) 25,000 14,000 Shipyard (2)
Blake 23 Mid-Continent
U-914 (3) 1,000,000 1995 (1) 25,000 14,000 Operating
Blake 24 National 110M (3) 760,000 1978 25,000 14,000 Operating
Blake 30 Skytop Brewster
N95 1,000,000 1978 30,000 16,000 Available
____________
(1) These rigs were reconstructed on the date indicated using the existing
hull.
(2) This rig is under construction.
(3) These rigs are leased to the Company.
Inland Marine Vessels. In connection with barge drilling and workover
operations, it is necessary to utilize other types of vessels:
- Utility barges are barges generally 100 to 120 feet in length, which
are positioned alongside the barge rig and are used (i) to store
materials or (ii) as a container in which to dump cuttings from the
well bore, which cuttings then are transported elsewhere for disposal.
- Service tugs are ships approximately 50 to 60 feet in length, having
400 to 900 horsepower, which are used to move and position utility
barges and transport materials and personnel to and from the barge rig.
- Rig moving tugs are ships approximately 60 to 70 feet in length, having
900 horsepower or greater, which are used to move barge rigs to and
from the drilling location. They can also be used to move and position
utility barges and move materials and personnel to and from the barge
rig.
A rig moving tug is typically used to move barge rigs and utility
barges to and from location, and is normally contracted by the hour. If
water conditions require a more powerful vessel or if no smaller vessels
are available, it may sometimes be used in a service tug capacity, in which
event it is normally contracted on a dayrate basis. Once a barge rig is on
location, the movement of utility barges, supplies and personnel can
normally be more economically handled with service tugs, which are on
contract throughout the operation, usually on a dayrate basis. During
drilling operations, anywhere from two to six utility barges may be in use
throughout the operation, as well as one to three service tugs. In a barge
rig operation, the Company's customer may contract directly for the utility
barges and tugs, or may ask the Company to provide them. As of March 23,
1998, the Company owned 80 tugs and 54 utility barges. Although the
Company expects that these assets will be used primarily in conjunction
with the Company's barge rig business, they will also be used in other
applications.
Fleet Maintenance. The Company follows a policy of keeping its
equipment well maintained and technologically competitive. However, its
equipment could be made obsolete by the development of new techniques and
equipment. In addition, industry-wide shortages of supplies, services,
skilled personnel and equipment necessary to conduct the Company's business
have occurred in the past, and such shortages could occur again.
Almost all of the Company's rigs, like most of the rigs with which they
compete, were constructed during the last drilling boom, which ended about
1982. With increasing age, the likelihood that a rig will require major
repairs in order to remain operational increases. The Company expects that
repair and maintenance of its rigs will require increasing amounts of
capital, and will result in such rigs being unavailable for service from
time to time. During any such period of repair to a rig, the Company will
not earn revenues from such rig, but will continue to incur a substantial
portion of the costs that would be incurred while the rig is operating.
Real Property. The Company owns and leases real property in connection
with the conduct of its business. The Company owns (i) an office and yard
facility in Broussard, Louisiana; (ii) an office and yard facility in
Houma, Louisiana; (iii) an office building in New Iberia, Louisiana; (iv)
an office and yard facility in Macae, Brazil; and (v) an office and yard
facility in Houston, Texas. The Company leases a two story, 86,000 square
foot office building in Houston, Texas that serves as its corporate
headquarters and as to which the Company has exercised an option to
purchase for $5.8 million. In addition, the Company leases other office
space in Houston, Texas, an office and yard facility in Belle Chasse,
Lousiana and facilities in most of the countries where it conducts
operations.
Oil & Gas Properties
The Company's oil and gas business is operated primarily through its
wholly owned subsidiary DEVCO, and to an insignificant extent, through its
wholly owned subsidiary Raptor Exploration Company, Inc. In March 1998,
the Company decided to divest its oil and gas business. It expects to
accomplish this divestiture prior to March 1999. The Company's oil and gas
business is treated as a discontinued operation in the financial statements
included in this report. See Note L of Notes to Consolidated Financial
Statements.
Domestic Operations. In October 1995, DEVCO purchased a 20% working
interest in the Green Canyon 254 Allegheny oil and gas development project
in the U.S. Gulf of Mexico from Enserch Exploration, Inc., now EEX
Corporation, ("EEX") which was the operator at that time. Mobil
Exploration & Production, Inc., ("Mobil") owned a 40% working interest in
the project and EEX retained the remaining 40% working interest. In the
third quarter of 1997, DEVCO acquired an additional 20% working interest in
the Allegheny field and British-Borneo Petroleum, Inc., ("British-Borneo"),
as successor operator to EEX, acquired the remaining 60% working interest
in the field. As part of an omnibus transaction involving DEVCO, EEX,
Mobil and British-Borneo, British-Borneo committed to develop the Allegheny
field utilizing a mini-TLP production system. First production is targeted
for July 1999. DEVCO has the option to either participate in the Allegheny
development with British-Borneo for its 40% working interest on a ground
floor basis or sell its 40% interest in the field ("Put Option") to British-
Borneo for approximately $25.0 million. DEVCO must make its Put Option
election on or before August 28, 1998. Prior to the election date, British-
Borneo bears all cost associated with the agreed development plan. If
DEVCO elects to participate, it will be required to reimburse British-
Borneo for its proportionate 40% share of costs plus interest. As of
December 31, 1997, DEVCO had accumulated costs related to its ownership in
the Allegheny project of approximately $41.2 million which are included in
Net Liabilities of Discontinued Operations.
In July 1996, DEVCO entered into an agreement with Shell Offshore Inc.
("Shell") to drill an appraisal well at DEVCO's expense to earn a working
interest in Shell's East Boomvang prospect in the U.S. Gulf of Mexico. The
appraisal well was drilled in the first quarter of 1997 and was suspended
pending completion at a later date after further delineation of the
reservoir.
In February 1997, Shell waived its election to remain a working
interest owner in the East Boomvang, North Boomvang and East Bequia
prospects ("Boomvang") and assigned its 100% interest in eight offshore
blocks to DEVCO. Shell retained an overriding royalty interest in the three
prospects and has the option to either increase its overriding royalty
interest or convert to a working interest if specified cumulative
production levels are achieved.
In July 1997, DEVCO entered into an Equity Participation Agreement with
Norcen Explorer, Inc. ("Norcen") pursuant to which the North Boomvang
prospect would be drilled at Norcen's expense (up to an agreed cap) and in
which Norcen committed to participate in drilling an appraisal well at East
Boomvang. Participation by Norcen in the two wells earns Norcen an
assignment of a 37.5% working interest in all three Boomvang prospects. In
August 1997, drilling commenced on North Boomvang. Hydrocarbons were
encountered in the initial wellbore and two sidetracks. Drilling was
completed in the fourth quarter of 1997 and the well was suspended as a
potential producer pending a decision to proceed with commercial
development. The Company's drilling rig "M.G. HULME, JR." drilled North
Boomvang for DEVCO and Norcen. Just prior to year end 1997, the "M.G.
HULME, JR." was moved to East Boomvang where the appraisal well was spud to
assess the extent of the reservoir discovered earlier in the year on that
prospect. In addition to the activity at Boomvang, as part of the Norcen
transaction DEVCO acquired the opportunity to participate in drilling
Norcen's Betelguese, Renegade and Zia prospects in the Green Canyon area of
the Gulf of Mexico. The initial test well at Betelguese was spudded
December 17, 1997. Norcen is the operator. As of December 31, 1997, DEVCO
had accumulated costs relating to its ownership in East Boomvang and North
Boomvang of approximately $21.5 million which are included in Net
Liabilities of Discontinued Operations.
During 1997, DEVCO participated with Santa Fe Energy Resources,
Marathon Oil Company and Shell in 10 Gross/4.35 Net wells that were plugged
and abandoned. A total of $66.2 million in well and prospect investment
costs were charged against income in the fiscal quarter in 1997 in which
the prospects were condemned.
International Operations. In October 1997, DEVCO contracted with Vanco
Energy Company ("Vanco") and its subsidiary companies to acquire a 20%
working interest in the Anton Marin and Astrid Marin Exploration and
Production Sharing Contracts covering 2,831,392 acres in deepwater offshore
Gabon, West Africa. As consideration for the acquisitions, DEVCO agreed to
loan Vanco up to $7.0 million for signing bonuses and operating costs and
up to an additional $2.0 million for seismic data. Repayment in full of
principal and interest is due on or before October 10, 1998. Processing of
new seismic data covering the Gabon prospect area commenced at the end of
1997. Vanco is seeking a major oil company to participate in the project.
DEVCO will have the option to sell a pro-rata portion of its interest if
Vanco sells an interest to a third party participant. The drillship
"DEEPWATER FRONTIER," which is currently under construction (see
"Significant Developments During 1997"), has been tentatively scheduled to
drill the initial well on the Gabon project in the second quarter of 1999.
In June 1997, DEVCO acquired a farmout from Avner Oil Exploration
Limited Partnership of a 10% working interest in five petroleum licenses
and one permit covering 854,200 acres in deepwater offshore Israel. The
assignment of the 10% working interest was made at no cost to DEVCO. DEVCO
has participated in shooting new seismic data across the prospect. The
data was submitted for processing at year end 1997. DEVCO has a contingent
option to acquire an additional 5% working interest at cost.
Industry Conditions and Competition
The financial performance of the marine contract drilling industry,
domestically and abroad, is dependent upon the exploration and production
programs of oil and gas companies. These programs are substantially
influenced by costs to find, develop and produce oil and gas; demand for
and price of oil and natural gas (which can fluctuate widely);
technological advancements, exploration success, restrictions and
incentives relative to exploration and production imposed by governmental
authorities and economic conditions in general.
A dramatic decline in demand for marine drilling services began in 1982
as a result of a precipitous decline in oil prices. This decline reflected
the effects of lower earnings of oil and gas producers and the unstable oil
and gas price environment. As a result, the entire marine drilling
industry experienced lower dayrates and associated earnings. Although there
were periods of improvements, the marine drilling industry remained
generally depressed from 1985 until 1995. The industry has improved in
recent years, but there is no assurance that such improvement will continue
or be maintained.
Political and military events in the Middle East and in the former
Soviet Union are an example of the factors which can contribute to the
volatility of world oil and gas prices. Other factors which influence
demand for the Company's services include the ability of the Organization
of Petroleum Exporting Countries ("OPEC") to set and maintain production
targets, the level of production by non-OPEC countries, worldwide demand
for oil and gas, domestic production of natural gas, general economic and
political conditions, availability of new offshore oil and gas leases and
concessions to explore and develop, and governmental regulations.
Accordingly, there is and probably will continue to be uncertainty as to
the future level of demand for the Company's services and the timing and
duration of any increases or decreases in demand.
Drilling in these international markets is typically driven by
exploration for oil as opposed to gas. International markets frequently
offer a drilling contractor the opportunity to enter into longer term
contracts at higher operating margins than can be obtained domestically.
Offsetting these benefits can be the risk of political uncertainty,
currency fluctuations, and the increased overhead in establishing a foreign
base of operation.
The marine contract drilling industry is highly competitive and no one
competitor is dominant. Although the demand for rigs has improved
significantly since 1995, the supply of rigs has, since 1982, generally
exceeded demand. The result has been a prolonged period of intense price
competition during which many drilling units have been idle for long
periods of time. Consequently, some drilling contractors have previously
gone out of business or consolidated with other contractors.
Notwithstanding these events, the industry remains fragmented and
competitive. The Company believes that strong competition for drilling
contracts will continue for the foreseeable future. In addition to price,
factors such as the quality of a company's fleet, the experience, quality
and reputation of its management and employees, and customer relationships
determine a contract drilling company's ability to compete favorably.
Increasing dayrates may encourage contractors to construct new drilling
units. The entry of newbuild offshore units into the active market could
depress dayrates and utilization rates of the Company's offshore units.
Recent technological advancements have made it more economical for oil
and gas producers to pursue deepwater programs and demand for rigs capable
of drilling in deepwater environments has increased accordingly. However,
no assurance can be given that such increased demand will be sustained in
the future.
In response to changing demand, offshore units can be moved from one
region to another. The cost of such moves is significant, however, and is
weighed against the benefits expected to be derived. The Company normally
will not undertake a major mobilization of a mobile offshore unit without
its customer agreeing to reimburse the Company for all or a substantial
portion of such costs, unless the dayrates in the new area are expected to
be sufficient to justify such expenditures.
Markets
General. Rigs can be moved from one region to another, and in this
sense the marine contract drilling market is one international market.
Because the cost of a rig move is significant and there is limited
availability of rig moving vessels, the demand/supply balance for rigs may
vary somewhat from region to region. However, significant variations
between regions tend not to exist on a long term basis due to the ability
to move rigs. For this reason, in marketing its rigs, the Company tends to
divide the drilling market by general equipment types based on water depth
capability, rather than by region.
Transition Zone. The Company's barge rig fleet operates in marshes,
rivers, lakes and shallow bay and coastal water areas that are referred to
as the "transition zone". The Company's principal barge market is the
shallow-water areas of the U.S. Gulf Coast. This area historically has
been the world's largest market for barge rigs. International markets for
barge rigs include Venezuela, West Africa, Southeast Asia, and Tunisia.
Shallow Water. The shallow water market is serviced by the Company's
jack-ups, submersibles and drilling tenders. It begins at the outer limit
of the transition zone and extends to water depths of about 400 feet. It
has been developed to a significantly greater degree than the deepwater
market, as technology required to explore for and produce hydrocarbons in
these water depths is not as demanding as in the deepwater markets, and
accordingly the costs are lower. Shallow water drilling is currently being
conducted primarily in the Gulf of Mexico, West Africa, the North Sea, the
Mediterranean, and Southeast Asia.
Deepwater. The deepwater market is serviced by the Company's
semisubmersibles and drillships. It begins in water depths of about 400
feet and extends to the maximum water depths in which rigs are currently
capable of drilling, being approximately 10,000 feet. In recent years,
there has been increased emphasis by oil companies on exploring for
hydrocarbons in deeper waters. This is, in part, due to technological
developments that have made it both more feasible and less expensive to
explore for and produce hydrocarbons in deeper waters. Deepwater drilling
is currently being conducted primarily in the North Sea, Gulf of Mexico,
Brazil and West Africa.
Marine Transportation. The Company's marine transportation assets are
primarily deployed in the same market as its domestic barge rig fleet.
These assets are used mostly in conjunction with barge drilling operations,
but also are used in connection with other types of work, mostly energy
related (such as pipeline and well platform construction). Although such
assets can be deployed to other uses, any significant downturn in oil and
gas activity in the transition zone would have a negative impact on the
Company's marine transportation business that could not be fully offset by
deployment of such assets to other markets.
Contracts, Marketing and Customers
There are several factors that determine the type of rig most suitable
for a particular job, the most significant of which are the marine
environment, water depth and seabed conditions at the proposed drilling
location, whether the drilling or workover is being done over a platform or
other structure, and the intended well depth. Thus, there may be
considerable variation in utilization and dayrates for various drilling
units as a function of demand for their capabilities. The Company's rigs
all provide the same basic function, namely, drilling wells. However,
because of the varying marine conditions in which wells are drilled, there
is a wide variety of rig designs.
Drilling in the areas served by the Company ranges from shallow wells
(up to 12,000 feet) to deep wells (up to 25,000 feet). Deeper wells
generally take disproportionately longer to drill than shallower wells, due
primarily to more varied and difficult subsurface conditions and the
frequent need to run protective casing. The Company's drilling rigs are
competitive for all types of drilling, but are particularly designed to
drill to depths in excess of 12,000 feet.
Rigs are generally employed under individual contracts which extend
over a period of time covering either the drilling of a well or wells (a
"well-to-well contract") or a stated term (a "term contract"). Contracts
for the employment of rigs are most often awarded based on competitive
bidding; however, some contracts are the result of negotiations between the
drilling contractor and the customer. Contracts may provide for early
termination by the customer, either with or without penalty, and may
provide for extension options exercisable by the customer. The Company's
contracts generally provide for payment in U.S. dollars. The Company's
contracts typically provide for compensation on a "daywork" basis, under
which the Company receives a fixed amount per day that the rig is operating
under contract and the Company generally pays operating expenses of the
rig, including wages and the cost of incidental supplies. A contract may
allow the Company to recover some or all of its mobilization and
demobilization costs associated with moving a unit, depending on market
conditions then prevailing. The dayrate under such daywork contracts may
be lower or not payable when the drilling unit is under tow to or from the
drill site (other than field moves) or when operations are suspended
because of weather or mechanical problems. Under daywork contracts, the
Company generally is responsible for paying the operating expenses of the
unit, including wages and the cost of incidental supplies.
Although the majority of the Company's contracts are daywork contracts,
the Company has participated via a joint venture in "turnkey" contracts.
Essentially, a turnkey contract provides for the drilling of a well on a
fixed price basis. In 1993, the Company formally established a turnkey
department and in 1994 the Company entered into a joint venture with F. J.
Brown & Associates, Inc. to offer turnkey services in both the
international markets and the U.S. Gulf of Mexico market. The cumulative
net results of the Company's turnkey contracts are immaterial in total and
insignificant as compared to the Company's operating income from the
traditional daywork contracting method. Additionally, the Company's joint
venture approach to entering the turnkey market minimized the Company's
overhead costs and capital investment costs, thus somewhat reducing
financial risks to the Company. The Company is not currently seeking
turnkey work.
The Company maintains a decentralized organization, with regional
offices throughout the world. The Company's primary marketing efforts are
carried out through these regional offices and its Houston office.
When the Company's offshore units operate in foreign locations,
operations are often conducted in conjunction with local companies.
Representative of the offshore areas where the Company has arrangements
with local companies are Abu Dhabi, Brazil, Brunei, China, Egypt, India,
Indonesia, Italy, Korea, Malaysia and Nigeria. The purpose of these
arrangements is to draw on the marketing, technical, supply and government
relations assistance of local third parties and in some cases to comply
with local legal requirements. Typically, the financial terms of these
arrangements are such that the third party receives a stated percentage of
drilling revenues. Many of the Company's existing arrangements are with
third parties with which the Company has had a relationship for ten or more
years.
The Company has a base of customers which includes major and
independent foreign and domestic oil and gas companies, as well as foreign
state-owned oil companies. During 1997, the Company performed services for
approximately 400 different customers.
For the year ended December 31, 1997, there were no customers that
individually accounted for 10.0% or more of the Company's total operating
revenues. For the year ended December 31, 1996, revenues of approximately
$70.6 million from British Petroleum and affiliates accounted for 11.6% of
the Company's total operating revenues. For the year ended December 31,
1995, revenues of approximately $42.6 million from Royal Dutch/Shell Group
and revenues of approximately $39.3 million from British Petroleum and
affiliates accounted for 10.9% and 10.1%, respectively, of the Company's
total operating revenues.
The loss of one of the Company's major customers could, at least on a
short-term basis, have a material adverse impact on the Company's business
or results of operations. However, the Company would have alternative
customers for its services in the event of the loss of any single customer
and that the loss of any one customer would not have a material adverse
effect on the Company on a long-term basis.
Financial information by geographic area is furnished in Note J of
Notes to Consolidated Financial Statements.
Governmental Regulation and Environmental Matters
Many aspects of the Company's operations are affected by domestic and
foreign political developments and are subject to numerous domestic and
foreign governmental laws and regulations that may relate directly or
indirectly to the Company's business and operations, including, without
limitation, laws and regulations controlling the discharge of materials
into the environment, requiring removal and cleanup under certain
circumstances or otherwise relating to the protection of the environment,
and certification, licensing, safety and training and other requirements
imposed by treaties, laws, regulations and conventions in the jurisdictions
in which the Company operates. The contract drilling industry is dependent
on demand for services from the oil and gas exploration industry and,
accordingly, is affected by changing taxes, regulations and other laws
relating to the energy business generally. The Company does not believe
that governmental regulations have had any material adverse effect on its
capital expenditures, results of operations or competitive position, and
does not anticipate that any material expenditures will be required to
enable it to comply with existing laws and regulations. However, the
modification of existing laws and regulations or the adoption of new laws
and regulations curtailing or increasing the effective cost of exploratory
or developmental drilling for oil and gas for economic, environmental or
other reasons could have a material adverse effect on the Company's
operations. The Company cannot currently determine the extent to which
future earnings may be affected by new legislation or regulations or
compliance with new or existing regulations which may become applicable as
a result of rig relocation.
There is great concern, particularly in developed countries such as the
United States, over protection of the environment. Offshore drilling in
certain areas has been opposed by environmental groups and, in certain
areas, has been restricted. To the extent laws are enacted or other
governmental actions are taken that prohibit or restrict offshore drilling
or impose environmental protection requirements that result in increased
costs to the oil and gas industry in general and the offshore contract
drilling industry in particular, the business and prospects of the Company
could be adversely affected.
The Company's operations may involve the use or handling of materials
that may be classified as environmentally hazardous substances.
Environmental laws and regulations applicable in the United States and
other countries in which the Company conducts operations have generally
become more stringent, and may in certain circumstances impose "strict
liability", rendering a person liable for environmental damage without
regard to negligence or fault on the part of such person. Such laws and
regulations may expose the Company to liability for the conduct of or
conditions caused by others, or for acts of the Company which were in
compliance with all applicable laws at the time such acts were taken. The
Company does not believe that environmental regulations have had any
material adverse effect on its capital expenditures, results of operations
or competitive position, and does not anticipate that any material
expenditures will be required to enable it to comply with existing laws and
regulations. However, the modification of existing laws or regulations or
the adoption of new laws or regulations curtailing exploratory or
developmental drilling for oil and gas for economic, environmental or other
reasons could have a material adverse effect on the Company's operations.
The transition zone and shallow-water areas of the U.S. Gulf Coast are
ecologically sensitive. Environmental issues have led to higher drilling
costs, a more difficult and lengthy well permitting process and, in
general, have adversely affected decisions of the oil companies to drill in
these areas. U.S. laws and regulations applicable to the Company's
operations include those controlling the discharge of materials into the
environment, requiring removal and cleanup of materials that may harm the
environment, or otherwise relating to the protection of the environment.
For example, as an operator of drilling rigs in navigable U.S. waters and
certain offshore areas, the Company may be liable for damages and costs
incurred in connection with spills or discharges of oil or other substances
for which it is held responsible. The discharge of oil or other substances
in a wetland or inland waterway could produce substantial damage to the
environment, including wildlife and groundwater. Laws and regulations
protecting the environment have become more stringent in recent years, and
may, in certain circumstances, impose "strict liability," rendering a
person liable for environmental damage without regard to negligence or
fault on the part of such person. Such laws and regulations may expose the
Company to liability for the conduct of or conditions caused by others, or
for acts of the Company that were in compliance with all applicable laws at
the time such acts were performed. The application of these requirements
or the adoption of new requirements could have a material adverse effect on
the Company.
The Federal Water Pollution Control Act of 1972, commonly referred to
as the Clean Water Act ("CWA") prohibits the discharge of certain
substances into the navigable waters of the United Stated without a permit.
The regulations implementing the CWA require permits to be obtained by an
operator before certain exploration activities occur. Violations of
monitoring, reporting and permitting requirements can result in the
imposition of civil and criminal penalties. The provisions of the Clean
Water Act can also be enforced by citizen's groups.
The Oil Pollution Act of 1990 ("OPA '90") and regulations promulgated
pursuant thereto impose a variety of regulations on "responsible parties"
related to the prevention of oil spills and liability for damages resulting
from such spills. A "responsible party" includes the owner or operator of
a facility or vessel, or the lessee or permittee of the area in which an
offshore facility is located. OPA '90 assigns liability to each
responsible party for oil removal costs and a variety of public and private
damages. While liability limits apply in some circumstances, a party
cannot take advantage of liability limits if the spill was caused by gross
negligence or willful misconduct or resulted from violation of a federal
safety, construction or operating regulation. If the party fails to report
a spill or to cooperate fully in the cleanup, liability limits likewise do
not apply. Few defenses exist to the liability imposed by OPA '90. OPA
'90 also imposes ongoing requirements on a responsible party. These
include proof of financial responsibility (to cover at least some costs in
a potential spill) and preparation of an oil spill contingency plan. A
failure to comply with ongoing requirements or inadequate cooperation in a
spill event may subject a responsible party to civil or criminal
enforcement action. In short, OPA '90 places a burden on drilling rig
owners or operators to conduct safe operations and take other measures to
prevent oil spills. If a spill occurs, OPA '90 then imposes liability for
resulting damages.
The Company generally seeks to obtain indemnity agreements whenever
possible from the Company's customers requiring such customers to hold the
Company harmless in the event of liability for pollution that originates
below the water surface, including, where applicable, liability under OPA
'90, and maintains marine liability insurance and contingent energy
exploration and development coverage (normal energy, exploration and
development coverage is maintained, to the extent of the Company's interest
in oil and gas properties, for operations of such properties) which affords
limited protection to the Company. There is no assurance that such
insurance or contractual indemnification will be sufficient or effective to
protect the Company from liability under OPA '90.
In addition, the Outer Continental Shelf Lands Act and regulations
promulgated pursuant thereto impose a variety of regulations relating to
safety and environmental protection applicable to lessees, permitees and
other parties operating on the Outer Continental Shelf. Specific design
and operational standards may apply to Outer Continental Shelf vessels,
rigs, platforms, vehicles and structures. Violations of lease conditions
or regulations issued pursuant to the Outer Continental Shelf Lands Act can
result in substantial civil and criminal penalties as well as potential
court injunctions curtailing operations and the cancellation of leases.
Such enforcement liabilities can result from either governmental or citizen
prosecution.
The Company believes it is in material compliance with applicable
federal, state, local and foreign legislation and regulations relating to
environmental controls. However, the existence of such laws and
regulations has had and will continue to have a restrictive effect on the
Company and its customers.
Operating Risks and Insurance
The Company's operations are subject to the many hazards. In the
drilling of oil and gas wells, especially exploratory wells where little is
known of the subsurface formations, there always exists a possibility of
encountering unexpected conditions of extreme pressure and temperature and
the risk of a blowout, cratering and fires that could cause injury or
death, damage to property, pollution, and suspension of drilling
operations. The Company's fleet is also subject to hazards inherent in
marine operations, either while on site or under tow, such as capsizing,
grounding, collision, damage from heavy weather or sea conditions and
unsound location. The Company may also be subject to liability for oil
spills, reservoir damage and other accidents that could cause substantial
damage. The Company maintains such insurance protection as it deems
prudent, including liability insurance and insurance against damage to or
loss of equipment. In addition, the Company generally seeks to obtain
indemnity agreements whenever possible from the Company's customers,
requiring such customers to hold the Company harmless in the event of loss
of production, reservoir damage or liability for pollution that originates
below the water surface. When obtained, such contractual indemnification
protection may not in all cases be supported by adequate insurance
maintained by the customer. There is no assurance that such insurance or
contractual indemnity protection will be sufficient or effective under all
circumstances or against all hazards to which the Company may be subject.
The principal hazards against which the Company may not be fully insured or
indemnified are environmental liabilities which may result from a blowout
or similar accident or a liability resulting from reservoir damage alleged
to be caused by the negligence or other legal fault of the Company.
Further, there is no assurance that the Company will be able to obtain
adequate insurance coverage at the rates it deems reasonable in the future.
Recognizing these risks, the Company has various programs that are designed
to promote a safe environment for its personnel and equipment.
R&B traditionally maintained business interruption insurance; Falcon
did not. At present, the Company intends generally to maintain business
interruption insurance with respect to its semisubmersibles and drillships,
but not the other rigs or vessels in its fleet.
The Company's foreign operations are also subject to certain political,
economic and other uncertainties, including, among others, risks of war,
expropriation, nationalization, renegotiation or nullification of existing
contracts, taxation policies, foreign exchange restrictions, changing
political conditions, international monetary fluctuations and other hazards
arising out of foreign governmental sovereignty over certain areas in which
the Company conducts operations. Currently, when conducting foreign
drilling operations in areas the Company perceives as politically unstable,
the Company may (i) negotiate contracts providing for indemnification
against expropriation and certain other political risks or (ii) purchase
insurance covering such risks, to the extent available at reasonable cost.
The Company believes it is adequately covered by insurance, but no
assurance can be given with respect to the availability of such insurance
at acceptable rates in the future. Since 1979, the Company has not
experienced any material losses associated with the above-described
political risks.
Employees
The Company emphasizes employee safety, training and retention. The
number of employees varies depending on the level of drilling activity. As
of December 31, 1997, the Company employed approximately 5,700 persons.
There are no collective bargaining contracts covering the Company's
domestic employees. As of December 31, 1997, the Company employed 116
local personnel in Venezuela, all of whom are covered by the Collective
Labor Contract of the Venezuelan Petroleum Industry. The Company believes
its relations with its employees are good.
The recent increase in rig utilization has resulted in increased demand
for the personnel necessary to operate the rigs. The Company has
experienced delays in placing refurbished rigs in service due to the
shortage of qualified personnel. The increased demand for labor may in the
future result in increases in the compensation the Company is required to
pay to attract and retain qualified personnel. In order to expand its pool
of qualified personnel, the Company has sometimes placed extra personnel on
certain of its rigs in order to have them gain experience. The cost of
these extra personnel is borne by the Company, and increases its operating
costs.
The Company believes that one of the biggest challenges facing it over
the next few years will be hiring and retention of sufficient qualified
personnel to operate its rigs. This problem is particularly acute with
respect to the additional deepwater rigs that the Company expects to bring
into service. (See "Significant Developments During 1997"). The Company's
deepwater rigs will require certain personnel having skills that differ
from those required in the operation of jack-ups and barge rigs. In
addition, the Company's deepwater rigs will generally be crewed on a
"twenty-eight on, twenty-eight off" rotation, as compared to a "seven on,
seven off" rotation typical for barges and a "fourteen on, fourteen off"
rotation typical for jack-ups. These two factors limit the ability of the
Company to fill its deepwater personnel requirements with personnel from
its barge and jack-up rigs. The Company intends to expand its training
programs in order to help meet its personnel requirements. Such expanded
training programs will increase the Company's operating costs.
Other drilling contractors are also expanding their active fleets
through refurbishments and new construction, and will compete with the
Company for qualified personnel. Such competition for personnel will
likely lead to increasing wages for such personnel, which would directly
increase the Company's operating costs.
Item 3. Legal Proceedings
In November 1988, a lawsuit was filed in the U.S. District Court for
the Southern District of West Virginia against Reading & Bates Coal Co., a
wholly owned subsidiary of the Company, by SCW Associates, Inc. claiming
breach of an alleged agreement to purchase the stock of Belva Coal Company,
a wholly owned subsidiary of Reading & Bates Coal Co. with coal properties
in West Virginia. When those coal properties were sold in July 1989 as
part of the disposition of the Company's coal operations, the purchasing
joint venture indemnified Reading & Bates Coal Co. and the Company against
any liability Reading & Bates Coal Co. might incur as the result of this
litigation. A judgment for the plaintiff of $32,000 entered in February
1991 was satisfied and Reading & Bates Coal Co. was indemnified by the
purchasing joint venture. On October 31, 1990, SCW Associates, Inc., the
plaintiff in the above-referenced action, filed a separate ancillary action
in the Circuit Court, Kanawha County, West Virginia against the Company,
Caymen Coal, Inc. (former owner of the Company's West Virginia coal
properties), as well as the joint venture, Mr. William B. Sturgill
personally (former President of Reading & Bates Coal Co.), three other
companies in which the Company believes Mr. Sturgill holds an equity
interest, two employees of the joint venture, First National Bank of
Chicago and First Capital Corporation. The lawsuit seeks to recover
compensatory damages of $50.0 million and punitive damages of $50.0 million
for alleged tortious interference with the contractual rights of the
plaintiff and to impose a constructive trust on the proceeds of the use
and/or sale of the assets of Caymen Coal, Inc. as they existed on
October 15, 1988. The Company intends to defend its interests vigorously
and believes the damages alleged by the plaintiff in this action are highly
exaggerated. In any event, the Company believes that it has valid defenses
and that it will prevail in this litigation.
The Company is involved in various other legal actions arising in the
normal course of business. The great majority of these actions involve
claims arising out of injuries to employees of the Company who work on the
Company's rigs and other vessels. After taking into consideration the
evaluation of such actions by counsel for the Company and the Company's
insurance coverage, 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. See Note D of Notes to Consolidated Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders
On December 23, 1997, R&B held a special meeting of stockholders to
consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Merger, dated as of July 10, 1997, among the Company, Falcon, and
R&B. The proposal received 46,463,835 votes FOR, 85,120 votes AGAINST, and
129,081 ABSTENTIONS, and therefore, was adopted by the stockholders of R&B.
On December 23, 1997, Falcon held a special meeting of stockholders to
consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Merger, dated as of July 10, 1997, among the Company, Falcon, and
R&B. The proposal received 66,632,944 votes FOR, 14,640 votes AGAINST, and
78,131 ABSTENTIONS, and therefore, was adopted by the stockholders of
Falcon.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
The combination of Falcon and R&B became effective at 11:59 p.m. E.S.T.
on December 31, 1997. The common stock of R&B Falcon began trading on the
New York Stock Exchange ("NYSE") on January 2, 1998 under the symbol "FLC."
During 1996 and 1997, the Falcon common stock was traded on the NYSE under
the symbol "FLC" and the R&B common stock was traded on the NYSE and the
Pacific Stock Exchange under the symbol "RB." The following table sets
forth, for the calendar periods indicated, the high and low sales prices
per share of Falcon common stock and R&B common stock as reported by the
NYSE Composite Tape for the periods indicated. All share price information
for Falcon common stock has been adjusted to reflect the two-for-one stock
split effected on July 15, 1997. No adjustment to these prices has been
made in respect of the share exchange ratio in the Merger (one share of
Company common stock for each share of Falcon common stock; 1.18 shares of
Company common stock for each share of R&B common stock). Neither Falcon
nor R&B have declared any dividends on common stock for the periods
indicated.
Falcon R&B
Common Stock Common Stock
---------------- ----------------
High Low High Low
------- ------- ------- -------
1996
First Quarter $ 12.81 $ 6.00 $ 20.38 $ 14.25
Second Quarter 14.25 11.13 26.13 19.75
Third Quarter 13.94 10.00 27.88 20.00
Fourth Quarter 21.63 12.88 31.13 25.00
1997
First Quarter $ 21.50 $ 15.13 $ 32.25 $ 22.50
Second Quarter 28.81 15.56 28.25 20.13
Third Quarter 38.13 25.44 44.63 26.75
Fourth Quarter 42.81 28.19 49.81 33.38
There were approximately 3,300 holders of record of the Company's
common stock as of March 18, 1998.
In December 1997, the Company adopted a preferred share Rights
Agreement. See Note G of Notes to Consolidated Financial Statements.
During 1997, Falcon sold shares of its common stock that were not
registered under the Securities Act of 1933. On May 21, 1997, Falcon
issued 44,000 shares of its common stock, par value $.01, to Michael J.
Smith as partial consideration for the acquisition by Falcon of all of the
issued and outstanding stock of Sun Towing Co., Inc. ("SUN") and MNS
Towing, Inc. ("MNS"). The agreed price for the shares issued to Mr. Smith
was $18.75 per share (after giving effect for the two-for-one stock split
effected by Falcon on July 15, 1997). Falcon relied upon Section 4(2) of
the Securities Act of 1933, as amended, for exemption from registration.
The shares were issued pursuant to a negotiated transaction wherein Falcon
agreed to buy, and Mr. Smith agreed to sell, all of the shares of Sun and
MNS, which companies were wholly owned by Mr. Smith.
Item 6. Selected Financial Data
R&B FALCON CORPORATION
AND SUBSIDIARIES
(in millions except per share amounts)
The following table includes the accounts of R&B and Falcon as a
result of the Merger. See Note B of Notes to Consolidated Financial
Statements.
Years Ended December 31,
-------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- ------ ------- -------
Operating revenues $ 942.1 $ 609.6 $ 390.3 $ 307.6 $ 245.6
========= ========= ======= ======= =======
Income (loss) from
continuing operations $ 156.0 $ 106.4 $ 23.5 $ (12.7) $ 8.5
Income (loss) from
discontinued operations (162.2) .3 - - -
Extraordinary gain (1) - - 3.4 - -
--------- --------- ------- ------- -------
Net income (loss) (6.2) 106.7 26.9 (12.7) 8.5
Dividends and accretion
on preferred stock (2) - 3.6 5.2 5.4 2.8
--------- --------- ------- ------- -------
Net income (loss) applicable
To common stockholders $ (6.2) $ 103.1 $ 21.7 $ (18.1) $ 5.7
========= ========= ======= ======= =======
Net income (loss) per
common share:
Basic:
Continuing operations $ .95 $ .70 $ .16 $ (.18) $ .06
Discontinued operations (.99) - - - -
Extraordinary gain - - .03 - -
--------- --------- ------- ------- -------
Net income (loss) $ (.04) $ .70 $ .19 $ (.18) .06
========= ========= ======= ======= =======
Diluted:
Continuing operations $ .94 $ .67 $ .15 $ (.18) $ .05
Discontinued operations (.98) - - - -
Extraordinary gain - - .03 - -
--------- --------- ------- ------- -------
Net income (loss) $ (.04) $ .67 $ .18 $ (.18) $ .05
========= ========= ======= ======= =======
Total assets $ 1,928.4 $ 1,455.8 $ 946.8 $ 810.9 $ 722.5
========= ========= ======= ======= =======
Long-term obligations
(including current portion)
and redeemable stocks $ 827.4 $ 514.2 $ 296.7 $ 288.6 $ 166.3
========= ========= ======= ======= =======
Dividends on Common Stock $ - $ - $ - $ - $ -
========= ========= ======= ======= =======
- -----------------
(1) Extraordinary gain for 1995 is due to the extinguishment of an R&B debt
obligation.
(2) In 1995, Falcon's Series A Convertible Preferred Stock was converted
into approximately 15.6 million shares of common stock and in 1996,
R&B's $1.625 Convertible Preferred Stock was converted into
approximately 10.2 million shares of common stock.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Business Combination
On July 10, 1997, Falcon Drilling Company, Inc. ("Falcon") and Reading
& Bates Corporation ("R&B") announced that they had agreed to combine their
companies under a new company -- R&B Falcon Corporation ("R&B Falcon") (the
"Merger"). On December 23, 1997, the Merger was approved by both companies'
shareholders and on December 31, 1997 the Merger was consummated. Each
outstanding share of common stock of Falcon was converted into one share of
R&B Falcon and each outstanding share of common stock of R&B was converted
into 1.18 shares of R&B Falcon. The Merger has been accounted for as a
pooling of interests and, accordingly, the consolidated financial
statements for the periods presented have been restated to include the
accounts of R&B and Falcon.
Results of Operations
The Company reported a net loss for 1997 of $6.2 million ($.04 net loss
per share) compared to net income of $106.7 million ($.70 earnings per
share after preferred stock dividends of $3.6 million) for 1996 and net
income of $26.9 million ($.19 earnings per share after preferred stock
dividends of $5.2 million) for 1995. Included in the 1997 results are
merger expenses of $66.4 million and losses related to discontinued
operations of $162.2 million. Included in the 1995 results is an
extraordinary gain of $3.4 million related to the extinguishment of a debt
obligation.
Operating Revenues
Years Ended December 31,
---------------------------
Operating Revenues (in millions) 1997 1996 1995
------- ------- -------
Deepwater $ 348.8 $ 211.8 $ 104.6
Shallow water 321.7 224.9 161.8
Inland water 271.6 172.9 123.9
------- ------- -------
Total $ 942.1 $ 609.6 $ 390.3
======= ======= =======
Operating revenues are primarily a function of dayrates and
utilization. Operating revenues from 1996 to 1997 increased $332.5 million
due to the following: The deepwater fleet increased $137.0 million
primarily due to an increase in dayrates for the semisubmersibles and due
to the addition of two drillships. The shallow water fleet increased $96.8
million primarily due to an increase in dayrates for the jack-up fleet. The
inland water fleet increased $98.7 million primarily due to an increase in
dayrates and utilization for the domestic and workover barges, and due to
the purchase of 68 tugs and 44 utility barges during 1997. See "Purchases
of Equipment".
Operating revenues from 1995 to 1996 increased $219.3 million due to
the following: The deepwater fleet increased $107.2 million primarily due
to an increase in dayrates for the semisubmersibles and due to the purchase
of drillships in 1996. The shallow water fleet increased $63.1 million
primarily due to an increase in dayrates for the jack-up fleet and due to
the addition of four jack-ups in late 1995. The inland water fleet
increased $49.0 million primarily due to an increase in dayrates and
utilization for the domestic barges. See "Purchases of Equipment".
The Company earned revenues of $167.6 million, $69.6 million and $3.6
million for 1997, 1996 and 1995, respectively, as a result of equipment
acquisitions. See "Purchases of Equipment".
Operating Expenses
Years Ended December 31,
---------------------------
Operating Expenses (in millions) 1997 1996 1995
------- ------- -------
Deepwater $ 141.6 $ 91.1 $ 58.1
Shallow water 151.8 128.3 113.0
Inland water 154.2 110.2 78.2
------- ------- -------
Total $ 447.6 $ 329.6 $ 249.3
======= ======= =======
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 of equipment and
overhauls are performed on a basis of number of hours operated in
accordance with the Company's preventive maintenance program. Operating
expenses for an offshore unit are typically deferred or capitalized as
appropriate during periods of mobilization, contract preparation, major
upgrades or conversions unless corresponding mobilization revenue is
recognized, in which case such operating expenses are expensed as incurred.
Operating expenses from 1996 to 1997 increased $118.0 million due to
the following: The deepwater fleet increased $50.5 million primarily due to
the addition of two drillships and the purchase of an FPSS vessel. The
shallow water fleet increased $23.5 million primarily due to the change in
the geographic location of the jack-up fleet from one year to the next. The
inland water fleet increased $44.0 million primarily due to the increased
utilization of the domestic barges, and due to the purchase of 68 tugs and
44 utility barges during 1997. See "Purchases of Equipment".
Operating expenses from 1995 to 1996 increased $80.3 million due to
the following: The deepwater fleet increased $33.0 million primarily due to
the purchase of drillships in 1996. The shallow water fleet increased $15.3
million primarily due to the purchase of four jack-ups in late 1995. The
inland water fleet increased $32.0 million primarily due to the increased
utilization of the domestic barges. See "Purchases of Equipment".
Depreciation
Years Ended December 31,
---------------------------
1997 1996 1995
------- ------- -------
Depreciation (in millions) $ 82.9 $ 62.3 $ 46.9
======= ======= =======
The increase in depreciation expense in each of 1996 and 1997 is
primarily due to the purchase and/or significant upgrades of rigs and
inland marine vessels.
General and Administrative Expenses
Years Ended December 31,
---------------------------
1997 1996 1995
------- ------- -------
General and Administrative
Expenses (in millions) $ 51.9 $ 37.0 $ 29.2
======= ======= =======
General and administrative expenses increased $14.9 million in 1997
compared to 1996 primarily due to increases in payroll and related expenses
associated with employee incentive plans.
General and administrative expenses increased $7.8 million in 1996
compared to 1995 primarily due to increases in payroll and related expenses
associated with employee incentive plans and a $2.2 million charge related
to severance benefits for two executives whose employment was terminated
during 1996.
Merger Expenses
In connection with the Merger between R&B and Falcon, the Company
recorded $66.4 million of merger expenses in the fourth quarter of 1997.
Merger expenses consisted primarily of employment contract termination fees
associated with executives of R&B, the acceleration of unearned
compensation of certain stock grants previously awarded to certain R&B
employees, fees for investment bankers, attorneys, and accountants, and
printing and other related costs.
Interest Expense
Years Ended December 31,
---------------------------
1997 1996 1995
------- ------- -------
Interest Expense, net of interest
capitalized (in millions) $ 46.3 $ 43.0 $ 34.6
======= ======= =======
Despite an increase in capitalized interest during 1997 as compared to
1996 primarily due to the capitalization of interest related to significant
upgrade and new build projects, interest expense increased by $3.3 million.
This increase is primarily attributable to increased borrowings under the
Company's credit facilities. Noncash interest expense attributable to
amortization of discount and deferrals associated with the 8% Senior
Subordinated Convertible Debentures due 1998 for the year ended December
31, 1997 was $2.6 million.
The $8.4 million increase in interest expense in 1996 as compared to
1995 is primarily attributable to increased borrowings under the Company's
revolving credit facilities and the issuance by Falcon of $120.0 million in
senior notes in 1996. This was partially offset by the 1996 capitalization
of interest related to the significant refurbishment and upgrade of a
drillship. Noncash interest expense attributable to amortization of
discount and deferrals associated with the 8% Senior Subordinated
Convertible Debentures due 1998 for the year ended December 31, 1996 was
$2.2 million.
Income Tax Expense
Years Ended December 31,
---------------------------
1997 1996 1995
------- ------- -------
Income Tax Expense (in millions) $ 84.7 $ 27.0 $ 6.3
======= ======= =======
The increases in income tax expense in each of 1996 and 1997 were
primarily due to increases in the Company's pretax income.
Minority Interest
Years Ended December 31,
---------------------------
1997 1996 1995
------- ------- -------
Minority Interest (in millions) $ 9.4 $ 6.7 $ 2.8
======= ======= =======
Minority interest relates primarily to the results of Arcade Drilling
and the percentage attributable to stockholders other than the Company.
Arcade Drilling reported income in 1997, 1996 and 1995 of $36.9, $26.3 and
$5.6 million, respectively. The ownership percentage attributable to
stockholders other than the Company was 25.6%, 25.6% and 25.7% for the
years ending December 31, 1997, 1996 and 1995, respectively.
Purchases of Equipment
The following is a summary of significant equipment purchases by the
Company during the last three years.
1997
- In January 1997, the Company purchased the "PEREGRINE VI" (ex "COASTAL
GOLDEN"), a bulk carrier, for approximately $7.5 million.
- In June 1997, the Company purchased the "PEREGRINE VII" (ex "DEEPSEA
WORKER"), a purpose-built dynamically positioned drillship for
approximately $33.8 million.
- In the third quarter of 1997, the Company purchased the
semisubmersible accommodation unit "RIG 82" (ex "ALLEGHENY") for
approximately $34.2 million.
- In October 1997, the Company purchased a cantilevered, mat-supported
jack-up for $22.0 million.
- In November 1997, the Company purchased the "PEREGRINE VIII" (ex
"KASSOS"), a bulk carrier, for $9.2 million.
- During the fourth quarter of 1997, the Company purchased three
offshore supply vessels for an aggregate cost of $7.5 million.
- During 1997, the Company purchased 68 tugs and 44 utility barges for
an aggregate cost of $49.0 million.
1996
- In January 1996, the Company purchased a drilling barge for $6.0
million.
- In February 1996, the Company purchased the "PEREGRINE II", a
dynamically positioned drillship, for $24.1 million.
- In May 1996, the Company purchased the "PEREGRINE III", a dynamically
positioned drillship, for $34.5 million.
- In September 1996, the Company purchased the floating production
storage and shuttle (FPSS) vessel, the "SEILLEAN", for $42.2 million.
- In December 1996, the Company purchased the "FALCON DUCHESS", a
conventionally moored drillship, for $5.0 million in cash and $15.0
million in shares of the Company's common stock.
- In December 1996, the Company purchased a substantially completed
drillship hull (the "PEREGRINE IV") for approximately $8.0 million.
1995
- In September 1995, the Company purchased two cantilevered mat-
supported jack-ups, two slot-type mat-supported jack-ups and one
submersible all for $37.8 million.
- In September 1995, the Company purchased the "PEREGRINE I", a
dynamically positioned drillship, for $9.8 million.
- In September 1995, the Company purchased the support vessel "IOLAIR".
- In September 1995, the Company purchased the second-generation
semisubmersible drilling unit "J.W. McLEAN". In connection with the
purchase of the "J.W. McLEAN" the Company issued 1.5 million shares of
the Company's common stock.
- In the fourth quarter of 1995, the Company purchased three posted
barge drilling rigs for an aggregate purchase price of $12.2 million.
Sale/Lease-back of Drilling Unit
In November 1995, the Company entered into a sale/lease-back of the "M.
G. HULME, JR." and agreed to lease the drilling unit for ten years. The
lease-back is accounted for as an operating lease and a deferred gain of
$7.4 million was recorded and is being amortized over the life of the
lease. In addition, the lease contains a provision which allows the
Company to repurchase the drilling unit at the end of the lease for a fair
market price, but not to exceed a pre-established maximum price.
Oil & Gas Activities
In October 1995, the Company purchased an approximate 20% working
interest in the Green Canyon 254 Allegheny oil and gas development project
in the U.S. Gulf of Mexico from Enserch Exploration, Inc. ("Enserch") who
was the operator at that time. Mobil Exploration & Producing Inc., an
affiliate of Mobil Corporation, had a 40% working interest in the project
and Enserch had retained the remaining 40% working interest. In the third
quarter of 1997, the Company acquired an additional 20% working interest in
the Allegheny field and British-Borneo Petroleum, Inc., the new operator,
acquired the remaining 60% working interest in the field. As of December
31, 1997, the Company had accumulated costs related to its ownership in
such project of approximately $41.2 million which are included in Net
Liabilities of Discontinued Operations.
In July 1996, the Company entered into an agreement with Shell Offshore
Inc. to drill an appraisal well at the Company's expense in Shell's East
Boomvang prospect in the U.S. Gulf of Mexico with terms that if the results
were positive the Company would earn a working interest. The estimated
cost to drill the appraisal well, which was drilled in the first quarter of
1997 and was suspended as a potential producer, was approximately $12.1
million. In February 1997, Shell Offshore Inc. waived its election to
remain a working interest owner in the East Boomvang, North Boomvang and
East Bequia prospects ("Boomvang"), but retained an overriding royalty
interest in the three prospects. In July 1997, the Company entered into an
agreement with Norcen Explorer, Inc. ("Norcen") whereby an appraisal well
on the North Boomvang prospect would be drilled primarily at Norcen's
expense (up to an agreed upon cap) in exchange for a working interest in
Boomvang. In August 1997, drilling commenced on the North Boomvang
prospect and the well was completed in the fourth quarter of 1997 and
suspended as a potential producer pending a decision to proceed with
commercial development. As of December 31, 1997, the Company had
accumulated costs related to its ownership in East Boomvang and North
Boomvang of approximately $21.5 million which are included in Net
Liabilities of Discontinued Operations.
In March 1998, the Company decided to divest its oil and gas business,
and expects such divestiture to occur by March 1999. The Company's oil and
gas business has been accounted for as a discontinued operation in the
financial statements included in this report. The Company recorded a
charge of $78.8 million for losses on ultimate disposal and operations
until disposal. See Note L of Notes to Consolidated Financial Statements.
Year 2000
The Company is currently in the process of evaluating its computer
software programs and operating systems to ensure such programs and systems
will be able to process transactions in the year 2000. However, the Company
does not expect that such costs to modify its programs and systems will be
material to its financial condition or results of operations. The Company
does not currently have information concerning the year 2000 compliance of
its suppliers and customers. In the event the Company's major suppliers or
customers do not successfully and timely achieve year 2000 compliance, the
Company's operations could be adversely affected.
Accounting Pronouncements
In March 1995, Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of ("SFAS 121") was issued. SFAS 121, which became
effective in 1996, requires that certain long-lived assets be reviewed for
impairment whenever events indicate that the carrying amount of an asset
may not be recoverable, and that an impairment loss be recognized under
certain circumstances in the amount by which the carrying value exceeds the
fair value of the asset. In 1995, the Company adopted SFAS 121 which had
no effect on the Company's consolidated results of operations or
consolidated financial position.
In October 1995, Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensation ("SFAS 123") was issued. SFAS 123
requires either recognition of compensation expense in the financial
statements for those companies that adopt the fair value based accounting
method or expanded disclosure of pro forma net income and earnings per
share information for those companies that retain the current accounting
method set forth in Accounting Principles Board (APB) Opinion 25,
Accounting for Stock Issued to Employees. The Company follows the
accounting method set forth in APB 25 and provides the expanded disclosure
requirements. See Note H of Notes to Consolidated Financial Statements.
In February 1997, Statement of Financial Accounting Standards No. 128,
Earnings per Share ("SFAS 128") was issued. SFAS 128 establishes revised
standards for computing and presenting earnings per share. The Company
adopted SFAS 128 in the fourth quarter of 1997 and restated all prior
periods presented.
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 nonowner
changes in equity. The Company is required to adopt SFAS 130 in the first
quarter of fiscal 1998. Reclassification of comparative financial
statements provided for earlier periods will be required. The Company
believes that the display of comprehensive income will not differ
materially from the currently reported net income (loss) attributable to
common stockholders.
In June 1997, Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("SFAS
131") was issued. SFAS 131 requires that companies report financial and
descriptive information about their reportable operating segments. Segment
information to be reported is to be based upon the way management organizes
the segments for making operating decisions and assessing performance. The
Company will adopt SFAS 131 in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $342.8 million for 1997,
compared to $167.3 million and $56.0 million for 1996 and 1995,
respectively. The increases in each year were primarily the result of
improved operating results from continuing operations.
Net cash used in investing activities was $611.0 million for 1997,
compared to $365.1 million for 1996 and $101.3 million for 1995. The
increases in each year were due to increasing levels of capital
expenditures, primarily related to rig and vessel acquisitions and the
expansion of the Company's deepwater drilling rig fleet.
Net cash provided in financing activities was $301.2 million for 1997,
compared to $319.6 million for 1996 and $55.7 million for 1995. The
decrease in net cash provided by financing activities in 1997 over 1996 was
primarily the result of a decline in proceeds from the issuance of common
stock more than offsetting increased borrowings under two credit facilities
with two syndicates of commercial banks. The increase in net cash provided
by financing activities for 1996 over 1995 was primarily the result of
increased borrowings and increased issuance of common stock.
Net cash used in discontinued operations was $105.3 million for 1997,
compared to $39.2 million for 1996 and $12.4 million for 1995. The
increases in each year were due to increasing levels of purchases of oil
and gas properties.
At December 31, 1997, the Company had approximately $233.9 million in
the aggregate of cash, cash equivalents, short-term investments and
borrowing capacity under its revolving credit facilities.
During 1998 and 1999, the Company expects to spend approximately $1.4
billion to expand and upgrade its operating rig fleet. Approximately $1.1
billion of this total will be expended in connection with the expansion of
the Company's deepwater rig fleet. The remaining expected capital
expenditures of approximately $300.0 million would be used to reactivate
currently idle barge drilling rigs and upgrade the Company's existing rig
fleet.
The following are the significant capital expenditure projects of the
Company:
"DEEPWATER PATHFINDER". This is a dynamically positioned drillship
being constructed for a joint venture in which the Company owns a 50%
interest. The estimated cost is approximately $235.0 million plus
capitalized interest, with delivery expected to be in 1998. The Company's
portion of the project is expected to be funded through working capital and
project financing which is expected to be provided by a third party on a
limited recourse basis.
"DEEPWATER FRONTIER". This is a dynamically positioned drillship being
constructed for a joint venture in which the Company owns a 60% interest.
The estimated cost is approximately $240.0 million plus capitalized
interest, with delivery expected to be in the first quarter of 1999. The
Company's portion of the project is expected to be funded through working
capital and project financing of the joint venture which is expected to be
provided by a third party on a limited recourse basis. During 1997, the
Company had advanced approximately $46.4 million to the joint venture which
was reimbursed in November 1997, after financing was obtained by the joint
venture. The Company has agreed to guarantee repayment of 60% of the
$175.0 million financing which was obtained.
Drillship III. This is a dynamically positioned drillship being
constructed by the Company at an estimated cost of approximately $245.0
million plus capitalized interest. Delivery of the drillship is expected
to be in the third quarter of 1999. The cost of this drillship is expected
to be funded through non-recourse project financing. As of December 31,
1997, the Company had spent approximately $40.5 million on this project
which is included in "Property and Equipment: Drilling".
"RBS-6". The Company has entered into a letter of intent with Shell
Deepwater Development Inc. ("Shell") to build a new generation ultra
deepwater moored semisubmersible to be used by Shell under a five year
drilling contract. The estimated cost of the unit is approximately $280.0
million plus capitalized interest and other non-hardware costs and delivery
of the unit is scheduled for the first quarter of 2000. The drilling
contract is being structured to facilitate non-recourse financing by the
Company by using the five year contract with Shell as the primary financing
collateral. As of December 31, 1997, the Company had spent approximately
$15.2 million which is included in "Property and Equipment: Drilling".
"PEREGRINE IV". This is a dynamically positioned drillship being
constructed by the Company at an estimated cost of approximately $160.0
million plus capitalized interest. Delivery is expected in the fourth
quarter of 1998. As of December 31, 1997, the Company had spent
approximately $52.8 million on this project which is included in "Property
and Equipment: Drilling".
"PEREGRINE VI". This is a dynamically positioned drillship being
constructed by the Company at an estimated cost of approximately $200.0
million plus capitalized interest. Delivery is expected in the first
quarter of 1999. As of December 31, 1997, the Company had spent
approximately $36.8 million on this project which is included in "Property
and Equipment: Drilling".
"PEREGRINE VII". This is a dynamically positioned drillship that was
purchased by the Company in 1997 for $33.8 million. It is currently
undergoing an upgrade that is expected to cost approximately $120.0 million
plus capitalized interest. Delivery of the drillship is expected in the
fourth quarter of 1998. As of December 31, 1997, the Company had spent
approximately $61.4 million on this project which is included in "Property
and Equipment: Drilling".
"PEREGRINE VIII". This is a dynamically positioned drillship being
constructed by the Company at an estimated cost of approximately $200.0
million plus capitalized interest. Delivery is expected in the third
quarter of 1999. As of December 31, 1997, the Company had spent
approximately $21.7 million on this project which is included in "Property
and Equipment: Drilling".
"FALCON 100". This is a second-generation semisubmersible that was
purchased by the Company in 1995 and is being upgraded to third-generation
capability at an estimated cost of $65.0 million plus capitalized interest.
Delivery is expected in the fourth quarter of 1998. As of December 31,
1997, the Company had spent approximately $14.2 million on this project
which is included in "Property and Equipment-Drilling".
The Company's cash on hand and available borrowing capacity together
with its expected future cash flows will likely be insufficient to fully
fund its currently expected capital spending program. Accordingly, during
the first half of 1998, the Company will initiate a debt refinancing
program which is planned to retire substantially all of the Company's
existing subsidiary debt obligations and provide the liquidity necessary to
complete its capital spending plans. This debt refinancing program is
intended to include a new $500.0 million revolving credit facility and an
approximate $1.0 billion bond financing. The Company has received a $500.0
million revolving credit commitment from a financial institution, which
commitment is subject to, among other things, successful completion of a
bond offering and retirement of substantially all of the Company's existing
subsidiary debt obligations.
Future cash flows and credit market conditions are subject to a number
of uncertainties. Liquidity of the Company should be considered in light
of the significant fluctuations in demand that may be experienced by
drilling contractors as rapid changes in oil and gas producers'
expectations and budgets occur. These fluctuations can rapidly impact the
Company's liquidity as supply and demand factors directly affect
utilization and dayrates, which are the primary determinates of cash flow
from the Company's operations. There can be no assurance that internally
generated cash resources and externally provided capital will be sufficient
to fund the Company's liquidity requirements. Should conditions occur that
significantly delay or otherwise impede the Company's refinancing plan,
management believes that the Company could delay capital spending programs
or alternatively sell assets in order to maintain adequate liquidity to
meet its needs.
At December 31, 1997, approximately $49.8 million of total consolidated
cash, cash equivalents and short-term investments of $100.9 million were
restricted from the Company's use outside of Drilling's activities. See
Note A of Notes to Consolidated Financial Statements.
In 1998, the Company will begin recording income taxes at the full
statutory rates as tax benefit carryforwards will no longer be reserved.
The impact of inflation on the Company's operations for the three years
ended December 31, 1997 has not been material.
Public Equity Offerings
1996
In December 1996, Falcon sold 6.4 million shares of its common stock in
a public offering, resulting in net proceeds of approximately $108.5
million. Proceeds were used primarily for the purchase of drilling
equipment. See Note G of Notes to Consolidated Financial Statements.
1995
In August 1995, Falcon sold 8.5 million shares of its common stock in a
public offering, resulting in net proceeds of approximately $34.4 million.
Proceeds were used primarily for the purchase of drilling equipment. See
Note G of Notes to Consolidated Financial Statements.
In November 1995, Falcon sold 6.4 million shares of its common stock in
a public offering, resulting in net proceeds of approximately $30.9
million. Proceeds were used primarily for the purchase of drilling
equipment. See Note G of Notes to Consolidated Financial Statements.
Debt Offerings
1996
Pursuant to an offering in March 1996, Falcon issued $120.0 million
principal amount of 8 7/8% Senior Notes resulting in net proceeds of
approximately $116.0 million. See Note C of Notes to Consolidated Financial
Statements.
1995
Pursuant to an offering in March 1995, Falcon issued $50.0 million
principal amount of Subordinated Notes resulting in net proceeds of
approximately $48.0 million. See Note C of Notes to Consolidated Financial
Statements.
Credit Facilities
CBK Facility. The Company has entered into a credit facility agreement
with Christiania Bank og Kreditkasse (the "CBK Facility") as agent for a
syndicate of banks (including itself). The CBK Facility consists of a
$400.0 million reducing revolving credit facility to be utilized for
revolving loans and/or issuance of standby letters of credit (subject to a
maximum of $30.0 million). At December 31, 1997, there were no letters of
credit outstanding under the CBK Facility, leaving $48.0 million available
for revolving loans and/or issuance of standby letters of credit (maximum
of $30.0 million). In addition, the Company has entered into a separate
$20.0 million letter of credit agreement with Christiania Bank og
Kreditkasse. At December 31, 1997, $9.2 million was available under such
agreement. See Notes C and D of Notes to Consolidated Financial
Statements.
Paribas Facility. The Company has entered into a revolving credit
facility agreement with Banque Paribas (the "Paribas Facility") as agent
for a syndicate of banks (including itself). The Paribas Facility consists
of (i) a $25.0 million secured revolving loan facility, maturing in
November 1999, (ii) a $60.0 million secured revolving loan facility
maturing in November 1998 and (iii) a $130.0 million unsecured revolving
loan facility maturing in October 1998. At December 31, 1997, there were
available borrowings of $85.0 million under the Paribas Facility. See Note
C of Notes to Consolidated Financial Statements.
Item 8. Financial Statements and Supplementary Data
R&B FALCON CORPORATION AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
R&B Falcon Corporation
We have audited the accompanying consolidated balance sheets of R&B Falcon
Corporation (a Delaware corporation) and Subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of operations, cash
flows and stockholders' equity for each of the three years in the period
ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of R&B Falcon
Corporation and Subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
/s/Arthur Andersen LLP
Houston, Texas
March 24, 1998
R&B FALCON CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1997 and 1996
(in millions except share amounts)
1997 1996
ASSETS --------- ---------
------
CURRENT ASSETS:
Cash and cash equivalents $ 55.5 $ 127.8
Short-term investments 45.4 16.3
Accounts receivable:
Trade, net 165.1 128.9
Other 22.3 14.8
Materials and supplies inventory 15.1 13.4
Other current assets 13.1 5.5
--------- ---------
Total current assets 316.5 306.7
--------- ---------
PROPERTY AND EQUIPMENT:
Drilling 1,925.9 1,412.9
Other 81.1 14.1
--------- ---------
Total property and equipment 2,007.0 1,427.0
Accumulated depreciation (426.3) (355.3)
--------- ---------
Net property and equipment 1,580.7 1,071.7
--------- ---------
DEFERRED CHARGES AND OTHER ASSETS 31.2 26.3
--------- ---------
NET ASSETS OF DISCONTINUED OPERATIONS - 51.1
--------- ---------
TOTAL ASSETS $ 1,928.4 $ 1,455.8
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Long-term obligations due within one year $ 135.2 $ 14.3
Accounts payable - trade 51.5 44.6
Accrued liabilities 144.7 52.5
--------- ---------
Total current liabilities 331.4 111.4
LONG-TERM OBLIGATIONS 692.2 499.9
OTHER NONCURRENT LIABILITIES 38.6 52.1
DEFERRED INCOME TAXES 76.8 29.6
NET LIABILITIES OF DISCONTINUED OPERATIONS 5.8 -
--------- ---------
Total liabilities 1,144.8 693.0
--------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 55.6 46.1
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 550,000,000
shares authorized, 164,312,224 shares and
163,398,663 shares issued and outstanding
at December 31, 1997 and 1996, respectively 1.6 1.6
Capital in excess of par value 631.4 630.8
Retained earnings 96.3 102.5
Other (1.3) (18.2)
--------- ---------
Total stockholders' equity 728.0 716.7
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,928.4 $ 1,455.8
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions except per share amounts)
Years Ended December 31,
----------------------------
1997 1996 1995
-------- -------- --------
OPERATING REVENUES $ 942.1 $ 609.6 $ 390.3
-------- -------- --------
COSTS AND EXPENSES:
Operating expenses 447.6 329.6 249.3
Depreciation 82.9 62.3 46.9
General and administrative 51.9 37.0 29.2
Merger expenses 66.4 - -
-------- -------- --------
Total costs and expenses 648.8 428.9 325.4
-------- -------- --------
OPERATING INCOME 293.3 180.7 64.9
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense, net of interest
capitalized (46.3) (43.0) (34.6)
Interest income 5.8 3.4 3.0
Other, net (2.7) (1.0) (.7)
-------- -------- --------
Total other income (expense) (43.2) (40.6) (32.3)
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAX EXPENSE, MINORITY INTEREST
AND EXTRAORDINARY GAIN 250.1 140.1 32.6
-------- -------- --------
INCOME TAX EXPENSE:
Current 39.3 6.3 2.9
Deferred 45.4 20.7 3.4
-------- -------- --------
Total income tax expense 84.7 27.0 6.3
-------- -------- --------
MINORITY INTEREST (9.4) (6.7) (2.8)
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY GAIN 156.0 106.4 23.5
-------- -------- --------
DISCONTINUED OPERATIONS:
Income (loss) from operations (83.4) .3 -
Loss on disposal (78.8) - -
-------- -------- --------
Total discontinued operations (162.2) .3 -
-------- -------- --------
EXTRAORDINARY GAIN - - 3.4
-------- -------- --------
NET INCOME (LOSS) (6.2) 106.7 26.9
DIVIDENDS ON PREFERRED STOCK - 3.6 5.2
-------- -------- --------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS $ (6.2) $ 103.1 $ 21.7
======== ======== ========
NET INCOME (LOSS) PER COMMON SHARE:
Basic:
Continuing operations $ .95 $ .70 $ .16
Discontinued operations (.99) - -
Extraordinary gain - - .03
--------- --------- ---------
Net income (loss) $ (.04)$ .70 $ .19
========= ========= =========
Diluted:
Continuing operations $ .94 $ .67 $ .15
Discontinued operations (.98) - -
Extraordinary gain - - .03
--------- --------- ---------
Net income (loss) $ (.04)$ .67 $ .18
========= ========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 164.1 147.4 115.7
======== ======== ========
Diluted 166.2 157.7 121.8
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Years Ended December 31,
----------------------------
1997 1996 1995
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (6.2) $ 106.7 $ 26.9
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 82.9 62.3 46.9
Gain on dispositions of property
and equipment (6.9) (3.7) (0.3)
Deferred income taxes 49.9 15.9 3.4
Recognition of deferred expenses 7.1 8.0 9.2
Deferred compensation 17.8 3.2 0.2
Minority interest in income of
consolidated subsidiaries 9.4 6.7 2.8
Loss (income) from discontinued
operations 162.2 (.3) -
Extraordinary gain from extinguishment
of debt - - (3.4)
Changes in assets and liabilities:
Accounts receivable, net (39.8) (56.1) (17.0)
Materials and supplies inventory (1.4) (2.3) (0.5)
Deferred charges and other assets (19.6) (8.2) (8.1)
Accounts payable - trade 6.9 9.2 (14.7)
Accrued interest 7.1 6.2 5.4
Accrued liabilities 74.6 13.5 10.5
Other, net (1.2) 6.2 (5.3)
-------- -------- --------
Net cash provided by
operating activities 342.8 167.3 56.0
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Dispositions of property and equipment 10.4 3.9 53.1
Purchases of property and equipment,
exclusive of noncash items (593.2) (352.3) (155.9)
Sale (purchase) of short-term investments (29.1) (15.5) 2.4
Other .9 (1.2) (.9)
-------- -------- --------
Net cash used in investing activities (611.0) (365.1) (101.3)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on short-term
obligations - - (12.2)
Net proceeds from revolving credit
facilities 316.0 141.0 20.0
Proceeds from long-term obligations 38.0 120.0 80.0
Principal payments on long-term
obligations (49.6) (45.8) (92.1)
Dividends paid on preferred stock - (3.6) (5.2)
Distribution to minority shareholders
of consolidated subsidiaries - (5.1) (1.8)
Issuance of common stock, net 2.7 110.7 70.4
Other (5.9) 2.4 (3.4)
-------- -------- --------
Net cash provided by financing
activities 301.2 319.6 55.7
-------- -------- --------
CASH USED IN DISCONTINUED OPERATIONS (105.3) (39.2) (12.4)
-------- -------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (72.3) 82.6 (2.0)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 127.8 45.2 47.2
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 55.5 $ 127.8 $ 45.2
======== ======== ========
Supplemental Cash Flow Disclosures:
Interest paid, net of capitalized
interest $ 36.5 $ 35.2 $ 29.4
Income taxes paid $ 13.9 $ 5.7 $ 3.0
Noncash investing activities:
Purchase of property and equipment
in exchange for equity or debt $ 8.0 $ 30.9 $ 31.0
Purchase of property included in
discontinued operations in
exchange for debt $ - $ - $ 12.0
The accompanying notes are an integral part of the consolidated financial
statements.
R&B FALCON CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Years Ended December 31, 1997
(in millions)
Common Stock
------------ Capital in Retained
Amount Excess of Earnings
Shares (1) Par Value (Deficit) Other
------ ------ --------- ------- -------
Balances at December 31, 1994 102.3 $ 1.0 $ 361.5 $(22.3) $ (1.1)
Net income 26.9
Dividends paid on
preferred stock (5.2)
Conversion of preferred stock 15.6 .2 14.2
Purchase of assets 2.9 21.0
Activity in Company stock plans 7.3 .1 8.2 .2
Restricted stock grant .6 7.5 (7.6)
Issuance of common stock 14.8 .1 65.2
Additional minimum liability (.3)
Other .2 (.2)
----- ----- ------- ------ -------
Balances at December 31, 1995 143.5 1.4 477.8 (.6) (9.0)
Net income 106.7
Dividends paid on peferred
stock (3.6)
Conversion of preferred
stock 10.2 .1 2.9
Purchase of assets .8 15.0
Activity in Company stock plans 1.9 13.0 .1
Restricted stock grant .6 13.8 (10.6)
Issuance of common stock 6.4 .1 108.4
Additional minimum liability 1.2
Other (.1) .1
----- ----- ------- ------- ------
Balances at December 31, 1996 163.4 1.6 630.8 102.5 (18.2)
Net loss (6.2)
Activity in Company stock plans 1.2 8.9
Restricted stock grant .9 6.8
Acceleration of stock grants (.3) (9.3) 10.1
Other .1
----- ----- ------- ------- -------
Balances at December 31, 1997 164.3 $ 1.6 $ 631.4 $ 96.3 $ (1.3)
===== ===== ======= ======= =======
____________________
(1) Amounts less than one-tenth of a million are not shown.
The accompanying notes are an integral part of the consolidated financial
statements.
R&B FALCON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
______________
(A) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - The consolidated financial statements include the
accounts of R&B Falcon Corporation ("R&B Falcon") and its subsidiaries
(collectively, the "Company"), including Reading & Bates Corporation
("R&B"), Falcon Drilling Company, Inc. ("Falcon"), and its majority-owned
(approximately 74.4%) subsidiary Arcade Drilling AS ("Drilling").
Investments in unconsolidated investees are accounted for on the equity
method. All significant intercompany accounts and transactions have been
eliminated.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments purchased with an original maturity of three months or less to
be cash equivalents. At December 31, 1997, $4.4 million of the cash and
cash equivalents balance related to Drilling. Such cash and cash
equivalents balance as well as the short-term investments discussed below,
are available to Drilling for all purposes subject to restrictions under
the Standstill Agreement dated as of August 31, 1991 among Drilling,
Transocean Offshore Inc. (as successor to Sonat Offshore Drilling Inc.) and
R&B which restrictions preclude R&B from borrowing any cash from Drilling
unless (i) Transocean is offered a pro-rata loan (based on stock ownership
in Drilling) on similar terms and (ii) any such loan(s) otherwise comply
with applicable laws. Drilling declared a distribution of approximately
$14.3 million in the first quarter of 1996, of which the Company received
approximately $10.6 million.
SHORT-TERM INVESTMENTS - Short-term investments consist of interest-
bearing deposits with a commercial bank with an original maturity greater
than three months but less than one year from the date of the investment.
At December 31, 1997, all of the short-term investments balance related to
Drilling (see CASH AND CASH EQUIVALENTS above).
MATERIALS AND SUPPLIES INVENTORY - Materials and supplies are stated at
the lower of average cost or market.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Drilling units and marine equipment are depreciated under the straight-line
method. Estimated useful lives range from three to twenty-five years.
Gain (loss) on disposal of properties is credited (charged) to income. The
amount of construction in progress included in drilling equipment at
December 31, 1997 and 1996 was $255.0 million and $99.3 million,
respectively. Certain barge drilling rigs and other related equipment are
being held in non-operating status pending modification and decisions
regarding their deployment. Management believes their market value exceeds
their net book value of $14.4 million and $17.8 million at December 31,
1997 and 1996, respectively.
INCOME TAXES - Deferred income taxes are recognized for revenues and
expenses reported in different years for financial statement purposes and
income tax purposes.
REVENUE RECOGNITION - Revenues are recognized as they are earned.
Proceeds associated with the early termination of a contract are recorded
as deferred income and recognized as contract revenues over the remaining
term of the contract or until such time as the mobile offshore unit begins
a new contract. There were no such amounts deferred at December 31, 1997
or 1996. In addition, when a unit's mobilization revenue exceeds the cost
of the mobilization by a significant amount, the Company recognizes the
excess as contract revenue during the contract preparation and mobilization
period on a dayrate basis. If there is revenue that has not been
recognized by the time the unit has arrived on location, the remaining
amount is recognized over the primary term of the contract.
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 years ended December 31,
1997, 1996 and 1995 was $10.8 million, $4.9 million and $.4 million,
respectively and is shown net of interest expense in the Consolidated
Statement of Operations.
FOREIGN CURRENCY TRANSACTIONS - The net gains and losses resulting from
foreign currency transactions included in determining net income amounted
to a net loss of $.4 million in 1997 and a net gain of $.8 million and $.2
million in 1996 and 1995, respectively. The Company may enter into forward
exchange contracts to hedge specific commitments and anticipated
transactions but not for speculative or trading purposes. In the third
quarter of 1996, the Company entered into a short-term foreign exchange
forward contract to hedge a firm commitment relating to the purchase of
equipment. This contract was intended to reduce currency risk from
exchange rate movements. Insignificant gains and losses were deferred and
accounted for as part of the underlying transaction. At December 31, 1997,
the Company did not have any outstanding forward exchange contracts.
During 1997 and 1995 the Company did not enter into any forward exchange
contracts.
MINORITY INTEREST - Minority interest relates primarily to the results
of Drilling, which owns the drilling units "HENRY GOODRICH" and "PAUL B.
LOYD, JR." The ownership percentage of Drilling attributable to
stockholders other than the Company was 25.6%, 25.6% and 25.7% for the
years ending December 31, 1997, 1996 and 1995, respectively. Drilling
reported income in 1997, 1996 and 1995 of $36.9 million, $26.3 million and
$5.6 million, respectively.
EXTRAORDINARY GAIN - In December 1995, the Company recorded an
extraordinary gain of $3.4 million for the extinguishment of a debt
obligation.
CONCENTRATION OF CREDIT RISK - The Company maintains cash balances and
short-term investments with commercial banks throughout the world. The
Company's cash equivalents and short-term investments generally consist of
commercial paper, money-market mutual funds and interest-bearing deposits
with strong credit rated financial institutions, therefore, bearing minimal
risk. No losses were incurred during 1997, 1996 and 1995.
The Company's revenues were generated primarily from its drilling rigs.
Revenues can be generated from a relatively small number of customers,
which are primarily major and independent foreign and domestic oil and gas
companies, as well as foreign state-owned oil and gas companies. The
Company performs ongoing credit evaluations of its customers' financial
conditions and generally requires no collateral from its customers. The
Company's allowance for doubtful accounts at December 31, 1997 and 1996 was
$7.4 million and $3.4 million, respectively.
INDUSTRY CONDITIONS - Results of operations and financial condition of
the Company should be considered in light of the fluctuations in demand
experienced by drilling contractors as changes in exploration and
production programs of oil and gas companies occur. These fluctuations can
impact the Company's results of operations and financial condition as
supply and demand factors directly affect utilization and dayrates, which
are the primary determinants of cash flow from the Company's operations.
LIQUIDITY - The Company's cash on hand and available borrowing capacity
together with its expected future cash flows will likely be insufficient to
fully fund its currently expected capital spending program. Accordingly,
during the first half of 1998, the Company will initiate a debt refinancing
program which is planned to retire substantially all of the Company's
existing subsidiary debt obligations and provide the liquidity necessary to
complete its capital spending plans. This debt refinancing program is
intended to include a new $500.0 million revolving credit facility and an
approximate $1.0 billion bond financing. The Company has received a $500.0
million revolving credit commitment from a financial institution, which
commitment is subject to, among other things, successful completion of a
bond offering and retirement of substantially all of the Company's existing
subsidiary debt obligations.
Future cash flows and credit market conditions are subject to a number
of uncertainties. Liquidity of the Company should be considered in light
of the significant fluctuations in demand that may be experienced by
drilling contractors as rapid changes in oil and gas producers'
expectations and budgets occur. These fluctuations can rapidly impact the
Company's liquidity as supply and demand factors directly affect
utilization and dayrates, which are the primary determinates of cash flow
from the Company's operations. There can be no assurance that internally
generated cash resources and externally provided capital will be sufficient
to fund the Company's liquidity requirements. Should conditions occur that
significantly delay or otherwise impede the Company's refinancing plan,
management believes that the Company could delay capital spending programs
or alternatively sell assets in order to maintain adequate liquidity to
meet its needs.
NEWLY ISSUED ACCOUNTING STANDARDS - In March 1995, Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of ("SFAS 121")
was issued. SFAS 121, which became effective in 1996, requires that
certain long-lived assets be reviewed for impairment whenever events
indicate that the carrying amount of an asset may not be recoverable, and
that an impairment loss be recognized under certain circumstances in the
amount by which the carrying value exceeds the fair value of the asset. In
1995, the Company adopted SFAS 121 which had no effect on the Company's
consolidated results of operations or financial position.
In October 1995, Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensation ("SFAS 123") was issued. SFAS 123
requires either recognition of compensation expense in the financial
statements for those companies that adopt the fair value based accounting
method or expanded disclosure of pro forma net income and earnings per
share information for those companies that retain the accounting method set
forth in Accounting Principles Board (APB) Opinion 25, Accounting for Stock
Issued to Employees. The Company follows the accounting method set forth
in APB 25 and provides the expanded disclosure requirements (See Note H).
In February 1997, Statement of Financial Accounting Standards No. 128,
Earnings per Share ("SFAS 128") was issued. SFAS 128 establishes revised
standards for computing and presenting earnings per share. The Company
adopted SFAS 128 in the fourth quarter of 1997 and restated all prior
period earnings per share data presented.
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 nonowner
changes in equity. The Company is required to adopt SFAS 130 in the first
quarter of fiscal 1998. Reclassification of comparative financial
statements provided for earlier periods will be required. The Company
believes that the display of comprehensive income will not differ
materially from the currently reported net income (loss) attributable to
common stockholders.
In June 1997, Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("SFAS
131") was issued. SFAS 131 requires that companies report financial and
descriptive information about their reportable operating segments. Segment
information to be reported is to be based upon the way management organizes
the segments for making operating decisions and assessing performance. The
Company will adopt SFAS 131 in 1998.
ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
(B) BUSINESS COMBINATION
On December 31, 1997, R&B and Falcon completed a business combination
(merger) whereby each outstanding share of common stock of Falcon was
converted into one share of R&B Falcon common stock and each outstanding
share of common stock of R&B was converted into 1.18 shares of R&B Falcon
common stock. The merger qualified as a tax-free exchange and has been
accounted for as a pooling of interests and, accordingly, the consolidated
financial statements for the periods presented have been restated to
include the accounts of R&B and Falcon.
There was one transaction between R&B and Falcon prior to the merger
which resulted in an adjustment to the combined restated financial
statements of R&B Falcon. In 1996, R&B sold the drilling unit, the "D.K.
McINTOSH" to Falcon. The resulting gain of $3.8 million recorded by R&B
has been eliminated from the accompanying financial statements.
The results of operations for the separate companies and the combined
amounts presented in the consolidated financial statements for the years
ended December 31, 1997, 1996 and 1995 are as follows (in millions):
1997 1996 1995
------- ------- -------
Operating revenues
R&B $ 424.2 $ 290.3 $ 212.8
Falcon 517.9 319.3 177.5
------- ------- -------
Combined $ 942.1 $ 609.6 $ 390.3
======= ======= =======
Extraordinary gain
R&B $ - $ - $ 3.4
Falcon - - -
------- ------- -------
Combined $ - $ - $ 3.4
======= ======= =======
Net income (loss)
R&B $ (73.5) $ 74.1 $ 21.8
Falcon 67.3 32.6 5.1
------- ------- -------
Combined $ (6.2) $ 106.7 $ 26.9
======= ======= =======
In connection with the merger, the Company recorded $66.4 million of
expenses in the fourth quarter of 1997. Such expenses consist primarily of
employment contract termination fees associated with executives of R&B, the
acceleration of unearned compensation of certain stock grants previously
awarded to certain R&B employees, fees for investment bankers, attorneys,
and accountants, and printing and other related costs.
(C) LONG-TERM OBLIGATIONS
Long-term obligations at December 31, 1997 and 1996 consisted of the
following (in millions):
1997 1996
------- -------
Christiania Bank (1) $ 352.0 $ 166.0
Banque Paribas (2) 130.0 -
8% Senior Subordinated Convertible Debentures, due
December 1998 ("8% Debentures") (3) 15.6 13.1
8 7/8% Senior Notes, due March 2003
("8 7/8% Notes") (4) 120.0 120.0
9 3/4% Senior Notes, due January 2001
("9 3/4% Notes") (5) 110.0 110.0
12 1/2 % Subordinated Notes, due
March 2005 ("12 1/2% Notes") (6) 50.0 50.0
Floating Rate Notes (7) 10.0 10.0
NIC (8) 25.3 -
Deferred payment obligation (9) 7.5 7.5
Secured promissory note (10) 6.4 -
Chase Manhattan (11) - 32.5
Other debt obligations .6 5.1
------- -------
Total 827.4 514.2
Less long-term obligations due within one year (135.2) (14.3)
------- -------
Long-term obligations $ 692.2 $ 499.9
======= =======
__________________________
(1) The Company has entered into a credit facility agreement with
Christiania Bank og Kreditkasse (the "CBK Facility") as agent for a
syndicate of banks (including itself). The CBK Facility consists of a
$400.0 million reducing revolving credit facility to be utilized for
revolving loans and/or issuance of standby letters of credit (subject
to a maximum of $30.0 million) (see Note D). The CBK Facility shall
be reduced/repaid by five semi-annual installments of $37.0 million
commencing in May 1999 and one final reduction/repayment of $215.0
million in November 2001 and bears interest at the London Interbank
Offered Rate ("LIBOR") (5.84375% at December 31, 1997) plus .85%. In
addition, a fee of .85% per annum is paid on outstanding letters of
credit and a commitment fee of .35% per annum is paid on the unused
portion of the CBK Facility. At December 31, 1997, there were no
letters of credit outstanding under the CBK Facility, leaving $48.0
million available for revolving loans and/or issuance of standby
letters of credit (maximum of $30.0 million). The CBK Facility
contains covenants which require R&B to meet certain ratios and
working capital conditions, and is collateralized by vessel mortgages
on fourteen of the drilling units owned by the Company, related
assignments of insurance and earnings, and a pledge of the Company's
shares of stock of Drilling. As of December 31, 1997, the Company was
in compliance with the CBK Facility covenants, as amended.
(2) The Company has entered into a revolving credit facility agreement
with Banque Paribas (the "Paribas Facility") as agent for a syndicate
of banks (including itself). The Paribas Facility consists of (i) a
$25.0 million tranche secured by accounts receivable, maturing in
November 1999, (ii) a $60.0 million tranche secured by certain
drilling rigs and receivables, maturing in November 1998 and (iii) a
$130.0 million tranche that is unsecured, maturing in October 1998.
At December 31, 1997, there were available borrowings of $85.0
million under the Paribas Facility. The facilities require Falcon to
meet certain tests related to its net worth, interest coverage ratio,
and current ratio, and places restrictions on dividends and
investments by Falcon. The facility provides generally for interest
at LIBOR plus 1% on the $25.0 million tranche, at LIBOR plus 1.5% on
the $60.0 million tranche, and at LIBOR plus 1.75% on the $130.0
million tranche. The interest rate on the $130.0 million tranche
increases by .50% during each calendar quarter commencing in the
second quarter of 1998. The Company has paid fees to the banks in the
aggregate amount of approximately $1.5 million in order to implement
the facilities, and pays a commitment fee equal to (i) .375% per
annum of the unused portion of the $25.0 million and $60.0 million
tranches, and .20% per annum on the unused portion of the $130.0
million tranche.
(3) The 8% Debentures are convertible into the Company's common stock at
$31.386 per share. Accrued interest associated with the 8% Debentures
at December 31, 1997 and 1996, was $11.9 million and $11.9 million,
respectively. The 8% Debentures were recorded at amounts equal to the
net present value of their respective future cash payments required,
discounted at 15%, which is the interest rate the Company believes it
would have been required to pay to obtain financing of a similar
nature from other sources during 1991. The face amount of the 8%
Debentures and the related unamortized discount at December 31, 1997
totaled $18.6 million and $3.0 million, respectively. The face amount
of the 8% Debentures and the related unamortized discount at December
31, 1996 totaled $18.6 million and $5.5 million, respectively.
(4) The 8 7/8% Notes were issued by Falcon pursuant to an offering in
March 1996, resulting in net proceeds of approximately $116.0 million
to the Company after deducting offering related expenses. The 8 7/8%
Notes consist of $120.0 million principal amount and bear interest at
a rate of 8 7/8%, payable semiannually on March 15 and September 15.
The 8 7/8% Notes are unsecured obligations of Falcon, ranking pari
passu in right of payment with all other senior indebtedness of
Falcon. The 8 7/8% Notes are not guaranteed by any of Falcon's
subsidiaries, and thus are structurally subordinated to the 9 3/4%
Notes (defined below) and other indebtedness of the subsidiaries.
Further, they are effectively subordinated to any secured indebtedness
of Falcon to the extent of the collateral securing such secured
indebtedness.
(5) The 9 3/4% Notes were issued by Falcon pursuant to an offering in
January 1994 resulting in net proceeds of approximately $104.9 million
to the Company after deducting offering related expenses. The 9 3/4%
Notes consist of $110.0 million principal amount and bear interest at
a rate of 9 3/4%, payable semiannually on January 15 and July 15. The
9 3/4% Notes are guaranteed by certain of the Company's subsidiaries.
The 9 3/4% Notes are unsecured obligations of Falcon, ranking pari
passu in right of payment with all other senior indebtedness of
Falcon, but are effectively subordinated to any secured indebtedness
of Falcon to the extent of the collateral securing such secured
indebtedness.
(6) The 12 1/2% Notes were issued by Falcon pursuant to an offering in
March 1995, resulting in net proceeds of approximately $48.0 million
to the Company after deducting offering related expenses. The 12 1/2%
Notes consist of $50.0 million principal amount and bear interest at a
rate of 12 1/2%, payable semiannually on March 15 and September 15.
The 12 1/2% Notes are subordinated to all other indebtedness of the
Company except indebtedness that expressly provides it shall not be
senior in right of payment to the 12 1/2% Notes.
(7) On February 23, 1994, Falcon issued $10.0 million of Floating Rate
Notes which bear interest at LIBOR plus 3.5%. The principal amounts
of the Floating Rate Notes are due in payments of $1.0 million, $2.0
million and $2.0 million on January 24 of 1998, 1999 and 2000,
respectively, with the balance due January 24, 2001. The Floating Rate
Notes are guaranteed by certain of the Company's subsidiaries. The
Floating Rate Notes are unsecured obligations of Falcon, ranking pari
passu in right of payment with all other senior indebtedness of
Falcon, but are effectively subordinated to any secured indebtedness
of Falcon to the extent of the collateral securing such secured
indebtedness.
(8) In April 1997, a wholly owned subsidiary of the Company entered
into a five year $38.0 million loan agreement with Nissho Iwai Europe
PLC ("NIC"). The loan is collateralized by a vessel mortgage on the
"SEILLEAN" without recourse to the Company and bears interest at LIBOR
plus 2%. Principal repayments are monthly based on the greater of the
excess cash flow of the "SEILLEAN" or the outstanding principal
balance divided by the remaining monthly periods of the loan. In
addition, NIC has the option to purchase up to 10% of the ownership in
the "SEILLEAN", any time prior to April 25, 2000, at a minimum price
of $4.2 million.
(9) In September 1995, the Company entered into a $10.0 million deferred
payment obligation in connection with the purchase of the support
vessel "IOLAIR". The deferred payment obligation bears interest at a
fixed rate of 8%. A principal repayment of $2.5 million was paid in
September 1996 and payments of $7.0 million and $.5 million are due in
September 1998 and September 2000, respectively. The obligation is
collateralized by a vessel mortgage on the support vessel "IOLAIR".
(10) In January 1997, the Company issued a $6.4 million secured
promissory note, payable to Coastal Capital Corporation, in connection
with the purchase of the "PEREGRINE VI". The note bears interest at
7.5%, payable monthly, and matures in January 1999. The note is
collateralized by a vessel mortgage on the "PEREGRINE VI".
(11) In August 1997, Drilling's term loan payable to The Chase Manhattan
Bank, N.A. was repaid in full with Drilling's cash on hand. The term
loan bore interest at LIBOR plus .45%. The drilling units "HENRY
GOODRICH" and "PAUL B. LOYD, JR." collateralized the loan.
The indentures pursuant to which the 8 7/8% Notes, 9 3/4% Notes, and
the 12 1/2% Notes were issued (i) provide that Falcon may redeem such
obligations at a premium at certain times prior to maturity, (ii) require
Falcon to offer to redeem such obligations at a premium if there is a
change of control of Falcon (see below), and (iii) impose restrictions on
certain actions by Falcon, including payment of dividends, incurrence of
debt, pledging of assets, sale of assets, and making investments.
The consummation of the merger between R&B and Falcon caused a "change
of control" as defined in Falcon's note indentures representing outstanding
principal indebtedness of $290.0 million at December 31, 1997. On January
28, 1998, Falcon made a purchase offer to each note holder at a price equal
to 101% of the aggregate principal amount outstanding or approximately
$293.0 million, plus accrued interest. The date for tender of notes by any
electing bond holder is March 24, 1998, and the redemption date is March
27, 1998. As of March 24, 1998, none of the bonds were tendered for
redemption.
The Company estimates the fair value of its debt obligations to be
$846.0 million compared to a book value of $827.4 million, both as of
December 31, 1997.
Aggregate annual maturities of long-term obligations, (including the
current portion) for the next five years and thereafter are as follows (in
millions):
1998 $ 138.2
1999 65.8
2000 82.7
2001 373.2
2002 .5
Thereafter 170.0
-------
830.4
Less the unamortized discount
on the 8% Debentures (3.0)
-------
Total long-term obligations and long-
term obligations due within one year
at December 31, 1997 $ 827.4
=======
(D) COMMITMENTS AND CONTINGENCIES
GENERAL - In 1992, in connection with the acquisition of certain barge
drilling rig operations, the Company entered into contingent profits
interest agreements with the former rig owners and former mortgage holder.
The periods for determination of these payments began in 1993 and continued
through 1997.
Pursuant to certain of the Company's long-term drilling contracts, the
operator may purchase three of the Company's barge drilling rigs for
specified prices which decrease each year through 1999. Management of the
Company estimates that the option price will be less than the carrying
value for one of these rigs by approximately $.9 million in 1998, and that
the aggregate option price for the three rigs will be below the aggregate
carrying value for such rigs by approximately $1.2 million and $3.5 million
in 1998 and 1999, respectively. Management does not expect the purchase
option to be exercised and will continue to evaluate the net book value of
these rigs for possible future impairment.
The Company has a contract with Petrobras that requires the Company to
pay penalties, not to exceed $34.8 million in total, should the Company not
deliver a drillship and should such drillship not pass inspection by
certain dates.
CAPITAL EXPENDITURES - During 1998 and 1999, the Company expects to
spend approximately $1.4 billion to expand and upgrade its operating rig
fleet. Approximately $1.1 billion of this total will be expended in
connection with the expansion of the Company's deepwater rig fleet. The
remaining expected capital expenditures of approximately $300.0 million
would be used to reactivate currently idle barge drilling rigs and upgrade
the Company's existing rig fleet. These amounts exclude $475.0 million
related to construction commitments of two joint ventures funded through
working capital and project financing which is expected to be provided by a
third party on a limited recourse basis.
OPERATING LEASES - The Company has operating leases covering premises
and equipment. Certain operating leases contain renewal options and have
options to purchase the asset at fair market value at the end of the lease
term. Lease expense amounted to $40.2 million (1997), $22.7 million (1996)
and $10.6 million (1995). As of December 31, 1997, future minimum rental
payments relating to operating leases were as follows (in millions):
1998 1999 2000 2001 2002 Thereafter
------ ------ ------ ------ ------ ----------
Drilling units $ 21.8 $ 20.6 $ 12.6 $ 11.7 $ 11.7 $ 34.3
Other 2.2 .9 .6 .4 .4 -
------ ------ ------ ------ ------ ------
Total $ 24.0 $ 21.5 $ 13.2 $ 12.1 $ 12.1 $ 34.3
====== ====== ====== ====== ====== ======
In November 1995, the Company entered into a sale/lease-back of the "M.
G. HULME, JR." and agreed to lease the drilling unit for ten years. The
lease-back is accounted for as an operating lease and a deferred gain of
$7.4 million was recorded and is being amortized over the life of the lease
(see Note E).
GUARANTY - In November 1997, the Company agreed to guarantee repayment
of 60% of a loan in the principal amount of $175.0 million by a syndicate
of banks led by Bank of America National Trust and Savings Association and
National Westminster Plc to Deepwater Drilling II L. L. C., a limited
liability company in which the Company has a 60% interest, and accounts for
using the equity method.
LITIGATION - In November 1988, a lawsuit was filed in the U.S. District
Court for the Southern District of West Virginia against Reading & Bates
Coal Co., a wholly owned subsidiary of the Company, by SCW Associates, Inc.
claiming breach of an alleged agreement to purchase the stock of Belva Coal
Company, a wholly owned subsidiary of Reading & Bates Coal Co. with coal
properties in West Virginia. When those coal properties were sold in July
1989 as part of the disposition of the Company's coal operations, the
purchasing joint venture indemnified Reading & Bates Coal Co. and the
Company against any liability Reading & Bates Coal Co. might incur as the
result of this litigation. A judgment for the plaintiff of $32,000 entered
in February 1991 was satisfied and Reading & Bates Coal Co. was indemnified
by the purchasing joint venture. On October 31, 1990, SCW Associates,
Inc., the plaintiff in the above-referenced action, filed a separate
ancillary action in the Circuit Court, Kanawha County, West Virginia
against the Company, Caymen Coal, Inc. (former owner of the Company's West
Virginia coal properties), as well as the joint venture, Mr. William B.
Sturgill personally (former President of Reading & Bates Coal Co.), three
other companies in which the Company believes Mr. Sturgill holds an equity
interest, two employees of the joint venture, First National Bank of
Chicago and First Capital Corporation. The lawsuit seeks to recover
compensatory damages of $50.0 million and punitive damages of $50.0 million
for alleged tortious interference with the contractual rights of the
plaintiff and to impose a constructive trust on the proceeds of the use
and/or sale of the assets of Caymen Coal, Inc. as they existed on
October 15, 1988. The Company intends to defend its interests vigorously
and believes the damages alleged by the plaintiff in this action are highly
exaggerated. In any event, the Company believes that it has valid defenses
and that it will prevail in this litigation.
The Company is involved in various other legal actions arising in the
normal course of business. The great majority of these actions involve
claims arising out of injuries to employees of the Company who work on the
Company's rigs and power vessels. After taking into consideration the
evaluation of such actions by counsel for the Company and the Company's
insurance coverage, management is of the opinion that the 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.
SELF INSURANCE - The Company is self-insured for the deductible portion
of its insurance coverage. In the opinion of management, adequate accruals
have been made based on known and estimated exposures up to the deductible
portion of the Company's insurance coverages. Management believes that
future claims and liabilities in excess of the amounts accrued are fully
insured.
LETTERS OF CREDIT - At December 31, 1997, the Company had letters of
credit outstanding and unused totalling $10.8 million and $9.2 million,
respectively (see Note C).
(E) ACCRUED LIABILITIES AND OTHER NONCURRENT LIABILITIES
The components of "Accrued liabilities" at December 31, 1997 and 1996
were as follows (in millions):
1997 1996
------- -------
Accrued expenses - general $ 64.8 $ 13.8
Accrued interest expense 28.6 12.9
Accrued payroll 6.2 2.6
Accrued worker compensation claims 8.4 3.7
Accrued income and sales tax 29.8 3.7
Other 6.9 15.8
------- -------
Total $ 144.7 $ 52.5
======= =======
The components of "OTHER NONCURRENT LIABILITIES" at December 31, 1997
and 1996 were as follows (in millions):
1997 1996
------- -------
Postretirement benefit obligations $ 14.9 $ 15.7
Accrued interest expense related to the 8% Debentures - 10.4
Deferred gain on sale of drilling unit (see Note D) 5.6 6.5
Foreign income taxes 6.1 6.0
Pension obligations 3.5 4.0
Other 8.5 9.5
------- -------
Total $ 38.6 $ 52.1
======= =======
(F) INCOME TAXES
Income tax expense for the years ended December 31, 1997, 1996 and 1995
consisted of the following (in millions):
1997 1996 1995
------- ------- -------
Current:
Foreign $ 9.4 $ 5.8 $ 2.4
Federal 26.9 .4 .5
State 3.0 .1 -
------- ------- -------
Total current 39.3 6.3 2.9
------- ------- -------
Deferred:
Foreign 17.9 4.0 1.8
Federal 26.6 15.0 .9
State .9 1.7 .7
------- ------- -------
Total deferred 45.4 20.7 3.4
------- ------- -------
Total $ 84.7 $ 27.0 $ 6.3
======= ======= =======
The domestic and foreign components of income from continuing
operations before income taxes for the years ended December 31, 1997, 1996
and 1995 were as follows (in millions):
1997 1996 1995
------- ------- -------
Domestic $ 31.2 $ 4.6 $ (23.3)
Foreign 218.9 135.5 55.9
------- ------- -------
Total $ 250.1 $ 140.1 $ 32.6
======= ======= =======
The effective tax rate, as computed on income from continuing
operations before income taxes, differs from the statutory U.S. income tax
rate for the years ended December 31, 1997, 1996 and 1995 due to the
following:
1997 1996 1995
----- ----- -----
Statutory rate 35 % 35 % 35 %
Use of previously reserved tax benefits (13) (11) (12)
Foreign tax expense (net of federal benefit) 1 (6) (5)
State tax expense (net of federal benefit) 1 1 1
Non-deductible merger expenses 8 - -
Other 2 - -
----- ----- -----
Effective rate 34 % 19 % 19 %
===== ===== =====
Deferred income taxes result from those transactions which affect
financial and taxable income in different years. The nature of these
transactions (all of which were long-term) and the income tax effect of
each as of December 31, 1997 and 1996 were as follows (in millions):
1997 1996
------- -------
Deferred tax liabilities:
Depreciation $ 208.0 $ 169.7
Discontinued operations, net - 5.4
Undistributed earnings 8.3 -
Other - .5
------- -------
Total deferred tax liabilities 216.3 175.6
------- -------
Deferred tax assets:
Rig leases - (6.3)
Postretirement benefits (5.4) (5.6)
Tax benefit carryforwards (169.8) (185.8)
Discontinued operations, net (22.3) -
Accrued expenses (3.5) (2.0)
Valuation allowance 63.5 53.7
Other (2.0) -
------- -------
Total deferred tax assets (139.5) (146.0)
------- -------
Net deferred tax liability $ 76.8 $ 29.6
======= =======
Valuation allowance reflects the possible expiration of tax benefits
(primarily net operating loss carryforwards) prior to their utilization.
Recapitalizations of R&B in 1989 and 1991 resulted in ownership changes
for federal income tax purposes. As a result of these ownership changes,
the amount of tax benefit carryforwards generated prior to the ownership
changes which may be utilized to offset federal taxable income is limited
by the Internal Revenue Code to approximately $3.8 million annually plus
certain built-in gains that existed as of the date of such changes. Net
tax operating losses of approximately $114.9 million arising since the 1991
ownership change are not subject to this limitation.
(G) CAPITAL SHARES
RIGHTS - On December 31, 1997, the effective date of the merger between
R&B and Falcon (see Note B), each share of the Company's common stock
received one preferred share purchase right (a "Right"). Each Right
entitles the registered holder to purchase from the Company one one-
hundredth of a share of Series A Junior Participating Preferred Stock, (the
"Preferred Shares") of the Company at a price of $150, subject to
adjustment. The Rights will not become exercisable until 10 days after a
public announcement that a person or group has acquired 15% or more of the
Company's common stock (thereby becoming an "Acquiring Person") or the
commencement of a tender or exchange offer upon consummation of which such
person or group would own 15% or more of the Company's common stock (the
earlier of such dates being called the "Distribution Date"). Until the
Distribution Date, the Rights will be evidenced by the certificates
representing the Company's common stock and will be transferrable only with
the Company's common stock. In the event that any person or group becomes
an Acquiring Person, each Right, other than Rights beneficially owned by
the Acquiring Person (which will thereafter be void), will thereafter
entitle its holder to purchase shares of the Company's common stock having
a market value of two times the exercise price of the Right. If after a
person or group has become an Acquiring Person, the Company is acquired in
a merger or other business combination transaction or 50% or more of its
assets or earning power are sold, each Right will entitle its holder to
purchase, at the Right's then current exercise price, that number of shares
of common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of the
Right. The board of directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right at any time prior to
ten business days following a public announcement that a person or group
becomes an Acquiring Person. The Rights expire on November 1, 2007.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a preferential
quarterly dividend payment equal to the greater of $1 per share or 100
times the dividend declared per common share. Liquidation preference will
be equal to 100 times the par value per share plus an amount equal to
accrued and unpaid dividends and distributions to the date of such payment.
Each Preferred Share will have 100 votes, voting together with the common
stock, and certain rights to elect two directors during certain periods of
default in the payment of dividends on the Preferred Shares.
PREFERRED STOCK - In January 1993, Falcon issued 25,989 shares of
Series A Convertible Preferred Stock in association with the satisfaction
of a debt obligation. In August 1995, such preferred stock was converted
into approximately 15.6 million shares of Falcon's common stock in
connection with a public offering.
In July 1993, R&B effected a public offering of approximately 3.0
million shares of $1.625 Convertible Preferred Stock, par value $1.00 per
share. On August 5, 1996, R&B announced it would redeem all of the
outstanding shares of such preferred stock on September 30, 1996. However,
the majority of such preferred stock outstanding was converted into
approximately 10.2 million shares of R&B's common stock on or before
September 30, 1996.
COMMON STOCK - On July 28, 1995, Falcon, a participating stockholder
and a group of underwriters entered into an agreement resulting in the
initial public sale by Falcon of 8.5 million shares of common stock and the
sale of 1.5 million shares of common stock by the participating
shareholder. The initial public offering closed on August 2, 1995 and
resulted in net proceeds to Falcon of $34.4 million after deducting
offering related expenses of $3.9 million.
In September 1995, R&B issued 1.5 million shares of R&B's common stock
in association with the purchase of the "J.W. McLEAN".
On November 15, 1995, Falcon, participating stockholders and a group of
underwriters entered into an agreement resulting in the public sale of 6.4
million shares of common stock by Falcon and the sale of 4.0 million shares
of common stock by selling shareholders. The public offering closed on
November 21, 1995 and resulted in net proceeds to Falcon of $30.9 million
after deducting offering related expenses of $2.4 million.
On December 9, 1996, Falcon, participating stockholders and a group of
underwriters entered into an agreement resulting in the public sale of 6.4
million shares of common stock by Falcon and the sale of 9.4 million shares
of common stock by selling shareholders. The public offering closed on
December 13, 1996 and resulted in net proceeds to Falcon of $108.5 million
after deducting offering related expenses of $5.5 million.
During June 1997, Falcon declared a two-for-one stock split effective
on July 15, 1997. Accordingly, all share amounts for all periods presented
have been restated to reflect this stock split.
WARRANTS - In 1992, Falcon issued (a) 2,800 Class A warrants, each of
which represented the right to purchase 600 shares of Falcon's common stock
for $1.665 per share, and (b) 2,600 Class B warrants, each of which
represented the right to purchase 1,200 shares of Falcon's common stock at
an exercise price of $1.665 per share. The exercise price of the Class A
and B warrants was adjusted to $1.21 per share subsequent to their
issuance. Two hundred Class A warrants were exercised on July 31, 1993,
while 1,200 Class A warrants expired on such date. During 1995, the
remaining 1,400 Class A warrants, and all of the 2,600 Class B warrants,
were exercised.
In connection with the issuance of preferred stock in January 1993,
Falcon issued a shadow warrant exercisable for up to an aggregate of 3.7
million shares of Falcon's common stock at a purchase price of $.005 per
share of common stock. Such warrant is exercisable only to the extent that
certain other warrants, options and convertible securities of Falcon are
exercised or converted. The aggregate number of shares for which the
shadow warrant was exercisable was reduced to 3.1 million shares upon the
expiration of 1,200 of the Class A warrants and the exercise of 200 Class A
warrants on July 31, 1993, as discussed above. On March 31, 1994, various
convertible subordinated debtholders exercised options to convert $605,000
in convertible subordinated debt for .4 million shares of common stock and
holders of bonus warrants (issued in connection with the prepayment of
convertible subordinated debt) exercised such warrants. In connection
therewith, .3 million shares of common stock were issued under the shadow
warrant. Additionally, rights to acquire .2 million shares of common stock
pursuant to the shadow warrant expired during 1994. As a result of the
exercise of the Class A and Class B warrants in 1995, 2.6 million shares of
common stock were issued pursuant to the shadow warrant. The shadow
warrant expired on December 31, 1997.
As of December 31, 1997, authorized, unissued shares of common stock
were reserved for issuance as follows:
Issuance under the Company's stock
plans (net of forfeitures) 8,285,704
Conversion of 8% Debentures 969,532
---------
Total 9,255,236
=========
(H) EMPLOYEE BENEFIT PLANS
PENSION PLANS - The Company has three noncontributory pension plans.
Substantially all of the R&B employees paid from a U.S. payroll are covered
by one or more of these plans. Plan benefits are primarily based on years
of service and average high thirty-six month compensation.
The Reading & Bates Pension Plan (the "Domestic Plan") is qualified
under the Employee Retirement Income Security Act (ERISA). It is the
Company's policy to fund this plan not less than the minimum required by
ERISA. It is the Company's policy to contribute to the Reading & Bates
Offshore Pension Plan (the "Offshore Plan") an amount equal to the normal
cost plus amounts sufficient to amortize the initial unfunded actuarial
liability and subsequent unfunded liability caused by plan or assumption
changes over thirty years. The unfunded liability arising from actuarial
gains and losses is funded over fifteen years. The Offshore Plan is a
nonqualified plan and is not subject to ERISA funding requirements. The
Domestic and Offshore Plans invest in cash equivalents, fixed income and
equity securities.
The Reading & Bates Retirement Benefit Replacement Plan (the
"Replacement Plan") is a self-administered unfunded excess benefit plan.
All members of the Domestic Plan or the Reading & Bates Savings Plan are
potential participants in the Replacement Plan.
Net pension costs for the years ended December 31, 1997, 1996 and 1995
included the following components (in millions):
1997 1996 1995
------ ------ ------
Service cost - benefits earned during the year $ 1.6 $ 1.8 $ 1.3
Interest cost on projected benefit obligation 4.9 4.6 4.5
Actual gain on plan assets (10.2) (5.2) (10.0)
Net amortization and deferral 4.1 (.2) 5.2
------ ------ ------
Net pension costs $ .4 $ 1.0 $ 1.0
====== ====== ======
The funded status of the plans at December 31, 1997 was as follows (in
millions):
Domestic Offshore Replacement
Plan Plan Plan
-------- -------- -----------
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 48.4 $ 13.5 $ 3.2
Nonvested benefit obligation 1.6 .5 .1
------- ------- -------
Accumulated benefit obligation 50.0 14.0 3.3
Effect of projected future
compensation levels 7.5 2.5 .2
------- ------- -------
Projected benefit obligation 57.5 16.5 3.5
Plan assets at fair value 52.8 17.0 -
------- ------- -------
Projected benefit obligation in
excess of plan assets 4.7 (.5) 3.5
Unrecognized cumulative net (loss) gain (12.7) (.5) 2.3
Prior service cost unrecognized
in pension cost 1.7 .1 .2
Unrecognized net implementation
asset (obligation) 1.4 - (2.1)
------- ------- -------
Accrued (prepaid) pension cost $ (4.9) $ (.9) $ 3.9
======= ======= =======
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligations was 7.4% and 4.5%, respectively. The
weighted average expected long-term rate of return on assets was 10%.
POSTRETIREMENT BENEFITS - In addition to providing pension benefits,
R&B provides certain health care and life insurance benefits for its
retired employees. Employees may become eligible for these benefits if
they reach normal or early retirement age while working for R&B and if they
have accumulated 25 years of service (15 years prior to January 1, 1996).
Health care costs are paid as they are incurred. Life insurance benefits
are provided through an insurance company whose premiums are based on
benefits paid during the year.
Postretirement benefit costs for the years ended December 31, 1997,
1996 and 1995 included the following (in millions):
1997 1996 1995
------- ------- -------
Service cost - benefits earned
during the year $ .1 $ .1 $ .2
Interest cost on projected
benefit obligations .7 .8 1.0
Amortization benefit
Accumulated Projected
Benefit Obligation (.9) (.9) (.8)
------- ------- -------
Total postretirement benefit costs $ (.1) $ - $ .4
======= ======= =======
The health care cost trend rates used to measure the expected cost in
1998 for medical, dental and vision benefits were 8%, 5.5% and 5.5%,
respectively, each graded down to an ultimate trend rate of 5%, 4.5% and
4.5%, respectively, to be achieved in the year 2021. The weighted average
discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
was 7.4% and 4.5%, respectively. The effect of a one-percentage-point
increase in health care cost trend rates for future periods would increase
the service cost and interest cost portion of net periodic postretirement
benefit cost approximately 16.8%. The accumulated postretirement benefit
obligation would increase by approximately 14.6%.
The amounts recognized in the Company's Consolidated Balance Sheet at
December 31, 1997 and 1996 were as follows (in millions):
1997 1996
------ ------
Plan assets at fair value $ - $ -
Accumulated postretirement benefit obligation:
Retirees 8.1 8.1
Fully eligible active plan participants .5 .5
Other active plan participants 1.9 1.7
Unrecognized prior service cost 1.7 2.7
Unrecognized cumulative net gain 3.4 3.5
Other (.1) (.4)
------ ------
Postretirement benefit liability recognized
in the Consolidated Balance Sheet $ 15.5 $ 16.1
====== ======
SAVINGS PLANS - The Company has three savings plans which allow an
employee to contribute up to 16% of their base salary (subject to certain
limitations) and the Company may make matching contributions at its
discretion. Employees may direct the investment of their contributions and
the contributions of the Company in various plan investment options.
The Company's matching contributions vest within five years of an
employee's service with the Company. Compensation costs under the plans
amounted to $2.7 million in 1997, $1.6 million in 1996, and $1.0 in 1995.
STOCK OPTION PLANS - The Company has six stock option plans which are
intended to provide an incentive that will allow the Company to retain in
its employ, persons of the training, experience and ability necessary for
the development and financial success of the Company. Four of these plans
were originally adopted by Falcon and two were originally adopted by R&B.
All of these plans were assumed by R&B Falcon in the merger, and the
options outstanding thereunder were converted to options to acquire common
stock of R&B Falcon (with appropriate adjustments to reflect the exchange
ratio for R&B stock in the merger).
The Company's Reading & Bates Corporation 1990 Stock Option Plan (the
"1990 Stock Option Plan") authorized options with respect to approximately
2.3 million shares of common stock to be granted to certain employees of
R&B at an adjusted option price of $6.25 per share. On September 25, 1991,
options with respect to all 2.3 million shares were granted and vested over
a four-year period. Such grant's option price was less than the market
price on the date of grant and the difference was recorded as compensation
expense during the vesting period. Such options will expire in 2001.
The Company's Falcon Drilling Company, Inc. 1992 Stock Option Plan (the
"1992 Stock Option Plan") authorized options with respect to 1.0 million
shares of common stock to be granted to certain employees and directors of
Falcon. On November 10, 1992, options with respect to all 1.0 million
shares were granted at adjusted option prices ranging from $1.665 to $1.85
per share and vested immediately. No compensation expense was recorded as
a result of the option price being the estimated market price of Falcon's
common stock on the date of grant. Such options will expire in 2002.
The Company's Falcon Drilling Company, Inc. 1994 Stock Option Plan (the
"1994 Stock Option Plan") authorized options with respect to 570,000 shares
of common stock to be granted to certain employees and directors of Falcon.
On January 26, 1994, options with respect to all 570,000 shares were
granted at an adjusted option price of $5.00 per share, vesting ratably
over three years. No compensation expense was recorded as a result of the
option price being the estimated market price of Falcon's common stock on
the date of grant. Such options will expire in 2004.
The Company's Falcon Drilling Company, Inc. 1995 Stock Option Plan (the
"1995 Stock Option Plan") authorized options with respect to 1.0 million
shares of common stock to be granted to certain employees and directors of
Falcon. On February 16, 1995, options with respect to 250,000 shares were
granted at an adjusted option price of $5.00 per share, vesting ratably
over three years, and expiring in 2005. In January 1996, options with
respect to 280,000 shares were granted at an adjusted option price of
$6.065 per share, vesting over two years, and expiring in 2006. In April
1996, options with respect to 150,000 shares were granted at an adjusted
option price of $9.72 per share, vesting ratably over five years, and
expiring in 2006. In February 1997, options with respect to 258,000 shares
were granted to certain employees and directors of Falcon at an adjusted
option price of $12.50 per share. These option grants were rescinded by
Falcon in November 1997. No compensation expense was recorded as a result
of the option price being the estimated market price of Falcon's common
stock on the date of grant.
The Company's Reading & Bates Corporation 1995 Director Stock Option
Plan (the "1995 Director Plan") is intended to obtain and retain non-
employee members of the board of directors by rewarding them for making
major contributions to the success of the Company. The 1995 Director Plan
authorized options with respect to 236,000 shares of common stock to be
granted at an adjusted option price of $6.25 per share. In 1995, R&B
granted 141,600 options. The market value of R&B's common stock at the
date of grant was less than the option price, and no compensation expense
was recorded.
The Company's Falcon Drilling Company, Inc. 1997 Stock Option Plan (the
"1997 Stock Option Plan") authorized options with respect to 1.2 million
shares of common stock to be granted to certain employees and directors of
Falcon. In July 1997, options for 3,000 shares were granted at an exercise
price of $12.50 per share, which options were rescinded by Falcon in
November 1997. In July 1997, options for 40,000 shares were granted at an
exercise price of $29.00 per share, vesting ratably over three years, and
expiring in 2007. The market value of Falcon's common stock on the date of
the grant was equal to the exercise price, and no compensation expense was
recorded.
STOCK INCENTIVE PLANS - The Company has four stock incentive plans,
which provide for grants of stock options, stock appreciation rights, stock
awards and cash awards, which may be granted singly, in combination or in
tandem. Such plans are intended to provide an incentive that will allow the
Company to retain in its employ, persons of the training, experience and
ability necessary for the development and financial success of the Company.
These plans were originally adopted by R&B and assumed by R&B Falcon in the
merger.
The Company's Reading & Bates Corporation 1992 Long-Term Incentive Plan
(the "1992 Incentive Plan") authorized 1,180,000 shares of common stock to
be available for awards. In 1992, restricted stock awards with respect to
354,000 shares were granted to certain officers of R&B. Such shares
awarded were restricted as to transfer until vested pursuant to a schedule
whereby 1/24th of the total number of shares vested per calendar quarter
from June 30, 1992 through March 31, 1998 (subject to certain conditions).
The market value at the date of grant of the common stock granted was
recorded as unearned compensation and was amortized to expense over the
periods during which the restrictions lapse or shares vest. In 1995, stock
options with respect to the remaining 826,000 shares were granted to
certain officers and employees of R&B at adjusted option prices ranging
from $7.627 to $11.759 per share (the market price on the date of grants).
Such options become exercisable either over a one or four year period from
the date of grant. All stock awards under the 1992 Incentive Plan vested
on December 31, 1997 as a result of the merger of R&B and Falcon (see Note
B).
The Company's Reading & Bates Corporation 1995 Long-Term Incentive Plan
("1995 Incentive Plan") authorized 2,950,000 shares of common stock to be
available for awards. In 1995, stock options with respect to 708,000 shares
were granted to an officer of R&B at an adjusted option price of $11.759
per share (the market price on the date of grants). Such options became
exercisable one year from the date of grant. Also in 1995, restricted stock
awards with respect to 642,156 shares were granted to certain employees of
R&B. Such shares awarded were restricted as to transfer until fully vested
three years from the date of grant. The market value at the date of grant
of the common stock granted was recorded as unearned compensation and was
amortized to expense over the period during which the shares vest. In
1996, stock options with respect to 177,000 shares were granted to an
officer of R&B at an adjusted option price of $23.729 per share (the market
price on the date of the grant). Such options became exercisable over a
three-year period from the date of grant. Also in 1996, restricted stock
awards with respect to 489,228 shares were granted to certain employees of
R&B. Such shares awarded were restricted as to transfer until fully vested
three years from the date of grant. The market value at the date of grant
of the common stock granted was recorded as unearned compensation and was
amortized to expense over the period during which the shares vest. In
1997, stock options with respect to 902,582 shares were granted to officers
of R&B at an adjusted option price of $20.127 per share, which options were
rescinded in August 1997. Under the 1995 Incentive Plan, stock options and
restricted stock awards with respect to 868,700 shares vested on December
31, 1997 as a result of the merger of R&B and Falcon (See Note B).
The Company's Reading & Bates Corporation 1996 Director Restricted
Stock Award Plan (the "1996 Director Plan") authorized 63,720 shares of
common stock to be available for awards. In 1996, restricted stock awards
with respect to all 63,720 shares were granted to non-employee directors of
R&B. Such shares awarded were restricted as to transfer in one-third
increments over three years from the date of grant. The market value at
the date of grant of the common stock granted was recorded as unearned
compensation and was amortized to expense over the period during which the
shares vest. All stock awards under the 1996 Director Plan vested on
December 31, 1997 as a result of the merger of R&B and Falcon (see Note B).
The Company's Reading & Bates Corporation 1997 Long-Term Incentive Plan
(the "1997 Incentive Plan") authorized 2,950,000 shares of common stock to
be available for awards. In 1997, restricted stock awards with respect to
33,866 shares were granted to certain employees of R&B. Such shares
awarded were restricted as to transfer until fully vested three years from
the date of grant. The market value at the date of grant of the common
stock granted was recorded as unearned compensation and was amortized to
expense over the period during which the shares vest. Also in 1997, stock
options with respect to 6,018 shares were granted to an officer of R&B at
an adjusted option price of $20.127 per share, which options were rescinded
by R&B in August 1997. Under the 1997 Incentive Plan, restricted stock
awards with respect to 33,866 shares vested on December 31, 1997 as a
result of the merger of R&B and Falcon (see Note B).
Unearned compensation relating to the Company's stock incentive plans
is shown as a reduction of stockholders' equity. Compensation recognized
under the stock incentive plans for the years ending December 31, 1997,
1996 and 1995 totaled approximately $17.8 million, $3.2 million and $.2
million, respectively.
Stock option transactions under the plans were as follows:
1997 1996 1995
------------------ ------------------ ------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of options Price of options Price of options Price
---------- ------- ---------- ------- ---------- -------
Outstanding at
beginning of year 3,836,159 $ 8.20 5,009,071 $ 6.52 3,646,594 $ 4.83
Granted 40,000 29.00 607,000 12.12 1,925,600 9.46
Exercised (997,731) 5.04 (1,771,888) 4.79 (554,863) 5.63
Forfeited (8,496) 7.63 (8,024) 7.22 (8,260) 7.23
--------- --------- ---------
Outstanding at
end of year 2,869,932 9.59 3,836,159 8.20 5,009,071 6.52
========= ========= =========
Exercisable at
end of year 2,377,433 9.95 2,776,413 7.84 3,213,271 4.75
Available for grant
at end of year 5,415,772 - 1,338,694 - 2,450,144 -
The fair value of each grant since January 1, 1995 was estimated as of
the date of the grant using the Black-Scholes option pricing model. The
following weighted-average assumptions were used for the options granted
pursuant to the 1997 Stock Option Plan: risk-free interest rate of 6.4%,
an expected life of 10 years and expected volatility of 50%. The resulting
fair value of such options granted was $20.38.
The Company accounts for these plans under APB Opinion No. 25, under
which no compensation cost has been recognized. Had compensation cost for
these plans been determined consistent with SFAS 123, the Company's net
income and earnings per share would have been reduced to the following pro
forma amounts (in millions except per share amounts):
1997 1996 1995
------ ------ ------
Net income (loss) applicable
to common stockholders:
As reported $ (6.2) $ 103.1 $ 21.7
Pro forma $(10.0) $ 98.4 $ 20.7
Basic EPS:
As reported $ (.04) $ .70 $ .19
Pro forma $ (.06) $ .67 $ .18
Diluted EPS:
As reported $ (.04) $ .67 $ .18
Pro forma $ (.06) $ .64 $ .17
Because the SFAS 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in
future years.
(I) RELATED PARTY TRANSACTIONS
Drilling had rig management agreements with Transocean Offshore Inc.
(as successor to Sonat Offshore Drilling Inc.), a major shareholder of
Drilling, for the operation and marketing of both of its drilling units.
The management agreement for one of Drilling's drilling units expired in
December 1995 and the other expired in October 1996, and a subsidiary of
the Company now manages both drilling units. For each of the years ending
December 31, 1996 and 1995, Drilling paid to Transocean Offshore Inc.
approximately $1.2 million and $2.6 million, respectively, for such
management services. Additionally, for the years ended December 31, 1996
and 1995, Drilling received from Transocean Offshore Inc. approximately
$15.1 million and $11.8 million, respectively, pursuant to a bareboat
charter agreement on one of the rigs. At December 31, 1996, Drilling had a
net receivable from Transocean Offshore Inc. of $.8 million.
The former owners of a company acquired by the Company in 1992, who are
also officers of Falcon, lease crewboats, tugboats and supply barges and
other vessels to Falcon at a contracted bareboat rate of $100 per day for
crewboats and tugboats and $60 per day for other vessels, with Falcon
responsible for drydocking, painting and repairs. The former owners
received revenues of $.9 million for each of the years ended December 31,
1997, 1996 and 1995.
A director and stockholder of the Company is a partner in a law firm
which provided legal services to the Company and certain of its affiliated
entities. Fees paid by the Company to this law firm were $.2 million, $.6
million and $1.1 million for the years ended December 31, 1997, 1996, and
1995, respectively.
A director of the Company who performs financial consulting services
for the Company from time to time and is also an officer of Raptor
Exploration Company, Inc., a wholly-owned subsidiary of the Company,
received $.1 million for such services in the year ended December 31, 1995.
In addition, during 1996, Raptor paid such officer $.1 million for services
rendered in connection with the sale of certain assets of Raptor.
In June 1994, the Company entered into an agreement with Eilert-Olsen
Investments, Inc. (Eilert-Olsen), to buy the equity interest of Eilert-
Olsen for a nominal purchase price. In June of 1994, Eilert-Olsen acquired
three barge drilling rigs for a cost of approximately $2.8 million
consisting of cash of approximately $.9 million and the assumption of debt
of approximately $1.9 million secured by the three barge drilling rigs.
The Company advanced $.9 million to Eilert-Olsen in June of 1994 and has
subsequently advanced approximately $.5 million, $.5 million and $.8
million to pay principal and interest due on this debt for the years ended
December 31, 1997, 1996 and 1995, respectively. Due to the Company's
affiliation with Eilert-Olsen, the financial statements of Eilert-Olsen and
the option to purchase Eilert-Olsen from inception have been consolidated
with the financial statements of the Company and, accordingly, the accounts
and transactions between the Company and Eilert-Olsen have been eliminated
in consolidation.
In 1995, the Company paid $.1 million in fees to a privately held
company controlled by a stockholder, for financial advisory services.
In 1997, 1996, and 1995, the Company paid $.4 million, $.9 million, and
$.5 million respectively, to Bantam Services, Inc. under a contract
pursuant to which Bantam is to supply, at cost, groceries and supplies to
be used on certain of the Company's rigs. Bantam is entitled under the
contract to bill third parties for meals and lodging supplied to their
personnel on such rigs. In the absence of such contract, the Company would
be entitled to bill the third parties for the food and lodging provided.
Bantam is owned by an officer of Falcon Workover Company, Inc., a wholly-
owned subsidiary of the Company.
(J) MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION
For the year ended December 31, 1997, there were no customers that
individually accounted for 10.0% or more of the Company's total operating
revenues. For the year ended December 31, 1996, revenues from one customer
of $70.6 million accounted for 11.6% of the Company's total operating
revenues. For the year ended December 31, 1995, revenues from two
customers of $42.6 million and $39.3 million accounted for 10.9 % and
10.1%, respectively, of the Company's total operating revenues.
Geographic information about the Company's operations for the three
years ended December 31, 1997 is as follows (in millions):
1997 1996 1995
--------- --------- -------
Operating revenues:
United States $ 460.3 $ 276.7 $ 170.7
Southeast Asia 82.4 59.0 63.6
Mediterranean-
Middle East 7.9 8.7 31.4
Europe 247.3 146.9 63.6
Australia 23.4 39.6 20.9
West Africa 69.9 25.5 8.5
South America 50.9 52.2 31.3
Other Foreign - 1.0 .3
Corporate - - -
--------- --------- -------
Total $ 942.1 $ 609.6 $ 390.3
========= ========= =======
Operating profit:(1)
United States $ 166.1 $ 69.1 $ 21.6
Southeast Asia 40.9 23.6 22.4
Mediterranean-
Middle East 2.2 2.4 10.7
Europe 143.4 73.9 16.2
Australia 5.2 11.4 (.3)
West Africa 25.5 8.9 2.7
South America 2.3 14.0 9.8
Other Foreign - 3.0 .2
Corporate (28.6) (26.6) (19.1)
--------- --------- -------
Total $ 357.0 $ 179.7 $ 64.2
========= ========= =======
Identifiable assets:
United States $ 823.8 $ 458.5 $ 316.4
Southeast Asia 92.7 133.4 163.1
Mediterranean-
Middle East 52.2 14.0 61.0
Europe 535.2 402.2 258.9
Australia 21.9 47.9 3.9
West Africa 190.3 47.0 14.4
South America 175.1 234.6 77.2
Other Foreign - 76.2 .1
Corporate 37.2 42.0 51.8
--------- --------- -------
Total $ 1,928.4 $ 1,455.8 $ 946.8
========= ========= =======
(1) Operating profit represents operating revenues less operating
expenses, depreciation, general and administrative and other, net.
(K) NET INCOME (LOSS) PER COMMON SHARE
Basic net income per common share is computed by dividing net income,
after deducting the preferred stock dividend, by the weighted average
number of common shares outstanding during the period. Diluted net income
per common share is the same as basic and assumes the exercise of
outstanding stock options as computed using the treasury stock method and
the conversion of preferred stock if dilutive, and is approximately equal
to the combined primary earnings per share previously reported by R&B and
Falcon adjusted for merger related adjustments.
The following table reconciles weighted average common shares
outstanding from basic to diluted for the years ended December 31, 1997,
1996 and 1995 as follows (in millions):
1997 1996 1995
----- ----- -----
Weighted average common shares
outstanding - basic 164.1 147.4 115.7
Outstanding stock options 2.1 2.7 1.2
Convertible preferred stock - 7.6 -
Outstanding stock warrants - - 4.9
----- ----- -----
Weighted average common shares
outstanding - diluted 166.2 157.7 121.8
===== ===== =====
(L) DISCONTINUED OPERATIONS
The Company, primarily through its wholly owned subsidiary Reading &
Bates Development Co. ("Devco") and to an insignificant extent through its
wholly owned subsidiary Raptor Exploration Company, Inc., engages in oil
and gas exploration activities. Devco engages primarily in the acquisition
of working interests in offshore oil and gas properties pursuant to which
it shares in reservoir and oil and gas price risks and thus profits and
losses from such properties. 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 December 31, 1997 which consisted
primarily of oil and gas properties were $81.2 million and related
liabilities totaled $87.0 million, including a $78.8 million reserve for
losses on ultimate disposal and operations until disposal. Net assets of
discontinued operations at December 31, 1996 consisted primarily of oil and
gas properties. There were no revenues from the discontinued operations
during the years ended December 31, 1997, 1996, and 1995.
The successful efforts method of accounting was used for oil and gas
exploration and production activities. Under this method, acquisition
costs for proved and unproved properties were capitalized when incurred.
Exploration costs, including geological and geophysical costs and costs of
carrying and retaining unproved properties, were charged to expense as
incurred. The costs of drilling exploratory wells were capitalized pending
determination of whether each well had discovered proved reserves. If
proved reserves were not discovered, such drilling costs were charged to
expense. Costs incurred to drill and equip development wells, including
unsuccessful development wells, were capitalized.
In 1997, R&B approved, in principle, an option plan for Devco stock.
This plan was rescinded in November 1997 prior to any grants being made.
(M) QUARTER FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the two years ended December
31, 1997, are as follows (in millions except for per share amounts):
Quarter
------------------------------------------------
First Second Third Fourth Total
-------- -------- -------- -------- --------
1997:
- ----
Operating revenues $ 203.1 $ 222.2 $ 247.8 $ 269.0 $ 942.1
Gross income (1) $ 80.8 $ 100.9 $ 115.7 $ 111.5 $ 408.9
Income (loss) from
continuing operations (2) $ 44.7 $ 60.7 $ 77.2 $ (26.6) $ 156.0
Loss from discontinued
operations $ (5.8) $ (16.7) $ (42.2) $ (97.5) $(162.2)
Net income (loss) $ 38.9 $ 44.0 $ 35.0 $(124.1) $ (6.2)
Net income (loss) per
common share:
Basic:
Continuing operations $ .27 $ .37 $ .47 $ (.16) $ .95
Discontinued operations (.03) (.10) (.26) (.59) (.9)
-------- -------- -------- -------- --------
Net income (loss) $ .24 $ .27 $ .21 $ (.75) $ (.04)
======== ======== ======== ======== ========
Diluted:
Continuing operations $ .27 $ .37 $ .47 $ (.16) $ .94
Discontinued operations (.04) (.10) (.25) (.59) (.98)
-------- -------- -------- -------- --------
Net income (loss) $ .23 $ .27 $ .22 $ (.75) $ (.04)
======== ======== ======== ======== ========
1996:
- ----
Operating revenues $ 117.3 $ 135.7 $ 167.3 $ 189.3 $ 609.6
Gross income (1) $ 34.2 $ 43.2 $ 61.0 $ 78.3 $ 216.7
Income from continuing
operations $ 14.5 $ 18.3 $ 33.4 $ 40.2 $ 106.4
Income (loss) from
discontinued operations $ (.1) $ .1 $ .2 $ .1 $ .3
Net income $ 14.4 $ 18.4 $ 33.6 $ 40.3 $ 106.7
Net income per common
share:
Basic:
Continuing operations $ .09 $ .12 $ .22 $ .26 $ .70
Discontinued operations - - - - -
-------- -------- -------- -------- --------
Net income $ .09 $ .12 $ .22 $ .26 $ .70
======== ======== ======== ======== ========
Diluted:
Continuing operations $ .09 $ .12 $ .21 $ .25 $ .67
Discontinued operations - - - - -
-------- -------- -------- -------- --------
Net income $ .09 $ .12 $ .21 $ .25 $ .67
======== ======== ======== ======== ========
- --------------------------
(1) Gross income represents operating revenues less operating expenses,
depreciation, and other, net.
(2) The fourth quarter of 1997 includes merger expenses of $66.4 million.
(N) SUBSEQUENT EVENTS
On March 23, 1998, the Company offered to redeem the 8 7/8% Notes, the 9
3/4% Notes and the 12 1/2% Notes subject to (a) the execution by the trustee
of each of these notes of an amended indenture which modifies the terms of
the existing indenture including removal of certain restrictive covenants and
events of default, and (b) receipt by the Company of proceeds of an issuance
of debt securities in an amount sufficient to pay the aggregate cost of
redeeming these notes and all related costs and expenses of the tender offer.
Subsequent to December 31, 1997, the Company purchased the following: (1)
outstanding shares of common stock of a company which owns six workover rigs
in exchange for 204,900 shares of the Company's common stock. In connection
with this purchase, the Company is contingently obligated to issue (a) an
additional 36,494 shares of its common stock based upon a working capital
adjustment, as defined and (b) an additional 59,581 shares of its common
stock based upon the operating results of the Company's workover operations,
as defined. (2) Eight tugs and five ocean going barges in exchange for cash
of $1.5 million and 517,184 shares of the Company's common stock. In
addition, the Company is contingently obligated to issue an additional
172,250 shares of its common stock based on certain potential adjustments.
(3) Eight tugs in exchange for cash of approximately $8.9 million.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
The information called for by Part III of Form 10-K is incorporated by
reference from the Registrant's Proxy Statement relating to its annual
meeting of Stockholders to be held May 19, 1998, which will be filed by the
Registrant with the Securities and Exchange Commission no later than 120
days after the close of the fiscal year.
PART IV
Item 14. Exhibits, Financial Statements and Reports on Form 8-K
(a)Financial Statements and Exhibits
1.Financial Statements:
Report of Independent Public Accountants
Consolidated Balance Sheet as of December 31, 1997 and 1996
Consolidated Statement of Operations for the years ended December
31, 1997, 1996 and 1995
Consolidated Statement of Cash Flows for the years ended December
31, 1997, 1996 and 1995
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
2. Exhibits:
2.1 - Agreement and Plan of Merger, dated July 10, 1997, among
R&B Falcon, FDC Acquisition Corp., Reading & Bates
Acquisition Corp., Falcon and R&B. (Filed as Exhibit 2.1
to R&B Falcon's Registration Statement on Form S-4 dated
November 20, 1997 and incorporated herein by reference.)
3.1 - Amended and Restated Certificate of Incorporation of R&B
Falcon.
3.2 - Amended and Restated Bylaws of R&B Falcon.
4.1 - Form of R&B Falcon's Common Stock Certificate.
4.2 - Rights Agreement dated as of December 23, 1997 between
R&B Falcon and American Stock Transfer and Trust Company.
4.3 - Indenture relating to R&B's 8% Senior Subordinated
Convertible Debentures due 1998 dated as of August 29,
1989, between R&B and IBJ Schroder Bank & Trust Company,
as Trustee. (Filed as Exhibit 4.1 to R&B's Annual Report
on Form 10-K for 1989 and incorporated herein by
reference.)
4.4 - Form of R&B's registered 8% Senior Subordinated
Convertible Debentures due 1998. (Filed as Exhibit 4.2
to R&B's Registration No. 33-28580 and incorporated
herein by reference.)
4.5 - Form of R&B's bearer 8% Senior Subordinated Convertible
Debentures due 1998. (Filed as Exhibit 4.3 to R&B's
Registration No. 33-28580 and incorporated herein by
reference.)
4.6 - First Supplemental Indenture dated as of December 23,
1997 among the Company, R&B and IBJ Schroder Bank & Trust
Company.
4.7 - Indenture dated as of January 15, 1994, between Falcon
and Texas Commerce Bank National Association, including a
form of Note. (Filed as an exhibit to Falcon's
Registration Statement on Form S-4, filed on April 29,
1994, Registration No. 33-78369 and incorporated herein
by reference.)
4.8 - Supplemental Indenture dated as of June 3, 1994, pursuant
to which Falcon Workover Company, Inc., became a
Guarantor. (Filed as an exhibit to Falcon's Registration
Statement on Form S-4, Amendment No.1, filed on June 30,
1994, Registration No. 33-78360 and incorporated herein
by reference.)
4.9 - Supplemental Indenture dated as of June 28, 1994,
pursuant to which Raptor Exploration Company, Inc. and
FALRIG Offshore (USA), L.P., and FALRIG Offshore Partners
became Guarantors. (Filed as an exhibit to Falcon's
Registration Statement on Form S-4, Amendment No.1, filed
on June 30, 1994, Registration No. 33-78360 and
incorporated herein by reference.)
4.10 - Supplemental Indenture dated as of December 30, 1994,
pursuant to which Falcon Inland, Inc., Falcon Services
Company, Inc. and FALRIG de Venezuela, Inc. became
Guarantors. (Filed as an exhibit to Falcon's Annual
Report on form 10-K for the year ended December 31, 1994
and incorporated herein by reference.)
4.11 - 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.
(Filed as an exhibit to Falcon's Registration Statement
of Form S-1, Amendment No. 3, filed on July 19, 1995,
Registration No. 33-84582 and incorporated herein by
reference.)
4.12 - Joinder Agreement dated as of June 3, 1994, pursuant to
which Falcon Workover Company, Inc. became a Guarantor.
(Filed as an exhibit to Falcon's Registration Statement
of Form S-1, Amendment No. 3, filed on July 19, 1995,
Registration No. 33-84582 and incorporated herein by
reference.)
4.13 - Joinder Agreement dated as of June 28, 1994, pursuant to
which Raptor Exploration Company, Inc., FALRIG Offshore
(USA), L.P., and FALRIG Offshore partners became
Guaranctors. (Filed as an exhibit to Falcon's
Registration Statement of Form S-1, Amendment No. 3,
filed on July 19, 1995, Registration No. 33-84582 and
incorporated herein by reference.)
4.14 - Joinder Agreement dated as of December 30, 1994, pursuant
to which Falcon Inland, Inc., Falcon Services Company,
Inc. and FALRIG de Venezuela, Inc. became Guarantors.
(Filed as an exhibit to Falcon's Registration Statement
of Form S-1, Amendment No. 3, filed on July 19, 1995,
Registration No. 33-84582 and incorporated herein by
reference.)
4.15 - Joinder Agreement dated as of March 1, 1996, pursuant to
which Falcon Atlantic, Ltd., Falcon Drilling do Brasil,
Ltda., Falcon Drilling de Venezuela, Inc. and
perforaciones FALRIG de Venezuela, C.A. became
Guarantors. (Filed as an exhibit to Falcon's Annual
Report on Form 10-K for the year ended December 31, 1995
and incorporated herein by reference.)
4.16 - Indenture dated as of March 15, 1995, between Falcon and
Texas Commerce Bank National Association, including a
form of Note. (Filed as an exhibit to Falcon's
Registration Statement on Form S-4, filed on March 24,
1995, Registration No. 33-90582 and incorporated herein
by reference.)
4.17 - Indenture dated as of March 1, 1996, between Falcon and
Bank One, Texas, N. A., including a form of Note. (Filed
as an exhibit to Falcon's Registration Statement on Form
S-4, filed on March 8, 1996, Registration No. 333-2114
and incorporated herein by reference.)
Falcon hereby agrees to furnish to the Commission upon
its request any instrument defining the rights of holders
of long-term debt of Falcon and its consolidated
subsidiaries and for any of its unconsolidated subsid-
iaries for which financial statements are required to be
filed with respect to long-term debt not being registered
which does not exceed 10% of the total assets of Falcon
and its subsidiaries on a consolidated basis.
9.1 - Voting Trust Agreement dated as of November 12, 1991,
between Lydia Richardson and Linda Webster as common
stockholders and Steven A. Webster as voting trustee.
(Filed as an exhibit to Falcon's Registration Statement
on Form S-4, filed on April 29, 1994, Registration No. 33-
78369 and incorporated herein by reference.)
9.2 - Amendment to Voting Trust Agreement dated as of November
1, 1995. (Filed as an exhibit to Falcon's Annual Report
on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference.)
9.3 - Voting Trust Agreement dated as of November 21, 1989,
between Lydia Richardson and Linda Webster as common
stockholders and Steven A. Webster as voting trustee.
(Filed as an exhibit to Falcon's Registration Statement
on Form S-1, Amendment No.2, filed on July 6, 1995,
Registration No. 33-84582 and incorporated herein by
reference.)
9.4 - Voting Trust Agreement dated as of May 30, 1990, between
Lydia Richardson and Linda Webster as common stockholders
and Steven A. Webster as voting trustee. (Filed as an
exhibit to Falcon's Registration Statement on Form S-1,
Amendment No.2, filed on July 6, 1995, Registration No.
33-84582 and incorporated herein by reference.)
10.1* - Reading & Bates 1990 Stock Option Plan. (Filed as
Appendix A to R&B's Proxy Statement dated April 26, 1993
and incorporated herein by reference.)
10.2* - 1992 Long-Term Incentive Plan of Reading & Bates
Corporation. (Filed as Exhibit B to R&B's Proxy
Statement dated April 27, 1992 and incorporated herein by
reference.)
10.3* - 1995 Long-Term Incentive Plan of Reading & Bates
Corporation (Filed as Exhibit 99.A to R&B's Proxy
Statement dated March 29, 1995 and incorporated herein by
reference.)
10.4* - 1995 Director Stock Option Plan of Reading & Bates
Corporation (Filed as Exhibit 99.B to R&B's Proxy
Statement dated March 29, 1995 and incorporated herein by
reference.)
10.5* - Director Stock Option Agreement dated as of September 14,
1993 between R&B and C. A. Donabedian. (Filed as
Exhibit 10.15 to R&B's Annual Report on Form 10-K for
1993 and incorporated herein by reference.)
10.6* - Surrender Letter dated as of February 7, 1995 by C. A.
Donabedian. (Filed as Exhibit 10.33 to R&B's Annual
Report on Form 10-K for 1995 and incorporated herein by
reference.)
10.7* - Director Stock Option Agreement dated as of September 14,
1993 between R&B and J. W. McLean. (Filed as Exhibit
10.16 to R&B's Annual Report on Form 10-K for 1993 and
incorporated herein by reference.)
10.8* - Surrender Letter dated as of February 7, 1995 by J. W.
McLean. (Filed as Exhibit 10.35 to R&B's Annual Report
on Form 10-K for 1995 and incorporated herein by
reference.)
10.9* - Director Stock Option Agreement dated as of September 14,
1993 between R&B and R. L. Sandmeyer. (Filed as
Exhibit 10.17 to R&B's Annual Report on Form 10-K for
1993 and incorporated herein by reference.)
10.10* - Surrender Letter dated as of February 7, 1995 by R. L.
Sandmeyer. (Filed as Exhibit 10.37 to R&B's Annual
Report on Form 10-K for 1995 and incorporated herein by
reference.)
10.11* - Director Stock Option Agreement dated as of September 14,
1993 between R&B and S. A. Webster. (Filed as Exhibit
10.18 to R&B's Annual Report on Form 10-K for 1993 and
incorporated herein by reference.)
10.12* - Surrender Letter dated as of February 7, 1995 by S. A.
Webster. (Filed as Exhibit 10.39 to R&B's Annual Report
on Form 10-K for 1995 and incorporated herein by
reference.)
10.13* - Stock Option Agreement dated as of February 7, 1995
between A.L. Chavkin and R&B. (Filed as Exhibit 10.40
to R&B's Annual Report on Form 10-K for 1995 and
incorporated herein by reference.)
10.14* - Stock Option Agreement dated as of February 7, 1995
between Willem Cordia and R&B. (Filed as Exhibit 10.41
to R&B's Annual Report on Form 10-K for 1995 and
incorporated herein by reference.)
10.15* - Stock Option Agreement dated as of February 7, 1995
between C.A. Donabedian and R&B. (Filed as Exhibit
10.42 to R&B's Annual Report on Form 10-K for 1995 and
incorporated herein by reference.)
10.16* - Stock Option Agreement dated as of February 7, 1995
between Ted Kalborg and R&B. (Filed as Exhibit 10.43 to
R&B's Annual Report on Form 10-K for 1995 and
incorporated herein by reference.)
10.17* - Stock Option Agreement dated as of February 7, 1995
between J.W. McLean and R&B. (Filed as Exhibit 10.44 to
R&B's Annual Report on Form 10-K for 1995 and
incorporated herein by reference.)
10.18* - Stock Option Agreement dated as of February 7, 1995
between R.L. Sandmeyer and R&B. (Filed as Exhibit 10.45
to R&B's Annual Report on Form 10-K for 1995 and
incorporated herein by reference.)
10.19* - Stock Option Agreement dated as of February 7, 1995
between S.A. Webster and R&B. (Filed as Exhibit 10.46
to R&B's Annual Report on Form 10-K for 1995 and
incorporated herein by reference.)
10.20* - Stock Option Agreement dated as of April 19, 1995 between
M.A.E. Lacqueur and R&B. (Filed as Exhibit 10.47 to
R&B's Annual Report on Form 10-K for 1995 and
incorporated herein by reference.)
10.21* - Stock Option Agreement with respect to the 1995 Long-Term
Incentive Plan dated February 6, 1996 between R&B and
Paul B. Loyd, Jr. (Filed as Exhibit 10.48 to R&B's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
10.22* - Amendment No. 1, dated as of December 3, 1996 to Stock
Option Agreement with respect to the 1995 Long-Term
Incentive Plan between R&B and Paul B. Loyd, Jr. (Filed
as Exhibit 10.22 to R&B's Annual Report on Form 10-K for
1996 and incorporated herein by reference.)
10.23* - Stock Option Agreement with respect to the 1992 Long-Term
Incentive Plan dated February 6, 1996 between R&B and
Paul B. Loyd, Jr. (Filed as Exhibit 10.49 to R&B's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
10.24* - Amendment No. 1, dated as of December 3, 1996 to Stock
Option Agreement with respect to the 1992 Long-Term
Incentive Plan between R&B and Paul B. Loyd, Jr. (Filed
as Exhibit 10.24 to R&B's Annual Report on Form 10-K for
1996 and incorporated herein by reference.)
10.25* - Employment Agreement dated as of November 1, 1991 between
R&B and L. E. Voss, Jr. (Filed as Exhibit 10.34 to R&B's
Annual Report on Form 10-K for 1991 and incorporated
herein by reference.)
10.26* - Amendment No. 1, dated as of October 1, 1993, to the
Employment Agreement dated as of November 1, 1991 between
R&B and L. E. Voss, Jr. (Filed as Exhibit 10.22 to
R&B's Annual Report on Form 10-K for 1993 and
incorporated herein by reference.)
10.27* - Employment Agreement dated as of November 1, 1991 between
R&B and T. W. Nagle. (Filed as Exhibit 10.35 to R&B's
Annual Report on Form 10-K for 1991 and incorporated
herein by reference.)
10.28* - Amendment No. 1, dated as of October 1, 1993, to the
Employment Agreement dated as of November 1, 1991 between
R&B and T. W. Nagle. (Filed as Exhibit 10.24 to R&B's
Annual Report on Form 10-K for 1993 and incorporated
herein by reference.)
10.29* - Employment Agreement dated as of November 1, 1991 between
R&B and C. R. Ofner. (Filed as Exhibit 10.36 to R&B's
Annual Report on Form 10-K for 1991 and incorporated
herein by reference.)
10.30* - Amendment No. 1, dated as of October 1, 1993, to the
Employment Agreement dated as of November 1, 1991 between
R&B and C. R. Ofner. (Filed as Exhibit 10.26 to R&B's
Annual Report on Form 10-K for 1993 and incorporated
herein by reference.)
10.31* - Employment Agreement dated as of November 1, 1991 between
R&B and D. L. McIntire. (Filed as Exhibit 10.37 to R&B's
Annual Report on Form 10-K for 1991 and incorporated
herein by reference.)
10.32* - Amendment No. 1, dated as of October 1, 1993, to the
Employment Agreement dated as of November 1, 1991 between
R&B and D. L. McIntire. (Filed as Exhibit 10.28 to
R&B's Annual Report on Form 10-K for 1993 and
incorporated herein by reference.)
10.33* - Employment Agreement dated as of November 1, 1991 between
R&B and W. K. Hillin. (Filed as Exhibit 10.38 to R&B's
Annual Report on Form 10-K for 1991 and incorporated
herein by reference.)
10.34* - Amendment No. 1, dated as of October 1, 1993, to the
Employment Agreement dated as of November 1, 1991 between
R&B and W. K. Hillin. (Filed as Exhibit 10.30 to R&B's
Annual Report on Form 10-K for 1993 and incorporated
herein by reference.)
10.35* - Employment Agreement dated as of January 1, 1992 between
R&B and Paul B. Loyd, Jr. (Filed as Exhibit 10.42 to
Registration No. 33-51120 and incorporated herein by
reference.)
10.36* - Amendment No. 1, dated as of October 1, 1993, to the
Employment Agreement dated as of January 1, 1992 between
R&B and Paul B. Loyd, Jr. (Filed as Exhibit 10.32 to
R&B's Annual Report on Form 10-K for 1993 and
incorporated herein by reference.)
10.37* - Restricted Stock Award Agreement dated December 5, 1995
under the 1995 Long-Term Incentive Plan between L. E.
Voss, Jr. and R&B. (Filed as Exhibit 10.41 to R&B's
Annual Report on Form 10-K for 1996 and incorporated
herein by reference.)
10.38* - Restricted Stock Award Agreement dated December 5, 1995
under the 1995 Long-Term Incentive Plan between T. W.
Nagle and R&B. (Filed as Exhibit 10.42 to R&B's Annual
Report on Form 10-K for 1996 and incorporated herein by
reference.)
10.39* - Restricted Stock Award Agreement dated December 5, 1995
under the 1995 Long-Term Incentive Plan between C. R.
Ofner and R&B. (Filed as Exhibit 10.43 to R&B's Annual
Report on Form 10-K for 1996 and incorporated herein by
reference.)
10.40* - Restricted Stock Award Agreement dated December 5, 1995
under the 1995 Long-Term Incentive Plan between D. L.
McIntire and R&B. (Filed as Exhibit 10.44 to R&B's
Annual Report on Form 10-K for 1996 and incorporated
herein by reference.)
10.41* - Restricted Stock Award Agreement dated December 5, 1995
under the 1995 Long-Term Incentive Plan between W. K.
Hillin and R&B. (Filed as Exhibit 10.45 to R&B's Annual
Report on Form 10-K for 1996 and incorporated herein by
reference.)
10.42* - 1996 Director Restricted Stock Award Plan of Reading &
Bates Corporation. (Filed as Exhibit 99.B to R&B's Proxy
Statement dated March 28, 1997 and incorporated herein by
reference.)
10.43* - Restricted Stock Award Agreement dated December 3, 1996
under the 1996 Director Restricted Stock Award Plan
between A. L. Chavkin and R&B. (Filed as Exhibit 10.46
to R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.44* - Restricted Stock Award Agreement dated December 3, 1996
under the 1996 Director Restricted Stock Award Plan
between C. A. Donabedian and R&B. (Filed as Exhibit
10.47 to R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.45* - Restricted Stock Award Agreement dated December 3, 1996
under the 1996 Director Restricted Stock Award Plan
between M. A. E. Laqueur and R&B. (Filed as Exhibit
10.49 to R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.46* - Restricted Stock Award Agreement dated December 3, 1996
under the 1996 Director Restricted Stock Award Plan
between R. L. Sandmeyer and R&B. (Filed as Exhibit 10.51
to R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.47* - Restricted Stock Award Agreement dated December 3, 1996
under the 1995 Long-Term Incentive Plan between Paul B.
Loyd, Jr. and R&B. (Filed as Exhibit 10.52 to R&B's
Annual Report on Form 10-K for 1996 and incorporated
herein by reference.)
10.48* - Stock Option Agreement dated December 3, 1996 under the
1995 Long-Term Incentive Plan between T. W. Nagle and
R&B. (Filed as Exhibit 10.53 to R&B's Annual Report on
Form 10-K for 1996 and incorporated herein by reference.)
10.49* - Restricted Stock Award Agreement dated December 3, 1996
under the 1995 Long-Term Incentive Plan between C. R.
Ofner and R&B. (Filed as Exhibit 10.54 to R&B's Annual
Report on Form 10-K for 1996 and incorporated herein by
reference.)
10.50* - Restricted Stock Award Agreement dated December 3, 1996
under the 1995 Long-Term Incentive Plan between D. L.
McIntire and R&B. (Filed as Exhibit 10.55 to R&B's
Annual Report on Form 10-K for 1996 and incorporated
herein by reference.)
10.51* - Restricted Stock Award Agreement dated December 3, 1996
under the 1995 Long-Term Incentive Plan between W. K.
Hillin and R&B. (Filed as Exhibit 10.56 to R&B's Annual
Report on Form 10-K for 1996 and incorporated herein by
reference.)
10.52* - 1997 Long-Term Incentive Plan of Reading & Bates
Corporation. (Filed as Exhibit 99.A to R & B's Proxy
Statement dated March 18, 1997 and incorporated herein by
reference.)
10.53* - Stock Option Agreement dated as of April 24, 1997 between
R&B and P.B. Loyd, Jr. under R&B's 1995 Long-Term
Incentive Plan.
10.54* - Stock Option Agreement dated as of April 24, 1997 between
R&B and T. W. Nagle under R&B's 1995 Long-Term Incentive
Plan.
10.55* - Stock Option Agreement dated as of April 24, 1997 between
R&B and C. R. Ofner under R&B's 1995 Long-Term Incentive
Plan.
10.56* - Stock Option Agreement dated as of April 24, 1997 between
R&B and D.L. McIntire under R&B's 1995 Long-Term
Incentive Plan.
10.57* - Stock Option Agreement dated as of April 24, 1997 between
R&B and W. K. Hillin under R&B's 1995 Long-Term Incentive
Plan.
10.58* - Stock Option Agreement dated as of April 24, 1997 between
R&B and W.K. Hillin under R&B's 1997 Long-Term Incentive
Plan.
10.59* - Amended and Restated Stock Option Agreement dated as of
February 16, 1995 between Falcon and Robert F. Fulton.
10.60* - Amended and Restated Stock Option Agreement dated as of
January 23, 1996 between Falcon and Steven A. Webster.
10.61* - Stock Option Agreement dated as of April 15, 1996 between
Falcon and Bernie W. Stewart.
10.62* - Rescission Agreement dated August 5, 1997 between R&B and
P.B. Loyd, Jr.
10.63* - Rescission Agreement dated August 5, 1997 between R&B and
T. W. Nagle.
10.64* - Rescission Agreement dated August 5, 1997 between R&B and
C. R. Ofner.
10.65* - Rescission Agreement dated August 5, 1997 between R&B and
D. L. McIntire.
10.66* - Rescission Agreement dated August 5, 1997 between R&B and
W. K. Hillin.
10.67* - Affiliate Agreement effective December 31, 1997 between
R&B and P. B. Loyd, Jr.
10.68* - Affiliate Agreement effective December 31, 1997 between
R&B and A. L. Chavkin.
10.69* - Affiliate Agreement effective December 31, 1997 between
R&B and C. A. Donabedian.
10.70* - Affiliate Agreement effective December 31, 1997 between
R&B and M. A. E. Laqueur.
10.71* - Affiliate Agreement effective December 31, 1997 between
R&B and R. L. Sandmeyer.
10.72* - Affiliate Agreement effective December 31, 1997 between
R&B and T. W. Nagle.
10.73* - Affiliate Agreement effective December 31, 1997 between
R&B and C. R. Ofner.
10.74* - Affiliate Agreement effective December 31, 1997 between
R&B and D. L. McIntire.
10.75* - Affiliate Agreement effective December 31, 1997 between
R&B and W. K. Hillin.
10.76* - Affiliate Agreement effective December 31, 1997 between
Falcon and Steven A. Webster.
10.77* - Affiliate Agreement effective December 31, 1997 between
Falcon and Bernie W. Stewart.
10.78* - Affiliate Agreement effective December 31, 1997 between
Falcon and Robert F. Fulton.
10.79* - Affiliate Agreement effective December 31, 1997 between
Falcon and Leighton E. Moss.
10.80* - Affiliate Agreement effective December 31, 1997 between
Falcon and Rodney W. Meisetschlaeger.
10.81* - Affiliate Agreement effective December 31, 1997 between
Falcon and Steven R. Meheen.
10.82* - Affiliate Agreement effective December 31, 1997 between
Falcon and Douglas A.P. Hamilton.
10.83* - Affiliate Agreement effective December 31, 1997 between
Falcon and Michael Porter.
10.84* - Affiliate Agreement effective December 31, 1997 between
Falcon and William R. Ziegler.
10.85* - Affiliate Agreement effective December 31, 1997 between
Falcon and Don P. Rodney.
10.86 - Reading & Bates Stock Option Agreement dated as of July
10, 1997 between R&B and Falcon. (Filed as Annex E to
R&B Falcon's Registration Statement on Form S-4 dated
November 20, 1997 and incorporated herein by reference.)
10.87 - Falcon Stock Option Agreement dated as of July 10, 1997
between Falcon and R&B. (Filed as Annex D to R&B
Falcon's Registration Statement on Form S-4 dated
November 20, 1997 and incorporate herein by reference.)
10.88 - Agreement dated as of August 31, 1991 among R&B, Arcade
Shipping AS and Sonat Offshore Drilling Inc. (Filed as
Exhibit 10.40 to R&B's Annual Report on Form 10-K for
1991 and incorporated herein by reference.)
10.89 - Facility Agreement dated February 21, 1991 between Arcade
Drilling AS, Chase Investment Bank Limited, The Chase
Manhattan Bank, N.A. and others. (Filed as Exhibit 10.51
to Registration No. 33-51120 and incorporated herein by
reference.)
10.90 - Amendment Agreement dated November 30, 1995 to Facility
Agreement dated February 21, 1991 between Arcade Drilling
AS, Chase Investment Bank Limited, The Chase Manhattan
Bank, N.A. and others. (Filed as Exhibit 10.71 to R&B's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
10.91 - Second Amendment Agreement dated October, 1996 between
Arcade Drilling AS, Chase Investment Bank Limited, The
Chase Manhattan Bank, N.A. and others. (Filed as Exhibit
10.60 to R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.92 - 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.
(Filed as Exhibit 10.3 to R&B's Quarterly Report on Form
10-Q for the Third Quarter of 1995 and incorporated
herein by reference.)
10.93 - Mortgage of a Ship dated September 8, 1995 between
Reading & Bates (Caledonia) Limited, a subsidiary of R&B,
and BP Exploration Operating Company Limited. (Filed as
Exhibit 10.4 to R&B's Quarterly Report on Form 10-Q for
the Third Quarter of 1995 and incorporated herein by
reference.)
10.94 - Mortgage of a Ship dated September 8, 1995 between
Reading & Bates (Caledonia) Limited, a subsidiary of R&B,
and Britoil plc. (Filed as Exhibit 10.5 to R&B's
Quarterly Report on Form 10-Q for the Third Quarter of
1995 and incorporated herein by reference.)
10.95 - Deed of Covenant dated September 8, 1995 between Reading
& Bates (Caledonia) Limited, a subsidiary of R&B, and BP
Exploration Operating Company Limited. (Filed as Exhibit
10.6 to R&B's Quarterly Report on Form 10-Q for the Third
Quarter of 1995 and incorporated herein by reference.)
10.96 - Deed of Covenant dated September 8, 1995 between Reading
& Bates (Caledonia) Limited, a subsidiary of R&B, and
Britoil Public Limited Company. (Filed as Exhibit 10.7
to R&B's Quarterly Report on Form 10-Q for the Third
Quarter of 1995 and incorporated herein by reference.)
10.97 - Performance Guarantee dated September 8, 1995 by R&B in
favour of BP Exploration Operating Company Limited.
(Filed as Exhibit 10.8 to R&B's Quarterly Report on Form
10-Q for the Third Quarter of 1995 and incorporated
herein by reference.)
10.98 - Performance Guarantee dated September 8, 1995 by R&B in
favour of Britoil plc. (Filed as Exhibit 10.9 to R&B's
Quarterly Report on Form 10-Q for the Third Quarter of
1995 and incorporated herein by reference.)
10.99 - Initial Services Agreement dated September 8, 1995
between Britoil Public Limited Company and Reading &
Bates (Caledonia) Limited, a subsidiary of R&B. (Filed
as Exhibit 10.10 to R&B's Quarterly Report on Form 10-Q
for the Third Quarter of 1995 and incorporated herein by
reference.)
10.100 - 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. (Filed as Exhibit 10.11 to
R&B's Quarterly Report on Form 10-Q for the Third Quarter
of 1995 and incorporated herein by reference.)
10.101 - Credit Agreement dated as of April 30, 1996 among R&B,
Reading & Bates Drilling Co., certain lending
institutions named therein, Credit Lyonnais New York
Branch, as co-agent, and Christiana Bank og Kreditkasse,
New York Branch, as agent. (Filed as Exhibit 10.85 to
R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.102 - Security Agreement dated as of April 30, 1996 among
Reading & Bates Drilling Co., Reading & Bates Exploration
Co., Reading & Bates (A) Pty. Ltd., Reading and Bates
Borneo Drilling Co., Ltd, and Christiana Bank og
Kreditkasse, New York Branch, as collateral agent.
(Filed as Exhibit 10.86 to R&B's Annual Report on Form 10-
K for 1996 and incorporated herein by reference.)
10.103 - Subsidiary Guaranty dated as of April 30, 1996 by
Reading & Bates Exploration Co., Reading & Bates (A) Pty.
Ltd., and Reading and Bates Borneo Drilling Co., Ltd.
(Filed as Exhibit 10.87 to R&B's Annual Report on Form 10-
K for 1996 and incorporated herein by reference.)
10.104 - First Preferred Mortgage on the "D. R. STEWART" dated
April 30, 1996 between Reading & Bates Exploration Co. in
favor of Wilmington Trust Company, as trustee. (Filed as
Exhibit 10.88 to R&B's Annual Report on Form 10-K for
1996 and incorporated herein by reference.)
10.105 - First Preferred Mortgage on the "JACK BATES" dated April
30, 1996 between Reading & Bates Drilling Co. in favor of
Wilmington Trust Company, as trustee. (Filed as Exhibit
10.89 to R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.106 - First Preferred Mortgage on the "W. D. KENT" dated April
30, 1996 between Reading & Bates Exploration Co. in favor
of Wilmington Trust Company, as trustee. (Filed as
Exhibit 10.90 to R&B's Annual Report on Form 10-K for
1996 and incorporated herein by reference.)
10.107 - Indenture of First Naval Mortgage on the "CHARLEY GRAVES"
dated April 30, 1996 between Reading and Bates Borneo
Drilling Co. Ltd. and Christiana Bank og Kreditkasse, New
York Branch, as mortgagee. (Filed as Exhibit 10.91 to
R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.108 - First Priority Mortgage on the "RON TAPPMEYER" dated
April 30, 1996 between Reading & Bates (A) Pty. Ltd. and
Christiana Bank og Kreditkasse, New York Branch, as
mortgagee. (Filed as Exhibit 10.92 to R&B's Annual
Report on Form 10-K for 1996 and incorporated herein by
reference.)
10.109 - Deed of Covenant on the "J. W. McLEAN" dated April 30,
1996 between Reading & Bates Drilling Co. and Christiana
Bank og Kreditkasse, New York Branch, as mortgagee.
(Filed as Exhibit 10.93 to R&B's Annual Report on Form 10-
K for 1996 and incorporated herein by reference.)
10.110 - Indenture of Trust dated as of April 30, 1996 among
Reading & Bates Drilling Co., Reading & Bates Exploration
Co., and Wilmington Trust Company, as trustee. (Filed as
Exhibit 10.94 to R&B's Annual Report on Form 10-K for
1996 and incorporated herein by reference.)
10.111 - Collateral Assignment of Insurance dated April 30, 1996
with respect to the "JACK BATES" between Reading & Bates
Drilling Co. and Wilmington Trust Company, as trustee.
(Filed as Exhibit 10.95 to R&B's Annual Report on Form 10-
K for 1996 and incorporated herein by reference.)
10.112 - Collateral Assignment of Insurance dated April 30, 1996
with respect to the "D. R. STEWART" between Reading &
Bates Exploration Co. and Wilmington Trust Company, as
trustee. (Filed as Exhibit 10.96 to R&B's Annual Report
on Form 10-K for 1996 and incorporated herein by
reference.)
10.113 - Collateral Assignment of Insurance dated April 30, 1996
with respect to the "W. D. KENT" between Reading & Bates
Exploration Co. and Wilmington Trust Company, as trustee.
(Filed as Exhibit 10.97 to R&B's Annual Report on Form 10-
K for 1996 and incorporated herein by reference.)
10.114 - Collateral Assignment of Insurance dated April 30, 1996
with respect to the "CHARLEY GRAVES" between Reading and
Bates Borneo Drilling Co., Ltd. and Christiana Bank og
Kreditkasse, New York Branch, as agent. (Filed as
Exhibit 10.98 to R&B's Annual Report on Form 10-K for
1996 and incorporated herein by reference.)
10.115 - Collateral Assignment of Insurance dated April 30, 1996
with respect to the "RON TAPPMEYER" between Reading and
Bates (A) Pty. Ltd. and Christiana Bank og Kreditkasse,
New York Branch, as agent. (Filed as Exhibit 10.99 to
R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.116 - Collateral Assignment of Insurance dated April 30, 1996
with respect to the "J. W. McLEAN" between Reading and
Bates Borneo Drilling Co., Ltd. and Christiana Bank og
Kreditkasse, New York Branch, as agent. (Filed as
Exhibit 10.100 to R&B's Annual Report on Form 10-K for
1996 and incorporated herein by reference.)
10.117 - First Amendment dated as of July 9, 1996 to Credit
Agreement dated as of April 30, 1996 among R&B, Reading &
Bates Drilling Co., certain lending institutions named
therein, Credit Lyonnais New York Branch, as co-agent,
and Christiana Bank og Kreditkasse, New York Branch, as
agent. (Filed as Exhibit 10.101 to R&B's Annual Report
on Form 10-K for 1996 and incorporated herein by
reference.)
10.118 - Subsidiary Assumption Agreement dated as of July 9, 1996
by RB Drilling Co. and HRB Rig Corporation. (Filed as
Exhibit 10.102 to R&B's Annual Report on Form 10-K for
1996 and incorporated herein by reference.)
10.119 - Indenture of First Naval Mortgage on the "J. W. McLEAN"
dated July 9, 1996 by Reading & Bates Drilling Co. in
favor of Christiana Bank og Kreditkasse, New York Branch,
as mortgagee. (Filed as Exhibit 10.103 to R&B's Annual
Report on Form 10-K for 1996 and incorporated herein by
reference.)
10.120 - First Preferred Mortgage on the "HARVEY H. WARD" dated
July 9, 1996 by HRB Rig Corporation in favor of
Wilmington Trust Company, as trustee. (Filed as Exhibit
10.104 to R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.121 - Amendment No. 1 to Indenture of First Naval Mortgage on
the "CHARLIE GRAVES" dated July 9, 1996 by Reading and
Bates Borneo Drilling Co., Ltd. in favor of Christiana
Bank og Kreditkasse, New York Branch, as mortgagee.
(Filed as Exhibit 10.105 to R&B's Annual Report on Form
10-K for 1996 and incorporated herein by reference.)
10.122 - Amendment to First Preferred Mortgage on the "JACK BATES"
dated July 9, 1996 by Reading & Bates Drilling Co. in
favor of Wilmington Trust Company, as trustee. (Filed as
Exhibit 10.106 to R&B's Annual Report on Form 10-K for
1996 and incorporated herein by reference.)
10.123 - Amendment to First Preferred Mortgage on the "D. R.
STEWART" dated July 9, 1996 by Reading & Bates
Exploration Co. in favor of Wilmington Trust Company, as
trustee. (Filed as Exhibit 10.107 to R&B's Annual Report
on Form 10-K for 1996 and incorporated herein by
reference.)
10.124 - Amendment to First Preferred Mortgage on the "W. D. KENT"
dated July 9, 1996 by Reading & Bates Exploration Co. in
favor of Wilmington Trust Company, as trustee. (Filed as
Exhibit 10.108 to R&B's Annual Report on Form 10-K for
1996 and incorporated herein by reference.)
10.125 - Collateral Assignment of Insurance dated July 9, 1996
with respect to the "HARVEY H. WARD" between HRB Rig
Corporation and Wilmington Trust Company, as trustee.
(Filed as Exhibit 10.109 to R&B's Annual Report on Form
10-K for 1996 and incorporated herein by reference.)
10.126 - Collateral Assignment of Insurance dated July 9, 1996
with respect to the "RIG 41" between RB Drilling Co. and
Christiana Bank og Kreditkasse, New York Branch, as
agent. (Filed as Exhibit 10.110 to R&B's Annual Report on
Form 10-K for 1996 and incorporated herein by reference.)
10.127 - Amended and Restated Indenture of Trust dated as of July
9, 1996 among Reading & Bates Drilling Co., Reading &
Bates Exploration Co., HRB Rig Corporation and
Wilmington Trust Company, as trustee. (Filed as Exhibit
10.111 to R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.128 - Second Amendment dated as of August 30, 1996 to Credit
Agreement dated as of April 30, 1996 among R&B, Reading &
Bates Drilling Co., certain lending institutions named
therein, Credit Lyonnais New York Branch, as co-agent,
and Christiana Bank og Kreditkasse, New York Branch, as
agent. (Filed as Exhibit 10.112 to R&B's Annual Report on
Form 10-K for 1996 and incorporated herein by reference.)
10.129 - Subsidiary Assumption Agreement dated as of August 30,
1996 by Reading & Bates Development Co. (Filed as Exhibit
10.113 to R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.130 - Subsidiary Guaranty dated as of August 30, 1996 by
Reading & Bates Development Co. (Filed as Exhibit 10.114
to R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.131 - Indenture of First Naval Mortgage on "SEILLEAN" dated
August 30, 1996 by Reading & Bates Development Co. in
favor of Christiana Bank og Kreditkasse, New York Branch,
as mortgagee. (Filed as Exhibit 10.115 to R&B's Annual
Report on Form 10-K for 1996 and incorporated herein by
reference.)
10.132 - Collateral Assignment of Insurance dated August 30, 1996
with respect to the "SEILLEAN" between Reading & Bates
Development Co. and Christiana Bank og Kreditkasee, New
York Branch, as agent. (Filed as Exhibit 10.116 to R&B's
Annual Report on Form 10-K for 1996 and incorporated
herein by reference.)
10.133 - Credit Agreement dated as of November 13, 1996 among R&B,
Reading & Bates Drilling Co., certain lending
institutions named therein, Banque Indosuez, as
documentation agent, Credit Lyonnais New York Branch, as
documentation agent, and Christiana Bank og Kreditkasse,
New York Branch, as administrative agent, arranger and
security trustee. (Filed as Exhibit 10.117 to R&B's
Annual Report on Form 10-K for 1996 and incorporated
herein by reference.)
10.134 - Security Agreement dated as of November 13, 1996 among
Reading & Bates Drilling Co., Reading & Bates Exploration
Co., Reading & Bates Offshore, Limited, HRB Rig
Corporation, Reading & Bates (A) Pty. Ltd., Reading and
Bates Borneo Drilling Co., Ltd, and Christiana Bank og
Kreditkasse, New York Branch, as collateral agent. (Filed
as Exhibit 10.118 to R&B's Annual Report on Form 10-K for
1996 and incorporated herein by reference.)
10.135 - Subsidiary Guaranty dated as of November 13, 1996 by
Reading & Bates Exploration Co., Reading & Bates (A) Pty.
Ltd., Reading and Bates Borneo Drilling Co., Ltd.,
Reading & Bates Offshore, Limited and HRB Rig
Corporation. (Filed as Exhibit 10.119 to R&B's Annual
Report on Form 10-K for 1996 and incorporated herein by
reference.)
10.136 - First Preferred Mortgage on the "D. R. STEWART" dated
November 13, 1996 between Reading & Bates Exploration Co.
in favor of Christiana Bank og Kreditkasse, New York
Branch, as security trustee. (Filed as Exhibit 10.120 to
R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.137 - First Preferred Mortgage on the "JACK BATES" dated
November 13, 1996 between Reading & Bates Drilling Co. in
favor of Christiana Bank og Kreditkasse, New York Branch,
as security trustee. (Filed as Exhibit 10.121 to R&B's
Annual Report on Form 10-K for 1996 and incorporated
herein by reference.)
10.138 - First Preferred Mortgage on the "W. D. KENT" dated
November 13, 1996 between Reading & Bates Exploration
Co. in favor of Christiana Bank og Kreditkasse, as
security trustee. (Filed as Exhibit 10.122 to R&B's
Annual Report on Form 10-K for 1996 and incorporated
herein by reference.)
10.139 - First Preferred Mortgage on the "RANDOLPH YOST" dated
November 13, 1996 between Reading & Bates Drilling Co.
in favor of Christiana Bank og Kreditkasse, as security
trustee. (Filed as Exhibit 10.123 to R&B's Annual Report
on Form 10-K for 1996 and incorporated herein by
reference.)
10.140 - First Preferred Mortgage on the "GEORGE H. GALLOWAY"
dated November 13, 1996 between Reading & Bates
Offshore, Limited in favor of Christiana Bank og
Kreditkasse, as security trustee. (Filed as Exhibit
10.124 to R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.141 - First Preferred Mortgage on the "F. G. MCCLINTOCK" dated
November 13, 1996 between Reading & Bates Offshore,
Limited in favor of Christiana Bank og Kreditkasse, as
security trustee. (Filed as Exhibit 10.125 to R&B's
Annual Report on Form 10-K for 1996 and incorporated
herein by reference.)
10.142 - First Preferred Mortgage on the "J. T. ANGEL" dated
November 13, 1996 between Reading & Bates Drilling Co.
in favor of Christiana Bank og Kreditkasse, as security
trustee. (Filed as Exhibit 10.126 to R&B's Annual Report
on Form 10-K for 1996 and incorporated herein by
reference.)
10.143 - First Preferred Mortgage on the "ROGER W. MOWELL" dated
November 13, 1996 between Reading & Bates Drilling Co.
in favor of Christiana Bank og Kreditkasse, as security
trustee. (Filed as Exhibit 10.127 to R&B's Annual Report
on Form 10-K for 1996 and incorporated herein by
reference.)
10.144 - First Preferred Mortgage on the "HARVEY H. WARD" dated
November 13, 1996 between HRB Rig Corporation in favor
of Christiana Bank og Kreditkasse, as security trustee.
(Filed as Exhibit 10.128 to R&B's Annual Report on Form
10-K for 1996 and incorporated herein by reference.)
10.145 - Indenture of First Naval Mortgage on the "CHARLEY GRAVES"
dated November 13, 1996 between Reading and Bates Borneo
Drilling Co. Ltd. and Christiana Bank og Kreditkasse, New
York Branch, as mortgagee. (Filed as Exhibit 10.129 to
R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.146 - Indenture of First Naval Mortgage on the "J. W. McLEAN"
dated November 13, 1996 between Reading & Bates Drilling
Co. and Christiana Bank og Kreditkasse, New York Branch,
as mortgagee. (Filed as Exhibit 10.130 to R&B's Annual
Report on Form 10-K for 1996 and incorporated herein by
reference.)
10.147 - Indenture of First Naval Mortgage on the "RIG 41" dated
November 13, 1996 between Reading and Bates Borneo
Drilling Co. Ltd. and Christiana Bank og Kreditkasse, New
York Branch, as mortgagee. (Filed as Exhibit 10.131 to
R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.148 - First Priority Mortgage on the "RON TAPPMEYER" dated
November 13, 1996 between Reading & Bates (A) Pty. Ltd.
and Christiana Bank og Kreditkasse, New York Branch, as
mortgagee. (Filed as Exhibit 10.132 to R&B's Annual
Report on Form 10-K for 1996 and incorporated herein by
reference.)
10.149 - Pledge Agreement dated as of November 13, 1996 between
R&B and Christiana Bank og Kreditkasse, New York Branch,
as collateral agent. (Filed as Exhibit 10.133 to R&B's
Annual Report on Form 10-K for 1996 and incorporated
herein by reference.)
10.150 - Amended and Restated Credit Agreement dated as of
November 13, 1996 and amended and restated as of July 3,
1997 among R&B, Reading & Bates Drilling Co., certain
lending institutions named therein, Credit Agricole
Indosuez, as documentation agent, Credit Lyonnais New
York Branch, as documentation agent, and Christiana Bank
og Kreditkasse, New York Branch, as administrative agent,
arranger and security trustee.
10.151 - 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. (Filed as Exhibit
10.134 to R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.152 - Memorandum of Agreement dated November 28, 1995 between
Reading and Bates, Inc., a subsidiary of R&B, and Deep
Sea Investors, L.L.C. (Filed as Exhibit 10.110 to R&B's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
10.153 - Bareboat Charter "M.G. Hulme, Jr." dated November 28,
1995 between Deep Sea Investors, L.L.C. and Reading &
Bates Drilling Co., a subsidiary of R&B. (Filed as
Exhibit 10.111 to R&B's Annual Report on Form 10-K for
1995 and incorporated herein by reference.)
10.154 - Purchase and Sale Agreement dated October 18, 1995
between Enserch Exploration, Inc. and Reading & Bates
Development Co., a subsidiary of R&B. (Filed as Exhibit
10.112 to R&B's Annual Report on Form 10-K for 1995 and
incorporated herein by reference.)
10.155 - Operating Agreement made effective as of May 1, 1995
among Enserch Exploration, Inc., Mobil Oil Corporation,
Mobil Oil exploration & Producing Southeast Inc. and
Reading & Bates Development Co., a subsidiary of R&B.
(Filed as Exhibit 10.125 to R&B's Annual Report on Form
10-K for 1995 and incorporated herein by reference.)
10.156 - Participation Agreement dated December 4, 1996 between
Santa Fe Energy Resources, Inc. and Reading & Bates
Development Co. (Filed as Exhibit 10.152 to R&B's Annual
Report on Form 10-K for 1996 and incorporated herein by
reference.)
10.157 - Joint Venture Agreement dated December 16, 1996 among
Shell Deepwater Development Inc., SOI Finance Inc. and
Reading & Bates Development Co. (Filed as Exhibit 10.161
to R&B's Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.158 - Limited Liability Company Agreement dated October 28,
1996 between Conoco Development Company and RB Deepwater
Exploration Inc. (Filed as Exhibit 10.162 to R&B's Annual
Report on Form 10-K for 1996 and incorporated herein by
reference.)
10.159 - Limited Liability Company Agreement dated April 30, 1997
between Conoco Development II Inc. and RB Deepwater
Exploration II Inc.
10.160 - Joint Venture Agreement dated February 22, 1996 between
INTEC Engineering, Inc. and Reading & Bates Development
Co. (Filed as Exhibit 10.163 to R&B's Annual Report on
Form 10-K for 1996 and incorporated herein by reference.)
10.161 - Loan Agreement dated as of December 14, 1996 among TRB
Holding Corporation, Reading & Bates (U.K.) Limited and
Nissho Iwai Europe PLC. (Filed as Exhibit 10.164 to R&B's
Annual Report on Form 10-K for 1996 and incorporated
herein by reference.)
10.162 - First Naval Mortgage on the "SEILLEAN" dated December 14,
1996 between TRB Holding Corporation in favor of Nissho
Iwai Europe PLC. (Filed as Exhibit 10.165 to R&B's Annual
Report on Form 10-K for 1996 and incorporated herein by
reference.)
10.163 - 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. (Filed as Exhibit 10.166 to R&B's
Annual Report on Form 10-K for 1996 and incorporated
herein by reference.)
10.164 - 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. (Filed as Exhibit 10.167 to R&B's Annual Report on
Form 10-K for 1996 and incorporated herein by reference.)
10.165 - Contract dated November 14, 1997 for Construction and
Sale of Vessel (Hull No. HRBS6) between Hyundai Heavy
Industries Co., Ltd., Hyundai Corporation and RB
Exploration Co.
10.166 - Contract dated September 5, 1997 for Construction and
Sale of a 103,000 Metric Tons Displacement Drillship
(Hull No. 1255) between Samsung Heavy Industries Co.,
Ltd., Samsung Corporation and Reading & Bates Drilling
Co.
10.167 - 1992 Stock Option Plan of Falcon. (Filed as an exhibit to
Falcon's Registration Statement on Form S-4, filed on
April 29, 1994, Registration No. 33-78369 and
incorporated herein by reference.)
10.168 - 1994 Stock Option Plan of Falcon. (Filed as an exhibit to
Falcon's Annual Report on form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.)
10.169 - Uncommitted Acquisition Credit Agreement dated as of
January 24, 1996, between Falcon and Banque Paribas.
(Filed as an exhibit to Falcon's Annual Report on Form 10-
K for the year ended December 31, 1995 and incorporated
herein by reference.)
10.170 - First Amendment, dated as of March 4, 1996, to
Uncommitted Acquisition Credit Agreement. (Filed as an
exhibit to Falcon's Annual Report on Form 10-K for the
year ended December 31, 1995 and incorporated herein by
reference.)
10.171 - 1995 Stock Option Plan of Falcon. (Filed as an exhibit to
Falcon's Annual Report on form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.)
10.172 - Bank Earn-Out Agreement, dated as of December 23, 1992,
by and between Falcon and Whitney National Bank. (Filed
as an exhibit to Falcon's Registration Statement of Form
S-1, Amendment No. 3, filed on July 19, 1995,
Registration No. 33-84582 and incorporated herein by
reference.)
10.173 - Senior Executive Incentive Compensation Agreement, dated
as of December 24, 1992, by and among Falcon, Robert H.
Reeves, Jr., and Charles E. Reeves. (Filed as an exhibit
to Falcon's Registration Statement of Form S-1, Amendment
No. 3, filed on July 19, 1995, Registration No. 33-84582
and incorporated herein by reference.)
10.174 - Registration Rights Agreement dated August 15, 1995,
between Falcon and Blake Holding Co., Inc. (Filed as an
exhibit to Falcon's Annual Report on Form 10-K for the
year ended December 31, 1995 and incorporated herein by
reference.)
10.175 - Credit Agreement dated as of November 12, 1996, among
Falcon, Banque Paribas, and Arab Banking Corporation
(B.S.C.) relating to a $25 million facility. (Filed as
Exhibit 10.24 to Falcon's Annual Report on Form 10-K for
the year ended December 31, 1996 and incorporated herein
by reference.)
10.176 - First Amendment to Credit Amendment, dated October 3,
1997, among Falcon, Banque Paribas, Arab Banking
Corporation (B.S.C.), and ING (U.S.) Capital Corporation,
amending Credit Agreement dated November 12, 1996,
relating to a $25 million facility.
10.177 - Credit Agreement dated as of November 12, 1996, among
Falcon, Banque Paribas, and Arab Banking Corporation
(B.S.C.) relating to a $40 million facility. (Filed as
Exhibit 10.25 to Falcon's Annual Report on Form 10-K for
the year ended December 31, 1996 and incorporated herein
by reference.)
10.178 - First Amendment to Credit Agreement, dated October 3,
1997, among Falcon, Bank Paribas, Arab Banking
Corporation (B.S.C.), and ING (U.S.) Capital Corporation,
amending Credit Agreement dated November 12, 1996
relating to a $40 million facility, increasing such
facility to $60 million.
10.179 - Credit Agreement dated as of October 3, 1997, among
Falcon, Banque Paribas, Arab Banking Corporation
(B.S.C.), and ING (U.S.) Capital Corporation relating to
an $80 million facility.
10.180 - First Amendment to Credit Agreement, dated December 22,
1997, among Falcon, Bank Paribas, Arab Banking
Corporation (B.S.C.), and ING (U.S.) Capital Corporation,
amending Credit Agreement dated October 3, 1997 relating
to an $80 million facility, increasing such facility to
$130 million.
10.181 - Registration Rights Agreement dated December 10, 1996,
between Falcon and KS Deepsea Drillships. (Filed as
Exhibit 10.26 to Falcon's Annual Report on Form 10-K for
the year ended December 31, 1996 and incorporated herein
by reference.)
10.182 - Participation Agreement made effective August 28, 1997,
between Reading & Bates Development Co., a subsidiary of
R&B, British-Borneo Petroleum, Inc. and British-Borneo
Exploration, Inc.
10.183 - Purchase and Sale and Acreage Exchange Agreement made
effective August 28, 1997 between Enserch Exploration,
Inc., and Reading & Bates Development Co., a subsidiary
of R&B.
21 - Schedule of Subsidiaries of the Company (Filed as Exhibit
21.1 to R&B Falcon's Registration Statement on Form S-4
dated November 20, 1997 and incorporated herein by
reference.)
23 - Consent of Arthur Andersen LLP
27 - Financial Data Schedule. (Exhibit 27 is being submitted
as an exhibit only in the electronic format of this
Annual Report on Form 10-K being submitted to the
Securities and Exchange Commission.)
99 - Annual Report on Form 11-K with respect to Reading &
Bates Savings Plan. (To be filed by amendment to the
Annual Report on Form 10-K.)
Instruments with respect to certain long-term obligations of
the Company are not being filed as exhibits hereto as the securities
authorized thereunder do not exceed 10% of the Company's total
assets. The Company agrees to furnish a copy of each such
instrument to the Securities and Exchange Commission upon its
request.
*Management contract or compensatory plan or arrangement required to
be filed as an exhibit pursuant to the requirements of Item 14(c)
of Form 10-K.
(b) Reports on Form 8-K
R&B filed twelve Current Reports on Form 8-K during the three months
ended December 31, 1997. A Current Report on Form 8-K was: filed
October 3, 1997 announcing the acquisition of the semisubmersible
accommodation unit "ALLEGHENY", filed October 14, 1997 announcing
additional unsuccessful exploratory expenses for the third quarter,
filed October 16, 1997 announcing third quarter 1997 earnings, filed
October 27, 1997 announcing the postponement of the special
stockholders meeting, filed October 29, 1997 announcing the award of
a two year contract for the "J.W. McLEAN", filed November 4, 1997
announcing the award of a three to four well contract for the "M.G.
HULME, JR.", filed November 6, 1997 announcing an update on newbuild
projects, filed November 21, 1997 announcing the rescheduling of the
special stockholders meeting, filed December 16, 1997 announcing the
extension of the "JACK BATES" contract with Mobil, filed December
17, 1997 announcing the board of directors of R&B Falcon
Corporation, filed December 23, 1997 announcing oil discovery on
East Breaks 643, North Boomvang and filed December 29, 1997
announcing Reading & Bates' shareholders approve business
combination with Falcon.
Falcon filed 2 current Reports on Form 8-K during the three months
ended December 31, 1997. A Current Report on Form 8-K was: filed
December 17, 1997 announcing the board of directors of R&B Falcon
Corporation and filed December 24, 1997 announcing Falcon's
shareholders approve business combination with Reading & Bates
Corporation.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on March
30, 1998.
R&B FALCON CORPORATION
By /s/ Steven A. Webster
-------------------------------------
Steven A. Webster
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated on March 30, 1998.
By /s/ Paul B. Loyd, Jr. By /s/ Steven A. Webster
--------------------------- -----------------------------
Paul B. Loyd, Jr. Steven A. Webster
Chairman and Director President, Chief Executive
Officer and Director
By /s/ Tim W. Nagle By /s/ Robert F. Fulton
--------------------------- -----------------------------
Tim W. Nagle Robert F. Fulton
Executive Vice President Executive Vice President
(Principal Accounting Officer) (Principal Financial Officer)
By /s/ Purnendu Chatterjee By
--------------------------- ----------------------------
Purnendu Chatterjee Macko A. E. Laqueur
Director Director
By /s/ Arnold L. Chavkin By /s/ Michael E. Porter
--------------------------- -----------------------------
Arnold L. Chavkin Michael E. Porter
Director Director
By /s/ Charles A. Donabedian By /s/ Robert L. Sandmeyer
--------------------------- -----------------------------
Charles A. Donabedian Robert L. Sandmeyer
Director Director
By /s/ Douglas A. P. Hamilton By /s/ William R. Ziegler
--------------------------- -----------------------------
Douglas A. P. Hamilton William R. Ziegler
Director Director
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
R&B FALCON CORPORATION
The undersigned, Steven A. Webster, certifies that he is the Chief
Executive Officer and President, of R&B Falcon Corporation, a corporation
organized under the laws of the State of Delaware (the "Corporation"), and
does hereby further certify as follows:
1. The name of the Corporation is R&B Falcon Corporation.
2. The name of the Corporation under which it was originally
incorporated was "R&B&F Corporation."
3. The original Certificate of Incorporation of the
Corporation was filed in the Office of the Secretary of State of
the State of Delaware on July 7, 1997.
4. The Amended and Restated Certificate of Incorporation was
duly adopted by stockholder written consent in accordance with
Sections 228, 242 and 245 of the General Corporation Law of the
State of Delaware.
5. The text of the Certificate of Incorporation of the
Corporation as amended hereby is restated to read in its entirety
as follows:
FIRST: The name of the corporation is R&B Falcon Corporation
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Service Company, 1013 Centre Road, in the
City of Wilmington, County of New Castle. The name of its registered agent
at such address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code ("GCL").
FOURTH: The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 600,000,000 shares
which shall be divided into (a) 550,000,000 shares of common stock having a
par value of $.01 per share (the "Common Stock") and (b) 50,000,000 shares
of preferred stock having a par value of $.01 per share (the "Preferred
Stock").
A description of the different classes of capital stock of the Corpora
tion, a statement of the relative rights of the holders of stock of such
classes, and a statement of the voting powers and the designations,
preferences and relative, participating, optional or other special rights,
and qualifications, limitations or restrictions thereof, of the various
classes of capital stock are as follows:
A. Subject to limitations prescribed by applicable law and the provisions
of this Article FOURTH, shares of the Preferred Stock may be issued by
the Board of Directors of the Corporation with such voting powers,
full or limited and without voting powers, and in such classes and
series and with such designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereon, as shall be stated and expressed
in the resolution or resolutions providing for the issue of such stock
adopted by the Board of Directors of the corporation, which
resolutions shall be set forth in a Certificate of Designation which
shall be filed with the Secretary of State of the State of Delaware
pursuant to the GCL.
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
(i) the number of shares constituting that series and the distinctive
designation of that series; (ii) the dividend rate on the shares of
that series, whether dividends shall be cumulative, and, if so, from
which date or dates, and the relative rights of priority, if any, of
payment of dividends on shares of that series; (iii) whether that
series shall have voting rights, in addition to the voting rights
provided by law, and, if so, the terms of such voting rights; (iv)
whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provisions for
adjustment of the conversion rate in such events as the Board of Direc
tors shall determine; (v) whether or not the shares of that series
shall be redeemable, and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they shall
be redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates; (vi) whether that series shall have a sinking fund
for the redemption or purchase of shares of that series, and, if so,
the terms and amount of such sinking fund; (vii) the rights of the
shares of that series in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that se
ries; and (viii) any other relative rights, preferences and
limitations of that series.
B. A holder of shares of Common Stock of the Corporation shall be
entitled to one vote for each and every share of Common Stock standing
in his name at any and all meetings of stockholders of the Corpora
tion.
C. There shall be set forth on the face or back of each certificate for
shares of capital stock of the Corporation a statement that the
Corporation will furnish without charge to each stockholder who so re
quests, the designations, preferences and relative, participating,
optional or other special rights of each class of capital stock or
series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
D. The designation, voting powers, preferences and relative,
participating, optional and other special rights of the shares of an
initial series of Preferred Stock, and the qualifications, limitations
or restrictions thereof shall be, in addition to those set forth
above, as follows:
1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock," par value
$.01 per share (the "Series A Junior Preferred Stock"), and the number of
shares constituting such series shall be 1,688,000.
2. Dividends and Distributions. (a) Subject to the prior and
superior rights of the holders of any shares of any series of Preferred
Stock ranking prior and superior to the shares of Series A Junior Preferred
Stock with respect to dividends, the holders of shares of Series A Junior
Preferred Stock in preference to the holders of Common Stock and of any
other junior stock, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available therefor,
dividends payable quarterly on the first day of January, April, July and
October (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A
Junior Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $1.00 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share amount
of all cash dividends, and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock, since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share
of Series A Junior Preferred Stock. In the event the Corporation shall at
any time after the record date for the initial distribution of the
Corporation's Preferred Stock Purchase Rights pursuant to the Rights
Agreement between the Corporation and American Stock Transfer & Trust
Company, as Rights Agent (the "Rights Declaration Date"), (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the amount to which
holders of shares of Series A Junior Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the
Series A Junior Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$1.00 per share on the Series A Junior Preferred Stock shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Junior Preferred Stock, unless the date of issue of such shares is prior to
the record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of holders of
shares of Series A Junior Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Junior
Preferred Stock in an amount less than the total amount of such dividends
at the time accrued and payable on such shares shall be allocated pro rata
on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of
holders of shares of Series A Junior Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record date
shall be no more than 60 days prior to the date fixed for the payment
thereof.
3. Voting Rights. The holders of shares of Series A Junior
Preferred Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Junior Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders
of the Corporation. In the event the Corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the number of votes per share to which
holders of shares of Series A Junior Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(b) Except as otherwise provided herein, or under applicable law,
the holders of shares of Series A Junior Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(c)(i) If at any time dividends on any Series A Junior Preferred
Stock shall be in arrears in an amount equal to six (6) quarterly dividends
thereon, the occurrence of such contingency shall mark the beginning of a
period (a "default period") that shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend periods
and for the current quarterly dividend period on all shares of Series A
Junior Preferred Stock then outstanding shall have been declared and paid
or set apart for payment. During each default period, all holders of
shares of Series A Junior Preferred Stock together with any other series of
Preferred Stock then entitled to such a vote under the terms of the Amended
and Restated Certificate of Incorporation, voting as a separate class,
shall be entitled to elect two members of the Board of Directors of the
Corporation.
(ii) During any default period, such voting right of the holders of
Preferred Stock may be exercised initially at a special meeting called
pursuant to subparagraph (iii) of this Subsection 3(c) or at any annual
meeting of stockholders, and thereafter at annual meetings of stockholders,
provided that neither such voting rights nor the rights of holders of
Preferred Stock as hereinafter provided to increase in certain cases the
authorized number of Directors shall be exercised unless the holders of 25%
in number of shares of Preferred Stock outstanding shall be present in
person or by proxy. The absence of a quorum of the holders of Common Stock
shall not affect the exercise by the holders of Preferred Stock of such
voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period,
they shall have the right, voting as a separate class, to elect Directors
to fill such vacancies, if any, in the Board of Directors as may then exist
up to two (2) Directors, or, if such right is exercised at an annual
meeting, to elect two (2) Directors. If the number that may be so elected
at any special meeting does not amount to the required number, the holders
of the Preferred Stock shall have the right to make such increase in the
number of Directors as shall be necessary to permit the election by them of
the required number. After the holders of the Preferred Stock shall have
exercised their right to elect Directors in any default period and during
the continuance of such period, the number of Directors shall not be
increased or decreased except by vote of the holders of Preferred Stock as
herein provided or pursuant to the rights of any equity securities ranking
senior to or pari passu with the Series A Junior Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than 10% of the total number
of shares of Preferred Stock outstanding, irrespective of series, may
request the Chairman or the Chief Executive Officer call a special meeting
of the holders of Preferred Stock, which meeting shall thereupon be called
by such person. Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled to vote pursuant to this Section
3(c)(iii) shall be given to each holder of record of Preferred Stock by
mailing a copy of such notice to him at his last address as the same
appears on the books of the Corporation. Such meeting shall be called for
a time not earlier than 10 days and not later than 60 days after such order
or request. In the event such meeting is not called within 60 days after
such order or request, such meeting may be called on a similar notice by
any stockholder or stockholders owning in the aggregate not less than 10%
of the total number of shares of Preferred Stock outstanding. Notwith
standing the provisions of this Section 3(c)(iii), no such special meeting
shall be called during the period within 60 days immediately preceding the
date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two (2) Directors
voting as a separate class, after the exercise of which right (x) the
Directors so elected by the holders of Preferred Stock shall continue in
office until their successors shall have been elected by such holders or
until the expiration of the default period, and (y) any vacancy in the
Board of Directors may (except as provided in Section 3(c)(ii)) be filled
by vote of a majority of the remaining Directors theretofore elected by the
class which elected the Director whose office shall have become vacant.
References in this Section 3(c)(iv) to Directors elected by a particular
class shall include Directors elected by such Directors to fill vacancies
as provided in clause (y) of the foregoing sentence.
(d) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock, as a separate class, to elect
Directors shall cease, (y) the term of any Directors elected by the holders
of Preferred Stock, as a separate class, shall terminate, and (z) the
number of Directors shall be such number as may be provided for in, or
pursuant to, the Amended and Restated Certificate of Incorporation or
Bylaws irrespective of any increase made pursuant to the provisions of
Section 3(c)(ii) (such number being subject, however, to change thereafter
in any manner provided by law or in the Amended and Restated Certificate of
Incorporation or Bylaws). Any vacancies in the Board of Directors effected
by the provisions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining Directors, even though less than a
quorum.
(e) Except as set forth herein or as otherwise provided in the
Certificate of Incorporation, holders of Series A Junior Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.
4. Certain Restrictions. (a) Whenever quarterly dividends or other
dividends or distributions payable on the Series A Junior Preferred Stock
as provided in Section 2 are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on shares
of Series A Junior Preferred Stock outstanding shall have been paid in
full, the Corporation shall not:
(i) declare or pay or set apart for payment any
dividends or make any other distributions on, or redeem or
purchase or otherwise acquire, directly or indirectly, for
consideration any shares of any class of stock of the Corporation
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Preferred
Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Preferred Stock, except dividends paid
ratably on the Series A Junior Preferred Stock and all such
parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series A Junior Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior (either as to dividends
or upon dissolution, liquidation or winding up) to the Series A
Junior Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Junior Preferred Stock, or any shares of stock
ranking on a parity with the Series A Junior Preferred Stock,
except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corpora
tion to purchase or otherwise acquire for consideration any shares of stock
of the Corporation unless the Corporation could, under paragraph (a) of
this Section 4, purchase or otherwise acquire such shares at such time and
in such manner.
5. Reacquired Shares. Any shares of Series A Junior Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
6. Liquidation, Dissolution or Winding Up. (a) Upon any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation,
no distribution shall be made to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series A Junior Preferred Stock unless, prior thereto, the
holders of shares of Series A Junior Preferred Stock shall have received an
amount equal to 100 times the par value per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series A Liquidation Prefer
ence"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the
holders of shares of Series A Junior Preferred Stock unless, prior thereto,
the holders of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by dividing
(i) the Series A Liquidation Preference by (ii) 100 (as appropriately
adjusted as set forth in paragraph (c) below to reflect such events as
stock splits, stock dividends and recapitalizations with respect to the
Common Stock) (such number in clause (ii) being hereinafter referred to as
the "Adjustment Number"). Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Junior Preferred Stock and Common Stock,
respectively, holders of Series A Junior Preferred Stock and holders of
shares of Common Stock shall receive their ratable and proportionate share
of the remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such Series A Junior Preferred Stock and Common
Stock, on a per share basis, respectively.
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference
and the liquidation preferences of all other series of Preferred Stock, if
any, which rank on a parity with the Series A Junior Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of all
such shares in proportion to their respective liquidation preferences. In
the event, however, that there are not sufficient assets available to
permit payment in full of the Common Adjustment, then such remaining assets
shall be distributed ratably to the holders of Common Stock.
(c) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then
in each such case the Adjustment Number in effect immediately prior to such
event shall be adjusted by multiplying such Adjustment Number by a frac
tion, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
7. Consolidation, Merger, Share Exchange, etc. In case the
Corporation shall enter into any consolidation, merger, share exchange,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any
other property, then in any such case the shares of Series A Junior
Preferred Stock shall at the same time be similarly exchanged or changed in
an amount per share (subject to the provision for adjustment hereinafter
set forth) equal to 100 times the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be, into
which or for which each share of Common Stock is changed or exchanged. In
the event the Corporation shall at any time after the Rights Declaration
Date (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Junior Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the numerator of which
is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
8. No Redemption. The shares of Series A Junior Preferred Stock
shall not be redeemable.
9. Ranking. The Series A Junior Preferred Stock shall rank junior
to all other series of the Corporation's Preferred Stock as to the payment
of dividends and the distribution of assets, unless the terms of any such
series shall provide otherwise.
10. Amendment. The Amended and Restated Certificate of Incorpora
tion shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Junior
Preferred Stock so as to affect them adversely without the affirmative vote
of the holders of two-thirds or more of the outstanding shares of Series A
Junior Preferred Stock, voting together as a single voting group.
11. Fractional Shares. Series A Junior Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of
all other rights of holders of Series A Junior Preferred Stock.
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
Name Address
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the Corpo
ration and of its directors and stockholders:
A. Election of directors need not be by ballot unless the Bylaws so
provide.
B. A majority of the total number of authorized directors, whether or not
there exists any vacancies in previously authorized directorships (a
"Majority of the Board"), shall have the power, without the assent or
vote of the stockholders, to adopt, amend or repeal the Bylaws of the
Corporation.
C. Except as otherwise expressly prescribed by law, the stockholders may
not adopt, amend or repeal the Bylaws of the Corporation, except by
the affirmative vote of the holders of 66?% or more of the voting
power of the then issued and outstanding shares of capital stock of
the Corporation entitled to vote for the election of directors,
considered as one class.
D. The number of directors shall be fixed from time to time by, or in the
manner provided in, the Bylaws of the Corporation. No decrease in the
number of directors shall shorten the term of any incumbent director.
E. The directors, other than those who may be elected by the holders of
any class of series of stock having a preference over Common Stock as
to dividends or upon liquidation, of the Corporation shall be divided
into three classes, Class I, Class II and Class III. Except as other
wise provided in this Certificate of Incorporation, the number of
directors in each class shall be as nearly equal in number as
possible. Each initial director in Class I shall be elected to a term
expiring at the first annual stockholders meeting following his
election, each initial director in Class II shall be elected to a term
expiring at the second annual stockholders meeting following his
election, and each director in Class III shall be elected to an
initial term expiring at the third annual stockholders meeting
following his election. After the initial terms of the initial
directors of a class of directors, each director of such class shall
be elected for a term expiring on the third annual stockholders
meeting following the annual stockholders meeting at which such
director is elected. Any director elected to fill a vacancy or newly
created directorship shall serve until the next election of the class
for which such director has been elected.
F. A majority of the directors then in office, in their sole discretion,
and whether or not consisting of less than a quorum, may elect a
replacement director to serve during the unexpired term of any
director previously elected whose office is vacant as a result of
death, resignation, retirement, disqualification, removal or other
wise, and may elect directors to fill any newly created directorships.
Except as otherwise expressly prescribed by law and subject to the
terms of any Preferred Stock, the stockholders may not elect a
replacement director to fill any vacancy on the Board caused by death,
resignation, retirement, disqualification, removal or otherwise, and
may not elect directors to fill any newly created directorships. At
any election of directors by the Board of Directors to fill any
vacancy caused by an increase in the number of directors, the terms of
the office for which candidates are nominated and elected shall be
divided as set forth in paragraph E of this Article SIXTH.
G. No director of the Corporation shall be personally liable to the
Corporation or any of its stockholders for monetary damages for any
breach of fiduciary duty by such a director as a director to the full
extent authorized or permitted by law (as now or hereafter in effect).
Notwithstanding the foregoing sentence, a director shall be liable to
the extent provided by applicable law (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant
to Section 174 of the GCL or (iv) for any transaction from which the
director derived an improper personal benefit. No amendment to or
repeal of this paragraph H. of Article SIXTH shall apply to or have
any effect on the liability or alleged liability of any director of
the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
H. Any action required or permitted to be taken at any annual or special
meeting of stockholders of the Corporation may be taken only upon the
vote of the stockholders at an annual or special meeting duly noticed
and called, as provided in the Bylaws of the Corporation, and may not
be taken by a written consent of the stockholders pursuant to the GCL.
I. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by law, may be called by the Chairman or
the President and shall be called by the Chairman or the President or
Secretary at the request in writing of a Majority of the Board. Such
request shall state the purpose or purposes of the proposed meeting.
Special meetings of the Corporation may not be called by any other
person or persons.
J. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of
66?% of all classes of capital stock of the Corporation entitled to
vote in the election of directors, considered as one class, shall be
required to alter, amend, or adopt any provision inconsistent with or
repeal this Article SIXTH.
SEVENTH: The Corporation shall indemnify its officers to the full extent
permitted by the GCL, as amended from time to time.
EIGHTH: No more than a minority of the number of the Corporation's
directors necessary to constitute a quorum may be non-United States citi
zens, within the meaning of Section 2 of the Shipping Act of 1916, as
amended, and as may be further amended from time to time, and the rules and
regulations promulgated thereunder (the "Shipping Act").
NINTH: The Chairman of the Board of Directors and the President and, if
the President is not the Chief Executive Officer, the Chief Executive
Officer by whatever title, must each be a United States citizen, within the
meaning of the Shipping Act.
TENTH:
A. (1) Any transfer, or attempted or purported transfer, of any
shares of any class of stock issued by the Corporation or any
interest therein or right thereof, which would result in the own
ership or control by one or more Aliens (as defined herein) of an
aggregate percentage of the shares of any class of stock of the
Corporation or of any interest therein or right thereof in excess
of the Permitted Percentage (as defined herein) shall, to the
full extent permitted by law, and for so long as such excess
shall exist, be void and shall be ineffective as against the
Corporation, and the Corporation shall not recognize, to the
extent of such excess, the purported transferee as a stockholder
of the Corporation for any purpose whatsoever except the purpose
of making a further transfer to a person who is not an Alien,
provided, however, that such shares, to the extent of such
excess, may nevertheless be deemed to be Alien-owned shares for
purposes of the other provisions of this Article TENTH.
(2) The Board of Directors is authorized to take such actions
as it may deemed necessary or desirable to implement the restric
tion set forth in subsection (1) of paragraph A of this Article
TENTH, including, without limitation, (i) requiring, as a
condition precedent to the transfer of shares on the records of
the Corporation, representations and other proof as to the identi
ty of existing or prospective stockholders and persons on whose
behalf shares of stock of the Corporation or any interest therein
or right thereof are or are to be held and as to whether such
persons are Aliens, and (ii) adopting an appropriate legend or
legends for certificates evidencing shares of stock of the Corpo
ration.
B. If Alien ownership of the outstanding stock of the Corporation
or any class of stock thereof is in excess of the Permitted
Percentage, the shares deemed included in such excess (herein
referred to as "Excess Shares") shall be those Alien-owned shares
that the Board of Directors determines became so owned most
recently. The determination of the Board of Directors as to those
shares that constitute the Excess Shares shall be conclusive. At
any time there are Excess Shares, to the extent permitted by law,
(i) such Excess Shares shall not be accorded any voting rights and
shall not be deemed to be outstanding for purposes of determining
the vote required on any matter properly brought before the
stockholders of the Corporation, and (ii) the Corporation shall
withhold the payment of dividends and the sharing in any other
distribution in respect of the Excess Shares.
C. The Corporation shall have the power, but not the
obligation, to redeem Excess Shares subject to the following terms
and conditions:
(1) The per share redemption price (the "Redemption Price") to
be paid for each Excess Share to be redeemed shall be the sum of
(i) the average closing sales price of the Common Stock and (ii)
any dividend or distribution declared with respect to such share
prior to the date such share is called for redemption hereunder
but which has been withheld by the Corporation under this
Article. As used herein, the term "average closing sales price"
shall mean the average of the closing sales prices of the Common
Stock on the New York Stock Exchange Composite Tape during the 10
trading days immediately prior to the date the notice of
redemption is given; except that if the Common Stock is not
traded on the New York Stock Exchange, then the closing sales
prices of the Common Stock on any other national security
exchange on which such Common Stock is listed.
(2) The Redemption Price shall be paid in cash.
(3) A notice of redemption shall be given by first class mail,
postage prepaid, mailed not less than 10 days prior to the
redemption date to each holder of record of the shares to be re
deemed, at such holder's address as the same appears on the stock
register of the Corporation. Each such notice shall state (i)
the redemption date, (ii) the number of shares of Common Stock to
be redeemed from such holder, (iii) the Redemption Price, and
(iv) the place where certificates for such shares are to be
surrendered for payment of the Redemption Price.
(4) From and after the redemption date, dividends on the
shares of Common Stock called for redemption shall cease to
accrue and such shares shall no longer be deemed to be
outstanding and all rights of the holders thereof as stockholders
of the Corporation (except the right to receive from the
Corporation the Redemption Price) shall cease.
(5) Such other terms and conditions as the Board of Directors
may reasonably determine.
D. The provisions of this Article TENTH expire and become null
and void in the event that the Corporation and each Subsidiary (as
defined herein) and Controlled Person (as defined herein) cease to
be a U.S. Maritime Company (as defined herein) unless, at or prior
to that time, either the Corporation or a Subsidiary or a Controlled
Person has, in some manner, reinstated itself as a U.S. Maritime Com
pany or has contracted to reinstate itself as a U.S. Maritime
Company.
E. For purposes of this Article TENTH:
(1) "Alien" means (a) any person (including an individual,
partnership, corporation or association) who is not a citizen of
the United States within the meaning of the Shipping Act; (b) any
foreign government or representative thereof; (c) any corpora
tion, the president, chief executive officer or chairman of the
board of directors of which is an Alien, or of which more than an
minority of the number of its directors necessary to constitute a
quorum are Aliens; (d) any corporation organized under the laws
of any foreign government; (e) any corporation of which 50% or
greater interest is owned, beneficially or of record, or may be
voted, by an Alien or Aliens, or which by any other means whatso
ever is controlled by or in which control is permitted to be
exercised by an Alien or Aliens (the Board of Directors being
authorized to determine reasonably the meaning of "control" for
this purpose); (f) any partnership or association which is
controlled by an Alien or Aliens; or (g) any person (including an
individual, partnership, corporation or association) who acts as
representative of or fiduciary for any person described in
clauses (a) through (f) above.
(2) "Controlled Person" means any corporation or partnership
of which the Corporation or any Subsidiary owns or controls an
interest in excess of 50%.
(3) "Permitted Percentage" means 24% of the percentage of the
outstanding shares of stock of the Corporation, or any class
thereof, which, if such percentage were held by Aliens, would pre
vent the Corporation (or any Subsidiary or Controlled Person)
from being a U.S. Maritime Company.
(4) "Subsidiary" means any corporation a majority of whose
outstanding stock having ordinary voting power in the election of
directors is owned by the Corporation, by a Subsidiary or Con
trolled Person or by the Corporation and one or more Subsidiaries
and/or Controlled Persons.
(5) "U.S. Maritime Company" means any corporation or other
entity which, directly or indirectly, (a) owns or operates
vessels in the United States coastwise or foreign trade; (b) owns
or operates any vessel documented under the laws of the United
States; (c) owns or operates any vessel on which there is a
preferred mortgage issued in connection with the Title XI of the
Merchant Marine Act, 1936, as amended; (d) owns or operates
vessels under agreement with the United States Government (or any
agency thereof); (e) conducts any activity, takes any actions or
receives any benefit which would be adversely affected under any
provision of the U.S. maritime, shipping or vessel documentation
laws by virtue of Alien ownership of its stock; or (f) maintains
a Capital Construction Fund under the provisions of Section 607
of the Merchant Marine Act, 1936, as amended.
6. This restatement of the Certificate of Incorporation of R&B
Falcon Corporation was adopted in accordance with Sections 228, 242 and 245
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, R&B Falcon Corporation has caused this Amended and
Restated Certificate to be signed by Steven A. Webster, its Chief Executive
Officer and President, this 23rd day of December, 1997.
R&B FALCON CORPORATION
By: /s/Steven A. Webster
Name: Steven A. Webster
Title: Chief Executive Officer and President
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
R&B FALCON CORPORATION
AMENDED AND RESTATED BYLAWS
OF
R&B FALCON CORPORATION
(hereinafter called the "Corporation")
ARTICLE 1.
MEETINGS OF STOCKHOLDERS
SECTION 1.1. Annual Meeting. A meeting of stockholders shall be held
annually for the election of directors and the transaction of such other
business as is related to the purpose or purposes set forth in the notice
of meeting on such date and at such time as may be fixed from time to time
by the Board of Directors; or if no date and time are so fixed, at 10:00
a.m. on the third Wednesday in May in each and every year, unless such day
shall fall on a legal holiday, in which case such meeting shall be held on
the next succeeding business day, at such time as may be fixed by the Board
of Directors.
Any business to be conducted at an annual meeting, including, without
limitation, any nomination for election to the Board of Directors, must be
(a) specified in the notice of meeting given by or at the direction of the
Board of Directors; (b) brought before the annual meeting by or at the
direction of the chair of the meeting, the Board of Directors, or a
committee thereof; or (c) brought before the annual meeting, in compliance
with the notice procedures set forth in this section, by any stockholder of
the Corporation who is a stockholder of record on the record date for the
determination of stockholders entitled to vote at such meeting.
A stockholder intending to nominate a candidate for election to the
Board of Directors or to bring any other business before an annual meeting
must give timely written notice thereof to the secretary of the
Corporation. In order to be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of
the Corporation, not less than 60 days nor more than 90 days prior to the
anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting
is called for a date that is not within the 30 days before or after such
anniversary date, notice by the stockholder in order to be timely must be
so received not later than the close of business on the 15th day following
the day on which such notice of the date of the annual meeting was mailed
or such public disclosure of the date of the meeting was made, whichever
first occurs.
A stockholder's notice to the secretary shall set forth:
(a) as to each nominee for election or reelection to the Board of
Directors, (i) that person's consent to such nomination, (ii) the name,
age, business address and residence address of the proposed nominee, (iii)
the principal occupation or employment of the proposed nominee, (iv) the
class and number of shares of stock of the Corporation which are
beneficially owned by the proposed nominee;
(b) as to each matter of any other business, (i) a brief description
of the business desired to be brought before the annual meeting and (ii)
the reasons for conducting such business at the annual meeting; and
(c) as to the stockholder proposing any such nomination or other
business, (i) the name and record address of the stockholder, (ii) the
class and number of shares of the Corporation which are beneficially owned
by the stockholder, (iii) a description of all arrangements or
understandings between such stockholder and any other person or persons
(including their names) in connection with the proposal of such business by
such stockholder and any material interest of the stockholder in such
nomination or business, and (iv) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
The Corporation may require any proposed nominee to furnish such other
information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as director of the
Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth
herein.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that the nomination was not made in accordance with
the foregoing procedure, and if he should so determine, shall so declare to
the meeting and the nomination shall be disregarded.
SECTION 1.2. Special Meetings. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by law or by the
Certificate of Incorporation, may be called by the Chairman or the Chief
Executive Officer (or, if there is no Chief Executive Officer, the
President) and shall be called by the Chairman, Chief Executive Officer,
the President, or Secretary at the request in writing of a Majority of the
Board (as defined herein). Such request shall state the purpose or
purposes of the proposed meeting.
SECTION 1.3. Place of Meetings. Meetings of stockholders shall be held
at such place as may be designated by the Board of Directors (or by the
Chief Executive Officer, in the absence of a designation by the Board of
Directors).
SECTION 1.4. Notice of Meeting; Adjourned Meetings. Notice of each
meeting of stockholders shall be given in accordance with the Delaware
General Corporation Law ("GCL").
SECTION 1.5. Quorum. Except as otherwise provided by law or in the
Certificate of Incorporation, at any meeting of the stockholders, the
presence, in person or by proxy, of the holders of a majority of the shares
entitled to vote thereat shall constitute a quorum for the transaction of
any business. When a quorum is once present to organize a meeting, it is
not broken by the subsequent withdrawal of any stockholders. The
stockholders present may adjourn the meeting despite the absence of a
quorum.
SECTION 1.6. Proxies. Subject to applicable law, the Board of
Directors may impose such restrictions and requirements on the validity and
use of proxies as it deems appropriate. Any restriction or requirement so
imposed shall be set forth in the notice of any meeting to which it may be
applicable.
SECTION 1.7. Voting. Except as otherwise required by law, directors
shall be elected by a plurality of the votes cast at a meeting of
stockholders by the holders of shares entitled to vote in the election.
The directors who are to be elected at the annual meeting of stockholders
shall be elected by ballot by the holders of shares entitled to vote.
Whenever any corporate action, other than the election of directors, is to
be taken by vote of the stockholders at a meeting, it shall, except as
otherwise required by law, the Certificate of Incorporation or these
Bylaws, be authorized by a majority of the votes cast thereat, in person or
by proxy. Except as otherwise provided in the Certificate of
Incorporation, every stockholder of record shall be entitled to one vote on
each matter submitted to vote at a meeting of stockholders for every share
standing in his name on the record of stockholders.
SECTION 1.8. Conduct of Stockholders Meetings. Each meeting of
stockholders shall be presided over by such person as shall be designated
by the Board of Directors. If the Board fails to make such designation,
the meeting shall be presided over by the Chief Executive Officer, or in
his absence, the next highest ranking officer of the Corporation who is
able to attend such meeting. The person presiding over any meeting of
stockholders shall have the power, without the need for any vote of
stockholders, to adjourn such meeting for any reason.
ARTICLE 2.
BOARD OF DIRECTORS
SECTION 2.1. Power of Board. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors.
SECTION 2.2. Number of Directors. The number of directors
constituting the whole Board of Directors shall be such number not less
than one (1) nor more than fifteen (15) which is authorized from time to
time exclusively by the Board of Directors pursuant to a resolution adopted
by a majority of the total number of authorized directors, whether or not
there exists any vacancies in previously authorized directorships (a
"Majority of the Board"). The Board of Directors will initially consist of
ten (10) directors. No decrease in the number of directors shall shorten
the term of any incumbent director.
SECTION 2.3. Citizenship Requirements. No more than a minority of the
Corporation's directors necessary to constitute a quorum of the Board of
Directors may be non-United States citizens, within the meaning of Section
2 of the Shipping Act of 1916, as amended, and as may be further amended
from time to time, and the rules and regulations promulgated thereunder
(the "Shipping Act").
SECTION 2.4. Resignations. Any director of the Corporation may resign
at any time by giving written notice to the Board of Directors, the
Chairman of the Board, the Chief Executive Officer, the President or the
Secretary of the Corporation. Such resignation shall take effect at the
time specified therein; and unless otherwise specified therein the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 2.5. Newly Created Directorships and Vacancies. Vacancies and
newly created directorships shall be filled in the manner provided by the
Certificate of Incorporation.
SECTION 2.6. Executive and Other Committees of Directors. The Board of
Directors, by resolution adopted by a Majority of the Board, may designate
from among its members an executive committee and other committees to serve
at the pleasure of the Board of Directors, each consisting of one or more
directors, and each of which, to the extent provided in the resolution,
shall have all the authority of the Board to the fullest extent authorized
by law, including the power or authority to declare a dividend or to
authorize the issuance of stock. The Board of Directors may designate one
or more directors as alternate members of any such committee, who may
replace any absent or disqualified member or members at any meeting of such
committee.
SECTION 2.7. Compensation of Directors. The Board of Directors shall
have authority to fix the compensation of directors for services in any
capacity, or to allow a fixed sum plus expenses, if any, for attendance at
meetings of the Board or of committees designated thereby.
ARTICLE 3.
MEETINGS OF THE BOARD
SECTION 3.1. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such times and places, within or
without the State of Delaware or the United States of America, as may from
time to time be fixed by the Board.
SECTION 3.2. Special Meetings; Notice; Waiver. Special meetings of
the Board of Directors may be held at any time and place, within or
without the State of Delaware or the United States of America, upon the
call of the Chairman of the Board, the Chief Executive Officer, or a
Majority of the Board. Notice of a special meeting need not be given to
any director who submits a signed waiver of notice whether before or after
the meeting, or who attends the meeting without protesting, prior thereto
or at its commencement, the lack of notice to him. A notice, or waiver of
notice, need not specify the purpose of any special meeting of the Board of
Directors.
SECTION 3.3. Adjournment. A majority of the directors present,
whether or not a quorum is present, may adjourn any meeting to another time
and place.
ARTICLE 4.
OFFICERS
SECTION 4.1. Officers. The following shall be the officers of the
Corporation: one Chairman of the Board of Directors, one Chief Executive
Officer, one President, one Chief Financial Officer, one Chief Operating
Officer, one or more Vice Presidents, one or more Secretaries, one or more
Assistant Secretaries, one or more Treasurers, and one or more Assistant
Treasurers. The Board of Directors may from time to time may elect or
appoint such other officers as it may determine. Any two or more offices
may be held by the same person. The officers shall be appointed by the
Board of Directors. The Board of Directors may leave any officer position
unfilled for such period it deems appropriate.
Securities of other corporations held by the Corporation may be voted
by any officer designated by the Board and, in the absence of any such
designation, by the Chief Executive Officer, President, any Vice President,
the Secretary or the Treasurer.
The Board of Directors may require any officer to give security for
the faithful performance of his duties.
SECTION 4.2. Chairman of the Board. The Chairman of the Board shall
preside as chairman of all meetings of directors and stockholders and must
be a United States citizen. The Chairman of the Board shall report to the
Board of Directors.
SECTION 4.3. Chief Executive Officer. The Chief Executive Officer
shall be the chief executive officer of the Corporation with all the rights
and powers incident to that position and must be a United States citizen.
The Chief Executive Officer shall, in the absence of the chairman of the
Board, preside as the chairman of director meetings. The Chief Executive
Officer shall report to the Board of Directors.
SECTION 4.4. President. The President (who may also be the Chief
Executive Officer) shall perform all the duties customary to that office
with all the rights and powers incident to that position and must be a
United States citizen.
SECTION 4.5. Chief Financial Officer. The Chief Financial Officer
shall be the chief financial officer of the Corporation with all the rights
and powers incident to that position.
SECTION 4.6. Chief Operating Officer. The Chief Operating Officer
shall be the chief operating officer of the Corporation with all the rights
and powers incident to that position.
SECTION 4.7. Vice President. The Vice Presidents shall perform such
duties as may be prescribed or assigned to them by the Board of Directors,
the Chief Executive Officer or the President. In the absence of the
President, the highest-ranking Vice President shall perform the duties of
the President. In the event of the refusal or incapacity of the President
to function as such, the highest-ranking Vice President shall so perform
the duties of the President; and the order of rank of the Vice Presidents
shall be determined by the designated rank of their offices or, in the
absence of such designation, by seniority in the office of Vice President;
provided that said order or rank may be established otherwise by action of
the Board of Directors from time to time.
SECTION 4.8. Treasurer. The Treasurer shall perform all the duties
customary to that office, and shall have the care and custody of the funds
and securities of the Corporation. He shall at all reasonable times
exhibit his books and accounts to any director upon application, and shall
give such bond or bonds for the faithful performance of his duties with
such surety or sureties as the Board of Directors from time to time may
determine.
SECTION 4.9. Secretary. The Secretary shall act as secretary of the
Corporation and shall keep the minutes of the meetings of the Board of
Directors and of the stockholders, and perform all of the other duties
usual to that office.
SECTION 4.10. Assistant Treasurer and Assistant Secretary. Any
Assistant Treasurer or Assistant Secretary shall perform such duties as may
be prescribed or assigned to him by the Board of Directors, the Chairman of
the Board, the Chief Executive Officer or the President. An Assistant
Treasurer shall give such bond or bonds for the faithful performance of his
duties with such surety or sureties as the Board of Directors from time to
time may determine.
SECTION 4.11. Term of Office; Removal. Each officer shall hold office for
such term as may be prescribed by the Board and may be removed at any time
by the Board with or without cause. The removal of an officer without
cause shall be without prejudice to his contract rights, if any. If the
office of any officer becomes vacant for any reason, the vacancy shall be
filled by a Majority of the Board. The election or appointment of an
officer shall not of itself create contract rights.
SECTION 4.12. Compensation. The compensation of all officers of the
Corporation shall be fixed by the Board of Directors.
ARTICLE 5.
CERTIFICATES OF STOCK
SECTION 5.1. Form of Stock Certificates. The shares of the
Corporation shall be represented by certificates, in such form as the Board
of Directors may from time to time prescribe. The signatures of the
officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than
the Corporation or its employees. In case any such officer, transfer agent
or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or it were such officer, transfer
agent or registrar, as the case may be, at the date of issue.
Notwithstanding the foregoing, to the extent permitted by applicable law,
the Board of Directors may (i) dispense with the requirement that any or
all shares of the Corporation be represented by certificates and (ii)
provide that shares be evidenced in such form as the Board of Directors
deems appropriate.
SECTION 5.2. Lost Certificates. In case of the loss, theft,
mutilation or destruction of a stock certificate, a duplicate certificate
will be issued by the Corporation upon notification thereof and receipt of
such proper indemnity as shall be prescribed by the Board of Directors.
SECTION 5.3. Transfer of Stock. Transfers of shares of stock shall
be made upon the books of the Corporation by the registered holder in
person or by duly authorized attorney, upon surrender of the certificate or
certificates for such shares properly endorsed.
SECTION 5.4. Registered Stockholders. Except as otherwise provided
by law, the Corporation shall be entitled to recognize the exclusive right
of a person registered on its books as the owner of shares to receive
dividends or other distributions and to vote as such owner, and to hold
such person liable for calls and assessments, and shall not be bound to
recognize any equitable or legal claim to or interest in such share or
shares on the part of any other person.
ARTICLE 6.
INDEMNIFICATION
SECTION 6.1. Indemnification. The Corporation shall indemnify to the
fullest extent authorized or permitted by law (as now or hereafter in
effect) any person made, or threatened to be made, a party to or otherwise
involved in any action or proceeding (whether civil or criminal or
otherwise) by reason of the fact that he, his testator or intestate, is or
was a director or officer of the Corporation or by reason of the fact that
such director or officer, at the request of the Corporation, is or was
serving any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, in any capacity. Nothing contained
herein shall affect any rights to indemnification to which employees other
than directors and officers may be entitled by law. No amendment or repeal
of this Section 6.1 shall apply to or have any effect on any right to
indemnification provided hereunder with respect to any acts or omissions
occurring prior to such amendment or repeal.
SECTION 6.2. Insurance, Indemnification Agreements and Other Matters.
The Corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation, or
is serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of the
law. The Corporation may create a trust fund, grant a security interest
and/or use other means (including, without limitation, letters of credit,
surety bonds and/or other similar arrangements), as well as enter into
contracts providing for indemnifi
cation to the fullest extent authorized or permitted by law and including
as part thereof any or all of the foregoing, to ensure the payment of such
sums as may become necessary to effect full indemnification.
SECTION 6.3. Advancement of Expenses. In furtherance and not in
limitation of the foregoing provisions, all reasonable expenses incurred by
or on behalf of any person entitled to indemnification by the Corporation
pursuant to this Article VI shall be advanced to such person by the
Corporation within 20 calendar days after the receipt by the Corporation of
a statement or statements from such person requesting such advance or
advances from time to time, whether prior to or after final disposition of
the action or proceeding giving rise to the right of indemnification. Such
statement or statements shall reasonably evidence the expenses incurred by
the indemnitee and, if required by law at the time of such advance, shall
include or be accompanied by an undertaking by or on behalf of such
indemnitee to repay the amounts advanced if it should ultimately be
determined that such indemnitee is not entitled to be indemnified against
such expenses pursuant to this Article VI.
SECTION 6.4. Nonexclusivity. The rights to indemnification conferred
in this Article VI shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, the Certificate of
Incorporation of the Corporation, these Bylaws or any agreement, vote of
stockholders or directors or otherwise.
ARTICLE 7.
MISCELLANEOUS PROVISIONS
SECTION 7.1. Corporate Seal. The Corporation shall not have a formal
or official seal unless the Board of Directors so determines. The
Board of Directors may adopt one or more seals, and may revoke the adoption
of any seal. To the extent any officer deems it appropriate to expedite
any action to be taken by the Corporation, such officer may utilize a seal
purporting to be a corporate seal of the corporation.
SECTION 7.2. Fiscal Year. The fiscal year of the Corporation shall
be the twelve months ending December 31 or such other period as may be
prescribed by the Board of Directors.
ARTICLE 8.
AMENDMENTS
SECTION 8.1. Power to Amend. A Majority of the Board shall have the
power, without the assent or vote of the stockholders, to adopt, amend, or
repeal the Bylaws of the Corporation. Except as otherwise expressly
prescribed by law, the stockholders may not adopt, amend, or repeal the
Bylaws of the Corporation, except by the affirmative vote of the holders of
66 % or more of the voting power of the then issued and outstanding shares
of capital stock of the Corporation entitled to vote for the election of
directors, considered as one class.
Exhibit 4.1
Form of R&B Falcon's Common Stock Certificate
NUMBER
C
This Certificate is Transferable COMMON STOCK
in New York, New York PAR VALUE $.01
SHARES
R&B FALCON CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR CERTAIN DEFINITIONS
SEE LEGEND ENDORSED ON REVERSE SIDE
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
CERTIFICATE OF STOCK
R&B Falcon Corporation (hereinafter called the Corporation), transferable
on the books of the Corporation by the holder hereof in person or by duly
authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid unless countersigned by the Transfer Agent
and registered by the Registrar.
Witness, the seal of the Corporation and the signatures of its duly
authorized officers.
DATED:
R&B FALCON CORPORATION
CORPORATE
SEAL
1997
DELAWARE
SECRETARY CHIEF EXECUTIVE OFFICER AND PRESIDENT
AUTHORIZED SIGNATURE
TRANSFER AGENT AND REGISTRAR
R&B FALCON CORPORATION
The Corporation is authorized to issue shares of more than one class
and to issue shares in more than one series of at least one class. The
Corporation will furnish without charge to each stockholder who so requests
a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof of the Corporation and the qualifications, limitations or
restrictions of such preferences and/or rights. Such request may be made
to the Corporation or to the transfer agent.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM-as tenants in common UNIF GIFT MIN ACT ___Custodian_____
TEN ENT-as tenants by the entireties (Cust.) (Minor)
JT TEN-as joint tenants with right
of survivorship and not as
tenants under Uniform Gifts to Minors
in common Act_____________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ________________________hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
__________________________________________________________________ shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated,_____________________________
X_______________________________________
(Signature)
NOTICE:
The signature(s) to this
assignment must corres-
pond with the name(s) as
written upon the face of
the certificate in every
particular without alter-
ation or enlargement or
any change whatever.
X_______________________________________
(Signature)
The signature(s) should be guaranteed by an
"Eligible Guarantor Institution" as defined
in rule 17Ad-15 under the Securities Exchange
Act of 1934 as amended.
SIGNATURE(S) GUARANTEED BY:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between R&B Falcon Corporation
and American Stock Transfer & Trust Company, dated as of December 23, 1997
(the "Rights Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal offices of R&B
Falcon Corporation. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate certificates
and will no longer be evidenced by this certificate. R&B Falcon
Corporation will mail to the holder of this certificate a copy of the
Rights Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or held
by, any Person who is, was or becomes an Acquiring Person or any Affiliate
or Associate thereof (as such terms are defined in the Rights Agreement),
whether currently held by or on behalf of such Person or by any subsequent
holder, may become null and void.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. AS AMENDED, AND HAVE BEEN ISSUED PURSUANT TO A
CLAIM OF EXEMPTION FROM THE REGISTRATION OR QUALIFICATION PROVIDISIONS OF
THE FEDERAL AND STATE SECURITIES LAWS BASED, IN PART, ON AN INVESTMENT
REPRESENTATION ON THE PART OF THE HOLDER THEREOF. THESE SECURITIES MAY NOT
BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED WITHOUT
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
EXHIBIT 4.2
============================================================================
R&B FALCON CORPORATION
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Rights Agent
__________________
Rights Agreement
Dated as of December 23, 1997
============================================================================
Table of Contents
Section
1. Certain Definitions
2. Appointment of Rights Agent
3. Issue of Rights Certificates
4. Form of Rights Certificates
5. Countersignature and Registration
6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates
7. Exercise of Rights; Purchase Price; Expiration Date of Rights
8. Cancellation and Destruction of Rights Certificates
9. Reservation and Availability of Capital Stock
10. Preferred Stock Record Date
11. Adjustment of Purchase Price, Number and Kind of Shares or Number of
Rights
12. Certificate of Adjusted Purchase Price or Number of Shares
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power
14. Fractional Rights and Fractional Shares
15. Rights of Action
16. Agreement of Rights Holders
17. Rights Certificate Holder Not Deemed a Stockholder
18. Concerning the Rights Agent
19. Merger or Consolidation or Change of Name of Rights Agent
20. Duties of Rights Agent
21. Change of Rights Agent
22. Issuance of New Rights Certificates
23. Redemption and Termination.
24. Notice of Certain Events
25. Notices
26. Supplements and Amendments
27. Successors
28. Determinations and Actions by the Board of Directors, etc.
29. Benefits of this Agreement
30. Severability
31. Governing Law
32. Counterparts
33. Descriptive Headings
Exhibit A -- Amended and Restated Certificate of Incorporation
Exhibit B -- Form of Rights Certificate
============================================================================
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of December 23, 1997 (the "Agree
ment"), between R&B Falcon Corporation, a Delaware corporation (the "Com
pany"), and American Stock Transfer & Trust Company, a trust company
organized under the laws of the State of New York (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on July 10, 1997, the Company, FDC Acquisition Corp., a
Delaware corporation, Reading & Bates Acquisition Corp., a Delaware corpora
tion, Falcon Drilling Company, a Delaware company ("Falcon"), and Reading &
Bates Corporation ("R&B"), entered into the Agreement and Plan of
Reorganization (the "Merger Agreement"), pursuant to which, among other
things, Falcon and R&B will become wholly owned subsidiaries of the Company
and the former stockholders of Falcon and R&B will become stockholders of
the Company (the "Transaction");
WHEREAS, as a part of the Transaction, Falcon and R&B determined that
it would be desirable to distribute Rights (as hereinafter defined)
associated with the shares of Common Stock (as hereinafter defined) of the
Company to be issued in the Transaction to the former stockholders of
Falcon and R&B and that certificates representing such Common Stock would
also evidence such Rights and that the registered holders of Common Stock
would also be the registered holders of the associated Rights;
WHEREAS, Section 6.16(b) of the Merger Agreement provides that Falcon
and R&B will take all actions necessary to cause the Company to adopt a
Rights Plan providing for the distribution of Rights prior to the
consummation of the Transaction;
WHEREAS, in order to effectuate the foregoing, Falcon and R&B, as the
sole stockholders of Parent, are authorizing and directing the Company to
create a stockholder rights plan, to issue Rights to the former stockhold
ers of Falcon and R&B in connection with the Transaction, which Rights will
be attached to the shares of Common Stock and evidenced by certificates
representing Common Stock and to enter into a rights agreement
substantially in the form of this Agreement;
WHEREAS, the Board of Directors of the Company has authorized the
distribution as of the Effective Time (as defined in the Merger Agreement)
of the Mergers (as defined in the Merger Agreement) of one Right for each
share of Common Stock of the Company issued in connection with the Mergers,
and authorized the issuance of one Right (as such number may hereafter be
adjusted pursuant to the provisions of Section 11(p) hereof) for each share
of Common Stock of the Company issued between the Effective Time (whether
originally issued or delivered from the Company's treasury) and the Distri
bution Date (as hereinafter defined), each Right initially representing the
right to purchase one one-hundredth of a share of Series A Junior Partici
pating Preferred Stock of the Company having the rights, powers and prefer
ences set forth in the Amended and Restated Certificate of Incorporation of
the Company attached hereto as Exhibit A, upon the terms and subject to the
conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a)"Acquiring Person" shall mean any Person who or which, togeth
er with all Affiliates and Associates of such Person, shall after the
Effective Time be the Beneficial Owner of 15% or more of the shares of
Common Stock then outstanding, but shall not include (i) the Company, (ii)
any Subsidiary of the Company, (iii) any employee benefit plan of the
Company or of any Subsidiary of the Company, or (iv) any Person or entity
organized, appointed or established by the Company for or pursuant to the
terms of any such plan, or any Person who becomes an Acquiring Person
solely as a result of a reduction in the number of shares of Common Stock
outstanding due to the repurchase of shares of Common Stock by the Company,
unless and until such Person shall purchase or otherwise become the
Beneficial Owner of additional shares of Common Stock constituting 1% or
more of the then outstanding shares of Common Stock. Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good
faith that a Person who would otherwise be an Acquiring Person has become
such inadvertently, and such Person divests as promptly as practicable a
sufficient number of shares of Common Stock so that such Person would no
longer be an Acquiring Person, then such Person shall not be deemed to be
an Acquiring Person for any purposes of this Agreement.
(b)"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended and in effect on the
date of this Agreement (the "Exchange Act").
(c)A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options,
or otherwise; provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own," (A)
securities tendered pursuant to a tender or exchange offer made
by such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase or
exchange, or (B) securities issuable upon exercise of Rights at
any time prior to the occurrence of a Triggering Event, or (C)
securities issuable upon exercise of Rights from and after the
occurrence of a Triggering Event which Rights were acquired by
such Person or any of such Person's Affiliates or Associates
prior to the Distribution Date or pursuant to Section 3(a) or
Section 22 hereof (the "Original Rights") or pursuant to Section
11(i) hereof in connection with an adjustment made with respect
to any Original Rights;
(ii) which such Person or any of such Person's Affil
iates or Associates, directly or indirectly, has the right to
vote or dispose of or has "beneficial ownership" of (as deter
mined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security
under this subparagraph (ii) as a result of an agreement, arrange
ment or understanding to vote such security if such agreement,
arrangement or understanding: (A) arises solely from a revocable
proxy given in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the
Exchange Act, and (B) is not also then reportable by such Person
on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or indi
rectly, by any other Person (or any Affiliate or Associate
thereof) with which such Person (or any of such Person's
Affiliates or Associates) has any agreement, arrangement or under
standing (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy
as described in the proviso to subparagraph (ii) of this para
graph (c)) or disposing of any voting securities of the Company;
provided, however, that nothing in this paragraph (c) shall cause
a Person engaged in the business as an underwriter of securities
to be deemed the "Beneficial Owner" of, or to "beneficially own,"
any securities acquired through such Person's participation in
good faith in a firm commitment underwriting until the expiration
of forty (40) days after the date of such acquisition.
(d)"Business Day" shall mean any day other than a Saturday, Sund
ay or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(e)"Close of business" on any given date shall mean 5:00 P.M., N
ew York City time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(f)"Common Stock" shall mean the common stock, par value $.01 per
share, of the Company, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock of such
Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(g)"Continuing Director" shall mean (i) any member of the Board
of Directors of the Company, while such Person is a member of the Board,
who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative of an Acquiring Person or of any such
Affiliate or Associate, and was a member of the Board at the Effective
Time, or (ii) any Person who subsequently becomes a member of the Board,
while such Person is a member of the Board, who is not an Acquiring Person,
or an Affiliate or Associate of an Acquiring Person, or a representative of
an Acquiring Person or of any such Affiliate or Associate, if such Person's
nomination for election or election to the Board is recommended or approved
by a majority of the Continuing Directors.
(h)"Person" shall mean any individual, firm, corporation, partne
rship or other entity.
(i)"Preferred Stock" shall mean shares of Series A Junior Partic
ipating Preferred Stock, par value $.01 per share, of the Company and, to
the extent that there are not a sufficient number of shares of Series A
Junior Participating Preferred Stock authorized to permit the full exercise
of the Rights, any other series of preferred stock, par value $.01 per
share, of the Company designated for such purpose containing terms
substantially similar to the terms of the Series A Junior Participating
Preferred Stock.
(j)"Section 11(a)(ii) Event" shall mean the event described in S
ection 11(a)(ii) hereof.
(k)"Section 13 Event" shall mean any event described in clauses
(x), (y) or (z) of Section 13(a) hereof.
(l)"Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such.
(m)"Subsidiary" shall mean, with reference to any Person, any co
rporation of which an amount of voting securities sufficient to elect at
least a majority of the directors of such corporation is beneficially
owned, directly or indirectly, by such Person, or otherwise controlled by
such Person.
(n)"Triggering Event" shall mean the Section 11(a)(ii) Event or
any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Stock) in accordance
with the terms and conditions hereof, and the Rights Agent hereby accepts
such appointment. The Company may from time to time appoint such Co-Rights
Agents as it may deem necessary or desirable.
Section 3. Issue of Rights Certificates.
(a)Until the earlier of (i) the close of business on the tenth B
usiness Day after the Stock Acquisition Date or (ii) the close of business
on the tenth Business Day (or such later date as the Board of Directors
shall determine) after the date that a tender or exchange offer by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any
Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan) is first published or sent or given
within the meaning of Rule 14d-2(a) of the General Rules and Regulations
under the Exchange Act, if upon consummation thereof, such Person would be
the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding (the earlier of (i) and (ii) being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates for the
Common Stock registered in the names of the holders of the Common Stock
(which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the
Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company).
As soon as practicable after the Distribution Date, the Rights Agent will
send by first-class, insured, postage prepaid mail, to each record holder
of the Common Stock as of the close of business on the Distribution Date,
at the address of such holder shown on the records of the Company, one or
more right certificates, in substantially the form of Exhibit B hereto (the
"Rights Certificates"), evidencing one Right for each share of Common Stock
so held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per share of Common Stock has been made
pursuant to Section 11(p) hereof, at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and
cash is paid in lieu of any fractional Rights. As of and after the
Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b)Rights shall be issued in respect of all shares of Common
Stock which are issued after the Effective Time but prior to the earlier of
the Distribution Date or the Expiration Date. Certificates representing
such shares of Common Stock shall also be deemed to be certificates for
Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights Agreement
between R&B Falcon Corporation and American Stock Transfer &
Trust Company, dated as of December 19, 1997 (the "Rights Agree
ment"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal offices
of R&B Falcon Corporation. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by this
certificate. R&B Falcon Corporation will mail to the holder of
this certificate a copy of the Rights Agreement, as in effect on
the date of mailing, without charge promptly after receipt of a
written request therefor. Under certain circumstances set forth
in the Rights Agreement, Rights issued to, or held by, any Person
who is, was or becomes an Acquiring Person or any Affiliate or
Associate thereof (as such terms are defined in the Rights Agree
ment), whether currently held by or on behalf of such Person or
by any subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until
the earlier of (i) the Distribution Date or (ii) the Expiration Date, the
Rights associated with the Common Stock represented by such certificates
shall be evidenced by such certificates alone and registered holders of
Common Stock shall also be the registered holders of the associated Rights,
and the transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificates.
Section 4. Form of Rights Certificates.
(a)The Rights Certificates (and the forms of election to purchase
and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any stock exchange
on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the
Rights Certificates, whenever distributed, shall be dated as of the
Effective Time and on their face shall entitle the holders thereof to
purchase such number of one one-hundredths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such exercise
price per one one-hundredth of a share, the "Purchase Price"), but the
amount and type of securities purchasable upon the exercise of each Right
and the Purchase Price thereof shall be subject to adjustment as provided
herein.
(b)Any Rights Certificate issued pursuant to Section 3(a) or Sec
tion 22 hereof that represents Rights beneficially owned by: (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii)
a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes such, or (iii)
a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of
Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect avoidance of Section
7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Rights Certificate referred to in this sentence, shall contain (to
the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in Section
7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto
the Company's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be countersigned by the
Rights Agent, either manually or by facsimile signature, and shall not be
valid for any purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates shall cease to
be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Rights Certificates, never
theless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who
signed such Rights Certificates had not ceased to be such officer of the
Company; and any Rights Certificates may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement
any such person was not such an officer.
(b)Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates
issued hereunder. Such books shall show the names and addresses of the
respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the date of
each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, at any time after the close of business on the Distribution Date,
and at or prior to the close of business on the Expiration Date, any Rights
Certificate or Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of one one-hundredths of a
share of Preferred Stock (or, following a Triggering Event, Common Stock,
other securities, cash or other assets, as the case may be) as the Rights
Certificate or Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to
the Rights Agent, and shall surrender the Rights Certificate or
Certificates to be transferred, split up, combined or exchanged at the
principal office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have
completed and signed the certificate contained in the form of assignment on
the reverse side of such Rights Certificate and shall have provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request. Thereupon the Rights Agent shall, subject to Section
4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the
Person entitled thereto a Rights Certificate or Rights Certificates, as the
case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Rights
Certificates.
(b)Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them, and
reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will
execute and deliver a new Rights Certificate of like tenor to the Rights
Agent for countersignature and delivery to the registered owner in lieu of
the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. (a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions
on exercisability set forth in Section 9(c), Section 11(a)(iii) and Section
23(a) hereof) in whole or in part at any time after the Distribution Date
upon surrender of the Rights Certificate, with the form of election to
purchase and the certificate on the reverse side thereof duly executed, to
the Rights Agent at the principal office or offices of the Rights Agent
designated for such purpose, together with payment of the aggregate
Purchase Price with respect to the total number of one one-hundredths of a
share of Preferred Stock (or other securities, cash or other assets, as the
case may be) as to which such surrendered Rights are then exercisable, at
or prior to the earlier of (i) the close of business on November 1, 2007
(the "Final Expiration Date"), or (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the earlier of (i) and (ii)
being herein referred to as the "Expiration Date").
(b)The Purchase Price for each one one-hundredth of a share of P
referred Stock pursuant to the exercise of a Right shall initially be $150,
and shall be subject to adjustment from time to time as provided in
Sections 11 and 13(a) hereof and shall be payable in accordance with
paragraph (c) below.
(c)Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly
executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one one-hundredth of a share of Preferred Stock
(or other securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable transfer
tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon
promptly (i) (A) requisition from any transfer agent of the shares of
Preferred Stock (or make available, if the Rights Agent is the transfer
agent for such shares) certificates for the total number of one one-
hundredths of a share of Preferred Stock to be purchased and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-hundredths of a
share of Preferred Stock as are to be purchased (in which case certificates
for the shares of Preferred Stock represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu
of fractional shares in accordance with Section 14 hereof, (iii) after
receipt of such certificates or depositary receipts, cause the same to be
delivered to, or upon the order of, the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, and (iv) after receipt thereof, deliver such cash, if any, to, or
upon the order of, the registered holder of such Rights Certificate. The
payment of the Purchase Price (as such amount may be reduced pursuant to
Section 11(a)(iii) hereof) may be made (x) in cash or by certified bank
check or bank draft payable to the order of the Company, or (y) by delivery
of a certificate or certificates (with appropriate stock powers executed in
blank attached thereto) evidencing a number of shares of Common Stock equal
to the then Purchase Price divided by the closing price (as determined
pursuant to Section 11(d) hereof) per share of Common Stock on the Trading
Day immediately preceding the date of such exercise. In the event that the
Company is obligated to issue other securities (including Common Stock) of
the Company, pay cash and/or distribute other property pursuant to Section
11(a) hereof, the Company will make all arrangements necessary so that such
other securities, cash and/or other property are available for distribution
by the Rights Agent, if and when appropriate. The Company reserves the
right to require prior to the occurrence of a Triggering Event that, upon
any exercise of Rights, a number of Rights be exercised so that only whole
shares of Preferred Stock would be issued.
(d)In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or upon
the order of, the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, subject to the
provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the occurrence of the Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate
of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of
any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration)
from the Acquiring Person to holders of equity interests in such Acquiring
Person or to any Person with whom the Acquiring Person has any continuing
agreement, arrangement or understanding regarding the transferred Rights or
(B) a transfer which the Board of Directors of the Company has determined
is part of a plan, arrangement or understanding which has as a primary
purpose or effect the avoidance of this Section 7(e), shall become null and
void without any further action, and no holder of such Rights shall have
any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. The Company shall use all reason
able efforts to insure that the provisions of this Section 7(e) and Section
4(b) hereof are complied with, but shall have no liability to any holder of
Rights Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(f)Notwithstanding anything in this Agreement to the contrary, n
either the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any
purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the
form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise, and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or
any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled
by it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The
Company shall deliver to the Rights Agent for cancellation and retirement,
and the Rights Agent shall so cancel and retire, any other Rights
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all cancelled Rights
Certificates to the Company, or shall, at the written request of the
Company, destroy such cancelled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Triggering Event, out of its authorized
and unissued shares of Common Stock and/or other securities or out of its
authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities) that, as provided in this Agreement
including Section 11(a)(iii) hereof, will be sufficient to permit the
exercise in full of all outstanding Rights.
(b)So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights may be listed on
any national securities exchange, the Company shall use its best efforts to
cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.
(c)The Company shall use its best efforts (i) to file, as soon as
practicable following the earliest date after the occurrence of the Section
11(a)(ii) Event on which the consideration to be delivered by the Company
upon exercise of the Rights has been determined in accordance with Section
11(a)(iii) hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act of 1933 (the "Act"), with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) to
cause such registration statement to become effective as soon as
practicable after such filing, and (iii) to cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities, and (B) the date of
the expiration of the Rights. The Company will also take such action as
may be appropriate under, or to ensure compliance with, the securities or
"blue sky" laws of the various states in connection with the exercisability
of the Rights. The Company may temporarily suspend, for a period of time
not to exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this Section 9(c), the exercisability of the Rights
in order to prepare and file such registration statement and permit it to
become effective. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction if the requisite qualification in such jurisdiction shall not
have been obtained, the exercise thereof shall not be permitted under
applicable law or a registration statement shall not have been declared
effective.
(d)The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all one one-hundredths of a share
of Preferred Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities) delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such shares (subject
to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable.
(e)The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of one one-hundredths of
a share of Preferred Stock (or Common Stock and/or other securities, as the
case may be) upon the exercise of Rights. The Company shall not, however,
be required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Rights Certificates to a Person other than, or the
issuance or delivery of a number of one one-hundredths of a share of
Preferred Stock (or Common Stock and/or other securities, as the case may
be) in respect of a name other than that of, the registered holder of the
Rights Certificates evidencing Rights surrendered for exercise or to issue
or deliver any certificates for a number of one one-hundredths of a share
of Preferred Stock (or Common Stock and/or other securities, as the case
may be) in a name other than that of the registered holder upon the
exercise of any Rights until such tax shall have been paid (any such tax
being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction
that no such tax is due.
Section 10. Preferred Stock Record Date. Each person in whose name
any certificate for a number of one one-hundredths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) is
issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of such fractional shares of Preferred Stock
(or Common Stock and/or other securities, as the case may be) represented
thereby on, and such certificate shall be dated, the date upon which the
Rights Certificate evidencing such Rights was duly surrendered and payment
of the Purchase Price (and all applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date
upon which the Preferred Stock (or Common Stock and/or other securities, as
the case may be) transfer books of the Company are closed, such Person
shall be deemed to have become the record holder of such shares (fractional
or otherwise) on, and such certificate shall be dated, the next succeeding
Business Day on which the Preferred Stock (or Common Stock and/or other
securities, as the case may be) transfer books of the Company are open.
Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of
the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and
shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights. The Purchase Price, the number and kind of shares
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred
Stock payable in shares of Preferred Stock, (B) subdivide the
outstanding Preferred Stock, (C) combine the outstanding
Preferred Stock into a smaller number of shares, or (D) issue any
shares of its capital stock in a reclassification of the
Preferred Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is
the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of
shares of Preferred Stock or capital stock, as the case may be,
issuable on such date, shall be proportionately adjusted so that
the holder of any Right exercised after such time shall be
entitled to receive, upon payment of the Purchase Price then in
effect, the aggregate number and kind of shares of Preferred
Stock or capital stock, as the case may be, which, if such Right
had been exercised immediately prior to such date and at a time
when the Preferred Stock transfer books of the Company were open,
he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii)In the event any Person becomes an Acquiring Person,
unless the event causing the 15% threshold to be crossed is a
transaction set forth in Section 13(a) hereof, or is an
acquisition of shares of Common Stock pursuant to a tender offer
or an exchange offer for all outstanding shares of Common Stock
at a price and on terms determined by at least a majority of the
Continuing Directors to be in the best interests of the Company
and its stockholders (a "Qualifying Offer"),
then, promptly following the occurrence of such event, proper provision
shall be made so that each holder of a Right (except as provided below and
in Section 7(e) hereof) shall thereafter have the right to receive, upon
exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, in lieu of a number of one one-hundredths of a
share of Preferred Stock, such number of shares of Common Stock of the
Company as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the then number of one one-hundredths of a share
of Preferred Stock for which a Right was exercisable immediately prior to
the occurrence of the Section 11(a)(ii) Event, and (y) dividing that
product (which, following such occurrence, shall thereafter be referred to
as the "Purchase Price" for each Right and for all purposes of this Agree-
ment) by 50% of the current market price (determined pursuant to Section
11(d) hereof) per share of Common Stock on the date of such occurrence
(such number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common
Stock which are authorized by the Certificate of Incorporation
but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights are not sufficient to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company shall: (A)
determine the excess of (1) the value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value") over
(2) the Purchase Price (such excess, the "Spread"), and (B) with
respect to each Right (subject to Section 7(e) hereof), make
adequate provision to substitute for the Adjustment Shares, upon
exercise of the Right and payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3)
Common Stock or other equity securities of the Company
(including, without limitation, shares, or units of shares, of
preferred stock which the Board of Directors of the Company has
deemed to have the same value as shares of Common Stock (such
shares of preferred stock, "common stock equivalents")), (4) debt
securities of the Company, (5) other assets, or (6) any combin-
ation of the foregoing, having an aggregate value equal to the
Current Value, where such aggregate value has been determined by
the Board of Directors of the Company based upon the advice of a
nationally recognized investment banking firm selected by the
Board of Directors of the Company; provided, however, if the
Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following
the later of (x) the occurrence of the Section 11(a)(ii) Event
and (y) the date on which the Company's right of redemption
pursuant to Section 23(a) expires (the later of (x) and (y) being
referred to herein as the "Section 11(a)(ii) Trigger Date"), then
the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase
Price, shares of Common Stock (to the extent available) and then,
if necessary, cash, which shares and/or cash have an aggregate
value equal to the Spread. If the Board of Directors of the
Company shall determine in good faith that it is likely that
sufficient additional shares of Common Stock could be authorized
for issuance upon exercise in full of the Rights, the thirty (30)
day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section
11(a)(ii) Trigger Date, in order that the Company may seek stock
holder approval for the authorization of such additional shares
(such period, as it may be extended, the "Substitution Period").
To the extent that the Company determines that some action need
be taken pursuant to the first and/or second sentences of this
Section 11(a)(iii), the Company (x) shall provide, subject to
Section 7(e) hereof, that such action shall apply uniformly to
all outstanding Rights, and (y) may suspend the exercisability of
the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to
decide the appropriate form of distribution to be made pursuant
to such first sentence and to determine the value thereof. In
the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement
at such time as the suspension is no longer in effect. For
purposes of this Section 11(a)(iii), the value of each Adjustment
Share shall be the current market price (as determined pursuant
to Section 11(d) hereof) per share of the Common Stock on the
Section 11(a)(ii) Trigger Date and the per share or per unit
value of any "common stock equivalent" shall be deemed to be
equal to the current market price (as determined pursuant to
Section 11(d) hereof) of the Common Stock on such date.
(b)In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Preferred Stock entitling
them to subscribe for or purchase (for a period expiring within forty-five
(45) calendar days after such record date) Preferred Stock (or shares
having the same rights, privileges and preferences as the shares of
Preferred Stock ("equivalent preferred stock")) or securities convertible
into Preferred Stock or equivalent preferred stock at a price per share of
Preferred Stock or per share of equivalent preferred stock (or having a
conversion price per share, if a security convertible into Preferred Stock
or equivalent preferred stock) less than the current market price (as
determined pursuant to Section 11(d) hereof) per share of Preferred Stock
on such record date, the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Preferred Stock outstanding on such record
date, plus the number of shares of Preferred Stock which the aggregate
offering price of the total number of shares of Preferred Stock and/or
equivalent preferred stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would
purchase at such current market price, and the denominator of which shall
be the number of shares of Preferred Stock outstanding on such record date,
plus the number of additional shares of Preferred Stock and/or equivalent
preferred stock to be offered for subscription or purchase (or into which
the convertible securities so to be offered are initially convertible). In
case such subscription price may be paid by delivery of consideration part
or all of which may be in a form other than cash, the value of such
consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights
Agent and the holders of the Rights. Shares of Preferred Stock owned by or
held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed, and in the event that
such rights or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c)In case the Company shall fix a record date for a distribution
to all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a
regular quarterly cash dividend out of the earnings or retained earnings of
the Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section
11(b) hereof), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be
the current market price (as determined pursuant to Section 11(d) hereof)
per share of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with
the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or
warrants applicable to a share of Preferred Stock and the denominator of
which shall be such current market price (as determined pursuant to Section
11(d) hereof) per share of Preferred Stock. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that
such distribution is not so made, the Purchase Price shall be adjusted to
be the Purchase Price which would have been in effect if such record date
had not been fixed.
(d)(i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the
"current market price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices per
share of such Common Stock for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately
prior to such date, and for purposes of computations made
pursuant to Section 11(a)(iii) hereof, the "current market price"
per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such Common
Stock for the ten (10) consecutive Trading Days immediately
following such date; provided, however, that in the event that
the current market price per share of the Common Stock is
determined during a period following the announcement by the
issuer of such Common Stock of (A) a dividend or distribution on
such Common Stock payable in shares of such Common Stock or secu
rities convertible into shares of such Common Stock (other than
the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date
for such dividend or distribution, or the record date for such
subdivision, combination or reclassification shall not have
occurred prior to the commencement of the requisite thirty (30)
Trading Day or ten (10) Trading Day period, as set forth above,
then, and in each such case, the "current market price" shall be
properly adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the aver
age of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction re
porting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of
Common Stock are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or, if the shares
of Common Stock are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
or such other system then in use, or, if on any such date the
shares of Common Stock are not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock se
lected by the Board of Directors of the Company. If on any such
date no market maker is making a market in the Common Stock, the
fair value of such shares on such date as determined in good
faith by the Board of Directors of the Company shall be used.
The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares of Common Stock
are listed or admitted to trading is open for the transaction of
business or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange, a
Business Day. If the Common Stock is not publicly held or not so
listed or traded, "current market price" per share shall mean the
fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be conclu
sive for all purposes.
(ii) For the purpose of any computation hereunder, the
"current market price" per share of Preferred Stock shall be
determined in the same manner as set forth above for the Common
Stock in clause (i) of this Section 11(d) (other than the last
sentence thereof). If the current market price per share of
Preferred Stock cannot be determined in the manner provided above
or if the Preferred Stock is not publicly held or listed or
traded in a manner described in clause (i) of this Section 11(d),
the "current market price" per share of Preferred Stock shall be
conclusively deemed to be an amount equal to 100 (as such number
may be appropriately adjusted for such events as stock splits,
stock dividends and recapitalizations with respect to the Common
Stock occurring after the date of this Agreement) multiplied by
the current market price per share of the Common Stock. If
neither the Common Stock nor the Preferred Stock is publicly held
or so listed or traded, "current market price" per share of the
Preferred Stock shall mean the fair value per share as determined
in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes. For all
purposes of this Agreement, the "current market price" of one one-
hundredth of a share of Preferred Stock shall be equal to the
"current market price" of one share of Preferred Stock divided by
100.
(e)Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the
Purchase Price; provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the nearest ten-
thousandth of a share of Common Stock or other share or one-millionth of a
share of Preferred Stock, as the case may be. Notwithstanding the first
sentence of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three (3) years from the
date of the transaction which mandates such adjustment, or (ii) the
Expiration Date.
(f)If as a result of an adjustment made pursuant to Section 11(a)
(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable
upon exercise of any Right and the Purchase Price thereof shall be subject
to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred
Stock contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k)
and (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with
respect to the Preferred Stock shall apply on like terms to any such other
shares.
(g)All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths
of a share of Preferred Stock purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as provided
herein.
(h)Unless the Company shall have exercised its election as provi
ded in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price,
that number of one one-hundredths of a share of Preferred Stock (calculated
to the nearest one-millionth) obtained by (i) multiplying (x) the number of
one one-hundredths of a share covered by a Right immediately prior to this
adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained
by the Purchase Price in effect immediately after such adjustment of the
Purchase Price.
(i)The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one one-hundredths of a share of Preferred
Stock purchasable upon the exercise of a Right. Each of the Rights
outstanding after the adjustment in the number of Rights shall be
exercisable for the number of one one-hundredths of a share of Preferred
Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the
nearest one-ten-thousandth) obtained by dividing the Purchase Price in
effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This
record date may be the date on which the Purchase Price is adjusted or any
day thereafter, but, if the Rights Certificates have been issued, shall be
at least ten (10) days later than the date of the public announcement. If
Rights Certificates have been issued, upon each adjustment of the number of
Rights pursuant to this Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Rights Certifi
cates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the
date of adjustment, and upon surrender thereof, if required by the Company,
new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the
adjusted Purchase Price) and shall be registered in the names of the
holders of record of Rights Certificates on the record date specified in
the public announcement.
(j)Irrespective of any adjustment or change in the Purchase Price
or the number of one one-hundredths of a share of Preferred Stock issuable
upon the exercise of the Rights, the Rights Certificates theretofore and
thereafter issued may continue to express the Purchase Price per one one-
hundredths of a share and the number of one one-hundredths of a share which
were expressed in the initial Rights Certificates issued hereunder.
(k)Before taking any action that would cause an adjustment redu-
cing the Purchase Price below the then stated value, if any, of the number
of one one-hundredths of a share of Preferred Stock issuable upon exercise
of the Rights, the Company shall take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable such number of one
one-hundredths of a share of Preferred Stock at such adjusted Purchase
Price.
(l)In any case in which this Section 11 shall require that an ad-
justment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of
such event the issuance to the holder of any Right exercised after such
record date the number of one one-hundredths of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon
such exercise over and above the number of one one-hundredths of a share of
Preferred Stock and other capital stock or securities of the Company, if
any, issuable upon such exercise on the basis of the Purchase Price in
effect prior to such adjustment; provided, however, that the Company shall
deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares (fraction
al or otherwise) or securities upon the occurrence of the event requiring
such adjustment.
(m)Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase
Price, in addition to those adjustments expressly required by this Section
11, as and to the extent that in their good faith judgment the Board of
Directors of the Company shall determine to be advisable in order that any
(i) consolidation or subdivision of the Preferred Stock, (ii) issuance
wholly for cash of any shares of Preferred Stock at less than the current
market price, (iii) issuance wholly for cash of shares of Preferred Stock
or securities which by their terms are convertible into or exchangeable for
shares of Preferred Stock, (iv) stock dividends, or (v) issuance of rights,
options or warrants referred to in this Section 11, hereafter made by the
Company to holders of its Preferred Stock shall not be taxable to such
stockholders.
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person
(other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), (ii) merge with or into any other Person (other
than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary
to sell or transfer), in one transaction, or a series of related
transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company and/or any of
its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), if (x) at the time of or immediately after such
consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately
after such consolidation, merger or sale, the stockholders of the Person
who constitutes, or would constitute, the "Principal Party" for purposes of
Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates.
(o)The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 26 hereof,
take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded
by the Rights.
(p)Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Effective Time and
prior to the Distribution Date (i) declare a dividend on the outstanding
shares of Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding shares of Common Stock, or (iii) combine the outstanding
shares of Common Stock into a smaller number of shares, the number of
Rights associated with each share of Common Stock then outstanding, or
issued or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated
with each share of Common Stock following any such event shall equal the
result obtained by multiplying the number of Rights associated with each
share of Common Stock immediately prior to such event by a fraction the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
Section 12 Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 and
Section 13 hereof, the Company shall (a) promptly prepare a certificate
setting forth such adjustment and a brief statement of the facts accounting
for such adjustment, (b) promptly file with the Rights Agent, and with each
transfer agent for the Preferred Stock and the Common Stock, a copy of such
certificate, and (c) mail or cause the Rights Agent to mail a brief summary
thereof to each holder of a Rights Certificate (or, if prior to the
Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 25 hereof. The Rights Agent shall
be fully protected in relying on any such certificate and on any adjustment
therein contained.
Section 13 Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a)In the event that, following the Stock Acquisition Date, dir-
ectly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and the Company
shall not be the continuing or surviving corporation of such consolidation
or merger, (y) any Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof) shall consolidate
with, or merge with or into, the Company, and the Company shall be the
continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the
outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to any Person or Persons (other than
the Company or any Subsidiary of the Company in one or more transactions
each of which complies with Section 11(o) hereof), then, and in each such
case (except as may be contemplated by Section 13(d) hereof), proper provi
sion shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive, upon
the exercise thereof at the then current Purchase Price in accordance with
the terms of this Agreement, such number of validly authorized and issued,
fully paid, nonassessable and freely tradeable shares of Common Stock of
the Principal Party (as such term is hereinafter defined), not subject to
any liens, encumbrances, rights of first refusal or other adverse claims,
as shall be equal to the result obtained by (1) multiplying the then
current Purchase Price by the number of one one-hundredths of a share of
Preferred Stock for which a Right is exercisable immediately prior to the
first occurrence of a Section 13 Event (or, if the Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of such one one-hundredths of a share for which a
Right was exercisable immediately prior to the occurrence of the Section
11(a)(ii) Event by the Purchase Price in effect immediately prior to such
first occurrence), and dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase
Price" for each Right and for all purposes of this Agreement) by (2) 50% of
the current market price (determined pursuant to Section 11(d)(i) hereof)
per share of the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the
first occurrence of a Section 13 Event; (iv) such Principal Party shall
take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its shares of Common Stock thereafter deliverable
upon the exercise of the Rights; and (v) the provisions of Section
11(a)(ii) hereof shall be of no effect following the first occurrence of
any Section 13 Event.
(b)"Principal Party" shall mean
(i) in the case of any transaction described in clause
(x) or (y) of the first sentence of Section 13(a), the Person
that is the issuer of any securities into which shares of Common
Stock of the Company are converted in such merger or
consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person
that is the party receiving the greatest portion of the assets or
earning power transferred pursuant to such transaction or
transactions;
provided, however, that in any such case, (1) if the Common Stock of such
Person is not at such time and has not been continuously over the preceding
twelve (12) month period registered under Section 12 of the Exchange Act,
and such Person is a direct or indirect Subsidiary of another Person the
Common Stock of which is and has been so registered, "Principal Party"
shall refer to such other Person; and (2) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, the Common
Stocks of two or more of which are and have been so registered, "Principal
Party" shall refer to whichever of such Persons is the issuer of the Common
Stock having the greatest aggregate market value.
(c)The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued
or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and
such Principal Party shall have executed and delivered to the Rights Agent
a supplemental agreement providing for the terms set forth in paragraphs
(a) and (b) of this Section 13 and further providing that, as soon as
practicable after the date of any consolidation, merger or sale of assets
mentioned in paragraph (a) of this Section 13, the Principal Party will
(i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities purchas-
able upon exercise of the Rights on an appropriate form, and will
use its best efforts to cause such registration statement to (A)
become effective as soon as practicable after such filing and (B)
remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the requirements for
registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. In the event that a
Section 13 Event shall occur at any time after the occurrence of the
Section 11(a)(ii) Event, the Rights which have not theretofore been
exercised shall thereafter become exercisable in the manner described in
Section 13(a).
(d)Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subpara
graphs (x) and (y) of Section 13(a) if (i) such transaction is consummated
with a Person or Persons who acquired shares of Common Stock pursuant to a
Qualifying Offer (or a wholly owned subsidiary of such Person or Persons),
(ii) the price per share of Common Stock offered in such transaction is not
less than the price per share of Common Stock paid to all holders of shares
of Common Stock whose shares were purchased pursuant to such tender offer
or exchange offer, and (iii) the form of consideration being offered to the
remaining holders of shares of Common Stock pursuant to such transaction is
the same as the form of consideration paid pursuant to such tender offer or
exchange offer. Upon consummation of any such transaction contemplated by
this Section 13(d), all rights hereunder shall expire.
Section 14 Fractional Rights and Fractional Shares.
(a)The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates which evidence fractional
Rights. In lieu of such fractional Rights, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right. For
purposes of this Section 14(a), the current market value of a whole Right
shall be the closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights would have been otherwise
issuable. The closing price of the Rights for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted to trading on
the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading
on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-
counter market, as reported by NASDAQ or such other system then in use or,
if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is
making a market in the Rights the fair value of the Rights on such date as
determined in good faith by the Board of Directors of the Company shall be
used.
(b)The Company shall not be required to issue fractions of shares
of Preferred Stock (other than fractions which are integral multiples of
one one-hundredth of a share of Preferred Stock), which may, at the option
of the Company, be evidenced by depositary receipts upon exercise of the
Rights or to distribute certificates which evidence fractional shares of
Preferred Stock (other than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock). In lieu of fractional shares
of Preferred Stock that are not integral multiples of one one-hundredth of
a share of Preferred Stock, the Company may pay to the registered holders
of Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one one-hundredth of a share of Preferred Stock. For purposes of
this Section 14(b), the current market value of one one-hundredth of a
share of Preferred Stock shall be one one-hundredth of the closing price of
a share of Preferred Stock (as determined pursuant to Section 11(d)(ii)
hereof) for the Trading Day immediately prior to the date of such exercise.
(c)Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of shares of Common Stock upon
exercise of the Rights or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of fractional shares of Common
Stock, the Company may pay to the registered holders of Rights Certificates
at the time such Rights are exercised as herein provided an amount in cash
equal to the same fraction of the current market value of one (1) share of
Common Stock. For purposes of this Section 14(c), the current market value
of one (1) share of Common Stock shall be the closing price of one (1)
share of Common Stock (as determined pursuant to Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of such exercise.
(d)The holder of a Right by the acceptance of the Rights express-
ly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
Section 15 Rights of Action. All rights of action in respect of
this Agreement are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered
holders of the Common Stock); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common Stock),
without the consent of the Rights Agent or of the holder of any other
Rights Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company
to enforce, or otherwise act in respect of, his right to exercise the
Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy
at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against
actual or threatened violations of the obligations hereunder of any Person
subject to this Agreement.
Section 16 Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
(a)prior to the Distribution Date, the Rights will be transfer-
able only in connection with the transfer of Common Stock;
(b)after the Distribution Date, the Rights Certificates are tran-
sferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer
and with the appropriate forms and certificates fully executed;
(c)subject to Section 6(a) and Section 7(f) hereof, the Company
and the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificates or the associated Common Stock
certificate made by anyone other than the Company or the Rights Agent) for
all purposes whatsoever, and neither the Company nor the Rights Agent,
subject to the last sentence of Section 7(e) hereof, shall be required to
be affected by any notice to the contrary; and
(d)notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any
holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority, prohibiting or
otherwise restraining performance of such obligation; provided, however,
the Company must use its best efforts to have any such order, decree or
ruling lifted or otherwise overturned as soon as possible.
Section 17 Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the number of
one one-hundredths of a share of Preferred Stock or any other securities of
the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 24 hereof),
or to receive dividends or subscription rights, or otherwise, until the
Right or Rights evidenced by such Rights Certificate shall have been
exercised in accordance with the provisions hereof.
Section 18 Concerning the Rights Agent.
(a)The Company agrees to pay to the Rights Agent reasonable comp-
ensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and
to hold it harmless against, any loss, liability, or expense, incurred
without negligence, bad faith or willful misconduct on the part of the
Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any claim of
liability in the premises.
(b)The Rights Agent shall be protected and shall incur no liabil-
ity for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Common Stock or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to
be signed, executed and, where necessary, verified or acknowledged, by the
proper Person or Persons.
Section 19 Merger or Consolidation or Change of Name of Rights
Agent.
(a)Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any paper or
any further act on the part of any of the parties hereto; provided,
however, that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof. In case
at the time such successor Rights Agent shall succeed to the agency created
by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt
the countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent
may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such
cases such Rights Certificates shall have the full force provided in the
Rights Certificates and in this Agreement.
(b)In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates
shall not have been countersigned, the Rights Agent may countersign such
Rights Certificates either in its prior name or in its changed name; and in
all such cases such Rights Certificates shall have the full force provided
in the Rights Certificates and in this Agreement.
Section 20 Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
(a)The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to
any action taken or omitted by it in good faith and in accordance with such
opinion.
(b)Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person
and the determination of "current market price") be proved or established
by the Company prior to taking or suffering any action hereunder, such fact
or matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and
such certificate shall be full authorization to the Rights Agent for any
action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c)The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d)The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e)The Rights Agent shall not be under any responsibility in res-
pect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its counter
signature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 or Section 13 hereof or responsible for
the manner, method or amount of any such adjustment or the ascertaining of
the existence of facts that would require any such adjustment (except with
respect to the exercise of Rights evidenced by Rights Certificates after
actual notice of any such adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any
shares of Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f)The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered
all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or
performing by the Rights Agent of the provisions of this Agreement.
(g)The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken
or suffered to be taken by it in good faith in accordance with instructions
of any such officer.
(h)The Rights Agent and any stockholder, director, officer or em-
ployee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for
any other legal entity.
(i)The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct; provided, however, reasonable
care was exercised in the selection and continued employment thereof.
(j)No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnification against such risk or liability is
not reasonably assured to it.
(k)If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has
either not been completed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise of transfer without first consulting
with the Company.
Section 21 Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under
this Agreement upon thirty (30) days' notice in writing mailed to the
Company, and to each transfer agent of the Common Stock and Preferred
Stock, by registered or certified mail, and to the holders of the Rights
Certificates by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon thirty (30) days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be,
and to each transfer agent of the Common Stock and Preferred Stock, by
registered or certified mail, and to the holders of the Rights Certificates
by first-class mail. If the Rights Agent shall resign or be removed or
shall otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder
of a Rights Certificate (who shall, with such notice, submit his Rights
Certificate for inspection by the Company), then any registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for
the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation or-
ganized and doing business under the laws of the United States or of the
State of New York (or of any other state of the United States so long as
such corporation is authorized to do business as a banking institution in
the State of New York), in good standing, having a principal office in the
State of New York, which is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority and which either has or is an
affiliate of a corporation which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $100,000,000.
After appointment, the successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor
Rights Agent shall deliver and transfer to the successor Rights Agent any
property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment, the Company shall
file notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Stock and the Preferred Stock, and mail a
notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity
of the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.
Section 22 Issuance of New Rights Certificates. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights
in such form as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class
of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the redemption or expiration
of the Rights, the Company (a) shall, with respect to shares of Common
Stock so issued or sold pursuant to the exercise of stock options or under
any employee plan or arrangement, granted or awarded as of the Distribution
Date, or upon the exercise, conversion or exchange of securities herein
after issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue
Rights Certificates representing the appropriate number of Rights in
connection with such issuance or sale; provided, however, that (i) no such
Rights Certificate shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant
risk of material adverse tax consequences to the Company or the Person to
whom such Rights Certificate would be issued, and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjust
ment shall otherwise have been made in lieu of the issuance thereof.
Section 23 Redemption and Termination.
(a)The Board of Directors of the Company may, at its option, at
any time prior to the earlier of (i) the close of business on the tenth
Business Day following the Stock Acquisition Date or (ii) the Final Expira
tion Date, redeem all but not less than all the then outstanding Rights at
a redemption price of $.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"). Notwithstanding anything contained
in this Agreement to the contrary, the Rights shall not be exercisable
after the occurrence of the Section 11(a)(ii) Event until such time as the
Company's right of redemption hereunder has expired. The Company may, at
its option, pay the Redemption Price in cash, shares of Common Stock (based
on the "current market price," as defined in Section 11(d)(i) hereof, of
the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.
(b)Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have
been filed with the Rights Agent and without any further action and without
any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the action of the
Board of Directors ordering the redemption of the Rights, the Company shall
give notice of such redemption to the Rights Agent and the holders of the
then outstanding Rights by mailing such notice to all such holders at each
holder's last address as it appears upon the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made.
Section 24 Notice of Certain Events.
(a)In case the Company shall propose, at any time after the Dist-
ribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders
of Preferred Stock (other than a regular quarterly cash dividend out of
earnings or retained earnings of the Company), or (ii) to offer to the
holders of Preferred Stock rights or warrants to subscribe for or to
purchase any additional shares of Preferred Stock or shares of stock of any
class or any other securities, rights or options, or (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification
involving only the subdivision of outstanding shares of Preferred Stock),
or (iv) to effect any consolidation or merger into or with any other Person
(other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), or to effect any sale or other transfer (or to
permit one or more of its Subsidiaries to effect any sale or other
transfer), in one transaction or a series of related transactions, of more
than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company
and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the
Company shall give to each holder of a Rights Certificate, to the extent
feasible and in accordance with Section 25 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of
such stock dividend, distribution of rights or warrants, or the date on
which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Preferred Stock, if
any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other
action, at least twenty (20) days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
shares of Preferred Stock whichever shall be the earlier.
(b)In case the Section 11(a)(ii) Event shall occur, (i) the Comp-
any shall as soon as practicable thereafter give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 25
hereof, a notice of the occurrence of such event, which shall specify the
event and the consequences of the event to holders of Rights under Section
11(a)(ii) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or,
if appropriate, other securities.
Section 25 Notices. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Rights Agent) as follows:
R&B Falcon Corporation
1900 West Loop South, Suite 1800
Houston, Texas 77027
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Attention: Corporate Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address
of such holder as shown on the registry books of the Company.
Section 26 Supplements and Amendments. Prior to the Distribution
Date and subject to the penultimate sentence of this Section 26, the
Company and the Rights Agent shall, if the Company so directs, supplement
or amend any provision of this Agreement without the approval of any
holders of certificates representing shares of Common Stock. From and
after the Distribution Date and subject to the penultimate sentence of this
Section 26, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any
holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective
or inconsistent with any other provisions herein, (iii) to shorten or
lengthen any time period hereunder, or (iv) to change or supplement the
provisions hereunder in any manner which the Company may deem necessary or
desirable and which shall not adversely affect the interests of the holders
of Rights Certificates (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person); provided, this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time period relating to when the Rights may be redeemed at
such time as the Rights are not then redeemable, or (B) any other time
period unless such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the holders of Rights.
Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in
compliance with the terms of this Section 26, the Rights Agent shall
execute such supplement or amendment. Notwithstanding anything contained
in this Agreement to the contrary, no supplement or amendment shall be made
which changes the Redemption Price, the Final Expiration Date, the Purchase
Price or the number of one one-hundredths of a share of Preferred Stock for
which a Right is exercisable; provided, however, that at any time prior to
(i) the Stock Acquisition Date or (ii) the date that a tender or exchange
offer by any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any Subsidiary of the Company,
or any Person or entity organized, appointed or established by the Company
for or pursuant to the terms of any such plan) is first published or sent
or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such
Person would be the Beneficial Owner of 15% or more of the shares of Common
Stock then outstanding and if at the time of any amendment or supplement
such tender or exchange offer has not expired or been terminated, the Board
of Directors of the Company may amend this Agreement to increase the
Purchase Price or extend the Final Expiration Date. Prior to the Distri-
bution Date, the interests of the holders of Rights shall be deemed coinci-
dent with the interests of the holders of Common Stock.
Section 27. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 28. Determinations and Actions by the Board of Directors,
etc. For all purposes of this Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding
shares of Common Stock of which any Person is the Beneficial Owner, shall
be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act. The Board of
Directors of the Company (with, where specifically provided for herein, the
concurrence of the Continuing Directors) shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board (with, where specifically provided
for herein, the concurrence of the Continuing Directors) or to the Company,
or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Agreement, and (ii) make all determina
tions deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or
to amend the Agreement). All such actions, calculations, interpretations
and determinations (including, for purposes of clause (y) below, all
omissions with respect to the foregoing) which are done or made by the
Board (with, where specifically provided for herein, the concurrence of the
Continuing Directors) in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject the Board or the Continuing Directors to
any liability to the holders of the Rights.
Section 29. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to
the Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to
the Distribution Date, registered holders of the Common Stock).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired
or invalidated; provided, however, that notwithstanding anything in this
Agreement to the contrary, if any such term, provision, covenant or re-
striction is held by such court or authority to be invalid, void or unen-
forceable and the Board of Directors of the Company determines in its good
faith judgment that severing the invalid language from this Agreement would
adversely affect the purpose or effect of this Agreement, the right of
redemption set forth in Section 23 hereof shall be reinstated and shall not
expire until the close of business on the tenth Business Day following the
date of such determination by the Board of Directors. Without limiting the
foregoing, if any provision requiring a majority of the Board of Directors
of the Company to be Continuing Directors to act is held by any court of
competent jurisdiction or other authority to be invalid, void or
unenforceable, such determination shall then be made by the Board of
Directors of the Company in accordance with applicable law and the
Company's Certificate of Incorporation and By-Laws.
Section 31. Governing Law. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely within such
State.
Section 32. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above written.
Attest: R&B FALCON CORPORATION
By By /s/Steven A. Webster
Name: Name: Steven A. Webster
Title: Title: Chief Executive Officer and
President
Attest: AMERICAN STOCK TRANSFER &
TRUST COMPANY
By By /s/Hebert Lemmer
Name: Name: Herbert Lemmer
Title: Title: Vice President
Exhibit B
[Form of Rights Certificate]
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER NOVEMBER 1, 2007 OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREE
MENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND
ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE
RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY
OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE
OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECI
FIED IN SECTION 7(e) OF SUCH AGREEMENT.]1
Rights Certificate
R&B FALCON CORPORATION
This certifies that , or registered assigns,
is the registered owner of the number of Rights set forth above, each of
which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of December 23, 1997 (the
"Rights Agreement"), between R&B Falcon Corporation, a Delaware corporation
(the "Company"), and American Stock Transfer & Trust Company, a trust
company organized under the State of New York (the "Rights Agent"), to
purchase from the Company at any time prior to 5:00 P.M. (New York City
time) on November 1, 2007 at the office or offices of the Rights Agent
designated for such purpose, or its successors as Rights Agent, one one-hun
dredth of a fully paid, nonassessable share of Series A Junior Participat
ing Preferred Stock (the "Preferred Stock") of the Company, at a purchase
price of $150 per one one-hundredth of a share (the "Purchase Price"), upon
presentation and surrender of this Rights Certificate with the Form of
Election to Purchase and related Certificate duly executed. The Purchase
Price shall be paid, at the election of the holder, in cash or shares of
Common Stock of the Company having an equivalent value. The number of
Rights evidenced by this Rights Certificate (and the number of shares which
may be purchased upon exercise thereof) set forth above, and the Purchase
Price per share set forth above, are the number and Purchase Price as of
December 23, 1997, based on the Preferred Stock as constituted at such
date.
Upon the occurrence of the Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this
Rights Certificate are beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement), (ii) a transferee of any such Acquiring
Person, Associate or Affiliate, or (iii) under certain circumstances
specified in the Rights Agreement, a transferee of a person who, after such
transfer, became an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, such Rights shall become null and void and no holder
hereof shall have any right with respect to such Rights from and after the
occurrence of the Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of shares of Preferred Stock or other securities, which may
be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening
of certain events, including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part
hereof and to which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, which limitations of rights
include the temporary suspension of the exercisability of such Rights under
the specific circumstances set forth in the Rights Agreement. Copies of
the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights
Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent
designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of one one-hun-
dredths of a share of Preferred Stock as the Rights evidenced by the Rights
Certificate or Rights Certificates surrendered shall have entitled such
holder to purchase. If this Rights Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof another
Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option
at a redemption price of $.01 per Right at any time prior to the earlier of
the close of business on (i) the tenth Business Day following the Stock
Acquisition Date (as such time period may be extended pursuant to the
Rights Agreement), and (ii) the Final Expiration Date.
The Company is not required to issue fractional shares of Preferred
Stock upon the exercise of any Right or Rights evidenced hereby (other than
fractions which are integral multiples of one one-hundredth of a share of
Preferred Stock, which may, at the election of the Company, be evidenced by
depositary receipts), but in lieu thereof a cash payment may be made, as
provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any
time be issuable on the exercise hereof, nor shall anything contained in
the Rights Agreement or herein be construed to confer upon the holder
hereof, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or, to receive notice of meetings or other actions
affecting stockholders (except as provided in the Rights Agreement), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of __________, 1997
ATTEST: R&B FALCON CORPORATION
_____________________ By_________________________
Secretary Title:
Countersigned:
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By_________________________
Authorized Signature
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
________________ Attorney, to transfer the within Rights Certificate on the
books of the within-named Company, with full power of substitution.
Date: , ____
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person
(as such terms are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: ___________, ____
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change
whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented by the
Rights Certificate.)
To: R&B FALCON CORPORATION:
The undersigned hereby irrevocably elects to exercise __________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon
the exercise of the Rights) and requests that certificates for such shares
be issued in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by
this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
Dated: _______________, ____
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person
(as such terms are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: ___________, ____
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this
Rights Certificate in every particular, without alteration or enlargement
or any change whatsoever.
_______________________________
EXHIBIT 4.6
FIRST SUPPLEMENTAL INDENTURE (this "First Supplemental Indenture")
dated as of December 23, 1997, among R&B Falcon Corporation, a Delaware
corporation ("Parent"), Reading & Bates Corporation, a Delaware corporation
(the "Company"), and IBJ Schroder Bank & Trust Company, a New York banking
corporation, as trustee (the "Trustee"), under the Indenture (the
"Indenture") dated as of August 29, 1989, between the Company and the
Trustee.
WHEREAS pursuant to an Agreement and Plan of Merger dated as of
July 10, 1997 (the "Merger Agreement"), among Parent, FDC Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Parent
("SubF"), Reading & Bates Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("SubR"), Falcon Drilling Company, Inc.
("FDC") and the Company, SubF merged with and into FDC (the "FDC Merger"),
SubR merged with and into the Company (the "R&B Merger", and, together with
the FDC Merger, the "Mergers") with FDC and the Company continuing as the
surviving corporations in the Mergers, and thereupon becoming wholly owned
subsidiaries of Parent; and
WHEREAS pursuant to the Merger Agreement, each outstanding share
of common stock, par value $0.05 per share, of the Company ("R&B Common
Stock") will be converted into 1.18 shares of common stock, par value $.01
per share, of Parent ("Parent Common Stock"); and
WHEREAS as a result of the conversion of R&B Common Stock into
Parent Common Stock, Parent is required to execute and deliver to the
Trustee a supplemental indenture pursuant to Section 12.05 of the
Indenture;
NOW THEREFORE, Parent hereby covenants and agrees with the
Trustee for the benefit of the present and future holders of the Securities
as follows:
ARTICLE I
SECTION 1.01 Conversion Right. The holder of each Security
outstanding as of the date the Mergers are consummated shall have the
right, during the period such Security shall be convertible as specified in
Section 12.01 of the Indenture, to convert such Security into shares of
Parent Common Stock equal to 1.18 times the number of shares of R&B Common
Stock such holder would have had the right to receive upon conversion
immediately prior to the date of the consummation of the Mergers.
SECTION 1.02 Antidilution Adjustments. The conversion price in
effect at any time shall be subject to adjustment as set forth in Section
12.04 of the Indenture.
ARTICLE II
SECTION 2.01 Amendment to Definition of "Common Stock". The
definition of "Common Stock" set forth in Section 1.01 of the Indenture is
hereby amended by deleting the proviso thereto and replacing it with the
following:
"provided, however, that for the purposes of Sections 12.02,
12.03, 12.04, 12.05, 12.06, 12.07, 12.08, 12.09 and 12.11,
"Common Stock" means only shares of the class designated as
Common Stock of the Parent as of December 23, 1997 or as the same
may be reconstituted from time to time and stock of any other
class into which such shares may hereafter have been changed. As
of December 23, 1997, the Common Stock, par value $.01 per share,
of the Parent constitutes the Common Stock of the Parent for the
purposes of Sections 12.02, 12.03, 12.04, 12.05, 12.06, 12.07,
12.08, 12.09 and 12.11 herein."
SECTION 2.02 Definition of "Parent". The following definition
shall be added to Section 1.01 of the Indenture:
"Parent:
The term "Parent" shall mean R&B FALCON CORPORATION, a
corporation organized under the laws of the State of Delaware."
SECTION 2.03 Amendment to Section 12. Sections 12.04, 12.05,
12.06, 12.07, 12.09, 12.11 and 12.14 of the Indenture are hereby amended
such that each reference therein to "the Company" shall be deemed to read
"the Parent".
ARTICLE III
SECTION 3.01 First Supplemental Indenture. The Trustee accepts
the provisions of this First Supplemental Indenture upon the terms and
conditions set forth in the Indenture as amended by this First Supplemental
Indenture.
SECTION 3.02 Other Terms of Indenture. Except insofar as herein
otherwise expressly provided, all the provisions, terms and conditions of
the Indenture are in all respects ratified and confirmed and shall remain
in full force and effect.
SECTION 3.03 Definitions. Capitalized terms used herein and not
defined herein have the meanings ascribed to such terms in the Indenture
unless the context of this First Supplemental Indenture otherwise requires.
SECTION 3.04 Governing Law. This First Supplemental Indenture
shall be deemed to have been made under the laws of the State of New York
and shall for all purposes be governed by, and construed in accordance
with, the laws of such State.
SECTION 3.05 Counterparts. This First Supplemental Indenture
may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which when taken together shall
constitute but one instrument.
SECTION 3.06 Effective Time. This First Supplemental Indenture
shall become effective at 11:59 p.m. (Eastern Standard Time) on December
31, 1997.
SECTION 3.07 Separability. In case any one or more of the
provisions contained in this First Supplemental Indenture shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provision of this First Supplemental Indenture, the Indenture or the
Securities, but this First Supplemental Indenture, the Indenture and the
Securities shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein or therein.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed by their respective authorized
officers as of the date first written above.
R&B FALCON CORPORATION,
by
________________________
Name: Steven A. Webster
Title: Chief Executive Officer
Attest:
________________________
Name:
READING & BATES CORPORATION,
by
________________________
Name: Paul B. Loyd, Jr.
Title: Chairman of the Board
and Chief Executive Officer
Attest:
________________________
Name:
IBJ SCHRODER BANK & TRUST COMPANY
as Trustee,
by
________________________
Name: Luis Perez
Title: Assistant Vice President
Attest:
________________________
Name:
EXHIBIT 10.53
READING & BATES CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") between Reading & Bates
Corporation, a Delaware corporation ("Company") and Paul B. Loyd, Jr.
("Optionee"),
WITNESSETH:
WHEREAS, the Compensation Committee which administers the Reading
& Bates Corporation 1995 Long-Term Incentive Plan ("Plan") has selected the
Optionee, who is the Chairman, President & CEO of the Company, to receive a
nonqualified stock option under the terms of the Plan as an incentive to
the Optionee to remain in the employ of the Company and contribute to the
performance of the Company, on the terms and subject to the conditions
provided herein;
NOW THEREFORE, for and in consideration of these premises, it is
hereby agreed as follows:
1. The Option is issued in accordance with and subject to all
of the terms, conditions and provisions of the Plan and administrative
interpretations thereunder, if any, which have been adopted by the
Committee and are in effect on the date hereof. Capitalized terms used but
not defined herein shall have the meanings assigned to such terms in the
Plan.
2. On the terms and subject to the conditions contained herein,
the Committee hereby grants to the Optionee an option for a term of ten
years ending on April 24, 2007 ("Option Period") to purchase from the
Company 310,000 shares ("Option Shares") of the Company's Common Stock, at
a price equal to $23.75 per share.
3. This Option shall not be exercisable, except upon the death
or disability of the Optionee, until after 6 months immediately following
the date this Option is granted, and thereafter shall be exercisable for
Common Stock as follows:
(a) After one year following the effective date of grant,
this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 33-1/3% of the aggregate number of shares
subject to this Option; and
(b) After two years following the effective date of grant,
this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 66-2/3% of the aggregate number of shares
subject to this Option; and
(c) After three years following the effective date of
grant, this Option shall be exercisable for any number of shares of Common
Stock up to and including, but not in excess of, 100% of the aggregate
number of shares subject to this Option;
provided the number of shares as to which this Option becomes exercisable
shall, in each case, be reduced by the number of shares theretofore
purchased pursuant to the terms hereof.
4. The option herein granted may be exercised by the Optionee
by giving written notice to the Secretary of the Company setting forth the
number of Option Shares with respect to which the option is to be
exercised, accompanied by payment for the shares to be purchased and any
appropriate withholding taxes, and specifying the address to which the
certificate for such shares is to be mailed. Payment shall be by means of
cash, certified check, bank draft or postal money order payable to the
order of the Company. As promptly as practicable after receipt of such
written notification and payment, the Company shall deliver to the Optionee
certificates for the number of Option Shares with respect to which such
option has been so exercised.
5. Subject to approval of the Committee, which shall not be
unreasonably withheld, the Optionee may pay for any Option Shares with
respect to which the option herein granted is exercised by tendering to the
Company other shares of Common Stock at the time of the exercise or partial
exercise hereof. The certificates representing such other shares of Common
Stock must be accompanied by a stock power duly executed with signature
guaranteed. The value of the Common Stock so tendered shall be its Fair
Market Value.
6. If the Optionee's employment with the Company is terminated
during the Option Period by the Company for Cause, as defined in that
certain Employment Agreement between the Company and Optionee dated as of
January 1, 1992, as amended (the "Employment Agreement"), or by the
Executive for any reason other than (i) death or disability or (ii) "Good
Reason" or during a "Window Period" (in each case as "Good Reason" and
"Window Period" are defined in the Employment Agreement) whether during or
after the Employment Period (as defined in the Employment Agreement), then
(a) the options herein granted to him that are not exercisable on the date
of his termination of employment shall thereupon terminate, and (b) any
options herein granted to him that are exercisable on the date of his
termination of employment may be exercised by the Optionee during a three-
month period beginning on such date, unless the Option Period shall expire
prior to such date, and shall thereafter terminate.
7. If the Optionee's employment with the Company is terminated
(whether during or after the Employment Period, as defined above) (i) by
the Optionee for Good Reason or during a Window Period; (ii) for any reason
by the Company other than for "Cause" (as defined in the Employment
Agreement) or (iii) by reason of death or disability, then (a) the options
granted to him that are not exercisable on the date of such termination of
employment shall be thereupon be fully exercisable, and (b) all options
then held by the Optionee, whether theretofore exercisable or exercisable
by reason of the termination of employment may be exercised by the Optionee
during the full remaining term of this option; provided, however, that all
options granted hereunder shall expire and not be exercisable on the first
anniversary of the Optionee's death.
8. The option herein granted shall not be transferable by the
Optionee otherwise than as permitted by Section 13 of the Plan. During the
lifetime of the Optionee, such option shall be exercisable only by him. No
transfer of the Option herein granted shall be effective to bind the
Company unless the Company shall have been furnished with written notice
thereof and a copy of such evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions hereof.
9. The Optionee shall have no rights as a stockholder with
respect to any Option Shares until the date of issuance of a certificate
for Option Shares purchased pursuant to this Agreement. Until such time,
the Optionee shall not be entitled to dividends or to vote at meetings of
the stockholders of the Company.
10. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is
required in connection with the option herein granted. The Optionee may
pay all or any portion of the taxes required to be withheld by the Company
or paid by the Optionee in connection with the exercise of all or any
portion of the option herein granted by electing to have the Company
withhold shares of Common Stock, or by delivering previously owned shares
of Common Stock, having a Fair Market Value equal to the amount required to
be withheld or paid. The Optionee must make the foregoing election on or
before the date that the amount of tax to be withheld is determined ("Tax
Date"). Any such election is irrevocable and subject to disapproval by the
Committee. If the Optionee is subject to the short-swing profits recapture
provisions of Section 16(b) of the Exchange Act, any such election shall be
subject to the following additional restrictions:
(a) Such election may not be made within six months of the
grant of this option, provided that this limitation shall not apply in the
event of death or disability.
(b) Such election must be made either in an Election Window
(as hereinafter defined) or at such other time as may be consistent with
Section 16(b)(3) of the Exchange Act. Where the Tax Date in respect of the
exercise of all or any portion of this Option is deferred until after such
exercise and the Optionee elects stock withholding, the full amount of
shares of Common Stock will be issued or transferred to the Optionee upon
exercise of this Option, but the Optionee shall be unconditionally
obligated to tender back to the Company on the Tax Date the number of
shares necessary to discharge with respect to such Option exercise the
greater of (i) the Company's withholding obligation and (ii) all or any
portion of the holder's federal and state tax obligation attributable to
the Option exercise. An Election Window is any period commencing on the
third business day following the Company's release of a quarterly or annual
summary statement of sales and earnings and ending on the twelfth business
day following such release.
11. Upon the acquisition of any shares pursuant to the exercise
of the option herein granted, the Optionee will enter into such written
representations, warranties and agreements as the Company may reasonably
request in order to comply with applicable securities laws or with this
Agreement.
12. The certificates representing the Option Shares purchased by
exercise of an option will be stamped or otherwise imprinted with a legend
in such form as the Company or its counsel may require with respect to any
applicable restrictions on sale or transfer, and the stock transfer records
of the Company will reflect stop-transfer instructions, as appropriate,
with respect to such shares.
13. Unless otherwise provided herein, every notice hereunder
shall be in writing and shall be given by registered or certified mail.
All notices of the exercise by the Optionee of any option hereunder shall
be directed to Reading & Bates Corporation, Attention: Secretary, at the
Company's current address. Any notice given by the Company to the Optionee
directed to him at his address on file with the Company shall be effective
to bind any other person who shall acquire rights hereunder. The Company
shall be under no obligation whatsoever to advise the Optionee of the
existence, maturity or termination of any of the Optionee's rights
hereunder and the Optionee shall be deemed to have familiarized himself
with all matters contained herein and in the Plan which may affect any of
the Optionee's rights or privileges hereunder.
14. Whenever the term "Optionee" is used herein under
circumstances applicable to any other person or persons to whom this award,
in accordance with the provisions of Paragraph 8, may be transferred, the
word "Optionee" shall be deemed to include such person or persons.
References to the masculine gender herein also include the feminine gender
for all purposes.
15. Notwithstanding any of the other provisions hereof, the
Optionee agrees that he will not exercise the option herein granted, and
that the Company will not be obligated to issue any shares pursuant to this
Agreement, if the exercise of the option or the issuance of such shares of
Common Stock would constitute a violation by the Optionee or by the Company
of any provision of any law or regulation of any governmental authority or
any national securities exchange.
16. The option to purchase Option Shares evidenced by this
Agreement shall be fully and immediately exercisable upon a Change of
Control of the Company as defined in the Employment Agreement.
17. This Agreement is subject to the Plan, a copy of which has
been provided the Optionee and for which the Optionee acknowledges receipt.
The terms and provisions of the Plan (including any subsequent amendments
thereto) are incorporated herein by reference. In the event of a conflict
between any term or provision contained herein and a term or provision of
the Plan, the applicable terms and provisions of the Plan will govern and
prevail. All definitions of words and terms contained in the Plan shall be
applicable to this Agreement.
18. In the event of a corporate merger or other business
combination in which the Company is not the surviving entity, the economic
equivalent number of the voting shares of common stock of, or participating
interests in, the surviving entity, based on the terms of such merger or
other business combination, shall be substituted for the Option Shares
hereunder, and the price per share set out in Section 2 hereof shall be
adjusted to reflect substantially the same economic equivalent value of the
Option Shares to the Optionee immediately prior to any such merger or other
business combination.
IN WITNESS WHEREOF, this Agreement is executed this day of
, 1997, effective as of the 24th day of April, 1997.
READING & BATES CORPORATION
By: _______________________
Tim W. Nagle
OPTIONEE
___________________________
Paul B. Loyd, Jr.
EXHIBIT 10.54
READING & BATES CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") between Reading & Bates
Corporation, a Delaware corporation ("Company") and Tim W. Nagle
("Optionee"),
WITNESSETH:
WHEREAS, the Compensation Committee which administers the Reading
& Bates Corporation 1995 Long-Term Incentive Plan ("Plan") has selected the
Optionee, who is the Executive V.P., Finance & Administration of the
Company, to receive a nonqualified stock option under the terms of the Plan
as an incentive to the Optionee to remain in the employ of the Company and
contribute to the performance of the Company, on the terms and subject to
the conditions provided herein;
NOW THEREFORE, for and in consideration of these premises, it is
hereby agreed as follows:
1. The Option is issued in accordance with and subject to all
of the terms, conditions and provisions of the Plan and administrative
interpretations thereunder, if any, which have been adopted by the
Committee and are in effect on the date hereof. Capitalized terms used but
not defined herein shall have the meanings assigned to such terms in the
Plan.
2. On the terms and subject to the conditions contained herein,
the Committee hereby grants to the Optionee an option for a term of ten
years ending on April 24, 2007 ("Option Period") to purchase from the
Company 120,000 shares ("Option Shares") of the Company's Common Stock, at
a price equal to $23.75 per share.
3. This Option shall not be exercisable, except upon the death
or disability of the Optionee, until after 6 months immediately following
the date this Option is granted, and thereafter shall be exercisable for
Common Stock as follows:
(a) After one year following the effective date of grant,
this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 33-1/3% of the aggregate number of shares
subject to this Option; and
(b) After two years following the effective date of grant,
this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 66-2/3% of the aggregate number of shares
subject to this Option; and
(c) After three years following the effective date of
grant, this Option shall be exercisable for any number of shares of Common
Stock up to and including, but not in excess of, 100% of the aggregate
number of shares subject to this Option;
provided the number of shares as to which this Option becomes exercisable
shall, in each case, be reduced by the number of shares theretofore
purchased pursuant to the terms hereof.
4. The option herein granted may be exercised by the Optionee
by giving written notice to the Secretary of the Company setting forth the
number of Option Shares with respect to which the option is to be
exercised, accompanied by payment for the shares to be purchased and any
appropriate withholding taxes, and specifying the address to which the
certificate for such shares is to be mailed. Payment shall be by means of
cash, certified check, bank draft or postal money order payable to the
order of the Company. As promptly as practicable after receipt of such
written notification and payment, the Company shall deliver to the Optionee
certificates for the number of Option Shares with respect to which such
option has been so exercised.
5. Subject to approval of the Committee, which shall not be
unreasonably withheld, the Optionee may pay for any Option Shares with
respect to which the option herein granted is exercised by tendering to the
Company other shares of Common Stock at the time of the exercise or partial
exercise hereof. The certificates representing such other shares of Common
Stock must be accompanied by a stock power duly executed with signature
guaranteed. The value of the Common Stock so tendered shall be its Fair
Market Value.
6. If the Optionee's employment with the Company is terminated
during the Option Period by the Company for Cause, as defined in that
certain Employment Agreement between the Company and Optionee dated as of
November 1, 1991, as amended (the "Employment Agreement"), or by the
Executive for any reason other than (i) death or disability or (ii) "Good
Reason" or during a "Window Period" (in each case as "Good Reason" and
"Window Period" are defined in the Employment Agreement) whether during or
after the Employment Period (as defined in the Employment Agreement), then
(a) the options herein granted to him that are not exercisable on the date
of his termination of employment shall thereupon terminate, and (b) any
options herein granted to him that are exercisable on the date of his
termination of employment may be exercised by the Optionee during a three-
month period beginning on such date, unless the Option Period shall expire
prior to such date, and shall thereafter terminate.
7. If the Optionee's employment with the Company is terminated
(whether during or after the Employment Period, as defined above) (i) by
the Optionee for Good Reason or during a Window Period; (ii) for any reason
by the Company other than for "Cause" (as defined in the Employment
Agreement) or (iii) by reason of death or disability, then (a) the options
granted to him that are not exercisable on the date of such termination of
employment shall be thereupon be fully exercisable, and (b) all options
then held by the Optionee, whether theretofore exercisable or exercisable
by reason of the termination of employment may be exercised by the Optionee
during the full remaining term of this option; provided, however, that all
options granted hereunder shall expire and not be exercisable on the first
anniversary of the Optionee's death.
8. The option herein granted shall not be transferable by the
Optionee otherwise than as permitted by Section 13 of the Plan. During the
lifetime of the Optionee, such option shall be exercisable only by him. No
transfer of the Option herein granted shall be effective to bind the
Company unless the Company shall have been furnished with written notice
thereof and a copy of such evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions hereof.
9. The Optionee shall have no rights as a stockholder with
respect to any Option Shares until the date of issuance of a certificate
for Option Shares purchased pursuant to this Agreement. Until such time,
the Optionee shall not be entitled to dividends or to vote at meetings of
the stockholders of the Company.
10. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is
required in connection with the option herein granted. The Optionee may
pay all or any portion of the taxes required to be withheld by the Company
or paid by the Optionee in connection with the exercise of all or any
portion of the option herein granted by electing to have the Company
withhold shares of Common Stock, or by delivering previously owned shares
of Common Stock, having a Fair Market Value equal to the amount required to
be withheld or paid. The Optionee must make the foregoing election on or
before the date that the amount of tax to be withheld is determined ("Tax
Date"). Any such election is irrevocable and subject to disapproval by the
Committee. If the Optionee is subject to the short-swing profits recapture
provisions of Section 16(b) of the Exchange Act, any such election shall be
subject to the following additional restrictions:
(a) Such election may not be made within six months of the
grant of this option, provided that this limitation shall not apply in the
event of death or disability.
(b) Such election must be made either in an Election Window
(as hereinafter defined) or at such other time as may be consistent with
Section 16(b)(3) of the Exchange Act. Where the Tax Date in respect of the
exercise of all or any portion of this Option is deferred until after such
exercise and the Optionee elects stock withholding, the full amount of
shares of Common Stock will be issued or transferred to the Optionee upon
exercise of this Option, but the Optionee shall be unconditionally
obligated to tender back to the Company on the Tax Date the number of
shares necessary to discharge with respect to such Option exercise the
greater of (i) the Company's withholding obligation and (ii) all or any
portion of the holder's federal and state tax obligation attributable to
the Option exercise. An Election Window is any period commencing on the
third business day following the Company's release of a quarterly or annual
summary statement of sales and earnings and ending on the twelfth business
day following such release.
11. Upon the acquisition of any shares pursuant to the exercise
of the option herein granted, the Optionee will enter into such written
representations, warranties and agreements as the Company may reasonably
request in order to comply with applicable securities laws or with this
Agreement.
12. The certificates representing the Option Shares purchased by
exercise of an option will be stamped or otherwise imprinted with a legend
in such form as the Company or its counsel may require with respect to any
applicable restrictions on sale or transfer, and the stock transfer records
of the Company will reflect stop-transfer instructions, as appropriate,
with respect to such shares.
13. Unless otherwise provided herein, every notice hereunder
shall be in writing and shall be given by registered or certified mail.
All notices of the exercise by the Optionee of any option hereunder shall
be directed to Reading & Bates Corporation, Attention: Secretary, at the
Company's current address. Any notice given by the Company to the Optionee
directed to him at his address on file with the Company shall be effective
to bind any other person who shall acquire rights hereunder. The Company
shall be under no obligation whatsoever to advise the Optionee of the
existence, maturity or termination of any of the Optionee's rights
hereunder and the Optionee shall be deemed to have familiarized himself
with all matters contained herein and in the Plan which may affect any of
the Optionee's rights or privileges hereunder.
14. Whenever the term "Optionee" is used herein under
circumstances applicable to any other person or persons to whom this award,
in accordance with the provisions of Paragraph 8, may be transferred, the
word "Optionee" shall be deemed to include such person or persons.
References to the masculine gender herein also include the feminine gender
for all purposes.
15. Notwithstanding any of the other provisions hereof, the
Optionee agrees that he will not exercise the option herein granted, and
that the Company will not be obligated to issue any shares pursuant to this
Agreement, if the exercise of the option or the issuance of such shares of
Common Stock would constitute a violation by the Optionee or by the Company
of any provision of any law or regulation of any governmental authority or
any national securities exchange.
16. The option to purchase Option Shares evidenced by this
Agreement shall be fully and immediately exercisable upon a Change of
Control of the Company as defined in the Employment Agreement.
17. This Agreement is subject to the Plan, a copy of which has
been provided the Optionee and for which the Optionee acknowledges receipt.
The terms and provisions of the Plan (including any subsequent amendments
thereto) are incorporated herein by reference. In the event of a conflict
between any term or provision contained herein and a term or provision of
the Plan, the applicable terms and provisions of the Plan will govern and
prevail. All definitions of words and terms contained in the Plan shall be
applicable to this Agreement.
18. In the event of a corporate merger or other business
combination in which the Company is not the surviving entity, the economic
equivalent number of the voting shares of common stock of, or participating
interests in, the surviving entity, based on the terms of such merger or
other business combination, shall be substituted for the Option Shares
hereunder, and the price per share set out in Section 2 hereof shall be
adjusted to reflect substantially the same economic equivalent value of the
Option Shares to the Optionee immediately prior to any such merger or other
business combination.
IN WITNESS WHEREOF, this Agreement is executed this day of
, 1997, effective as of the 24th day of April, 1997.
READING & BATES CORPORATION
By: _______________________
Paul B. Loyd, Jr.
OPTIONEE
___________________________
Tim W. Nagle
EXHIBIT 10.55
READING & BATES CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") between Reading & Bates
Corporation, a Delaware corporation ("Company") and Charles R. Ofner
("Optionee"),
WITNESSETH:
WHEREAS, the Compensation Committee which administers the Reading
& Bates Corporation 1995 Long-Term Incentive Plan ("Plan") has selected the
Optionee, who is the V.P., Business Development of the Company, to receive
a nonqualified stock option under the terms of the Plan as an incentive to
the Optionee to remain in the employ of the Company and contribute to the
performance of the Company, on the terms and subject to the conditions
provided herein;
NOW THEREFORE, for and in consideration of these premises, it is
hereby agreed as follows:
1. The Option is issued in accordance with and subject to all
of the terms, conditions and provisions of the Plan and administrative
interpretations thereunder, if any, which have been adopted by the
Committee and are in effect on the date hereof. Capitalized terms used but
not defined herein shall have the meanings assigned to such terms in the
Plan.
2. On the terms and subject to the conditions contained herein,
the Committee hereby grants to the Optionee an option for a term of ten
years ending on April 24, 2007 ("Option Period") to purchase from the
Company 100,000 shares ("Option Shares") of the Company's Common Stock, at
a price equal to $23.75 per share.
3. This Option shall not be exercisable, except upon the death
or disability of the Optionee, until after 6 months immediately following
the date this Option is granted, and thereafter shall be exercisable for
Common Stock as follows:
(a) After one year following the effective date of grant,
this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 33-1/3% of the aggregate number of shares
subject to this Option; and
(b) After two years following the effective date of grant,
this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 66-2/3% of the aggregate number of shares
subject to this Option; and
(c) After three years following the effective date of
grant, this Option shall be exercisable for any number of shares of Common
Stock up to and including, but not in excess of, 100% of the aggregate
number of shares subject to this Option;
provided the number of shares as to which this Option becomes exercisable
shall, in each case, be reduced by the number of shares theretofore
purchased pursuant to the terms hereof.
4. The option herein granted may be exercised by the Optionee
by giving written notice to the Secretary of the Company setting forth the
number of Option Shares with respect to which the option is to be
exercised, accompanied by payment for the shares to be purchased and any
appropriate withholding taxes, and specifying the address to which the
certificate for such shares is to be mailed. Payment shall be by means of
cash, certified check, bank draft or postal money order payable to the
order of the Company. As promptly as practicable after receipt of such
written notification and payment, the Company shall deliver to the Optionee
certificates for the number of Option Shares with respect to which such
option has been so exercised.
5. Subject to approval of the Committee, which shall not be
unreasonably withheld, the Optionee may pay for any Option Shares with
respect to which the option herein granted is exercised by tendering to the
Company other shares of Common Stock at the time of the exercise or partial
exercise hereof. The certificates representing such other shares of Common
Stock must be accompanied by a stock power duly executed with signature
guaranteed. The value of the Common Stock so tendered shall be its Fair
Market Value.
6. If the Optionee's employment with the Company is terminated
during the Option Period by the Company for Cause, as defined in that
certain Employment Agreement between the Company and Optionee dated as of
November 1, 1991, as amended (the "Employment Agreement"), or by the
Executive for any reason other than (i) death or disability or (ii) "Good
Reason" or during a "Window Period" (in each case as "Good Reason" and
"Window Period" are defined in the Employment Agreement) whether during or
after the Employment Period (as defined in the Employment Agreement), then
(a) the options herein granted to him that are not exercisable on the date
of his termination of employment shall thereupon terminate, and (b) any
options herein granted to him that are exercisable on the date of his
termination of employment may be exercised by the Optionee during a three-
month period beginning on such date, unless the Option Period shall expire
prior to such date, and shall thereafter terminate.
7. If the Optionee's employment with the Company is terminated
(whether during or after the Employment Period, as defined above) (i) by
the Optionee for Good Reason or during a Window Period; (ii) for any reason
by the Company other than for "Cause" (as defined in the Employment
Agreement) or (iii) by reason of death or disability, then (a) the options
granted to him that are not exercisable on the date of such termination of
employment shall be thereupon be fully exercisable, and (b) all options
then held by the Optionee, whether theretofore exercisable or exercisable
by reason of the termination of employment may be exercised by the Optionee
during the full remaining term of this option; provided, however, that all
options granted hereunder shall expire and not be exercisable on the first
anniversary of the Optionee's death.
8. The option herein granted shall not be transferable by the
Optionee otherwise than as permitted by Section 13 of the Plan. During the
lifetime of the Optionee, such option shall be exercisable only by him. No
transfer of the Option herein granted shall be effective to bind the
Company unless the Company shall have been furnished with written notice
thereof and a copy of such evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions hereof.
9. The Optionee shall have no rights as a stockholder with
respect to any Option Shares until the date of issuance of a certificate
for Option Shares purchased pursuant to this Agreement. Until such time,
the Optionee shall not be entitled to dividends or to vote at meetings of
the stockholders of the Company.
10. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is
required in connection with the option herein granted. The Optionee may
pay all or any portion of the taxes required to be withheld by the Company
or paid by the Optionee in connection with the exercise of all or any
portion of the option herein granted by electing to have the Company
withhold shares of Common Stock, or by delivering previously owned shares
of Common Stock, having a Fair Market Value equal to the amount required to
be withheld or paid. The Optionee must make the foregoing election on or
before the date that the amount of tax to be withheld is determined ("Tax
Date"). Any such election is irrevocable and subject to disapproval by the
Committee. If the Optionee is subject to the short-swing profits recapture
provisions of Section 16(b) of the Exchange Act, any such election shall be
subject to the following additional restrictions:
(a) Such election may not be made within six months of the
grant of this option, provided that this limitation shall not apply in the
event of death or disability.
(b) Such election must be made either in an Election Window
(as hereinafter defined) or at such other time as may be consistent with
Section 16(b)(3) of the Exchange Act. Where the Tax Date in respect of the
exercise of all or any portion of this Option is deferred until after such
exercise and the Optionee elects stock withholding, the full amount of
shares of Common Stock will be issued or transferred to the Optionee upon
exercise of this Option, but the Optionee shall be unconditionally
obligated to tender back to the Company on the Tax Date the number of
shares necessary to discharge with respect to such Option exercise the
greater of (i) the Company's withholding obligation and (ii) all or any
portion of the holder's federal and state tax obligation attributable to
the Option exercise. An Election Window is any period commencing on the
third business day following the Company's release of a quarterly or annual
summary statement of sales and earnings and ending on the twelfth business
day following such release.
11. Upon the acquisition of any shares pursuant to the exercise
of the option herein granted, the Optionee will enter into such written
representations, warranties and agreements as the Company may reasonably
request in order to comply with applicable securities laws or with this
Agreement.
12. The certificates representing the Option Shares purchased by
exercise of an option will be stamped or otherwise imprinted with a legend
in such form as the Company or its counsel may require with respect to any
applicable restrictions on sale or transfer, and the stock transfer records
of the Company will reflect stop-transfer instructions, as appropriate,
with respect to such shares.
13. Unless otherwise provided herein, every notice hereunder
shall be in writing and shall be given by registered or certified mail.
All notices of the exercise by the Optionee of any option hereunder shall
be directed to Reading & Bates Corporation, Attention: Secretary, at the
Company's current address. Any notice given by the Company to the Optionee
directed to him at his address on file with the Company shall be effective
to bind any other person who shall acquire rights hereunder. The Company
shall be under no obligation whatsoever to advise the Optionee of the
existence, maturity or termination of any of the Optionee's rights
hereunder and the Optionee shall be deemed to have familiarized himself
with all matters contained herein and in the Plan which may affect any of
the Optionee's rights or privileges hereunder.
14. Whenever the term "Optionee" is used herein under
circumstances applicable to any other person or persons to whom this award,
in accordance with the provisions of Paragraph 8, may be transferred, the
word "Optionee" shall be deemed to include such person or persons.
References to the masculine gender herein also include the feminine gender
for all purposes.
15. Notwithstanding any of the other provisions hereof, the
Optionee agrees that he will not exercise the option herein granted, and
that the Company will not be obligated to issue any shares pursuant to this
Agreement, if the exercise of the option or the issuance of such shares of
Common Stock would constitute a violation by the Optionee or by the Company
of any provision of any law or regulation of any governmental authority or
any national securities exchange.
16. The option to purchase Option Shares evidenced by this
Agreement shall be fully and immediately exercisable upon a Change of
Control of the Company as defined in the Employment Agreement.
17. This Agreement is subject to the Plan, a copy of which has
been provided the Optionee and for which the Optionee acknowledges receipt.
The terms and provisions of the Plan (including any subsequent amendments
thereto) are incorporated herein by reference. In the event of a conflict
between any term or provision contained herein and a term or provision of
the Plan, the applicable terms and provisions of the Plan will govern and
prevail. All definitions of words and terms contained in the Plan shall be
applicable to this Agreement.
18. In the event of a corporate merger or other business
combination in which the Company is not the surviving entity, the economic
equivalent number of the voting shares of common stock of, or participating
interests in, the surviving entity, based on the terms of such merger or
other business combination, shall be substituted for the Option Shares
hereunder, and the price per share set out in Section 2 hereof shall be
adjusted to reflect substantially the same economic equivalent value of the
Option Shares to the Optionee immediately prior to any such merger or other
business combination.
IN WITNESS WHEREOF, this Agreement is executed this day of
, 1997, effective as of the 24th day of April, 1997.
READING & BATES CORPORATION
By: -----------------------
Paul B. Loyd, Jr.
OPTIONEE
___________________________
Charles R. Ofner
EXHIBIT 10.56
READING & BATES CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") between Reading & Bates
Corporation, a Delaware corporation ("Company") and Don L. McIntire
("Optionee"),
WITNESSETH:
WHEREAS, the Compensation Committee which administers the Reading
& Bates Corporation 1995 Long-Term Incentive Plan ("Plan") has selected the
Optionee, who is the V.P., Human Resources of the Company, to receive a
nonqualified stock option under the terms of the Plan as an incentive to
the Optionee to remain in the employ of the Company and contribute to the
performance of the Company, on the terms and subject to the conditions
provided herein;
NOW THEREFORE, for and in consideration of these premises, it is
hereby agreed as follows:
1. The Option is issued in accordance with and subject to all
of the terms, conditions and provisions of the Plan and administrative
interpretations thereunder, if any, which have been adopted by the
Committee and are in effect on the date hereof. Capitalized terms used but
not defined herein shall have the meanings assigned to such terms in the
Plan.
2. On the terms and subject to the conditions contained herein,
the Committee hereby grants to the Optionee an option for a term of ten
years ending on April 24, 2007 ("Option Period") to purchase from the
Company 40,000 shares ("Option Shares") of the Company's Common Stock, at a
price equal to $23.75 per share.
3. This Option shall not be exercisable, except upon the death
or disability of the Optionee, until after 6 months immediately following
the date this Option is granted, and thereafter shall be exercisable for
Common Stock as follows:
(a) After one year following the effective date of grant,
this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 33-1/3% of the aggregate number of shares
subject to this Option; and
(b) After two years following the effective date of grant,
this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 66-2/3% of the aggregate number of shares
subject to this Option; and
(c) After three years following the effective date of
grant, this Option shall be exercisable for any number of shares of Common
Stock up to and including, but not in excess of, 100% of the aggregate
number of shares subject to this Option;
provided the number of shares as to which this Option becomes exercisable
shall, in each case, be reduced by the number of shares theretofore
purchased pursuant to the terms hereof.
4. The option herein granted may be exercised by the Optionee
by giving written notice to the Secretary of the Company setting forth the
number of Option Shares with respect to which the option is to be
exercised, accompanied by payment for the shares to be purchased and any
appropriate withholding taxes, and specifying the address to which the
certificate for such shares is to be mailed. Payment shall be by means of
cash, certified check, bank draft or postal money order payable to the
order of the Company. As promptly as practicable after receipt of such
written notification and payment, the Company shall deliver to the Optionee
certificates for the number of Option Shares with respect to which such
option has been so exercised.
5. Subject to approval of the Committee, which shall not be
unreasonably withheld, the Optionee may pay for any Option Shares with
respect to which the option herein granted is exercised by tendering to the
Company other shares of Common Stock at the time of the exercise or partial
exercise hereof. The certificates representing such other shares of Common
Stock must be accompanied by a stock power duly executed with signature
guaranteed. The value of the Common Stock so tendered shall be its Fair
Market Value.
6. If the Optionee's employment with the Company is terminated
during the Option Period by the Company for Cause, as defined in that
certain Employment Agreement between the Company and Optionee dated as of
November 1, 1991, as amended (the "Employment Agreement"), or by the
Executive for any reason other than (i) death or disability or (ii) "Good
Reason" or during a "Window Period" (in each case as "Good Reason" and
"Window Period" are defined in the Employment Agreement) whether during or
after the Employment Period (as defined in the Employment Agreement), then
(a) the options herein granted to him that are not exercisable on the date
of his termination of employment shall thereupon terminate, and (b) any
options herein granted to him that are exercisable on the date of his
termination of employment may be exercised by the Optionee during a three-
month period beginning on such date, unless the Option Period shall expire
prior to such date, and shall thereafter terminate.
7. If the Optionee's employment with the Company is terminated
(whether during or after the Employment Period, as defined above) (i) by
the Optionee for Good Reason or during a Window Period; (ii) for any reason
by the Company other than for "Cause" (as defined in the Employment
Agreement) or (iii) by reason of death or disability, then (a) the options
granted to him that are not exercisable on the date of such termination of
employment shall be thereupon be fully exercisable, and (b) all options
then held by the Optionee, whether theretofore exercisable or exercisable
by reason of the termination of employment may be exercised by the Optionee
during the full remaining term of this option; provided, however, that all
options granted hereunder shall expire and not be exercisable on the first
anniversary of the Optionee's death.
8. The option herein granted shall not be transferable by the
Optionee otherwise than as permitted by Section 13 of the Plan. During the
lifetime of the Optionee, such option shall be exercisable only by him. No
transfer of the Option herein granted shall be effective to bind the
Company unless the Company shall have been furnished with written notice
thereof and a copy of such evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions hereof.
9. The Optionee shall have no rights as a stockholder with
respect to any Option Shares until the date of issuance of a certificate
for Option Shares purchased pursuant to this Agreement. Until such time,
the Optionee shall not be entitled to dividends or to vote at meetings of
the stockholders of the Company.
10. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is
required in connection with the option herein granted. The Optionee may
pay all or any portion of the taxes required to be withheld by the Company
or paid by the Optionee in connection with the exercise of all or any
portion of the option herein granted by electing to have the Company
withhold shares of Common Stock, or by delivering previously owned shares
of Common Stock, having a Fair Market Value equal to the amount required to
be withheld or paid. The Optionee must make the foregoing election on or
before the date that the amount of tax to be withheld is determined ("Tax
Date"). Any such election is irrevocable and subject to disapproval by the
Committee. If the Optionee is subject to the short-swing profits recapture
provisions of Section 16(b) of the Exchange Act, any such election shall be
subject to the following additional restrictions:
(a) Such election may not be made within six months of the
grant of this option, provided that this limitation shall not apply in the
event of death or disability.
(b) Such election must be made either in an Election Window
(as hereinafter defined) or at such other time as may be consistent with
Section 16(b)(3) of the Exchange Act. Where the Tax Date in respect of the
exercise of all or any portion of this Option is deferred until after such
exercise and the Optionee elects stock withholding, the full amount of
shares of Common Stock will be issued or transferred to the Optionee upon
exercise of this Option, but the Optionee shall be unconditionally
obligated to tender back to the Company on the Tax Date the number of
shares necessary to discharge with respect to such Option exercise the
greater of (i) the Company's withholding obligation and (ii) all or any
portion of the holder's federal and state tax obligation attributable to
the Option exercise. An Election Window is any period commencing on the
third business day following the Company's release of a quarterly or annual
summary statement of sales and earnings and ending on the twelfth business
day following such release.
11. Upon the acquisition of any shares pursuant to the exercise
of the option herein granted, the Optionee will enter into such written
representations, warranties and agreements as the Company may reasonably
request in order to comply with applicable securities laws or with this
Agreement.
12. The certificates representing the Option Shares purchased by
exercise of an option will be stamped or otherwise imprinted with a legend
in such form as the Company or its counsel may require with respect to any
applicable restrictions on sale or transfer, and the stock transfer records
of the Company will reflect stop-transfer instructions, as appropriate,
with respect to such shares.
13. Unless otherwise provided herein, every notice hereunder
shall be in writing and shall be given by registered or certified mail.
All notices of the exercise by the Optionee of any option hereunder shall
be directed to Reading & Bates Corporation, Attention: Secretary, at the
Company's current address. Any notice given by the Company to the Optionee
directed to him at his address on file with the Company shall be effective
to bind any other person who shall acquire rights hereunder. The Company
shall be under no obligation whatsoever to advise the Optionee of the
existence, maturity or termination of any of the Optionee's rights
hereunder and the Optionee shall be deemed to have familiarized himself
with all matters contained herein and in the Plan which may affect any of
the Optionee's rights or privileges hereunder.
14. Whenever the term "Optionee" is used herein under
circumstances applicable to any other person or persons to whom this award,
in accordance with the provisions of Paragraph 8, may be transferred, the
word "Optionee" shall be deemed to include such person or persons.
References to the masculine gender herein also include the feminine gender
for all purposes.
15. Notwithstanding any of the other provisions hereof, the
Optionee agrees that he will not exercise the option herein granted, and
that the Company will not be obligated to issue any shares pursuant to this
Agreement, if the exercise of the option or the issuance of such shares of
Common Stock would constitute a violation by the Optionee or by the Company
of any provision of any law or regulation of any governmental authority or
any national securities exchange.
16. The option to purchase Option Shares evidenced by this
Agreement shall be fully and immediately exercisable upon a Change of
Control of the Company as defined in the Employment Agreement.
17. This Agreement is subject to the Plan, a copy of which has
been provided the Optionee and for which the Optionee acknowledges receipt.
The terms and provisions of the Plan (including any subsequent amendments
thereto) are incorporated herein by reference. In the event of a conflict
between any term or provision contained herein and a term or provision of
the Plan, the applicable terms and provisions of the Plan will govern and
prevail. All definitions of words and terms contained in the Plan shall be
applicable to this Agreement.
18. In the event of a corporate merger or other business
combination in which the Company is not the surviving entity, the economic
equivalent number of the voting shares of common stock of, or participating
interests in, the surviving entity, based on the terms of such merger or
other business combination, shall be substituted for the Option Shares
hereunder, and the price per share set out in Section 2 hereof shall be
adjusted to reflect substantially the same economic equivalent value of the
Option Shares to the Optionee immediately prior to any such merger or other
business combination.
IN WITNESS WHEREOF, this Agreement is executed this day of
, 1997, effective as of the 24th day of April, 1997.
READING & BATES CORPORATION
By: _______________________
Paul B. Loyd, Jr.
OPTIONEE
___________________________
Don L. McIntire
EXHIBIT 10.57
READING & BATES CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") between Reading & Bates
Corporation, a Delaware corporation ("Company") and Wayne K. Hillin
("Optionee"),
WITNESSETH:
WHEREAS, the Compensation Committee which administers the Reading
& Bates Corporation 1995 Long-Term Incentive Plan ("Plan") has selected the
Optionee, who is the Sr. V.P., General Counsel and Secretary of the
Company, to receive a nonqualified stock option under the terms of the Plan
as an incentive to the Optionee to remain in the employ of the Company and
contribute to the performance of the Company, on the terms and subject to
the conditions provided herein;
NOW THEREFORE, for and in consideration of these premises, it is
hereby agreed as follows:
1. The Option is issued in accordance with and subject to all
of the terms, conditions and provisions of the Plan and administrative
interpretations thereunder, if any, which have been adopted by the
Committee and are in effect on the date hereof. Capitalized terms used but
not defined herein shall have the meanings assigned to such terms in the
Plan.
2. On the terms and subject to the conditions contained herein,
the Committee hereby grants to the Optionee an option for a term of ten
years ending on April 24, 2007 ("Option Period") to purchase from the
Company 94,900 shares ("Option Shares") of the Company's Common Stock, at a
price equal to $23.75 per share.
3. This Option shall not be exercisable, except upon the death
or disability of the Optionee, until after 6 months immediately following
the date this Option is granted, and thereafter shall be exercisable for
Common Stock as follows:
(a) After one year following the effective date of grant,
this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 33-1/3% of the aggregate number of shares
subject to this Option; and
(b) After two years following the effective date of grant,
this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 66-2/3% of the aggregate number of shares
subject to this Option; and
(c) After three years following the effective date of
grant, this Option shall be exercisable for any number of shares of Common
Stock up to and including, but not in excess of, 100% of the aggregate
number of shares subject to this Option;
provided the number of shares as to which this Option becomes exercisable
shall, in each case, be reduced by the number of shares theretofore
purchased pursuant to the terms hereof.
4. The option herein granted may be exercised by the Optionee
by giving written notice to the Secretary of the Company setting forth the
number of Option Shares with respect to which the option is to be
exercised, accompanied by payment for the shares to be purchased and any
appropriate withholding taxes, and specifying the address to which the
certificate for such shares is to be mailed. Payment shall be by means of
cash, certified check, bank draft or postal money order payable to the
order of the Company. As promptly as practicable after receipt of such
written notification and payment, the Company shall deliver to the Optionee
certificates for the number of Option Shares with respect to which such
option has been so exercised.
5. Subject to approval of the Committee, which shall not be
unreasonably withheld, the Optionee may pay for any Option Shares with
respect to which the option herein granted is exercised by tendering to the
Company other shares of Common Stock at the time of the exercise or partial
exercise hereof. The certificates representing such other shares of Common
Stock must be accompanied by a stock power duly executed with signature
guaranteed. The value of the Common Stock so tendered shall be its Fair
Market Value.
6. If the Optionee's employment with the Company is terminated
during the Option Period by the Company for Cause, as defined in that
certain Employment Agreement between the Company and Optionee dated as of
November 1, 1991, as amended (the "Employment Agreement"), or by the
Executive for any reason other than (i) death or disability or (ii) "Good
Reason" or during a "Window Period" (in each case as "Good Reason" and
"Window Period" are defined in the Employment Agreement) whether during or
after the Employment Period (as defined in the Employment Agreement), then
(a) the options herein granted to him that are not exercisable on the date
of his termination of employment shall thereupon terminate, and (b) any
options herein granted to him that are exercisable on the date of his
termination of employment may be exercised by the Optionee during a three-
month period beginning on such date, unless the Option Period shall expire
prior to such date, and shall thereafter terminate.
7. If the Optionee's employment with the Company is terminated
(whether during or after the Employment Period, as defined above) (i) by
the Optionee for Good Reason or during a Window Period; (ii) for any reason
by the Company other than for "Cause" (as defined in the Employment
Agreement) or (iii) by reason of death or disability, then (a) the options
granted to him that are not exercisable on the date of such termination of
employment shall be thereupon be fully exercisable, and (b) all options
then held by the Optionee, whether theretofore exercisable or exercisable
by reason of the termination of employment may be exercised by the Optionee
during the full remaining term of this option; provided, however, that all
options granted hereunder shall expire and not be exercisable on the first
anniversary of the Optionee's death.
8. The option herein granted shall not be transferable by the
Optionee otherwise than as permitted by Section 13 of the Plan. During the
lifetime of the Optionee, such option shall be exercisable only by him. No
transfer of the Option herein granted shall be effective to bind the
Company unless the Company shall have been furnished with written notice
thereof and a copy of such evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions hereof.
9. The Optionee shall have no rights as a stockholder with
respect to any Option Shares until the date of issuance of a certificate
for Option Shares purchased pursuant to this Agreement. Until such time,
the Optionee shall not be entitled to dividends or to vote at meetings of
the stockholders of the Company.
10. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is
required in connection with the option herein granted. The Optionee may
pay all or any portion of the taxes required to be withheld by the Company
or paid by the Optionee in connection with the exercise of all or any
portion of the option herein granted by electing to have the Company
withhold shares of Common Stock, or by delivering previously owned shares
of Common Stock, having a Fair Market Value equal to the amount required to
be withheld or paid. The Optionee must make the foregoing election on or
before the date that the amount of tax to be withheld is determined ("Tax
Date"). Any such election is irrevocable and subject to disapproval by the
Committee. If the Optionee is subject to the short-swing profits recapture
provisions of Section 16(b) of the Exchange Act, any such election shall be
subject to the following additional restrictions:
(a) Such election may not be made within six months of the
grant of this option, provided that this limitation shall not apply in the
event of death or disability.
(b) Such election must be made either in an Election Window
(as hereinafter defined) or at such other time as may be consistent with
Section 16(b)(3) of the Exchange Act. Where the Tax Date in respect of the
exercise of all or any portion of this Option is deferred until after such
exercise and the Optionee elects stock withholding, the full amount of
shares of Common Stock will be issued or transferred to the Optionee upon
exercise of this Option, but the Optionee shall be unconditionally
obligated to tender back to the Company on the Tax Date the number of
shares necessary to discharge with respect to such Option exercise the
greater of (i) the Company's withholding obligation and (ii) all or any
portion of the holder's federal and state tax obligation attributable to
the Option exercise. An Election Window is any period commencing on the
third business day following the Company's release of a quarterly or annual
summary statement of sales and earnings and ending on the twelfth business
day following such release.
11. Upon the acquisition of any shares pursuant to the exercise
of the option herein granted, the Optionee will enter into such written
representations, warranties and agreements as the Company may reasonably
request in order to comply with applicable securities laws or with this
Agreement.
12. The certificates representing the Option Shares purchased by
exercise of an option will be stamped or otherwise imprinted with a legend
in such form as the Company or its counsel may require with respect to any
applicable restrictions on sale or transfer, and the stock transfer records
of the Company will reflect stop-transfer instructions, as appropriate,
with respect to such shares.
13. Unless otherwise provided herein, every notice hereunder
shall be in writing and shall be given by registered or certified mail.
All notices of the exercise by the Optionee of any option hereunder shall
be directed to Reading & Bates Corporation, Attention: Secretary, at the
Company's current address. Any notice given by the Company to the Optionee
directed to him at his address on file with the Company shall be effective
to bind any other person who shall acquire rights hereunder. The Company
shall be under no obligation whatsoever to advise the Optionee of the
existence, maturity or termination of any of the Optionee's rights
hereunder and the Optionee shall be deemed to have familiarized himself
with all matters contained herein and in the Plan which may affect any of
the Optionee's rights or privileges hereunder.
14. Whenever the term "Optionee" is used herein under
circumstances applicable to any other person or persons to whom this award,
in accordance with the provisions of Paragraph 8, may be transferred, the
word "Optionee" shall be deemed to include such person or persons.
References to the masculine gender herein also include the feminine gender
for all purposes.
15. Notwithstanding any of the other provisions hereof, the
Optionee agrees that he will not exercise the option herein granted, and
that the Company will not be obligated to issue any shares pursuant to this
Agreement, if the exercise of the option or the issuance of such shares of
Common Stock would constitute a violation by the Optionee or by the Company
of any provision of any law or regulation of any governmental authority or
any national securities exchange.
16. The option to purchase Option Shares evidenced by this
Agreement shall be fully and immediately exercisable upon a Change of
Control of the Company as defined in the Employment Agreement.
17. This Agreement is subject to the Plan, a copy of which has
been provided the Optionee and for which the Optionee acknowledges receipt.
The terms and provisions of the Plan (including any subsequent amendments
thereto) are incorporated herein by reference. In the event of a conflict
between any term or provision contained herein and a term or provision of
the Plan, the applicable terms and provisions of the Plan will govern and
prevail. All definitions of words and terms contained in the Plan shall be
applicable to this Agreement.
18. In the event of a corporate merger or other business
combination in which the Company is not the surviving entity, the economic
equivalent number of the voting shares of common stock of, or participating
interests in, the surviving entity, based on the terms of such merger or
other business combination, shall be substituted for the Option Shares
hereunder, and the price per share set out in Section 2 hereof shall be
adjusted to reflect substantially the same economic equivalent value of the
Option Shares to the Optionee immediately prior to any such merger or other
business combination.
IN WITNESS WHEREOF, this Agreement is executed this day of
, 1997, effective as of the 24th day of April, 1997.
READING & BATES CORPORATION
By: _______________________
Paul B. Loyd, Jr.
OPTIONEE
___________________________
Wayne K. Hillin
EXHIBIT 10.58
READING & BATES CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") between Reading & Bates
Corporation, a Delaware corporation ("Company") and Wayne K. Hillin
("Optionee"),
WITNESSETH:
WHEREAS, the Compensation Committee which administers the Reading
& Bates Corporation 1997 Long-Term Incentive Plan ("Plan") has selected the
Optionee, who is the Sr. V.P., General Counsel and Secretary of the
Company, to receive a nonqualified stock option under the terms of the Plan
as an incentive to the Optionee to remain in the employ of the Company and
contribute to the performance of the Company, on the terms and subject to
the conditions provided herein;
NOW THEREFORE, for and in consideration of these premises, it is
hereby agreed as follows:
1. The Option is issued in accordance with and subject to all
of the terms, conditions and provisions of the Plan and administrative
interpretations thereunder, if any, which have been adopted by the
Committee and are in effect on the date hereof. Capitalized terms used but
not defined herein shall have the meanings assigned to such terms in the
Plan.
2. On the terms and subject to the conditions contained herein,
the Committee hereby grants to the Optionee an option for a term of ten
years ending on April 24, 2007 ("Option Period") to purchase from the
Company 5,100 shares ("Option Shares") of the Company's Common Stock, at a
price equal to $23.75 per share.
3. This Option shall not be exercisable, except upon the death
or disability of the Optionee, until after 6 months immediately following
the date this Option is granted, and thereafter shall be exercisable for
Common Stock as follows:
(a) After one year following the effective date of grant,
this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 33-1/3% of the aggregate number of shares
subject to this Option; and
(b) After two years following the effective date of grant,
this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 66-2/3% of the aggregate number of shares
subject to this Option; and
(c) After three years following the effective date of
grant, this Option shall be exercisable for any number of shares of Common
Stock up to and including, but not in excess of, 100% of the aggregate
number of shares subject to this Option;
provided the number of shares as to which this Option becomes exercisable
shall, in each case, be reduced by the number of shares theretofore
purchased pursuant to the terms hereof.
4. The option herein granted may be exercised by the Optionee
by giving written notice to the Secretary of the Company setting forth the
number of Option Shares with respect to which the option is to be
exercised, accompanied by payment for the shares to be purchased and any
appropriate withholding taxes, and specifying the address to which the
certificate for such shares is to be mailed. Payment shall be by means of
cash, certified check, bank draft or postal money order payable to the
order of the Company. As promptly as practicable after receipt of such
written notification and payment, the Company shall deliver to the Optionee
certificates for the number of Option Shares with respect to which such
option has been so exercised.
5. Subject to approval of the Committee, which shall not be
unreasonably withheld, the Optionee may pay for any Option Shares with
respect to which the option herein granted is exercised by tendering to the
Company other shares of Common Stock at the time of the exercise or partial
exercise hereof. The certificates representing such other shares of Common
Stock must be accompanied by a stock power duly executed with signature
guaranteed. The value of the Common Stock so tendered shall be its Fair
Market Value.
6. If the Optionee's employment with the Company is terminated
during the Option Period by the Company for Cause, as defined in that
certain Employment Agreement between the Company and Optionee dated as of
November 1, 1991, as amended (the "Employment Agreement"), or by the
Executive for any reason other than (i) death or disability or (ii) "Good
Reason" or during a "Window Period" (in each case as "Good Reason" and
"Window Period" are defined in the Employment Agreement) whether during or
after the Employment Period (as defined in the Employment Agreement), then
(a) the options herein granted to him that are not exercisable on the date
of his termination of employment shall thereupon terminate, and (b) any
options herein granted to him that are exercisable on the date of his
termination of employment may be exercised by the Optionee during a three-
month period beginning on such date, unless the Option Period shall expire
prior to such date, and shall thereafter terminate.
7. If the Optionee's employment with the Company is terminated
(whether during or after the Employment Period, as defined above) (i) by
the Optionee for Good Reason or during a Window Period; (ii) for any reason
by the Company other than for "Cause" (as defined in the Employment
Agreement) or (iii) by reason of death or disability, then (a) the options
granted to him that are not exercisable on the date of such termination of
employment shall be thereupon be fully exercisable, and (b) all options
then held by the Optionee, whether theretofore exercisable or exercisable
by reason of the termination of employment may be exercised by the Optionee
during the full remaining term of this option; provided, however, that all
options granted hereunder shall expire and not be exercisable on the first
anniversary of the Optionee's death.
8. The option herein granted shall not be transferable by the
Optionee otherwise than as permitted by Section 13 of the Plan. During the
lifetime of the Optionee, such option shall be exercisable only by him. No
transfer of the Option herein granted shall be effective to bind the
Company unless the Company shall have been furnished with written notice
thereof and a copy of such evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions hereof.
9. The Optionee shall have no rights as a stockholder with
respect to any Option Shares until the date of issuance of a certificate
for Option Shares purchased pursuant to this Agreement. Until such time,
the Optionee shall not be entitled to dividends or to vote at meetings of
the stockholders of the Company.
10. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is
required in connection with the option herein granted. The Optionee may
pay all or any portion of the taxes required to be withheld by the Company
or paid by the Optionee in connection with the exercise of all or any
portion of the option herein granted by electing to have the Company
withhold shares of Common Stock, or by delivering previously owned shares
of Common Stock, having a Fair Market Value equal to the amount required to
be withheld or paid. The Optionee must make the foregoing election on or
before the date that the amount of tax to be withheld is determined ("Tax
Date"). Any such election is irrevocable and subject to disapproval by the
Committee. If the Optionee is subject to the short-swing profits recapture
provisions of Section 16(b) of the Exchange Act, any such election shall be
subject to the following additional restrictions:
(a) Such election may not be made within six months of the
grant of this option, provided that this limitation shall not apply in the
event of death or disability.
(b) Such election must be made either in an Election Window
(as hereinafter defined) or at such other time as may be consistent with
Section 16(b)(3) of the Exchange Act. Where the Tax Date in respect of the
exercise of all or any portion of this Option is deferred until after such
exercise and the Optionee elects stock withholding, the full amount of
shares of Common Stock will be issued or transferred to the Optionee upon
exercise of this Option, but the Optionee shall be unconditionally
obligated to tender back to the Company on the Tax Date the number of
shares necessary to discharge with respect to such Option exercise the
greater of (i) the Company's withholding obligation and (ii) all or any
portion of the holder's federal and state tax obligation attributable to
the Option exercise. An Election Window is any period commencing on the
third business day following the Company's release of a quarterly or annual
summary statement of sales and earnings and ending on the twelfth business
day following such release.
11. Upon the acquisition of any shares pursuant to the exercise
of the option herein granted, the Optionee will enter into such written
representations, warranties and agreements as the Company may reasonably
request in order to comply with applicable securities laws or with this
Agreement.
12. The certificates representing the Option Shares purchased by
exercise of an option will be stamped or otherwise imprinted with a legend
in such form as the Company or its counsel may require with respect to any
applicable restrictions on sale or transfer, and the stock transfer records
of the Company will reflect stop-transfer instructions, as appropriate,
with respect to such shares.
13. Unless otherwise provided herein, every notice hereunder
shall be in writing and shall be given by registered or certified mail.
All notices of the exercise by the Optionee of any option hereunder shall
be directed to Reading & Bates Corporation, Attention: Secretary, at the
Company's current address. Any notice given by the Company to the Optionee
directed to him at his address on file with the Company shall be effective
to bind any other person who shall acquire rights hereunder. The Company
shall be under no obligation whatsoever to advise the Optionee of the
existence, maturity or termination of any of the Optionee's rights
hereunder and the Optionee shall be deemed to have familiarized himself
with all matters contained herein and in the Plan which may affect any of
the Optionee's rights or privileges hereunder.
14. Whenever the term "Optionee" is used herein under
circumstances applicable to any other person or persons to whom this award,
in accordance with the provisions of Paragraph 8, may be transferred, the
word "Optionee" shall be deemed to include such person or persons.
References to the masculine gender herein also include the feminine gender
for all purposes.
15. Notwithstanding any of the other provisions hereof, the
Optionee agrees that he will not exercise the option herein granted, and
that the Company will not be obligated to issue any shares pursuant to this
Agreement, if the exercise of the option or the issuance of such shares of
Common Stock would constitute a violation by the Optionee or by the Company
of any provision of any law or regulation of any governmental authority or
any national securities exchange.
16. The option to purchase Option Shares evidenced by this
Agreement shall be fully and immediately exercisable upon a Change of
Control of the Company as defined in the Employment Agreement.
17. This Agreement is subject to the Plan, a copy of which has
been provided the Optionee and for which the Optionee acknowledges receipt.
The terms and provisions of the Plan (including any subsequent amendments
thereto) are incorporated herein by reference. In the event of a conflict
between any term or provision contained herein and a term or provision of
the Plan, the applicable terms and provisions of the Plan will govern and
prevail. All definitions of words and terms contained in the Plan shall be
applicable to this Agreement.
18. In the event of a corporate merger or other business
combination in which the Company is not the surviving entity, the economic
equivalent number of the voting shares of common stock of, or participating
interests in, the surviving entity, based on the terms of such merger or
other business combination, shall be substituted for the Option Shares
hereunder, and the price per share set out in Section 2 hereof shall be
adjusted to reflect substantially the same economic equivalent value of the
Option Shares to the Optionee immediately prior to any such merger or other
business combination.
IN WITNESS WHEREOF, this Agreement is executed this day of
, 1997, effective as of the 24th day of April, 1997.
READING & BATES CORPORATION
By: _______________________
Paul B. Loyd, Jr.
OPTIONEE
___________________________
Wayne K. Hillin
EXHIBIT 10.59
EMPLOYEE OPTIONEE: ROBERT F. FULTON
Date: As of February 16, 1995
Number of Shares Subject to Option: 90,000
FALCON DRILLING COMPANY, INC.
AMENDED AND RESTATED STOCK OPTION AGREEMENT
I.Incentive Stock Option
1.Grant of Incentive Stock Option. Pursuant to the provisions of the
Falcon Drilling Company, Inc. 1995 Stock Option Plan (the "Plan"), and in
compliance with the provisions of Section 422 of the Internal Revenue Code
of 1986, as may be amended from time to time, the Company hereby grants to
the Participant named above, subject to the terms and conditions of the
Plan and subject further to the terms and conditions herein set forth, the
option ("ISO") to purchase 30,000 shares of common stock ("Stock"), at the
purchase price of $10.00 per share, such ISO to be exercisable and
exercised as hereinafter provided.
2.Specific Terms and Conditions.
(a) Exercise of ISO. Subject to the other terms of this Agreement
regarding the exercisability of this ISO, this ISO may be exercised in
accordance with the following:
This ISO Shall be Exercisable
with Respect to the Following
On or After this Date Cumulative Number of Shares
--------------------- -----------------------------
2/16/96 10,000
2/16/97 10,000
2/16/98 10,000
This ISO may be exercised, to the extent exercisable by its terms,
from time to time in whole or in part at any time prior to the expiration
thereof. Any exercise shall be accompanied by a written notice to the
Company specifying the number of shares as to which this ISO is being
exercised.
(b) Notification of Disqualifying Disposition. The Participant
hereby agrees to notify the Company in writing in the event shares acquired
pursuant to the exercise of this ISO are transferred, other than by will or
by the laws of descent and distribution, within two years after the date
indicated above or within one year after the issuance of such shares
pursuant to such exercise.
II. Nonqualified Stock Option
1.Grant of Nonqualified Stock Option. Pursuant to the provisions of
the Plan, the Company hereby grants to the Participant, subject to the
terms and conditions of the Plan and subject further to the terms and
conditions herein set forth, the option ("NQSO") to purchase 60,000 shares
of Stock, at a purchase price of $10.00 per share, such NQSO to be
exercisable and exercised as hereinafter provided.
2.Exercise of NQSO. Subject to the other terms of this Agreement
regarding the exercisability of this NQSO, this NQSO may be exercised in
accordance with the following:
This NQSO Shall be Exercisable
with Respect to the Following
On or After this Date Cumulative Number of Shares
--------------------- ------------------------------
2/16/96 20,000
2/16/97 20,000
2/16/98 20,000
This NQSO may be exercised, to the extent exercisable by its terms,
from time to time in whole or in part at any time prior to the expiration
thereof. Any exercise shall be accompanied by a written notice to the
Company specifying the number of shares as to which this NQSO is being
exercised.
III. General Terms and Conditions
1.Payment of Purchase Price Upon Exercise. At the time of any
exercise of an ISO or NQSO, the purchase price of the shares as to which
any such option shall be exercised shall be paid in full to the Company in
cash, provided, that with the consent of the Company and in accordance with
the Plan, some or all of the purchase price may be in the form of Stock
already owned by the Participant or other consideration (including the
relinquishment of a portion of the ISO or NQSO).
2.Expiration Date. This Option (inclusive of ISO's and NQSO's granted
hereunder) shall expire ten years from the date indicated above.
3.Exercise in the Event of Death, Disability, or Termination of
Employment. (i) If the Participant's employment terminates because of
(a) involuntary termination of employment by the Participating Company
other than for cause, as determined by the Board in its sole discretion, or
(b) retirement in accordance with the terms and conditions of a retirement
plan adopted by the Participating Company; he or she may exercise his or
her ISO and/or NQSO to the extent that he or she shall have been entitled
to do so at the date of the termination of his or her employment, at any
time, or from time to time, within three months after the date of the
termination of his or her employment or within such other period, and
subject to such terms and conditions as the Committee may specify, but not
later than the expiration date specified in Section III.2.
(ii) If the Participant dies while an Employee of a Participating
Company, his or her ISO and/or NQSO may be exercised, to the extent that
the Participant shall have been entitled to do so on the date of his or her
death or such termination of employment, by his or her Beneficiary
including, if applicable, his or her executors or administrators, at any
time, or from time to time, within three months after the date of the
Participant's death or within such other period, and subject to such terms
and conditions as the Committee may specify, but no later than the
expiration date specified in Section III.2.
(iii) If the Participant's employment by a Participating Company
terminates because of his or her Total Disability, he or she may exercise
his or her ISO and/or NQSO, to the extent that he or she shall have been
entitled to do so at the date of the termination of his or her employment,
at any time, or from time to time, within one year after the date of the
termination of his or her employment or within such other period, and
subject to such terms and conditions as the Committee may specify, but not
later than the expiration date specified in Section III.2.
4.Nontransferability. No ISO or NQSO shall be transferable other than
by will or by the laws of descent and distribution. During the lifetime of
the Participant, any ISO or NQSO shall be exercisable only by the
Participant or, in the event of the Disability of the Participant, a
legally constituted representative of the Participant.
5.Adjustments. Subject to Section 9(b) of the Plan, if the
outstanding shares of Stock of the Company are increased, decreased, or
exchanged for a different number or kind of shares or other securities, or
if additional shares or new or different shares or other securities are
distributed with respect to such shares of Stock or other securities,
through merger, consolidation, sale of all or substantially all of the
property of the Company, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
distribution with respect to such shares of Stock or other securities, an
appropriate and proportionate adjustment shall be made in (i) the number
and kind of shares or other securities subject to the outstanding Options,
and (ii) the price for each share or other unit of any other securities
subject to outstanding Options without change in the aggregate purchase
price or value as to which such Options remain exercisable or subject to
restrictions. Any adjustment under this Section III.5 will be made by the
Board, whose determination as to what adjustments will be made and the
extent thereof will be final, binding and conclusive. No fractional
interests will be issued under the Plan resulting from any such adjustment.
Any adjustment so made shall be final and binding upon the Participant and
his or her Beneficiary.
6.No Rights as Stockholder. The Participant shall have no rights as a
stockholder with respect to any shares of Stock subject to any ISO or NQSO
prior to the date of issuance to him or her of a certificate or
certificates for such shares.
7.No Right to Continued Employment. This Agreement shall not confer
upon the Participant any right with respect to continuance of employment by
any Participating Company nor shall it interfere in any way with the right
of any Participating Company to terminate his or her employment at any
time.
8.Compliance with Law and Regulations. This Agreement and the
obligation of the Company to sell and deliver shares of Stock hereunder
shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as
the Committee shall determine are required. If at any time the Committee
shall determine that (i) the listing, registration or qualification of the
shares of Stock subject or related thereto upon any securities exchange or
under any state or federal law, or (ii) the consent or approval of any
government or regulatory body, or (iii) an agreement by the recipient of an
award with respect to the disposition of shares of Stock is necessary or
desirable as a condition of or in connection with the issue or purchase of
shares of Stock hereunder, such Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee. Moreover, an ISO or NQSO may not be exercised
if its exercise or the receipt of shares of Stock pursuant thereto would be
contrary to applicable law.
9.Tax Withholding Requirements. The Company shall have the right to
require the Participant to remit to the Company an amount sufficient to
satisfy any federal, state or local withholding tax requirements prior to
the delivery of any certificate or certificates for Stock.
10. Investment Representation. The Committee may require the
Participant to furnish to the Company, prior to the issuance of any shares
of Stock upon the exercise of all or any part of any ISO or NQSO, an
agreement (in such form as the Committee may specify) in which the
Participant represents that the shares acquired by him upon exercise are
being acquired for investment and not with a view to the sale or
distribution thereof.
IV. Miscellaneous
1.Participant Bound by Plan. The Participant hereby acknowledges
receipt of a copy of the Plan and agrees to be bound by all the terms and
provisions thereof. All capitalized terms not defined herein shall have
the same meaning as defined under the Plan.
2.Notices. Any notice hereunder to the Company shall be addressed to
it at its office, 1900 West Loop South, Suite 1910, Houston, Texas 77027,
Attention: Chairman, and any notice hereunder to the Participant shall be
addressed to him or her at subject to the right of either party to
designate at any time hereafter in writing some other address.
3.Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Falcon Drilling Company, Inc. has caused this
Agreement to be executed by a duly authorized officer and the Participant
has executed this Agreement both as of the 15th day of April, 1996, but
effective as of the day and year first above written.
FALCON DRILLING COMPANY, INC.
By:__________________________
Name: Steven A. Webster
Title: Chairman and CEO
_____________________(L.S.)
Participant
Robert F. Fulton
EXHIBIT 10.60
EMPLOYEE OPTIONEE: STEVEN A. WEBSTER
Date: As of January 23, 1996
Number of Shares Subject to Option: 100,000
FALCON DRILLING COMPANY, INC.
AMENDED AND RESTATED STOCK OPTION AGREEMENT
I. Incentive Stock Option
1. Grant of Incentive Stock Option. Pursuant to the provisions
of the Falcon Drilling Company, Inc. 1995 Stock Option Plan (the "Plan"), and
in compliance with the provisions of Section 422 of the Internal Revenue Code
of 1986, as may be amended from time to time, the Company hereby grants to
the Participant named above, subject to the terms and conditions of the Plan
and subject further to the terms and conditions herein set forth, the option
("ISO") to purchase 24,741 shares of common stock ("Stock"), at the purchase
price of $12.125 per share, such ISO to be exercisable and exercised as
hereinafter provided.
2. Specific Terms and Conditions.
(a) Exercise of ISO. Subject to the other terms of this Agreement
regarding the exercisability of this ISO, this ISO may be exercised in
accordance with the following:
This ISO Shall be Exercisable
with Respect to the Following
On or After this Date Cumulative Number of Shares
1/23/96 8,247
1/23/97 8,247
1/23/98 8,247
This ISO may be exercised, to the extent exercisable by its terms, from time
to time in whole or in part at any time prior to the expiration thereof. Any
exercise shall be accompanied by a written notice to the Company specifying
the number of shares as to which this ISO is being exercised.
(b) Notification of Disqualifying Disposition. The Participant
hereby agrees to notify the Company in writing in the event shares acquired
pursuant to the exercise of this ISO are transferred, other than by will or
by the laws of descent and distribution, within two years after the date
indicated above or within one year after the issuance of such shares pursuant
to such exercise.
II. Nonqualified Stock Option
1. Grant of Nonqualified Stock Option. Pursuant to the
provisions of the Plan, the Company hereby grants to the Participant, subject
to the terms and conditions of the Plan and subject further to the terms and
conditions herein set forth, the option ("NQSO") to purchase 75,259 shares of
Stock, at a purchase price of $12.125 per share, such NQSO to be exercisable
and exercised as hereinafter provided.
2. Exercise of NQSO. Subject to the other terms of this
Agreement regarding the exercisability of this NQSO, this NQSO may be
exercised in accordance with the following:
This NQSO Shall be Exercisable
with Respect to the Following
On or After this Date Cumulative Number of Shares
1/23/96 25,086
1/23/97 25,086
1/23/98 25,087
This NQSO may be exercised, to the extent exercisable by its terms, from time
to time in whole or in part at any time prior to the expiration thereof. Any
exercise shall be accompanied by a written notice to the Company specifying
the number of shares as to which this NQSO is being exercised.
III. General Terms and Conditions
1. Payment of Purchase Price Upon Exercise. At the time of any
exercise of an ISO or NQSO, the purchase price of the shares as to which any
such option shall be exercised shall be paid in full to the Company in cash,
provided, that with the consent of the Company and in accordance with the
Plan, some or all of the purchase price may be in the form of Stock already
owned by the Participant or other consideration (including the relinquishment
of a portion of the ISO or NQSO).
2. Expiration Date. This Option (inclusive of ISO's and NQSO's
granted hereunder) shall expire ten years from the date indicated above.
3. Exercise in the Event of Death, Disability, or Termination of
Employment. (i) If the Participant's employment terminates because of (a)
involuntary termination of employment by the Participating Company other than
for cause, as determined by the Board in its sole discretion, or (b)
retirement in accordance with the terms and conditions of a retirement plan
adopted by the Participating Company; he or she may exercise his or her ISO
and/or NQSO to the extent that he or she shall have been entitled to do so at
the date of the termination of his or her employment, at any time, or from
time to time, within three months after the date of the termination of his or
her employment or within such other period, and subject to such terms and
conditions as the Committee may specify, but not later than the expiration
date specified in Section III.2.
(ii) If the Participant dies while an Employee of a Participating
Company, his or her ISO and/or NQSO may be exercised, to the extent that the
Participant shall have been entitled to do so on the date of his or her death
or such termination of employment, by his or her Beneficiary including, if
applicable, his or her executors or administrators, at any time, or from time
to time, within three months after the date of the Participant's death or
within such other period, and subject to such terms and conditions as the
Committee may specify, but no later than the expiration date specified in
Section III.2.
(iii) If the Participant's employment by a Participating Company
terminates because of his or her Total Disability, he or she may exercise his
or her ISO and/or NQSO, to the extent that he or she shall have been entitled
to do so at the date of the termination of his or her employment, at any
time, or from time to time, within one year after the date of the termination
of his or her employment or within such other period, and subject to such
terms and conditions as the Committee may specify, but not later than the
expiration date specified in Section III.2.
4. Nontransferability. No ISO or NQSO shall be transferable
other than by will or by the laws of descent and distribution. During the
lifetime of the Participant, any ISO or NQSO shall be exercisable only by the
Participant or, in the event of the Disability of the Participant, a legally
constituted representative of the Participant.
5. Adjustments. Subject to Section 9(b) of the Plan, if the
outstanding shares of Stock of the Company are increased, decreased, or
exchanged for a different number or kind of shares or other securities, or if
additional shares or new or different shares or other securities are
distributed with respect to such shares of Stock or other securities, through
merger, consolidation, sale of all or substantially all of the property of
the Company, reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other distribution with respect
to such shares of Stock or other securities, an appropriate and proportionate
adjustment shall be made in (i) the number and kind of shares or other
securities subject to the outstanding Options, and (ii) the price for each
share or other unit of any other securities subject to outstanding Options
without change in the aggregate purchase price or value as to which such
Options remain exercisable or subject to restrictions. Any adjustment under
this Section III.5 will be made by the Board, whose determination as to what
adjustments will be made and the extent thereof will be final, binding and
conclusive. No fractional interests will be issued under the Plan resulting
from any such adjustment. Any adjustment so made shall be final and binding
upon the Participant and his or her Beneficiary.
6. No Rights as Stockholder. The Participant shall have no
rights as a stockholder with respect to any shares of Stock subject to any
ISO or NQSO prior to the date of issuance to him or her of a certificate or
certificates for such shares.
7. No Right to Continued Employment. This Agreement shall not
confer upon the Participant any right with respect to continuance of
employment by any Participating Company nor shall it interfere in any way
with the right of any Participating Company to terminate his or her
employment at any time.
8. Compliance with Law and Regulations. This Agreement and the
obligation of the Company to sell and deliver shares of Stock hereunder shall
be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as the Committee
shall determine are required. If at any time the Committee shall determine
that (i) the listing, registration or qualification of the shares of Stock
subject or related thereto upon any securities exchange or under any state or
federal law, or (ii) the consent or approval of any government or regulatory
body, or (iii) an agreement by the recipient of an award with respect to the
disposition of shares of Stock is necessary or desirable as a condition of or
in connection with the issue or purchase of shares of Stock hereunder, such
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the Committee.
Moreover, an ISO or NQSO may not be exercised if its exercise or the receipt
of shares of Stock pursuant thereto would be contrary to applicable law.
9. Tax Withholding Requirements. The Company shall have the
right to require the Participant to remit to the Company an amount sufficient
to satisfy any federal, state or local withholding tax requirements prior to
the delivery of any certificate or certificates for Stock.
10. Investment Representation. The Committee may require the
Participant to furnish to the Company, prior to the issuance of any shares of
Stock upon the exercise of all or any part of any ISO or NQSO, an agreement
(in such form as the Committee may specify) in which the Participant
represents that the shares acquired by him upon exercise are being acquired
for investment and not with a view to the sale or distribution thereof.
IV. Miscellaneous
1. Participant Bound by Plan. The Participant hereby
acknowledges receipt of a copy of the Plan and agrees to be bound by all the
terms and provisions thereof. All capitalized terms not defined herein shall
have the same meaning as defined under the Plan.
2. Notices. Any notice hereunder to the Company shall be
addressed to it at its office, 1900 West Loop South, Suite 1910, Houston,
Texas 77027, Attention: Executive Vice President, and any notice hereunder to
the Participant shall be addressed to him or her at subject to the right of
either party to designate at any time hereafter in writing some other
address.
3. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Falcon Drilling Company, Inc. has caused this
Agreement to be executed by a duly authorized officer and the Participant has
executed this Agreement both as of the 15th day of April, 1996, but effective
as of the day and year first above written.
FALCON DRILLING COMPANY, INC.
By:______________________________
Name: Robert F. Fulton
Title: Executive Vice President
_______________________(L.S.)
Participant
Steven A. Webster
EXHIBIT 10.61
EMPLOYEE: BERNIE W. STEWART
Date: As of April 15, 1996
Number of Shares Subject to Option: 75,000
FALCON DRILLING COMPANY, INC.
STOCK OPTION AGREEMENT
I. Nonqualified Stock Option
1. Grant of Nonqualified Stock Option. Pursuant to the
provisions of the Falcon Drilling Company, Inc. 1995 Stock Option Plan (the
"Plan"), the Company hereby grants to the Participant, subject to the terms
and conditions of the Plan and subject further to the terms and conditions
herein set forth, the option ("NQSO") to purchase 75,000 shares of Stock, at
a purchase price of $19.44 per share, such NQSO to be exercisable and
exercised as hereinafter provided.
2. Exercise of NQSO. Subject to the other terms of this
Agreement regarding the exercisability of this NQSO, this NQSO may be
exercised in accordance with the following:
This NQSO Shall be Exercisable
with Respect to the Following
On or After this Date Cumulative Number of Shares
4/15/97 15,000
4/15/98 15,000
4/15/99 15,000
4/15/2000 15,000
4/15/2001 15,000
This NQSO may be exercised, to the extent exercisable by its terms, from time
to time in whole or in part at any time prior to the expiration thereof. Any
exercise shall be accompanied by a written notice to the Company specifying
the number of shares as to which this NQSO is being exercised.
II. General Terms and Conditions
1. Payment of Purchase Price Upon Exercise. At the time of any
exercise of any NQSO, the purchase of the shares as to which any such option
shall be exercised shall be paid in full to the Company in cash, provided,
that with the consent of the Company and in accordance with the Plan, some or
all of the purchase price may be in the form of Stock already owned by the
Participant or other consideration (including the relinquishment of a portion
of the NQSO).
2. Expiration Date. This Option shall expire ten years from the
date indicated above.
3. Exercise in the Event of Death, Disability, or Termination of
Employment. (i) If the Participant's employment terminates because of (a)
involuntary termination of employment by the Participating Company other than
for cause, as determined by the Board in its sole discretion, or (b)
retirement in accordance with the terms and conditions of a retirement plan
adopted by the Participating Company; he or she may exercise his or her NQSO
to the extent that he or she shall have been entitled to do so at the date of
the termination of his or her employment, at any time, or from time to time,
within three months after the date of the termination of his or her
employment or within such other period, and subject to such terms and
conditions as the Committee may specify, but not later than the expiration
date specified in Section II.2.
(ii) If the Participant dies while an Employee of a Participating
Company, his or her ISO may be exercised, to the extent that the Participant
shall have been entitled to do so on the date of his or her death or such
termination of employment, by his or her Beneficiary including, if
applicable, his or her executors or administrators, at any time, or from time
to time, within three months after the date of the Participant's death or
within such other period, and subject to such terms and conditions as the
Committee may specify, but no later than the expiration date specified in
Section II.2.
(iii) If the Participant's employment by a Participating Company
terminates because of his or her Total Disability, he or she may exercise his
or her NQSO, to the extent that he or she shall have been entitled to do so
at the date of the termination of his or her employment, at any time, or from
time to time, within one year after the date of the termination of his or her
employment or within such other period, and subject to such terms and
conditions as the Committee may specify, but not later than the expiration
date specified in Section II.2.
4. Nontransferability. No NQSO shall be transferable other than
by will or by the laws of descent and distribution. During the lifetime of
the Participant, any NQSO shall be exercisable only by the Participant or, in
the event of the Disability of the Participant, a legally constituted
representative of the Participant.
5. Adjustments. Subject to Section 9(b) of the Plan, if the
outstanding shares of Stock of the Company are increased, decreased, or
exchanged for a different number or kind of shares or other securities, or if
additional shares or new or different shares or other securities are
distributed with respect to such shares of Stock or other securities, through
merger, consolidation, sale of all or substantially all of the property of
the Company, reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other distribution with respect
to such shares of Stock or other securities, an appropriate and proportionate
adjustment shall be made in (i) the number and kind of shares or other
securities subject to the outstanding Options, and (ii) the price for each
share or other unit of any other securities subject to outstanding Options
without change in the aggregate purchase price or value as to which such
Options remain exercisable or subject to restrictions. Any adjustment under
this Section II.5 will be made by the Board, whose determination as to what
adjustments will be made and the extent thereof will be final, binding and
conclusive. No fractional interests will be issued under the Plan resulting
from any such adjustment. Any adjustment so made shall be final and binding
upon the Participant and his or her Beneficiary.
6. No Rights as Stockholder. The Participant shall have no
rights as a stockholder with respect to any shares of Stock subject to any
NQSO prior to the date of issuance to him or her of a certificate or
certificates for such shares.
7. No Right to Continued Employment. This Agreement shall not
confer upon the Participant any right with respect to continuance of
employment by any Participating Company nor shall it interfere in any way
with the right of any Participating Company to terminate his or her
employment at any time.
8. Compliance with Law and Regulations. This Agreement and the
obligation of the Company to sell and deliver shares of Stock hereunder shall
be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as the Committee
shall determine are required. If at any time the Committee shall determine
that (i) the listing, registration or qualification of the shares of Stock
subject or related thereto upon any securities exchange or under any state or
federal law, or (ii) the consent or approval of any government or regulatory
body, or (iii) an agreement by the recipient of an award with respect to the
disposition of shares of Stock is necessary or desirable as a condition of or
in connection with the issue or purchase of shares of Stock hereunder, such
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the Committee.
Moreover, a NQSO may not be exercised if its exercise or the receipt of
shares of Stock pursuant thereto would be contrary to applicable law.
9. Tax Withholding Requirements. The Company shall have the
right to require the Participant to remit to the Company an amount sufficient
to satisfy any federal, state or local withholding tax requirements prior to
the delivery of any certificate or certificates for Stock.
10. Investment Representation. The Committee may require the
Participant to furnish to the Company, prior to the issuance of any shares of
Stock upon the exercise of all or any part of any NQSO, an agreement (in such
form as the Committee may specify) in which the Participant represents that
the shares acquired by him upon exercise are being acquired for investment
and not with a view to the sale or distribution thereof.
III. Miscellaneous
1. Participant Bound by Plan. The Participant hereby
acknowledges receipt of a copy of the Plan and agrees to be bound by all the
terms and provisions thereof. All capitalized terms not defined herein shall
have the same meaning as defined under the Plan.
2. Notices. Any notice hereunder to the Company shall be
addressed to it at its office, 1900 West Loop South, Suite 1910, Houston,
Texas 77027, Attention: Chairman, and any notice hereunder to the Participant
shall be addressed to him or her at subject to the right of either party to
designate at any time hereafter in writing some other address.
3. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Falcon Drilling Company, Inc. has caused this
Agreement to be executed by a duly authorized officer and the Participant has
executed this Agreement both as of the 28th day of October, 1996, but
effective as of the day and year first above written.
FALCON DRILLING COMPANY, INC.
By:__________________________
Name: Steven A. Webster
Title: Chairman and CEO
______________________ (L.S.)
Participant
Bernie W. Stewart
EXHIBIT 10.62
August 5, 1997
Mr. Paul B. Loyd, Jr.
418 Pineneedle Drive
Houston, Texas 77024
Re: STOCK OPTION AGREEMENT DATED AS OF APRIL 24, 1997 BETWEEN PAUL B. LOYD,
JR. AND READING & BATES CORPORATION - OPTIONS WITH RESPECT TO 310,000
SHARES OF THE COMMON STOCK OF READING & BATES CORPORATION
Dear Paul:
Reading & Bates Corporation (the "Company") requests you agree to a
rescission of the stock options awarded pursuant to the above-referenced
agreement, subject to: (a) completion of the transaction described in that
Agreement and Plan of Merger dated as of July 10, 1997 among, inter alia,
Falcon Drilling Company, Inc. and the Company and (b) such merger being
accounted for on a "pooling of interests" basis. If the transaction, as
described in such agreement, is not completed or is completed thereunder and
accounted for on any basis other than a "pooling of interests", the Company
agrees such rescission shall be of no legal effect, and the above-referenced
stock options and award agreement shall be restored to full force and effect,
as if this letter agreement had never existed.
If the foregoing is acceptable to you, please indicate your agreement in the
space provided below, and return one fully executed copy of this letter to us
for our files.
Very truly yours,
READING & BATES CORPORATION
By: ___________________________
Tim W. Nagle
Its: Executive Vice President, Finance and
Administration
Agreed this ________ day of August, 1997.
______________________
Mr. Paul B. Loyd, Jr.
EXHIBIT 10.63
August 5, 1997
Mr. Tim W. Nagle
13307 Tosca
Houston, Texas 77079
Re: STOCK OPTION AGREEMENT DATED AS OF APRIL 24, 1997 BETWEEN TIM W. NAGLE
AND READING & BATES CORPORATION - OPTIONS WITH RESPECT TO 120,000 SHARES
OF THE COMMON STOCK OF READING & BATES CORPORATION
Dear Tim:
Reading & Bates Corporation (the "Company") requests you agree to a
rescission of the stock options awarded pursuant to the above-referenced
agreement, subject to: (a) completion of the transaction described in that
Agreement and Plan of Merger dated as of July 10, 1997 among, inter alia,
Falcon Drilling Company, Inc. and the Company and (b) such merger being
accounted for on a "pooling of interests" basis. If the transaction, as
described in such agreement, is not completed or is completed thereunder and
accounted for on any basis other than a "pooling of interests", the Company
agrees such rescission shall be of no legal effect, and the above-referenced
stock options and award agreement shall be restored to full force and effect,
as if this letter agreement had never existed.
If the foregoing is acceptable to you, please indicate your agreement in the
space provided below, and return one fully executed copy of this letter to us
for our files.
Very truly yours,
READING & BATES CORPORATION
By:
Paul B. Loyd, Jr.
Its: Chairman and Chief Executive Officer
Agreed this day of August, 1997.
Mr. Tim W. Nagle
EXHIBIT 10.64
August 5, 1997
Mr. Charles R. Ofner
2110 Del Monte
Houston, Texas 77019
Re: STOCK OPTION AGREEMENT DATED AS OF APRIL 24, 1997 BETWEEN CHARLES R.
OFNER AND READING & BATES CORPORATION - OPTIONS WITH RESPECT TO 100,000
SHARES OF THE COMMON STOCK OF READING & BATES CORPORATION
Dear Charlie:
Reading & Bates Corporation (the "Company") requests you agree to a
rescission of the stock options awarded pursuant to the above-referenced
agreement, subject to: (a) completion of the transaction described in that
Agreement and Plan of Merger dated as of July 10, 1997 among, inter alia,
Falcon Drilling Company, Inc. and the Company and (b) such merger being
accounted for on a "pooling of interests" basis. If the transaction, as
described in such agreement, is not completed or is completed thereunder and
accounted for on any basis other than a "pooling of interests", the Company
agrees such rescission shall be of no legal effect, and the above-referenced
stock options and award agreement shall be restored to full force and effect,
as if this letter agreement had never existed.
If the foregoing is acceptable to you, please indicate your agreement in the
space provided below, and return one fully executed copy of this letter to us
for our files.
Very truly yours,
READING & BATES CORPORATION
By:
Paul B. Loyd, Jr.
Its: Chairman and Chief Executive Officer
Agreed this day of August, 1997.
Mr. Charles R. Ofner
EXHIBIT 10.65
August 5, 1997
Mr. Don L. McIntire
12625 Memorial Drive #140
Houston, Texas 77024
Re: STOCK OPTION AGREEMENT DATED AS OF APRIL 24, 1997 BETWEEN DON L.
McINTIRE AND READING & BATES CORPORATION - OPTIONS WITH RESPECT TO
40,000 SHARES OF THE COMMON STOCK OF READING & BATES CORPORATION
Dear Don:
Reading & Bates Corporation (the "Company") requests you agree to a
rescission of the stock options awarded pursuant to the above-referenced
agreement, subject to: (a) completion of the transaction described in that
Agreement and Plan of Merger dated as of July 10, 1997 among, inter alia,
Falcon Drilling Company, Inc. and the Company and (b) such merger being
accounted for on a "pooling of interests" basis. If the transaction, as
described in such agreement, is not completed or is completed thereunder and
accounted for on any basis other than a "pooling of interests", the Company
agrees such rescission shall be of no legal effect, and the above-referenced
stock options and award agreement shall be restored to full force and effect,
as if this letter agreement had never existed.
If the foregoing is acceptable to you, please indicate your agreement in the
space provided below, and return one fully executed copy of this letter to us
for our files.
Very truly yours,
READING & BATES CORPORATION
By:
Paul B. Loyd, Jr.
Its: Chairman and Chief Executive Officer
Agreed this day of August, 1997.
Mr. Don L. McIntire
EXHIBIT 10.66
August 5, 1997
Mr. Wayne K. Hillin
13414 Sweet Surrender Court
Houston, Texas 77041
Re: STOCK OPTION AGREEMENT DATED AS OF APRIL 24, 1997 BETWEEN WAYNE K.
HILLIN AND READING & BATES CORPORATION - OPTIONS WITH RESPECT TO 100,000
SHARES OF THE COMMON STOCK OF READING & BATES CORPORATION
Dear Wayne:
Reading & Bates Corporation (the "Company") requests you agree to a
rescission of the stock options awarded pursuant to the above-referenced
agreement, subject to: (a) completion of the transaction described in that
Agreement and Plan of Merger dated as of July 10, 1997 among, inter alia,
Falcon Drilling Company, Inc. and the Company and (b) such merger being
accounted for on a "pooling of interests" basis. If the transaction, as
described in such agreement, is not completed or is completed thereunder and
accounted for on any basis other than a "pooling of interests", the Company
agrees such rescission shall be of no legal effect, and the above-referenced
stock options and award agreement shall be restored to full force and effect,
as if this letter agreement had never existed.
If the foregoing is acceptable to you, please indicate your agreement in the
space provided below, and return one fully executed copy of this letter to us
for our files.
Very truly yours,
READING & BATES CORPORATION
By:
Paul B. Loyd, Jr.
Its: Chairman and Chief Executive Officer
Agreed this day of August, 1997.
Mr. Wayne K. Hillin
EXHIBIT 10.67
AFFILIATE LETTER FOR AFFILIATES OF R&B
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Reading & Bates Corporation, a Delaware corporation
("R&B"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and/or (ii) used
in and for purposes of Accounting Series Releases No. 130 and No. 135, as
amended, of the Commission. Pursuant to the terms of the Agreement and
Plan of Merger, dated as of July 10, 1997 (the "Merger Agreement"), among
R&B Falcon Corporation, a Delaware corporation ("Parent"), FDC Acquisition
Corp., a Delaware corporation ("SubF"), Reading & Bates Acquisition Corp.,
a Delaware corporation ("SubR"), Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), and R&B, pursuant to which (i) SubR will be merged
with and into R&B, with R&B continuing as the surviving corporation (the
"R&B Merger"), (ii) SubF will be merged with and into FDC, with FDC
continuing as the surviving corporation (the "FDC Merger" and together with
the R&B Merger, the "Mergers"), and (iii) each of FDC and R&B will become a
subsidiary of Parent and stockholders of each of FDC and R&B will become
stockholders of Parent. Capitalized terms used in this letter without
definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the R&B Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of
options for shares) owned by me of common stock, par value $.01 per share
of R&B (the "R&B Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that
in the event I receive any shares of Parent Common Stock as a result of the
R&B Merger:
A. I shall not make any offer, sale, pledge, transfer or other
disposition of the shares of Parent Common Stock in violation of the Act or
the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for R&B.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the R&B Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of R&B, (a) I may be deemed to be an
affiliate of R&B and (b) the distribution by me of the shares of Parent
Common Stock has not been registered under the Act, I may not sell,
transfer or otherwise dispose of the shares of Parent Common Stock issued
to me in the R&B Merger unless (i) such sale, transfer or other disposition
is made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Act, (ii) such sale, transfer or
other disposition has been registered under the Act or (iii) in the opinion
of counsel reasonably acceptable to Parent, or a "no action" letter
obtained by the undersigned from the staff of the Commission such sale,
transfer or other disposition is otherwise exempt from registration under
the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other
disposition of the Parent Stock by me or on my behalf under the Act or,
except as provided in paragraph 2(A) below, to take any other action
necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to
R&B's transfer agent with respect to the shares of R&B Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the R&B Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT
OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT
DATED [ ], 1997 BETWEEN THE REGISTERED HOLDER HEREOF, FALCON
DRILLING COMPANY, INC., READING & BATED CORPORATION AND R&B FALCON
CORPORATION, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF R&B FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A
PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE
IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF
THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC
Accounting Series Release No. 135) with respect to shares of R&B Common
Stock that I may hold and, furthermore, that I will not sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by SEC Accounting
Series Release No. 135) with respect to the shares of Parent Common Stock
received by me in the R&B Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of post-Mergers
financial results is referred to herein as the "Pooling Period"). Parent
shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be
prohibited from selling up to 10% of the shares of Parent Common Stock (the
"10% Shares") received by me or the shares of R&B Common Stock owned by me
or making charitable contributions or bona fide gifts of the shares of
Parent Common Stock received by me or the shares of R&B Common Stock owned
by me, subject to the same restrictions. The 10% Shares shall be
calculated in accordance with SEC Accounting Series Release No. 135 as
amended by Staff Accounting Bulletin No. 76. I covenant with Parent that I
will not sell, transfer or otherwise dispose of any 10% Shares during the
period commencing from the Effective Time and ending on the last day of the
Pooling period except in compliance with Rule 145(d)(i) under the Act or
pursuant to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of R&B as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the R&B
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shared of Parent Common Stock received in the R&B
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to FDC and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
______________________
Name: P. B. Loyd, Jr.
Agreed and accepted this ___ day
of _________, 1997 by
R&B FALCON CORPORATION
By:____________________________
Name:
Title:
READING & BATES CORPORATION
By:____________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By:____________________________
Name:
Title:
EXHIBIT 10.68
AFFILIATE LETTER FOR AFFILIATES OF R&B
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Reading & Bates Corporation, a Delaware corporation
("R&B"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and/or (ii) used
in and for purposes of Accounting Series Releases No. 130 and No. 135, as
amended, of the Commission. Pursuant to the terms of the Agreement and
Plan of Merger, dated as of July 10, 1997 (the "Merger Agreement"), among
R&B Falcon Corporation, a Delaware corporation ("Parent"), FDC Acquisition
Corp., a Delaware corporation ("SubF"), Reading & Bates Acquisition Corp.,
a Delaware corporation ("SubR"), Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), and R&B, pursuant to which (i) SubR will be merged
with and into R&B, with R&B continuing as the surviving corporation (the
"R&B Merger"), (ii) SubF will be merged with and into FDC, with FDC
continuing as the surviving corporation (the "FDC Merger" and together with
the R&B Merger, the "Mergers"), and (iii) each of FDC and R&B will become a
subsidiary of Parent and stockholders of each of FDC and R&B will become
stockholders of Parent. Capitalized terms used in this letter without
definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the R&B Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of
options for shares) owned by me of common stock, par value $.01 per share
of R&B (the "R&B Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that
in the event I receive any shares of Parent Common Stock as a result of the
R&B Merger:
A. I shall not make any offer, sale, pledge, transfer or other
disposition of the shares of Parent Common Stock in violation of the Act or
the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for R&B.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the R&B Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of R&B, (a) I may be deemed to be an
affiliate of R&B and (b) the distribution by me of the shares of Parent
Common Stock has not been registered under the Act, I may not sell,
transfer or otherwise dispose of the shares of Parent Common Stock issued
to me in the R&B Merger unless (i) such sale, transfer or other disposition
is made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Act, (ii) such sale, transfer or
other disposition has been registered under the Act or (iii) in the opinion
of counsel reasonably acceptable to Parent, or a "no action" letter
obtained by the undersigned from the staff of the Commission such sale,
transfer or other disposition is otherwise exempt from registration under
the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other
disposition of the Parent Stock by me or on my behalf under the Act or,
except as provided in paragraph 2(A) below, to take any other action
necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to
R&B's transfer agent with respect to the shares of R&B Common Stock
currently held and to Parent's transfer agent with respect to the shares
of Parent Common Stock issued to me in the R&B Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a
legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED [ ], 1997 BETWEEN THE REGISTERED HOLDER
HEREOF, FALCON DRILLING COMPANY, INC., READING & BATED
CORPORATION AND R&B FALCON CORPORATION, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF R&B FALCON
CORPORATION."
F. I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a registration
statement, Parent reserves the right to put the following legend on the
certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH
A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer
or otherwise dispose of or reduce my risk (as contemplated by the SEC
Accounting Series Release No. 135) with respect to shares of R&B Common
Stock that I may hold and, furthermore, that I will not sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by SEC Accounting
Series Release No. 135) with respect to the shares of Parent Common Stock
received by me in the R&B Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined
results of operations of FDC and R&B (the period commencing 30 days prior
to the Effective Time and ending on the date of the publication of post-
Mergers financial results is referred to herein as the "Pooling Period").
Parent shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be
prohibited from selling up to 10% of the shares of Parent Common Stock
(the "10% Shares") received by me or the shares of R&B Common Stock owned
by me or making charitable contributions or bona fide gifts of the shares
of Parent Common Stock received by me or the shares of R&B Common Stock
owned by me, subject to the same restrictions. The 10% Shares shall be
calculated in accordance with SEC Accounting Series Release No. 135 as
amended by Staff Accounting Bulletin No. 76. I covenant with Parent that
I will not sell, transfer or otherwise dispose of any 10% Shares during
the period commencing from the Effective Time and ending on the last day
of the Pooling period except in compliance with Rule 145(d)(i) under the
Act or pursuant to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of R&B as described in the first paragraph
of this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me
as follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the R&B
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shared of Parent Common Stock received in the R&B
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to FDC and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
______________________
Name: A. L. Chavkin
Agreed and accepted this ___ day
of _________, 1997 by
R&B FALCON CORPORATION
By:____________________________
Name:
Title:
READING & BATES CORPORATION
By:____________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By:____________________________
Name:
Title:
EXHIBIT 10.69
AFFILIATE LETTER FOR AFFILIATES OF R&B
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Reading & Bates Corporation, a Delaware corporation
("R&B"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and/or (ii) used
in and for purposes of Accounting Series Releases No. 130 and No. 135, as
amended, of the Commission. Pursuant to the terms of the Agreement and
Plan of Merger, dated as of July 10, 1997 (the "Merger Agreement"), among
R&B Falcon Corporation, a Delaware corporation ("Parent"), FDC Acquisition
Corp., a Delaware corporation ("SubF"), Reading & Bates Acquisition Corp.,
a Delaware corporation ("SubR"), Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), and R&B, pursuant to which (i) SubR will be merged
with and into R&B, with R&B continuing as the surviving corporation (the
"R&B Merger"), (ii) SubF will be merged with and into FDC, with FDC
continuing as the surviving corporation (the "FDC Merger" and together with
the R&B Merger, the "Mergers"), and (iii) each of FDC and R&B will become a
subsidiary of Parent and stockholders of each of FDC and R&B will become
stockholders of Parent. Capitalized terms used in this letter without
definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the R&B Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of
options for shares) owned by me of common stock, par value $.01 per share
of R&B (the "R&B Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that
in the event I receive any shares of Parent Common Stock as a result of the
R&B Merger:
A. I shall not make any offer, sale, pledge, transfer or other
disposition of the shares of Parent Common Stock in violation of the Act or
the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for R&B.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the R&B Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of R&B, (a) I may be deemed to be an
affiliate of R&B and (b) the distribution by me of the shares of Parent
Common Stock has not been registered under the Act, I may not sell,
transfer or otherwise dispose of the shares of Parent Common Stock issued
to me in the R&B Merger unless (i) such sale, transfer or other disposition
is made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Act, (ii) such sale, transfer or
other disposition has been registered under the Act or (iii) in the opinion
of counsel reasonably acceptable to Parent, or a "no action" letter
obtained by the undersigned from the staff of the Commission such sale,
transfer or other disposition is otherwise exempt from registration under
the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other
disposition of the Parent Stock by me or on my behalf under the Act or,
except as provided in paragraph 2(A) below, to take any other action
necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to
R&B's transfer agent with respect to the shares of R&B Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the R&B Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT DATED [ ], 1997 BETWEEN THE
REGISTERED HOLDER HEREOF, FALCON DRILLING COMPANY, INC.,
READING & BATED CORPORATION AND R&B FALCON CORPORATION, A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF R&B
FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH
A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC
Accounting Series Release No. 135) with respect to shares of R&B Common
Stock that I may hold and, furthermore, that I will not sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by SEC Accounting
Series Release No. 135) with respect to the shares of Parent Common Stock
received by me in the R&B Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of post-Mergers
financial results is referred to herein as the "Pooling Period"). Parent
shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be
prohibited from selling up to 10% of the shares of Parent Common Stock (the
"10% Shares") received by me or the shares of R&B Common Stock owned by me
or making charitable contributions or bona fide gifts of the shares of
Parent Common Stock received by me or the shares of R&B Common Stock owned
by me, subject to the same restrictions. The 10% Shares shall be
calculated in accordance with SEC Accounting Series Release No. 135 as
amended by Staff Accounting Bulletin No. 76. I covenant with Parent that I
will not sell, transfer or otherwise dispose of any 10% Shares during the
period commencing from the Effective Time and ending on the last day of the
Pooling period except in compliance with Rule 145(d)(i) under the Act or
pursuant to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of R&B as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the R&B
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shared of Parent Common Stock received in the R&B
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to FDC and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
______________________
Name: C. A. Donabedian
Agreed and accepted this ___ day
of _________, 1997 by
R&B FALCON CORPORATION
By:____________________________
Name:
Title:
READING & BATES CORPORATION
By:____________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By:____________________________
Name:
Title:
EXHIBIT 10.70
AFFILIATE LETTER FOR AFFILIATES OF R&B
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Reading & Bates Corporation, a Delaware corporation
("R&B"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and/or (ii) used
in and for purposes of Accounting Series Releases No. 130 and No. 135, as
amended, of the Commission. Pursuant to the terms of the Agreement and
Plan of Merger, dated as of July 10, 1997 (the "Merger Agreement"), among
R&B Falcon Corporation, a Delaware corporation ("Parent"), FDC Acquisition
Corp., a Delaware corporation ("SubF"), Reading & Bates Acquisition Corp.,
a Delaware corporation ("SubR"), Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), and R&B, pursuant to which (i) SubR will be merged
with and into R&B, with R&B continuing as the surviving corporation (the
"R&B Merger"), (ii) SubF will be merged with and into FDC, with FDC
continuing as the surviving corporation (the "FDC Merger" and together with
the R&B Merger, the "Mergers"), and (iii) each of FDC and R&B will become a
subsidiary of Parent and stockholders of each of FDC and R&B will become
stockholders of Parent. Capitalized terms used in this letter without
definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the R&B Merger, I may receive shares of common stock, par
value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of
options for shares) owned by me of common stock, par value $.01 per share
of R&B (the "R&B Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that
in the event I receive any shares of Parent Common Stock as a result of the
R&B Merger:
A. I shall not make any offer, sale, pledge, transfer or other
disposition of the shares of Parent Common Stock in violation of the Act or
the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for R&B.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the R&B Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of R&B, (a) I may be deemed to be an
affiliate of R&B and (b) the distribution by me of the shares of Parent
Common Stock has not been registered under the Act, I may not sell,
transfer or otherwise dispose of the shares of Parent Common Stock issued
to me in the R&B Merger unless (i) such sale, transfer or other
disposition is made in conformity with the volume and other limitations
of Rule 145 promulgated by the Commission under the Act, (ii) such sale,
transfer or other disposition has been registered under the Act or (iii) in
the opinion of counsel reasonably acceptable to Parent, or a "no action"
letter obtained by the undersigned from the staff of the Commission such
sale, transfer or other disposition is otherwise exempt from registration
under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other
disposition of the Parent Stock by me or on my behalf under the Act or,
except as provided in paragraph 2(A) below, to take any other action
necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to
R&B's transfer agent with respect to the shares of R&B Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the R&B Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT DATED [ ], 1997 BETWEEN THE
REGISTERED HOLDER HEREOF, FALCON DRILLING COMPANY, INC.,
READING & BATED CORPORATION AND R&B FALCON CORPORATION, A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF R&B
FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH
A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC
Accounting Series Release No. 135) with respect to shares of R&B Common
Stock that I may hold and, furthermore, that I will not sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by SEC Accounting
Series Release No. 135) with respect to the shares of Parent Common Stock
received by me in the R&B Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of post-Mergers
financial results is referred to herein as the "Pooling Period"). Parent
shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be
prohibited from selling up to 10% of the shares of Parent Common Stock (the
"10% Shares") received by me or the shares of R&B Common Stock owned by me
or making charitable contributions or bona fide gifts of the shares of
Parent Common Stock received by me or the shares of R&B Common Stock owned
by me, subject to the same restrictions. The 10% Shares shall be
calculated in accordance with SEC Accounting Series Release No. 135 as
amended by Staff Accounting Bulletin No. 76. I covenant with Parent that I
will not sell, transfer or otherwise dispose of any 10% Shares during the
period commencing from the Effective Time and ending on the last day of the
Pooling period except in compliance with Rule 145(d)(i) under the Act or
pursuant to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of R&B as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the R&B
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shared of Parent Common Stock received in the R&B
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to FDC and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
______________________
Name: M. A. E. Laqueur
Agreed and accepted this ___ day
of _________, 1997 by
R&B FALCON CORPORATION
By:____________________________
Name:
Title:
READING & BATES CORPORATION
By:____________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By:____________________________
Name:
Title:
EXHIBIT 10.71
AFFILIATE LETTER FOR AFFILIATES OF R&B
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Reading & Bates Corporation, a Delaware corporation
("R&B"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and/or (ii) used
in and for purposes of Accounting Series Releases No. 130 and No. 135, as
amended, of the Commission. Pursuant to the terms of the Agreement and
Plan of Merger, dated as of July 10, 1997 (the "Merger Agreement"), among
R&B Falcon Corporation, a Delaware corporation ("Parent"), FDC Acquisition
Corp., a Delaware corporation ("SubF"), Reading & Bates Acquisition Corp.,
a Delaware corporation ("SubR"), Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), and R&B, pursuant to which (i) SubR will be merged
with and into R&B, with R&B continuing as the surviving corporation (the
"R&B Merger"), (ii) SubF will be merged with and into FDC, with FDC
continuing as the surviving corporation (the "FDC Merger" and together with
the R&B Merger, the "Mergers"), and (iii) each of FDC and R&B will become a
subsidiary of Parent and stockholders of each of FDC and R&B will become
stockholders of Parent. Capitalized terms used in this letter without
definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the R&B Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of
options for shares) owned by me of common stock, par value $.01 per share
of R&B (the "R&B Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that
in the event I receive any shares of Parent Common Stock as a result of the
R&B Merger:
A. I shall not make any offer, sale, pledge, transfer or other
disposition of the shares of Parent Common Stock in violation of the Act or
the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for R&B.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the R&B Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of R&B, (a) I may be deemed to be an
affiliate of R&B and (b) the distribution by me of the shares of Parent
Common Stock has not been registered under the Act, I may not sell,
transfer or otherwise dispose of the shares of Parent Common Stock issued
to me in the R&B Merger unless (i) such sale, transfer or other disposition
is made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Act, (ii) such sale, transfer or
other disposition has been registered under the Act or (iii) in the opinion
of counsel reasonably acceptable to Parent, or a "no action" letter
obtained by the undersigned from the staff of the Commission such sale,
transfer or other disposition is otherwise exempt from registration under
the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other
disposition of the Parent Stock by me or on my behalf under the Act or,
except as provided in paragraph 2(A) below, to take any other action
necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to
R&B's transfer agent with respect to the shares of R&B Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the R&B Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED [ ], 1997 BETWEEN THE REGISTERED HOLDER
HEREOF, FALCON DRILLING COMPANY, INC., READING & BATED
CORPORATION AND R&B FALCON CORPORATION, A COPY OF WHICH AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICES OF R&B FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF
WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC
Accounting Series Release No. 135) with respect to shares of R&B Common
Stock that I may hold and, furthermore, that I will not sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by SEC Accounting
Series Release No. 135) with respect to the shares of Parent Common Stock
received by me in the R&B Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of post-Mergers
financial results is referred to herein as the "Pooling Period"). Parent
shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be
prohibited from selling up to 10% of the shares of Parent Common Stock (the
"10% Shares") received by me or the shares of R&B Common Stock owned by me
or making charitable contributions or bona fide gifts of the shares of
Parent Common Stock received by me or the shares of R&B Common Stock owned
by me, subject to the same restrictions. The 10% Shares shall be
calculated in accordance with SEC Accounting Series Release No. 135 as
amended by Staff Accounting Bulletin No. 76. I covenant with Parent that I
will not sell, transfer or otherwise dispose of any 10% Shares during the
period commencing from the Effective Time and ending on the last day of the
Pooling period except in compliance with Rule 145(d)(i) under the Act or
pursuant to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of R&B as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the R&B
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shared of Parent Common Stock received in the R&B
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to FDC and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
______________________
Name: R. L. Sandmeyer
Agreed and accepted this ___ day
of _________, 1997 by
R&B FALCON CORPORATION
By:____________________________
Name:
Title:
READING & BATES CORPORATION
By:____________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By:____________________________
Name:
Title:
EXHIBIT 10.72
AFFILIATE LETTER FOR AFFILIATES OF R&B
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Reading & Bates Corporation, a Delaware corporation
("R&B"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and/or (ii) used
in and for purposes of Accounting Series Releases No. 130 and No. 135, as
amended, of the Commission. Pursuant to the terms of the Agreement and
Plan of Merger, dated as of July 10, 1997 (the "Merger Agreement"), among
R&B Falcon Corporation, a Delaware corporation ("Parent"), FDC Acquisition
Corp., a Delaware corporation ("SubF"), Reading & Bates Acquisition Corp.,
a Delaware corporation ("SubR"), Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), and R&B, pursuant to which (i) SubR will be merged
with and into R&B, with R&B continuing as the surviving corporation (the
"R&B Merger"), (ii) SubF will be merged with and into FDC, with FDC
continuing as the surviving corporation (the "FDC Merger" and together with
the R&B Merger, the "Mergers"), and (iii) each of FDC and R&B will become a
subsidiary of Parent and stockholders of each of FDC and R&B will become
stockholders of Parent. Capitalized terms used in this letter without
definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the R&B Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of
options for shares) owned by me of common stock, par value $.01 per share
of R&B (the "R&B Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that
in the event I receive any shares of Parent Common Stock as a result of the
R&B Merger:
A. I shall not make any offer, sale, pledge, transfer or other
disposition of the shares of Parent Common Stock in violation of the Act or
the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for R&B.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the R&B Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of R&B, (a) I may be deemed to be an
affiliate of R&B and (b) the distribution by me of the shares of Parent
Common Stock has not been registered under the Act, I may not sell,
transfer or otherwise dispose of the shares of Parent Common Stock issued
to me in the R&B Merger unless (i) such sale, transfer or other disposition
is made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Act, (ii) such sale, transfer or
other disposition has been registered under the Act or (iii) in the opinion
of counsel reasonably acceptable to Parent, or a "no action" letter
obtained by the undersigned from the staff of the Commission such sale,
transfer or other disposition is otherwise exempt from registration under
the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other
disposition of the Parent Stock by me or on my behalf under the Act or,
except as provided in paragraph 2(A) below, to take any other action
necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to
R&B's transfer agent with respect to the shares of R&B Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the R&B Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT DATED [ ], 1997 BETWEEN THE
REGISTERED HOLDER HEREOF, FALCON DRILLING COMPANY, INC.,
READING & BATED CORPORATION AND R&B FALCON CORPORATION, A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF R&B
FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH
A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC
Accounting Series Release No. 135) with respect to shares of R&B Common
Stock that I may hold and, furthermore, that I will not sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by SEC Accounting
Series Release No. 135) with respect to the shares of Parent Common Stock
received by me in the R&B Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of post-Mergers
financial results is referred to herein as the "Pooling Period"). Parent
shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be
prohibited from selling up to 10% of the shares of Parent Common Stock (the
"10% Shares") received by me or the shares of R&B Common Stock owned by me
or making charitable contributions or bona fide gifts of the shares of
Parent Common Stock received by me or the shares of R&B Common Stock owned
by me, subject to the same restrictions. The 10% Shares shall be
calculated in accordance with SEC Accounting Series Release No. 135 as
amended by Staff Accounting Bulletin No. 76. I covenant with Parent that I
will not sell, transfer or otherwise dispose of any 10% Shares during the
period commencing from the Effective Time and ending on the last day of the
Pooling period except in compliance with Rule 145(d)(i) under the Act or
pursuant to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of R&B as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the R&B
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shared of Parent Common Stock received in the R&B
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to FDC and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
______________________
Name: T. W. Nagle
Agreed and accepted this ___ day
of _________, 1997 by
R&B FALCON CORPORATION
By:____________________________
Name:
Title:
READING & BATES CORPORATION
By:____________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By:____________________________
Name:
Title:
EXHIBIT 10.73
AFFILIATE LETTER FOR AFFILIATES OF R&B
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Reading & Bates Corporation, a Delaware corporation
("R&B"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and/or (ii) used
in and for purposes of Accounting Series Releases No. 130 and No. 135, as
amended, of the Commission. Pursuant to the terms of the Agreement and
Plan of Merger, dated as of July 10, 1997 (the "Merger Agreement"), among
R&B Falcon Corporation, a Delaware corporation ("Parent"), FDC Acquisition
Corp., a Delaware corporation ("SubF"), Reading & Bates Acquisition Corp.,
a Delaware corporation ("SubR"), Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), and R&B, pursuant to which (i) SubR will be merged
with and into R&B, with R&B continuing as the surviving corporation (the
"R&B Merger"), (ii) SubF will be merged with and into FDC, with FDC
continuing as the surviving corporation (the "FDC Merger" and together with
the R&B Merger, the "Mergers"), and (iii) each of FDC and R&B will become a
subsidiary of Parent and stockholders of each of FDC and R&B will become
stockholders of Parent. Capitalized terms used in this letter without
definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the R&B Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of
options for shares) owned by me of common stock, par value $.01 per share
of R&B (the "R&B Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that
in the event I receive any shares of Parent Common Stock as a result of the
R&B Merger:
A. I shall not make any offer, sale, pledge, transfer or other
disposition of the shares of Parent Common Stock in violation of the Act or
the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for R&B.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the R&B Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of R&B, (a) I may be deemed to be an
affiliate of R&B and (b) the distribution by me of the shares of Parent
Common Stock has not been registered under the Act, I may not sell,
transfer or otherwise dispose of the shares of Parent Common Stock issued
to me in the R&B Merger unless (i) such sale, transfer or other disposition
is made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Act, (ii) such sale, transfer or
other disposition has been registered under the Act or (iii) in the opinion
of counsel reasonably acceptable to Parent, or a "no action" letter
obtained by the undersigned from the staff of the Commission such sale,
transfer or other disposition is otherwise exempt from registration under
the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other
disposition of the Parent Stock by me or on my behalf under the Act or,
except as provided in paragraph 2(A) below, to take any other action
necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to
R&B's transfer agent with respect to the shares of R&B Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the R&B Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT DATED [ ], 1997 BETWEEN THE
REGISTERED HOLDER HEREOF, FALCON DRILLING COMPANY, INC.,
READING & BATED CORPORATION AND R&B FALCON CORPORATION, A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF R&B
FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH
A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC
Accounting Series Release No. 135) with respect to shares of R&B Common
Stock that I may hold and, furthermore, that I will not sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by SEC Accounting
Series Release No. 135) with respect to the shares of Parent Common Stock
received by me in the R&B Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of post-Mergers
financial results is referred to herein as the "Pooling Period"). Parent
shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be
prohibited from selling up to 10% of the shares of Parent Common Stock (the
"10% Shares") received by me or the shares of R&B Common Stock owned by me
or making charitable contributions or bona fide gifts of the shares of
Parent Common Stock received by me or the shares of R&B Common Stock owned
by me, subject to the same restrictions. The 10% Shares shall be
calculated in accordance with SEC Accounting Series Release No. 135 as
amended by Staff Accounting Bulletin No. 76. I covenant with Parent that I
will not sell, transfer or otherwise dispose of any 10% Shares during the
period commencing from the Effective Time and ending on the last day of the
Pooling period except in compliance with Rule 145(d)(i) under the Act or
pursuant to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of R&B as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the R&B
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shared of Parent Common Stock received in the R&B
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to FDC and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
______________________
Name: C. R. Ofner
Agreed and accepted this ___ day
of _________, 1997 by
R&B FALCON CORPORATION
By:____________________________
Name:
Title:
READING & BATES CORPORATION
By:____________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By:____________________________
Name:
Title:
EXHIBIT 10.74
AFFILIATE LETTER FOR AFFILIATES OF R&B
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Reading & Bates Corporation, a Delaware corporation
("R&B"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and/or (ii) used
in and for purposes of Accounting Series Releases No. 130 and No. 135, as
amended, of the Commission. Pursuant to the terms of the Agreement and
Plan of Merger, dated as of July 10, 1997 (the "Merger Agreement"), among
R&B Falcon Corporation, a Delaware corporation ("Parent"), FDC Acquisition
Corp., a Delaware corporation ("SubF"), Reading & Bates Acquisition Corp.,
a Delaware corporation ("SubR"), Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), and R&B, pursuant to which (i) SubR will be merged
with and into R&B, with R&B continuing as the surviving corporation (the
"R&B Merger"), (ii) SubF will be merged with and into FDC, with FDC
continuing as the surviving corporation (the "FDC Merger" and together with
the R&B Merger, the "Mergers"), and (iii) each of FDC and R&B will become a
subsidiary of Parent and stockholders of each of FDC and R&B will become
stockholders of Parent. Capitalized terms used in this letter without
definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the R&B Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of
options for shares) owned by me of common stock, par value $.01 per share
of R&B (the "R&B Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that
in the event I receive any shares of Parent Common Stock as a result of the
R&B Merger:
A. I shall not make any offer, sale, pledge, transfer or other
disposition of the shares of Parent Common Stock in violation of the Act or
the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for R&B.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the R&B Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of R&B, (a) I may be deemed to be an
affiliate of R&B and (b) the distribution by me of the shares of Parent
Common Stock has not been registered under the Act, I may not sell,
transfer or otherwise dispose of the shares of Parent Common Stock issued
to me in the R&B Merger unless (i) such sale, transfer or other
disposition is made in conformity with the volume and other limitations
of Rule 145 promulgated by the Commission under the Act, (ii) such sale,
transfer or other disposition has been registered under the Act or (iii) in
the opinion of counsel reasonably acceptable to Parent, or a "no action"
letter obtained by the undersigned from the staff of the Commission such
sale, transfer or other disposition is otherwise exempt from registration
under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other
disposition of the Parent Stock by me or on my behalf under the Act or,
except as provided in paragraph 2(A) below, to take any other action
necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to
R&B's transfer agent with respect to the shares of R&B Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the R&B Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT DATED [ ], 1997 BETWEEN THE
REGISTERED HOLDER HEREOF, FALCON DRILLING COMPANY, INC.,
READING & BATED CORPORATION AND R&B FALCON CORPORATION, A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF R&B
FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH
A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC
Accounting Series Release No. 135) with respect to shares of R&B Common
Stock that I may hold and, furthermore, that I will not sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by SEC Accounting
Series Release No. 135) with respect to the shares of Parent Common Stock
received by me in the R&B Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of post-Mergers
financial results is referred to herein as the "Pooling Period"). Parent
shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be
prohibited from selling up to 10% of the shares of Parent Common Stock (the
"10% Shares") received by me or the shares of R&B Common Stock owned by me
or making charitable contributions or bona fide gifts of the shares of
Parent Common Stock received by me or the shares of R&B Common Stock owned
by me, subject to the same restrictions. The 10% Shares shall be
calculated in accordance with SEC Accounting Series Release No. 135 as
amended by Staff Accounting Bulletin No. 76. I covenant with Parent that I
will not sell, transfer or otherwise dispose of any 10% Shares during the
period commencing from the Effective Time and ending on the last day of the
Pooling period except in compliance with Rule 145(d)(i) under the Act or
pursuant to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of R&B as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the R&B
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shared of Parent Common Stock received in the R&B
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to FDC and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
______________________
Name: D. L. McIntire
Agreed and accepted this ___ day
of _________, 1997 by
R&B FALCON CORPORATION
By:____________________________
Name:
Title:
READING & BATES CORPORATION
By:____________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By:____________________________
Name:
Title:
EXHIBIT 10.75
AFFILIATE LETTER FOR AFFILIATES OF R&B
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Reading & Bates Corporation, a Delaware corporation
("R&B"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and/or (ii) used
in and for purposes of Accounting Series Releases No. 130 and No. 135, as
amended, of the Commission. Pursuant to the terms of the Agreement and
Plan of Merger, dated as of July 10, 1997 (the "Merger Agreement"), among
R&B Falcon Corporation, a Delaware corporation ("Parent"), FDC Acquisition
Corp., a Delaware corporation ("SubF"), Reading & Bates Acquisition Corp.,
a Delaware corporation ("SubR"), Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), and R&B, pursuant to which (i) SubR will be merged
with and into R&B, with R&B continuing as the surviving corporation (the
"R&B Merger"), (ii) SubF will be merged with and into FDC, with FDC
continuing as the surviving corporation (the "FDC Merger" and together with
the R&B Merger, the "Mergers"), and (iii) each of FDC and R&B will become a
subsidiary of Parent and stockholders of each of FDC and R&B will become
stockholders of Parent. Capitalized terms used in this letter without
definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the R&B Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of
options for shares) owned by me of common stock, par value $.01 per share
of R&B (the "R&B Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that
in the event I receive any shares of Parent Common Stock as a result of the
R&B Merger:
A. I shall not make any offer, sale, pledge, transfer or other
disposition of the shares of Parent Common Stock in violation of the Act or
the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for R&B.
C. I have been advised that the issuance of the shares of Parent
Common Stock to me pursuant to the R&B Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of R&B, (a) I may be deemed to be an
affiliate of R&B and (b) the distribution by me of the shares of Parent
Common Stock has not been registered under the Act, I may not sell,
transfer or otherwise dispose of the shares of Parent Common Stock issued
to me in the R&B Merger unless (i) such sale, transfer or other disposition
is made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Act, (ii) such sale, transfer or
other disposition has been registered under the Act or (iii) in the opinion
of counsel reasonably acceptable to Parent, or a "no action" letter
obtained by the undersigned from the staff of the Commission such sale,
transfer or other disposition is otherwise exempt from registration under
the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other
disposition of the Parent Stock by me or on my behalf under the Act or,
except as provided in paragraph 2(A) below, to take any other action
necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to
R&B's transfer agent with respect to the shares of R&B Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the R&B Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT DATED [ ], 1997 BETWEEN THE
REGISTERED HOLDER HEREOF, FALCON DRILLING COMPANY, INC.,
READING & BATED CORPORATION AND R&B FALCON CORPORATION, A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF R&B
FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH
A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC
Accounting Series Release No. 135) with respect to shares of R&B Common
Stock that I may hold and, furthermore, that I will not sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by SEC Accounting
Series Release No. 135) with respect to the shares of Parent Common Stock
received by me in the R&B Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of post-Mergers
financial results is referred to herein as the "Pooling Period"). Parent
shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be
prohibited from selling up to 10% of the shares of Parent Common Stock (the
"10% Shares") received by me or the shares of R&B Common Stock owned by me
or making charitable contributions or bona fide gifts of the shares of
Parent Common Stock received by me or the shares of R&B Common Stock owned
by me, subject to the same restrictions. The 10% Shares shall be
calculated in accordance with SEC Accounting Series Release No. 135 as
amended by Staff Accounting Bulletin No. 76. I covenant with Parent that I
will not sell, transfer or otherwise dispose of any 10% Shares during the
period commencing from the Effective Time and ending on the last day of the
Pooling period except in compliance with Rule 145(d)(i) under the Act or
pursuant to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of R&B as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the R&B
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shared of Parent Common Stock received in the R&B
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to FDC and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
______________________
Name: W. K. Hillin
Agreed and accepted this ___ day
of _________, 1997 by
R&B FALCON CORPORATION
By:____________________________
Name:
Title:
READING & BATES CORPORATION
By:____________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By:____________________________
Name:
Title:
EXHIBIT 10.76
AFFILIATE LETTER FOR AFFILIATES OF FDC
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
and/or (ii) used in and for purposes of Accounting Series Releases No. 130
and No. 135, as amended, of the Commission. Pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 10, 1997 (the "Merger
Agreement"), among R&B Falcon Corporation, a Delaware corporation ("Par
ent"), FDC Acquisition Corp., a Delaware corporation ("SubF"), Reading &
Bates Acquisition Corp., a Delaware corporation ("SubR"), FDC and Reading &
Bates Corporation, a Delaware corporation ("R&B"), pursuant to which (i)
SubF will be merged with and into FDC, with FDC continuing as the surviving
corporation (the "FDC Merger"), (ii) SubR will be merged with and into R&B,
with R&B continuing as the surviving corporation (the "R&B Merger" and
together with the FDC Merger, the "Mergers"), and (iii) each of FDC and R&B
will become a subsidiary of Parent and stockholders of each of FDC and R&B
will become stockholders of Parent. Capitalized terms used in this letter
without definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the FDC Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of op
tions for shares) owned by me of common stock, par value $.01 per share of
FDC (the "FDC Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that in
the event I receive any shares of Parent Common Stock as a result of the
FDC Merger:
A. I shall not make any offer, sale, pledge, transfer or other disposition
of the shares of Parent Common Stock in violation of the Act or the Rules
and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for FDC.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the FDC Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of FDC, (a) I may be deemed to be an affili
ate of FDC and (b) the distribution by me of the shares of Parent Common
Stock has not been registered under the Act, I may not sell, transfer or
otherwise dispose of the shares of Parent Common Stock issued to me in the
FDC Merger unless (i) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer or other disposition
has been registered under the Act or (iii) in the opinion of counsel reason
ably acceptable to Parent, or a "no action" letter obtained by the
undersigned from the staff of the Commission such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other dispo
sition of the Parent Stock by me or on my behalf under the Act or, except
as provided in paragraph 2(A) below, to take any other action necessary in
order to make compliance with an exemption from such registration
available.
E. I also understand that stop transfer instructions will be given to
FDC's transfer agent with respect to the shares of FDC Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the FDC Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED [ ], 1997 BETWEEN THE REGISTERED HOLDER
HEREOF, FALCON DRILLING COMPANY, INC., READING & BATES CORPORA
TION AND R&B FALCON CORPORATION, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF R&B FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC Account
ing Series Release No. 135) with respect to shares of FDC Common Stock that
I may hold and, furthermore, that I will not sell, transfer or otherwise
dispose of or reduce my risk (as contemplated by SEC Accounting Series
Release No. 135) with respect to the shares of Parent Common Stock
received by me in the FDC Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of the post-
Mergers financial results is referred to herein as the "Pooling Period").
Parent shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be prohib
ited from selling up to 10% of the shares of Parent Common Stock (the "10%
Shares") received by me or the shares of FDC Common Stock owned by me or
making charitable contributions or bona fide gifts of the shares of Parent
Common Stock received by me or the shares of FDC Common Stock owned by me,
subject to the same restrictions. The 10% Shares shall be calculated in
accordance with SEC Accounting Series Release No. 135 as amended by Staff
Accounting Bulletin No. 76. I covenant with Parent that I will not sell,
transfer or otherwise dispose of any 10% Shares during the period commenc
ing from the Effective Time and ending on the last day of the Pooling
Period except in compliance with Rule 145(d)(i) under the Act or pursuant
to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of FDC as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the FDC
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shares of Parent Common Stock received in the FDC
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to R&B and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the Commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
________________________________
Name: Steven A. Webster
Agreed and accepted this __ day
of ___________, 1997, by
R&B FALCON CORPORATION
By: _______________________________
Name:
Title:
READING & BATES CORPORATION
By: ________________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By: ________________________________
Name:
Title:
EXHIBIT 10.77
AFFILIATE LETTER FOR AFFILIATES OF FDC
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
and/or (ii) used in and for purposes of Accounting Series Releases No. 130
and No. 135, as amended, of the Commission. Pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 10, 1997 (the "Merger
Agreement"), among R&B Falcon Corporation, a Delaware corporation ("Par
ent"), FDC Acquisition Corp., a Delaware corporation ("SubF"), Reading &
Bates Acquisition Corp., a Delaware corporation ("SubR"), FDC and Reading &
Bates Corporation, a Delaware corporation ("R&B"), pursuant to which (i)
SubF will be merged with and into FDC, with FDC continuing as the surviving
corporation (the "FDC Merger"), (ii) SubR will be merged with and into R&B,
with R&B continuing as the surviving corporation (the "R&B Merger" and
together with the FDC Merger, the "Mergers"), and (iii) each of FDC and R&B
will become a subsidiary of Parent and stockholders of each of FDC and R&B
will become stockholders of Parent. Capitalized terms used in this letter
without definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the FDC Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of op
tions for shares) owned by me of common stock, par value $.01 per share of
FDC (the "FDC Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that in
the event I receive any shares of Parent Common Stock as a result of the
FDC Merger:
A. I shall not make any offer, sale, pledge, transfer or other disposition
of the shares of Parent Common Stock in violation of the Act or the Rules
and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for FDC.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the FDC Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of FDC, (a) I may be deemed to be an affili
ate of FDC and (b) the distribution by me of the shares of Parent Common
Stock has not been registered under the Act, I may not sell, transfer or
otherwise dispose of the shares of Parent Common Stock issued to me in the
FDC Merger unless (i) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer or other disposition
has been registered under the Act or (iii) in the opinion of counsel reason
ably acceptable to Parent, or a "no action" letter obtained by the
undersigned from the staff of the Commission such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other dispo
sition of the Parent Stock by me or on my behalf under the Act or, except
as provided in paragraph 2(A) below, to take any other action necessary in
order to make compliance with an exemption from such registration
available.
E. I also understand that stop transfer instructions will be given to
FDC's transfer agent with respect to the shares of FDC Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the FDC Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED [ ], 1997 BETWEEN THE REGISTERED HOLDER
HEREOF, FALCON DRILLING COMPANY, INC., READING & BATES CORPORA
TION AND R&B FALCON CORPORATION, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF R&B FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC Account
ing Series Release No. 135) with respect to shares of FDC Common Stock that
I may hold and, furthermore, that I will not sell, transfer or otherwise
dispose of or reduce my risk (as contemplated by SEC Accounting Series
Release No. 135) with respect to the shares of Parent Common Stock
received by me in the FDC Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of the post-
Mergers financial results is referred to herein as the "Pooling Period").
Parent shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be prohib
ited from selling up to 10% of the shares of Parent Common Stock (the "10%
Shares") received by me or the shares of FDC Common Stock owned by me or
making charitable contributions or bona fide gifts of the shares of Parent
Common Stock received by me or the shares of FDC Common Stock owned by me,
subject to the same restrictions. The 10% Shares shall be calculated in
accordance with SEC Accounting Series Release No. 135 as amended by Staff
Accounting Bulletin No. 76. I covenant with Parent that I will not sell,
transfer or otherwise dispose of any 10% Shares during the period commenc
ing from the Effective Time and ending on the last day of the Pooling
Period except in compliance with Rule 145(d)(i) under the Act or pursuant
to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of FDC as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the FDC
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shares of Parent Common Stock received in the FDC
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to R&B and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the Commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
________________________________
Name: Bernie W. Stewart
Agreed and accepted this __ day
of ___________, 1997, by
R&B FALCON CORPORATION
By: _______________________________
Name:
Title:
READING & BATES CORPORATION
By: ________________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By: ________________________________
Name:
Title:
EXHIBIT 10.78
AFFILIATE LETTER FOR AFFILIATES OF FDC
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
and/or (ii) used in and for purposes of Accounting Series Releases No. 130
and No. 135, as amended, of the Commission. Pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 10, 1997 (the "Merger
Agreement"), among R&B Falcon Corporation, a Delaware corporation ("Par
ent"), FDC Acquisition Corp., a Delaware corporation ("SubF"), Reading &
Bates Acquisition Corp., a Delaware corporation ("SubR"), FDC and Reading &
Bates Corporation, a Delaware corporation ("R&B"), pursuant to which (i)
SubF will be merged with and into FDC, with FDC continuing as the surviving
corporation (the "FDC Merger"), (ii) SubR will be merged with and into R&B,
with R&B continuing as the surviving corporation (the "R&B Merger" and
together with the FDC Merger, the "Mergers"), and (iii) each of FDC and R&B
will become a subsidiary of Parent and stockholders of each of FDC and R&B
will become stockholders of Parent. Capitalized terms used in this letter
without definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the FDC Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of op
tions for shares) owned by me of common stock, par value $.01 per share of
FDC (the "FDC Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that in
the event I receive any shares of Parent Common Stock as a result of the
FDC Merger:
A. I shall not make any offer, sale, pledge, transfer or other disposition
of the shares of Parent Common Stock in violation of the Act or the Rules
and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for FDC.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the FDC Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of FDC, (a) I may be deemed to be an affili
ate of FDC and (b) the distribution by me of the shares of Parent Common
Stock has not been registered under the Act, I may not sell, transfer or
otherwise dispose of the shares of Parent Common Stock issued to me in the
FDC Merger unless (i) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer or other disposition
has been registered under the Act or (iii) in the opinion of counsel reason
ably acceptable to Parent, or a "no action" letter obtained by the
undersigned from the staff of the Commission such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other dispo
sition of the Parent Stock by me or on my behalf under the Act or, except
as provided in paragraph 2(A) below, to take any other action necessary in
order to make compliance with an exemption from such registration
available.
E. I also understand that stop transfer instructions will be given to
FDC's transfer agent with respect to the shares of FDC Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the FDC Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED [ ], 1997 BETWEEN THE REGISTERED HOLDER
HEREOF, FALCON DRILLING COMPANY, INC., READING & BATES CORPORA
TION AND R&B FALCON CORPORATION, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF R&B FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC Account
ing Series Release No. 135) with respect to shares of FDC Common Stock that
I may hold and, furthermore, that I will not sell, transfer or otherwise
dispose of or reduce my risk (as contemplated by SEC Accounting Series
Release No. 135) with respect to the shares of Parent Common Stock
received by me in the FDC Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of the post-
Mergers financial results is referred to herein as the "Pooling Period").
Parent shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be prohib
ited from selling up to 10% of the shares of Parent Common Stock (the "10%
Shares") received by me or the shares of FDC Common Stock owned by me or
making charitable contributions or bona fide gifts of the shares of Parent
Common Stock received by me or the shares of FDC Common Stock owned by me,
subject to the same restrictions. The 10% Shares shall be calculated in
accordance with SEC Accounting Series Release No. 135 as amended by Staff
Accounting Bulletin No. 76. I covenant with Parent that I will not sell,
transfer or otherwise dispose of any 10% Shares during the period commenc
ing from the Effective Time and ending on the last day of the Pooling
Period except in compliance with Rule 145(d)(i) under the Act or pursuant
to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of FDC as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the FDC
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shares of Parent Common Stock received in the FDC
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to R&B and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the Commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
________________________________
Name: Robert F. Fulton
Agreed and accepted this __ day
of ___________, 1997, by
R&B FALCON CORPORATION
By: _______________________________
Name:
Title:
READING & BATES CORPORATION
By: ________________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By: ________________________________
Name:
Title:
EXHIBIT 10.79
AFFILIATE LETTER FOR AFFILIATES OF FDC
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
and/or (ii) used in and for purposes of Accounting Series Releases No. 130
and No. 135, as amended, of the Commission. Pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 10, 1997 (the "Merger
Agreement"), among R&B Falcon Corporation, a Delaware corporation ("Par
ent"), FDC Acquisition Corp., a Delaware corporation ("SubF"), Reading &
Bates Acquisition Corp., a Delaware corporation ("SubR"), FDC and Reading &
Bates Corporation, a Delaware corporation ("R&B"), pursuant to which (i)
SubF will be merged with and into FDC, with FDC continuing as the surviving
corporation (the "FDC Merger"), (ii) SubR will be merged with and into R&B,
with R&B continuing as the surviving corporation (the "R&B Merger" and
together with the FDC Merger, the "Mergers"), and (iii) each of FDC and R&B
will become a subsidiary of Parent and stockholders of each of FDC and R&B
will become stockholders of Parent. Capitalized terms used in this letter
without definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the FDC Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of op
tions for shares) owned by me of common stock, par value $.01 per share of
FDC (the "FDC Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that in
the event I receive any shares of Parent Common Stock as a result of the
FDC Merger:
A. I shall not make any offer, sale, pledge, transfer or other disposition
of the shares of Parent Common Stock in violation of the Act or the Rules
and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for FDC.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the FDC Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of FDC, (a) I may be deemed to be an affili
ate of FDC and (b) the distribution by me of the shares of Parent Common
Stock has not been registered under the Act, I may not sell, transfer or
otherwise dispose of the shares of Parent Common Stock issued to me in the
FDC Merger unless (i) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer or other disposition
has been registered under the Act or (iii) in the opinion of counsel reason
ably acceptable to Parent, or a "no action" letter obtained by the
undersigned from the staff of the Commission such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other dispo
sition of the Parent Stock by me or on my behalf under the Act or, except
as provided in paragraph 2(A) below, to take any other action necessary in
order to make compliance with an exemption from such registration
available.
E. I also understand that stop transfer instructions will be given to
FDC's transfer agent with respect to the shares of FDC Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the FDC Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED [ ], 1997 BETWEEN THE REGISTERED HOLDER
HEREOF, FALCON DRILLING COMPANY, INC., READING & BATES CORPORA
TION AND R&B FALCON CORPORATION, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF R&B FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC Account
ing Series Release No. 135) with respect to shares of FDC Common Stock that
I may hold and, furthermore, that I will not sell, transfer or otherwise
dispose of or reduce my risk (as contemplated by SEC Accounting Series
Release No. 135) with respect to the shares of Parent Common Stock
received by me in the FDC Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of the post-
Mergers financial results is referred to herein as the "Pooling Period").
Parent shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be prohib
ited from selling up to 10% of the shares of Parent Common Stock (the "10%
Shares") received by me or the shares of FDC Common Stock owned by me or
making charitable contributions or bona fide gifts of the shares of Parent
Common Stock received by me or the shares of FDC Common Stock owned by me,
subject to the same restrictions. The 10% Shares shall be calculated in
accordance with SEC Accounting Series Release No. 135 as amended by Staff
Accounting Bulletin No. 76. I covenant with Parent that I will not sell,
transfer or otherwise dispose of any 10% Shares during the period commenc
ing from the Effective Time and ending on the last day of the Pooling
Period except in compliance with Rule 145(d)(i) under the Act or pursuant
to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of FDC as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the FDC
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shares of Parent Common Stock received in the FDC
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to R&B and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the Commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
________________________________
Name: Leighton E. Moss
Agreed and accepted this __ day
of ___________, 1997, by
R&B FALCON CORPORATION
By: _______________________________
Name:
Title:
READING & BATES CORPORATION
By: ________________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By: ________________________________
Name:
Title:
EXHIBIT 10.80
AFFILIATE LETTER FOR AFFILIATES OF FDC
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
and/or (ii) used in and for purposes of Accounting Series Releases No. 130
and No. 135, as amended, of the Commission. Pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 10, 1997 (the "Merger
Agreement"), among R&B Falcon Corporation, a Delaware corporation ("Par
ent"), FDC Acquisition Corp., a Delaware corporation ("SubF"), Reading &
Bates Acquisition Corp., a Delaware corporation ("SubR"), FDC and Reading &
Bates Corporation, a Delaware corporation ("R&B"), pursuant to which (i)
SubF will be merged with and into FDC, with FDC continuing as the surviving
corporation (the "FDC Merger"), (ii) SubR will be merged with and into R&B,
with R&B continuing as the surviving corporation (the "R&B Merger" and
together with the FDC Merger, the "Mergers"), and (iii) each of FDC and R&B
will become a subsidiary of Parent and stockholders of each of FDC and R&B
will become stockholders of Parent. Capitalized terms used in this letter
without definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the FDC Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of op
tions for shares) owned by me of common stock, par value $.01 per share of
FDC (the "FDC Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that in
the event I receive any shares of Parent Common Stock as a result of the
FDC Merger:
A. I shall not make any offer, sale, pledge, transfer or other disposition
of the shares of Parent Common Stock in violation of the Act or the Rules
and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for FDC.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the FDC Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of FDC, (a) I may be deemed to be an affili
ate of FDC and (b) the distribution by me of the shares of Parent Common
Stock has not been registered under the Act, I may not sell, transfer or
otherwise dispose of the shares of Parent Common Stock issued to me in the
FDC Merger unless (i) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer or other disposition
has been registered under the Act or (iii) in the opinion of counsel reason
ably acceptable to Parent, or a "no action" letter obtained by the
undersigned from the staff of the Commission such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other dispo
sition of the Parent Stock by me or on my behalf under the Act or, except
as provided in paragraph 2(A) below, to take any other action necessary in
order to make compliance with an exemption from such registration
available.
E. I also understand that stop transfer instructions will be given to
FDC's transfer agent with respect to the shares of FDC Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the FDC Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED [ ], 1997 BETWEEN THE REGISTERED HOLDER
HEREOF, FALCON DRILLING COMPANY, INC., READING & BATES CORPORA
TION AND R&B FALCON CORPORATION, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF R&B FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC Account
ing Series Release No. 135) with respect to shares of FDC Common Stock that
I may hold and, furthermore, that I will not sell, transfer or otherwise
dispose of or reduce my risk (as contemplated by SEC Accounting Series
Release No. 135) with respect to the shares of Parent Common Stock
received by me in the FDC Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of the post-
Mergers financial results is referred to herein as the "Pooling Period").
Parent shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be prohib
ited from selling up to 10% of the shares of Parent Common Stock (the "10%
Shares") received by me or the shares of FDC Common Stock owned by me or
making charitable contributions or bona fide gifts of the shares of Parent
Common Stock received by me or the shares of FDC Common Stock owned by me,
subject to the same restrictions. The 10% Shares shall be calculated in
accordance with SEC Accounting Series Release No. 135 as amended by Staff
Accounting Bulletin No. 76. I covenant with Parent that I will not sell,
transfer or otherwise dispose of any 10% Shares during the period commenc
ing from the Effective Time and ending on the last day of the Pooling
Period except in compliance with Rule 145(d)(i) under the Act or pursuant
to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of FDC as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the FDC
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shares of Parent Common Stock received in the FDC
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to R&B and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the Commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
________________________________
Name: Rodney W. Meisetschlaeger
Agreed and accepted this __ day
of ___________, 1997, by
R&B FALCON CORPORATION
By: _______________________________
Name:
Title:
READING & BATES CORPORATION
By: ________________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By: ________________________________
Name:
Title:
EXHIBIT 10.81
AFFILIATE LETTER FOR AFFILIATES OF FDC
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
and/or (ii) used in and for purposes of Accounting Series Releases No. 130
and No. 135, as amended, of the Commission. Pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 10, 1997 (the "Merger
Agreement"), among R&B Falcon Corporation, a Delaware corporation ("Par
ent"), FDC Acquisition Corp., a Delaware corporation ("SubF"), Reading &
Bates Acquisition Corp., a Delaware corporation ("SubR"), FDC and Reading &
Bates Corporation, a Delaware corporation ("R&B"), pursuant to which (i)
SubF will be merged with and into FDC, with FDC continuing as the surviving
corporation (the "FDC Merger"), (ii) SubR will be merged with and into R&B,
with R&B continuing as the surviving corporation (the "R&B Merger" and
together with the FDC Merger, the "Mergers"), and (iii) each of FDC and R&B
will become a subsidiary of Parent and stockholders of each of FDC and R&B
will become stockholders of Parent. Capitalized terms used in this letter
without definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the FDC Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of op
tions for shares) owned by me of common stock, par value $.01 per share of
FDC (the "FDC Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that in
the event I receive any shares of Parent Common Stock as a result of the
FDC Merger:
A. I shall not make any offer, sale, pledge, transfer or other disposition
of the shares of Parent Common Stock in violation of the Act or the Rules
and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for FDC.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the FDC Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of FDC, (a) I may be deemed to be an affili
ate of FDC and (b) the distribution by me of the shares of Parent Common
Stock has not been registered under the Act, I may not sell, transfer or
otherwise dispose of the shares of Parent Common Stock issued to me in the
FDC Merger unless (i) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer or other disposition
has been registered under the Act or (iii) in the opinion of counsel reason
ably acceptable to Parent, or a "no action" letter obtained by the
undersigned from the staff of the Commission such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other dispo
sition of the Parent Stock by me or on my behalf under the Act or, except
as provided in paragraph 2(A) below, to take any other action necessary in
order to make compliance with an exemption from such registration
available.
E. I also understand that stop transfer instructions will be given to
FDC's transfer agent with respect to the shares of FDC Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the FDC Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED [ ], 1997 BETWEEN THE REGISTERED HOLDER
HEREOF, FALCON DRILLING COMPANY, INC., READING & BATES CORPORA
TION AND R&B FALCON CORPORATION, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF R&B FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC Account
ing Series Release No. 135) with respect to shares of FDC Common Stock that
I may hold and, furthermore, that I will not sell, transfer or otherwise
dispose of or reduce my risk (as contemplated by SEC Accounting Series
Release No. 135) with respect to the shares of Parent Common Stock
received by me in the FDC Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of the post-
Mergers financial results is referred to herein as the "Pooling Period").
Parent shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be prohib
ited from selling up to 10% of the shares of Parent Common Stock (the "10%
Shares") received by me or the shares of FDC Common Stock owned by me or
making charitable contributions or bona fide gifts of the shares of Parent
Common Stock received by me or the shares of FDC Common Stock owned by me,
subject to the same restrictions. The 10% Shares shall be calculated in
accordance with SEC Accounting Series Release No. 135 as amended by Staff
Accounting Bulletin No. 76. I covenant with Parent that I will not sell,
transfer or otherwise dispose of any 10% Shares during the period commenc
ing from the Effective Time and ending on the last day of the Pooling
Period except in compliance with Rule 145(d)(i) under the Act or pursuant
to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of FDC as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the FDC
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shares of Parent Common Stock received in the FDC
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to R&B and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the Commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
____________________________
Name: Steven R. Meheen
Agreed and accepted this __ day
of ___________, 1997, by
R&B FALCON CORPORATION
By: _______________________________
Name:
Title:
READING & BATES CORPORATION
By: ________________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By: ________________________________
Name:
Title:
EXHIBIT 10.82
AFFILIATE LETTER FOR AFFILIATES OF FDC
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
and/or (ii) used in and for purposes of Accounting Series Releases No. 130
and No. 135, as amended, of the Commission. Pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 10, 1997 (the "Merger
Agreement"), among R&B Falcon Corporation, a Delaware corporation ("Par
ent"), FDC Acquisition Corp., a Delaware corporation ("SubF"), Reading &
Bates Acquisition Corp., a Delaware corporation ("SubR"), FDC and Reading &
Bates Corporation, a Delaware corporation ("R&B"), pursuant to which (i)
SubF will be merged with and into FDC, with FDC continuing as the surviving
corporation (the "FDC Merger"), (ii) SubR will be merged with and into R&B,
with R&B continuing as the surviving corporation (the "R&B Merger" and
together with the FDC Merger, the "Mergers"), and (iii) each of FDC and R&B
will become a subsidiary of Parent and stockholders of each of FDC and R&B
will become stockholders of Parent. Capitalized terms used in this letter
without definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the FDC Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of op
tions for shares) owned by me of common stock, par value $.01 per share of
FDC (the "FDC Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that in
the event I receive any shares of Parent Common Stock as a result of the
FDC Merger:
A. I shall not make any offer, sale, pledge, transfer or other disposition
of the shares of Parent Common Stock in violation of the Act or the Rules
and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for FDC.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the FDC Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of FDC, (a) I may be deemed to be an affili
ate of FDC and (b) the distribution by me of the shares of Parent Common
Stock has not been registered under the Act, I may not sell, transfer or
otherwise dispose of the shares of Parent Common Stock issued to me in the
FDC Merger unless (i) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer or other disposition
has been registered under the Act or (iii) in the opinion of counsel reason
ably acceptable to Parent, or a "no action" letter obtained by the
undersigned from the staff of the Commission such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other dispo
sition of the Parent Stock by me or on my behalf under the Act or, except
as provided in paragraph 2(A) below, to take any other action necessary in
order to make compliance with an exemption from such registration
available.
E. I also understand that stop transfer instructions will be given to
FDC's transfer agent with respect to the shares of FDC Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the FDC Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED [ ], 1997 BETWEEN THE REGISTERED HOLDER
HEREOF, FALCON DRILLING COMPANY, INC., READING & BATES CORPORA
TION AND R&B FALCON CORPORATION, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF R&B FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC Account
ing Series Release No. 135) with respect to shares of FDC Common Stock that
I may hold and, furthermore, that I will not sell, transfer or otherwise
dispose of or reduce my risk (as contemplated by SEC Accounting Series
Release No. 135) with respect to the shares of Parent Common Stock
received by me in the FDC Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of the post-
Mergers financial results is referred to herein as the "Pooling Period").
Parent shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be prohib
ited from selling up to 10% of the shares of Parent Common Stock (the "10%
Shares") received by me or the shares of FDC Common Stock owned by me or
making charitable contributions or bona fide gifts of the shares of Parent
Common Stock received by me or the shares of FDC Common Stock owned by me,
subject to the same restrictions. The 10% Shares shall be calculated in
accordance with SEC Accounting Series Release No. 135 as amended by Staff
Accounting Bulletin No. 76. I covenant with Parent that I will not sell,
transfer or otherwise dispose of any 10% Shares during the period commenc
ing from the Effective Time and ending on the last day of the Pooling
Period except in compliance with Rule 145(d)(i) under the Act or pursuant
to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of FDC as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the FDC
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shares of Parent Common Stock received in the FDC
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to R&B and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the Commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
____________________________
Name: Douglas A.P. Hamilton
Agreed and accepted this __ day
of ___________, 1997, by
R&B FALCON CORPORATION
By: _______________________________
Name:
Title:
READING & BATES CORPORATION
By: ________________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By: ________________________________
Name:
Title:
EXHIBIT 10.83
AFFILIATE LETTER FOR AFFILIATES OF FDC
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
and/or (ii) used in and for purposes of Accounting Series Releases No. 130
and No. 135, as amended, of the Commission. Pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 10, 1997 (the "Merger
Agreement"), among R&B Falcon Corporation, a Delaware corporation ("Par
ent"), FDC Acquisition Corp., a Delaware corporation ("SubF"), Reading &
Bates Acquisition Corp., a Delaware corporation ("SubR"), FDC and Reading &
Bates Corporation, a Delaware corporation ("R&B"), pursuant to which (i)
SubF will be merged with and into FDC, with FDC continuing as the surviving
corporation (the "FDC Merger"), (ii) SubR will be merged with and into R&B,
with R&B continuing as the surviving corporation (the "R&B Merger" and
together with the FDC Merger, the "Mergers"), and (iii) each of FDC and R&B
will become a subsidiary of Parent and stockholders of each of FDC and R&B
will become stockholders of Parent. Capitalized terms used in this letter
without definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the FDC Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of op
tions for shares) owned by me of common stock, par value $.01 per share of
FDC (the "FDC Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that in
the event I receive any shares of Parent Common Stock as a result of the
FDC Merger:
A. I shall not make any offer, sale, pledge, transfer or other disposition
of the shares of Parent Common Stock in violation of the Act or the Rules
and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for FDC.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the FDC Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of FDC, (a) I may be deemed to be an affili
ate of FDC and (b) the distribution by me of the shares of Parent Common
Stock has not been registered under the Act, I may not sell, transfer or
otherwise dispose of the shares of Parent Common Stock issued to me in the
FDC Merger unless (i) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer or other disposition
has been registered under the Act or (iii) in the opinion of counsel reason
ably acceptable to Parent, or a "no action" letter obtained by the
undersigned from the staff of the Commission such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other dispo
sition of the Parent Stock by me or on my behalf under the Act or, except
as provided in paragraph 2(A) below, to take any other action necessary in
order to make compliance with an exemption from such registration
available.
E. I also understand that stop transfer instructions will be given to
FDC's transfer agent with respect to the shares of FDC Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the FDC Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED [ ], 1997 BETWEEN THE REGISTERED HOLDER
HEREOF, FALCON DRILLING COMPANY, INC., READING & BATES CORPORA
TION AND R&B FALCON CORPORATION, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF R&B FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC Account
ing Series Release No. 135) with respect to shares of FDC Common Stock that
I may hold and, furthermore, that I will not sell, transfer or otherwise
dispose of or reduce my risk (as contemplated by SEC Accounting Series
Release No. 135) with respect to the shares of Parent Common Stock
received by me in the FDC Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of the post-
Mergers financial results is referred to herein as the "Pooling Period").
Parent shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be prohib
ited from selling up to 10% of the shares of Parent Common Stock (the "10%
Shares") received by me or the shares of FDC Common Stock owned by me or
making charitable contributions or bona fide gifts of the shares of Parent
Common Stock received by me or the shares of FDC Common Stock owned by me,
subject to the same restrictions. The 10% Shares shall be calculated in
accordance with SEC Accounting Series Release No. 135 as amended by Staff
Accounting Bulletin No. 76. I covenant with Parent that I will not sell,
transfer or otherwise dispose of any 10% Shares during the period commenc
ing from the Effective Time and ending on the last day of the Pooling
Period except in compliance with Rule 145(d)(i) under the Act or pursuant
to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of FDC as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the FDC
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shares of Parent Common Stock received in the FDC
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to R&B and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the Commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
_________________________
Name: Michael Porter
Agreed and accepted this __ day
of ___________, 1997, by
R&B FALCON CORPORATION
By: _______________________________
Name:
Title:
READING & BATES CORPORATION
By: ________________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By: ________________________________
Name:
Title:
EXHIBIT 10.84
AFFILIATE LETTER FOR AFFILIATES OF FDC
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
and/or (ii) used in and for purposes of Accounting Series Releases No. 130
and No. 135, as amended, of the Commission. Pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 10, 1997 (the "Merger
Agreement"), among R&B Falcon Corporation, a Delaware corporation ("Par
ent"), FDC Acquisition Corp., a Delaware corporation ("SubF"), Reading &
Bates Acquisition Corp., a Delaware corporation ("SubR"), FDC and Reading &
Bates Corporation, a Delaware corporation ("R&B"), pursuant to which (i)
SubF will be merged with and into FDC, with FDC continuing as the surviving
corporation (the "FDC Merger"), (ii) SubR will be merged with and into R&B,
with R&B continuing as the surviving corporation (the "R&B Merger" and
together with the FDC Merger, the "Mergers"), and (iii) each of FDC and R&B
will become a subsidiary of Parent and stockholders of each of FDC and R&B
will become stockholders of Parent. Capitalized terms used in this letter
without definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the FDC Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of op
tions for shares) owned by me of common stock, par value $.01 per share of
FDC (the "FDC Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that in
the event I receive any shares of Parent Common Stock as a result of the
FDC Merger:
A. I shall not make any offer, sale, pledge, transfer or other disposition
of the shares of Parent Common Stock in violation of the Act or the Rules
and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for FDC.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the FDC Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of FDC, (a) I may be deemed to be an affili
ate of FDC and (b) the distribution by me of the shares of Parent Common
Stock has not been registered under the Act, I may not sell, transfer or
otherwise dispose of the shares of Parent Common Stock issued to me in the
FDC Merger unless (i) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer or other disposition
has been registered under the Act or (iii) in the opinion of counsel reason
ably acceptable to Parent, or a "no action" letter obtained by the
undersigned from the staff of the Commission such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other dispo
sition of the Parent Stock by me or on my behalf under the Act or, except
as provided in paragraph 2(A) below, to take any other action necessary in
order to make compliance with an exemption from such registration
available.
E. I also understand that stop transfer instructions will be given to
FDC's transfer agent with respect to the shares of FDC Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the FDC Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED [ ], 1997 BETWEEN THE REGISTERED HOLDER
HEREOF, FALCON DRILLING COMPANY, INC., READING & BATES CORPORA
TION AND R&B FALCON CORPORATION, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF R&B FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC Account
ing Series Release No. 135) with respect to shares of FDC Common Stock that
I may hold and, furthermore, that I will not sell, transfer or otherwise
dispose of or reduce my risk (as contemplated by SEC Accounting Series
Release No. 135) with respect to the shares of Parent Common Stock
received by me in the FDC Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of the post-
Mergers financial results is referred to herein as the "Pooling Period").
Parent shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be prohib
ited from selling up to 10% of the shares of Parent Common Stock (the "10%
Shares") received by me or the shares of FDC Common Stock owned by me or
making charitable contributions or bona fide gifts of the shares of Parent
Common Stock received by me or the shares of FDC Common Stock owned by me,
subject to the same restrictions. The 10% Shares shall be calculated in
accordance with SEC Accounting Series Release No. 135 as amended by Staff
Accounting Bulletin No. 76. I covenant with Parent that I will not sell,
transfer or otherwise dispose of any 10% Shares during the period commenc
ing from the Effective Time and ending on the last day of the Pooling
Period except in compliance with Rule 145(d)(i) under the Act or pursuant
to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of FDC as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the FDC
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shares of Parent Common Stock received in the FDC
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to R&B and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the Commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
_________________________
Name: William R. Ziegler
Agreed and accepted this __ day
of ___________, 1997, by
R&B FALCON CORPORATION
By: _______________________________
Name:
Title:
READING & BATES CORPORATION
By: ________________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By: ________________________________
Name:
Title:
EXHIBIT 10.85
AFFILIATE LETTER FOR AFFILIATES OF FDC
R&B Falcon Corporation
1900 West Loop South
Suite 1800
Houston, Texas 77027
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Reading & Bates Corporation
901 Threadneedle
Suite 2000
Houston, Texas 77079
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Falcon Drilling Company, Inc., a Delaware
corporation ("FDC"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
and/or (ii) used in and for purposes of Accounting Series Releases No. 130
and No. 135, as amended, of the Commission. Pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 10, 1997 (the "Merger
Agreement"), among R&B Falcon Corporation, a Delaware corporation ("Par
ent"), FDC Acquisition Corp., a Delaware corporation ("SubF"), Reading &
Bates Acquisition Corp., a Delaware corporation ("SubR"), FDC and Reading &
Bates Corporation, a Delaware corporation ("R&B"), pursuant to which (i)
SubF will be merged with and into FDC, with FDC continuing as the surviving
corporation (the "FDC Merger"), (ii) SubR will be merged with and into R&B,
with R&B continuing as the surviving corporation (the "R&B Merger" and
together with the FDC Merger, the "Mergers"), and (iii) each of FDC and R&B
will become a subsidiary of Parent and stockholders of each of FDC and R&B
will become stockholders of Parent. Capitalized terms used in this letter
without definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the FDC Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Stock in exchange for shares (or upon exercise of op
tions for shares) owned by me of common stock, par value $.01 per share of
FDC (the "FDC Common Stock").
1. I hereby represent, warrant and covenant to Parent, FDC and R&B that in
the event I receive any shares of Parent Common Stock as a result of the
FDC Merger:
A. I shall not make any offer, sale, pledge, transfer or other disposition
of the shares of Parent Common Stock in violation of the Act or the Rules
and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for FDC.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the FDC Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of FDC, (a) I may be deemed to be an affili
ate of FDC and (b) the distribution by me of the shares of Parent Common
Stock has not been registered under the Act, I may not sell, transfer or
otherwise dispose of the shares of Parent Common Stock issued to me in the
FDC Merger unless (i) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer or other disposition
has been registered under the Act or (iii) in the opinion of counsel reason
ably acceptable to Parent, or a "no action" letter obtained by the
undersigned from the staff of the Commission such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other dispo
sition of the Parent Stock by me or on my behalf under the Act or, except
as provided in paragraph 2(A) below, to take any other action necessary in
order to make compliance with an exemption from such registration
available.
E. I also understand that stop transfer instructions will be given to
FDC's transfer agent with respect to the shares of FDC Common Stock
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the FDC Merger, and there will be
placed on the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED [ ], 1997 BETWEEN THE REGISTERED HOLDER
HEREOF, FALCON DRILLING COMPANY, INC., READING & BATES CORPORA
TION AND R&B FALCON CORPORATION, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF R&B FALCON CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
G. I further represent to, and covenant with Parent, FDC and R&B that I
will not, during the 30 days prior to the Effective Time, sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC Account
ing Series Release No. 135) with respect to shares of FDC Common Stock that
I may hold and, furthermore, that I will not sell, transfer or otherwise
dispose of or reduce my risk (as contemplated by SEC Accounting Series
Release No. 135) with respect to the shares of Parent Common Stock
received by me in the FDC Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
operations of Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes the combined results
of operations of FDC and R&B (the period commencing 30 days prior to the
Effective Time and ending on the date of the publication of the post-
Mergers financial results is referred to herein as the "Pooling Period").
Parent shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be prohib
ited from selling up to 10% of the shares of Parent Common Stock (the "10%
Shares") received by me or the shares of FDC Common Stock owned by me or
making charitable contributions or bona fide gifts of the shares of Parent
Common Stock received by me or the shares of FDC Common Stock owned by me,
subject to the same restrictions. The 10% Shares shall be calculated in
accordance with SEC Accounting Series Release No. 135 as amended by Staff
Accounting Bulletin No. 76. I covenant with Parent that I will not sell,
transfer or otherwise dispose of any 10% Shares during the period commenc
ing from the Effective Time and ending on the last day of the Pooling
Period except in compliance with Rule 145(d)(i) under the Act or pursuant
to charitable contributions or bona fide gifts.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of FDC as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the FDC
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shares of Parent Common Stock received in the FDC
Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to R&B and
Parent, or a "no-action" letter obtained by the undersigned from the staff
of the Commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
_____________________
Name: Don P. Rodney
Agreed and accepted this __ day
of ___________, 1997, by
R&B FALCON CORPORATION
By: _______________________________
Name:
Title:
READING & BATES CORPORATION
By: ________________________________
Name:
Title:
FALCON DRILLING COMPANY, INC.
By: ________________________________
Name:
Title:
EXHIBIT 10.150
==========================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
among
READING & BATES CORPORATION,
READING & BATES DRILLING CO.,
VARIOUS LENDING INSTITUTIONS,
CREDIT AGRICOLE INDOSUEZ,
as DOCUMENTATION AGENT
CREDIT LYONNAIS NEW YORK BRANCH,
as DOCUMENTATION AGENT
and
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as ADMINISTRATIVE AGENT,
ARRANGER
AND SECURITY TRUSTEE
_______________________________________
Dated as of November 13, 1996
and
Amended and Restated as of July 3, 1997
_______________________________________
==========================================================================
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. Letters of Credit
2.01 Letters of Credit
2.02 Letter of Credit Requests; Request for
Issuance of Letter of Credit
2.03 Agreement to Repay Letter of Credit Payments
2.04 Letter of Credit Participations
2.05 Increased Costs
2.06 Indemnities
SECTION 3. Fees; Commitments
3.01 Fees
3.02 Voluntary Reduction of Commitments
3.03 Mandatory Adjustments of Commitments, etc.
SECTION 4. Payments
4.01 Voluntary Prepayments
4.02 Mandatory Prepayments
4.03 Method and Place of Payment
4.04 Net Payments
SECTION 5. Conditions Precedent
5.01 Execution of Agreement; Notes
5.02 No Default; Representations and Warranties
5.03 Officer's Certificate
5.04 Opinions of Counsel
5.05 Corporate Proceedings
5.06 Adverse Change, etc.
5.07 Litigation
5.08 Approvals
5.09 Fees
5.10 Security Agreement
5.11 Subsidiary Guaranty
5.12 Mortgages
5.13 Evidence of Filing of Mortgage Amendments;
Variation of Australian Mortgage, etc.
5.14 Pledge Agreement
5.15 Refinancing; Existing Credit Agreement
5.16 Compliance Certificate
SECTION 6. Representations, Warranties and Agreements
6.01 Corporate Status
6.02 Corporate Power and Authority
6.03 No Violation
6.04 Litigation
6.05 Use of Proceeds; Margin Regulations
6.06 Governmental Approvals
6.07 Investment Company Act
6.08 Public Utility Holding Company Act
6.09 True and Complete Disclosure
6.10 Financial Condition; Financial Statements;
Projections
6.11 Security Interests
6.12 Tax Returns and Payments
6.13 Compliance with ERISA
6.14 Subsidiaries
6.15 Patents, etc.
6.16 Pollution and Other Regulations
6.17 Properties
6.18 Labor Relations
6.19 Existing Indebtedness
6.20 Citizenship
6.21 Rig Classification
SECTION 7. Affirmative Covenants
7.01 Information Covenants
7.02 Books, Records and Inspections
7.03 Insurance
7.04 Payment of Taxes
7.05 Consolidated Corporate Franchises
7.06 Compliance with Statutes, etc.
7.07 Good Repair
7.08 End of Fiscal Years; Fiscal Quarters
7.09 Use of Proceeds
7.10 Earnings Concentration Account
7.11 Additional Rig Valuations
7.12 Further Assurances
7.13 ERISA
SECTION 8. Negative Covenants
8.01 Changes in Business
8.02 Consolidation, Merger or Sale of Assets, etc.
8.03 Liens on Collateral; Arcade Drilling
8.04 Indebtedness of Arcade
8.05 Dividends; Restrictions on Subsidiaries, etc.
8.06 Transactions with Affiliates
8.07 Vessel Management; Registry
8.08 Coverage Ratio
8.09 Working Capital
8.10 Leverage Ratio
8.11 Collateral Maintenance
SECTION 9. Events of Default
9.01 Payments
9.02 Representations, etc.
9.03 Covenants
9.04 Default Under Other Agreements
9.05 Bankruptcy, etc.
9.06 Security Documents
9.07 Guaranty
9.08 Judgments
9.09 Citizenship
9.10 Employee Benefit Plans
9.11 Change of Control
SECTION 10. Definitions
SECTION 11. The Administrative Agent and the
Security Trustee
11.01 Appointment of the Administrative
Agent and the Security Trustee
11.02 Nature of Duties
11.03 Lack of Reliance on the Administrative Agent
11.04 Certain Rights of the Administrative Agent
11.05 Reliance
11.06 Indemnification
11.07 The Administrative Agent in Its
Individual Capacity
11.08 Holders
11.09 Resignation by the Administrative Agent
SECTION 12. Miscellaneous
12.01 Payment of Expenses, etc.
12.02 Right of Setoff
12.03 Notices
12.04 Benefit of Agreement
12.05 No Waiver; Remedies Cumulative
12.06 Payments Pro Rata
12.07 Calculations; Computations
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION;
VENUE; WAIVER OF JURY TRIAL
12.09 Counterparts
12.10 Effectiveness
12.11 Headings Descriptive
12.12 Amendment or Waiver
12.13 Survival
12.14 Domicile of Loans
12.15 Confidentiality
12.16 Registry
SECTION 13. Holdings Guaranty
13.01 The Guaranty
13.02 Bankruptcy
13.03 Nature of Liability
13.04 Independent Obligation
13.05 Waiver of Notice, etc.
13.06 Authorization
13.07 Reliance
13.08 Subordination
13.09 Waiver
ANNEX I -- Commitments
ANNEX II -- Bank Addresses
ANNEX III -- Existing Letters of Credit
ANNEX IV -- Commitment Reduction Schedule
ANNEX V -- Subsidiaries
ANNEX VI -- Rigs and Vessels
ANNEX VII -- Existing Indebtedness
ANNEX VIII -- Existing Liens
ANNEX IX -- Approved Shipbrokers
EXHIBIT A -- Form of Notice of Borrowing
EXHIBIT B -- Form of Note
EXHIBIT C -- Form of Letter of Credit Request
EXHIBIT D -- Form of Section 4.04(b)(ii) Certificate
EXHIBIT E-1 -- Form of Opinion of Wayne Hillin, Esq.
EXHIBIT E-2 -- Form of Opinion of White & Case
EXHIBIT F -- Form of Officers' Certificate
EXHIBIT G -- Form of Security Agreement
EXHIBIT H -- Form of Subsidiary Guaranty
EXHIBIT I-1 -- Form of US Mortgage
EXHIBIT I-2 -- Form of Panamanian Mortgage
EXHIBIT I-3 -- Form of Australian Mortgage
EXHIBIT J -- Form of Pledge Agreement
EXHIBIT K -- Form of Compliance Certificate
EXHIBIT L -- Form of Assignment and Assumption Agreement
--------------------------------------
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of November 13,
1996 and amended and restated as of July 3, 1997, among READING & BATES
CORPORATION ("Holdings"), a Delaware corporation, READING & BATES DRILLING
CO. (the "Borrower"), an Oklahoma corporation, the lending institutions
listed from time to time on Annex I hereto (each a "Bank" and, collec
tively, the "Banks"), CREDIT AGRICOLE INDOSUEZ and CREDIT LYONNAIS NEW YORK
BRANCH as documentation agents (the "Documentation Agents") and CHRISTIANIA
BANK OG KREDITKASSE, NEW YORK BRANCH, as administrative agent, arranger and
security trustee (the "Administrative Agent"). Unless otherwise 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 at any time and from time to time
on and after the Restatement Effective Date and prior to the Maturity Date,
(ii) 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, (iii) may be repaid and reborrowed in accordance
with the provisions hereof, (iv) shall not exceed in the aggregate for all
Banks at any time outstanding, the Total Commitment and (v) 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 and with such Bank's Adjusted Percentage of the
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are
repaid with the proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Loans) 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 10 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 and 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 and (iv) disbursement
instructions. The Administrative Agent shall promptly give each Bank writ
ten notice (or telephonic notice promptly confirmed in writing) of each
proposed Borrowing, of such Bank's proportionate 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
Restatement 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 4.02 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 Applicable Eurodollar Margin plus the relevant 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 12.07(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 with respect to any Borrowing of Loans
under the Facility may be elected that would extend beyond any date
upon which a Scheduled Commitment Reduction is required to be made in
respect of the Facility if, after giving effect to the selection of
such Interest Period, the aggregate principal amount of Loans
maintained as Eurodollar Loans under the Facility with Interest
Periods ending after such date would exceed the aggregate principal
amount of Loans of the Facility permitted to be outstanding after such
Scheduled Commitment Reduction;
(vi) 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
(vii) no more than six 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 an 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 appli-cable 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 9) 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), 2.05 or 4.04 with re
spect 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, Letters of Credit 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 obliga
tions of the Borrower or the right of any Bank provided in Section 1.10,
2.05 or 4.04.
(b) Notwithstanding anything in this Agreement to the contrary,
to the extent any notice required by Section 1.10, 2.05 or 4.04 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, 2.05 or 4.04 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), 2.05
or 4.04 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
12.12(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 12.04(b) (and with all fees payable pursuant to said
Section 12.04(b) to be paid by the Replacement Bank) pursuant to which the
Replacement Bank shall acquire all of the Commitments and outstanding Loans
of, and in each case participations in Letters of Credit by, the Replaced
Bank and, in connection therewith, shall pay to (x) the Replaced Bank in
respect thereof an amount equal to the sum of (A) an amount equal to the
principal of, and all accrued interest on, all outstanding Loans of the
Replaced Bank, (B) an amount equal to all Unpaid Drawings that have been
funded by (and not reimbursed to) such Replaced Bank, together with all
then unpaid interest with respect thereto at such time and (C) an amount
equal to all accrued, but theretofore unpaid, Fees owing to the Replaced
Bank pursuant to Section 3.01, and (y) the Letter of Credit Issuer an
amount equal to such Replaced Bank's Percentage of any Unpaid Drawing
(which at such time remains an Unpaid Drawing) to the extent such amount
was not theretofore funded by such 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. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request that the Letter of
Credit Issuer at any time and from time to time on or after the Restatement
Effective Date and prior to the Business Day immediately preceding the
Maturity Date issue, for the account of the Borrower and in support of L/C
Supportable Obligations, and subject to and upon the terms and conditions
herein set forth, the Letter of Credit Issuer agrees to issue from time to
time, irrevocable standby letters of credit denominated in U.S. Dollars or
any other currency acceptable to the Letter of Credit Issuer (subject to
the provisions of Section 2.01(b)) and in such form as may be approved by
the Letter of Credit Issuer (each such standby letter of credit, a "Letter
of Credit" and collectively, the "Letters of Credit"). Annex III contains
a description of all letters of credit issued under the Existing Credit
Agreement prior to the Restatement Effective Date and which will remain
outstanding on the Restatement Effective Date. Each such letter of credit,
including any extension thereof (each an "Existing Letter of Credit") shall
constitute a "Letter of Credit" for all purposes of this Agreement and
shall be deemed issued for purposes of Sections 2.04 and 3.01(b) and (c) on
the Restatement Effective Date.
(b) Whenever the Letter of Credit Issuer issues a Letter of
Credit in a currency other than U.S. Dollars, the Letter of Credit
Outstandings relating to such Letter of Credit at such time shall be
calculated on the basis of the U.S. Dollar Equivalent of the Stated Amount
of such Letter of Credit. Any U.S. Dollar Equivalent established according
to the preceding sentence shall remain in effect until such date as the
calculation of the U.S. Dollar Equivalent determined as above, if made on
such date, would yield a U.S. Dollar Equivalent which varies by greater
than 10.0% from the U.S. Dollar Equivalent then in effect, at which time
the Letter of Credit Outstandings shall be adjusted to reflect the current
U.S. Dollar Equivalent of the Stated Amount of such Letter of Credit.
Subsequent adjustments shall then be made on any date on which the current
calculation of the U.S. Dollar Equivalent would yield a result which varies
by greater than 10.0% from the U.S. Dollar Equivalent then in effect.
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall
be issued, the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of,
and prior to the issuance of, the respective Letter of Credit) at such
time, would exceed either (x) $30,000,000 or (y) when added to the
aggregate principal amount of all Loans made by Non-Defaulting Banks then
outstanding, the Adjusted Total Commitment at such time; and (ii) each
Letter of Credit shall have an expiry date occurring not later than the
Business Day immediately preceding the Maturity Date.
2.02 Letter of Credit Requests; Request for Issuance of Letter
of Credit. (a) Whenever it desires that a Letter of Credit be issued, the
Borrower shall give the Letter of Credit Issuer written notice (including
by way of telecopier) in the form of Exhibit C prior to 1:00 P.M. (New York
time) at least three Business Days (or such shorter period as may be accept
able to the Letter of Credit Issuer) prior to the proposed date of issuance
(which shall be a Business Day) (each a "Letter of Credit Request"), which
Letter of Credit Request shall include any documents that the Letter of
Credit Issuer customarily requires in connection therewith. The Letter of
Credit Issuer shall promptly notify each Bank of each Letter of Credit
Request.
(b) The Letter of Credit Issuer shall, on the date of each
issuance of a Letter of Credit by it, give each Bank and the Borrower writ
ten notice of the issuance of such Letter of Credit.
2.03 Agreement to Repay Letter of Credit Payments. (a) The
Borrower hereby agrees to reimburse the Letter of Credit Issuer, by making
payment at the Payment Office, for any payment or disbursement made by the
Letter of Credit Issuer under any Letter of Credit (each such amount so
paid or disbursed until reimbursed, an "Unpaid Drawing") immediately after,
and in any event on the date on which the Borrower is notified by the
Letter of Credit Issuer of such payment or disbursement with interest on
the amount so paid or disbursed by the Letter of Credit Issuer, to the
extent not reimbursed prior to 1:00 P.M. (New York time) on the date of
such payment or disbursement, from and including the date paid or disbursed
to but not including the date the Letter of Credit Issuer is reimbursed
therefor at a rate per annum which shall be the Base Rate as in effect on
the date of such notice of payment or disbursements (plus an additional 2%
per annum if not reimbursed by the third Business Day after the date of
such notice of payment or disbursement), such interest also to be payable
on demand.
(b) The Borrower's obligation under this Section 2.03 to
reimburse the Letter of Credit Issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and
unconditional under any and all circumstances and irrespective of any
setoff, counterclaim or defense to payment which the Borrower may have or
have had against the Letter of Credit Issuer or any Bank, including,
without limitation, any defense based upon the failure of any drawing under
a Letter of Credit to conform to the terms of the Letter of Credit (other
than the failure of the Letter of Credit Issuer to determine that any
documents required to be delivered under such Letter of Credit have been
delivered and that they substantially comply on their face with the
requirements of such Letter of Credit) or any non-application or
misapplication by the beneficiary of the proceeds of such drawing;
provided, however, that the Borrower shall not be obligated to reimburse
the Letter of Credit Issuer for any wrongful payment made by the Letter of
Credit Issuer under a Letter of Credit as a result of acts or omissions
constituting willful misconduct or gross negligence on the part of the
Letter of Credit Issuer.
2.04 Letter of Credit Participations. (a) Immediately upon the
issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter
of Credit Issuer shall be deemed to have sold and transferred to each other
Bank, and each such Bank (each a "Participant") shall be deemed irrevocably
and unconditionally to have purchased and received from the Letter of
Credit Issuer, without recourse or warranty, an undivided interest and
participation, to the extent of such Bank's Adjusted Percentage, in such
Letter of Credit, each substitute letter of credit, each drawing made
thereunder and the obligations of the Borrower under this Agreement with
respect thereto (although the Letter of Credit Fee shall be payable
directly to the Administrative Agent for the account of the Banks as
provided in Section 3.01(b) and the Participants shall have no right to
receive any portion of any Facing Fees) and any security therefor or
guaranty pertaining thereto. Upon any change in the Commitments or
Adjusted Percentages of the Banks pursuant to Section 12.04(b) or upon a
Bank Default, it is hereby agreed that, with respect to all outstanding
Letters of Credit and Unpaid Drawings, there shall be an automatic ad
justment to the participations pursuant to this Section 2.04 to reflect the
new Adjusted Percentages of the assigning and assignee Bank or of all
Banks, as the case may be.
(b) In determining whether to pay under any Letter of Credit,
the Letter of Credit Issuer shall not have any obligation relative to the
Participants other than to determine that any documents required to be
delivered under such Letter of Credit have been delivered and that they
substantially comply on their face with the requirements of such Letter of
Credit. Any action taken or omitted to be taken by the Letter of Credit
Issuer under or in connection with any Letter of Credit, if taken or
omitted in the absence of gross negligence or willful misconduct, shall not
create for the Letter of Credit Issuer any resulting liability to the
Participants.
(c) In the event that the Letter of Credit Issuer makes any pay
ment under any Letter of Credit and the Borrower shall not have reimbursed
such amount in full to the Letter of Credit Issuer pursuant to Section
2.03(a), the Letter of Credit Issuer shall promptly notify each Participant
of such failure, and each Participant shall promptly and unconditionally
pay to the Letter of Credit Issuer, the amount of such Participant's
Adjusted Percentage of such payment in U.S. Dollars and in same day funds;
provided, however, that no Participant shall be obligated to pay to the
Letter of Credit Issuer its Adjusted Percentage of such unreimbursed amount
for any wrongful payment made by the Letter of Credit Issuer under a Letter
of Credit as a result of acts or omissions constituting willful misconduct
or gross negligence on the part of the Letter of Credit Issuer. If the
Administrative Agent so notifies any Participant required to fund an Unpaid
Drawing under a Letter of Credit prior to 12:00 Noon (New York time) on any
Business Day, such Participant shall make available to the Letter of Credit
Issuer such Participant's Adjusted Percentage of the amount of such payment
on such Business Day in same day funds. If and to the extent such Partici
pant shall not have so made its Adjusted Percentage of the amount of such
Unpaid Drawing available to the Letter of Credit Issuer, such Participant
agrees to pay to the Letter of Credit Issuer, forthwith on demand such
amount, together with interest thereon, for each day from such date until
the date such amount is paid to the Letter of Credit Issuer at the
overnight Federal Funds Effective Rate. The failure of any Participant to
make available to the Letter of Credit Issuer its Adjusted Percentage of
any Unpaid Drawing under any Letter of Credit shall not relieve any other
Participant of its obligation hereunder to make available to the Letter of
Credit Issuer its Adjusted Percentage of any payment under any Letter of
Credit on the date required, as specified above, but no Participant shall
be responsible for the failure of any other Participant to make available
to the Letter of Credit Issuer such other Participant's Adjusted Percentage
of any such payment.
(d) Whenever the Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Administrative Agent has received
for the account of the Letter of Credit Issuer any payments from the
Participants pursuant to clause (c) above, the Letter of Credit Issuer
shall pay to each Participant which has paid its Adjusted Percentage
thereof, in Dollars and in same day funds, an amount equal to such
Participant's Adjusted Percentage of the principal amount thereof and
interest thereon accruing at the overnight Federal Funds Effective Rate
after the purchase of the respective participations.
(e) The obligations of the Participants to make payments to the
Letter of Credit Issuer with respect to Letters of Credit shall be irre
vocable and not subject to counterclaim, set-off or other defense or any
other qualification or exception whatsoever (provided that no Participant
shall be required to make payments resulting from the Letter of Credit
Issuer's gross negligence or willful misconduct) and shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following circum
stances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower may have at any time against a beneficiary named in
a Letter of Credit, any transferee of any Letter of Credit (or any
Person for whom any such transferee may be acting), the Administrative
Agent, any Bank or other Person, whether in connection with this Agree
ment, any Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying transaction
between the Borrower and the beneficiary named in any such Letter of
Credit);
(iii) any draft, certificate or other document presented under the
Letter of Credit proving to be forged, fraudulent, or invalid in any
respect or any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 Increased Costs. If at any time after the date of the
Agreement, the adoption or effectiveness of any applicable law, rule or
regulation, 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 interpretation or administration
thereof, or compliance by the Letter of Credit Issuer or any Bank with any
request or directive (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) by any such authority, central bank or comparable
agency shall either (i) impose, modify or make applicable any reserve,
deposit, capital adequacy or similar requirement against Letters of Credit
issued by the Letter of Credit Issuer or such Bank's participation therein,
or (ii) shall impose on the Letter of Credit Issuer or any Bank any other
conditions affecting this Agreement, any Letter of Credit or such Bank's
participation therein; and the result of any of the foregoing is to
increase the cost to the Letter of Credit Issuer or such Bank of issuing,
maintaining or participating in any Letter of Credit, or to reduce the
amount of any sum received or receivable by the Letter of Credit Issuer or
such Bank hereunder (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), then, upon demand to the
Borrower by the Letter of Credit Issuer or such Bank (a copy of which
notice shall be sent by the Letter of Credit Issuer or such Bank to the
Administrative Agent), the Borrower shall, subject to Section 1.11(b) (to
the extent applicable), pay to the Letter of Credit Issuer or such Bank
such additional amount or amounts as will compensate the Letter of Credit
Issuer or such Bank for such increased cost or reduction. A certificate
submitted to the Borrower by the Letter of Credit Issuer or such Bank, as
the case may be (a copy of which certificate shall be sent by the Letter of
Credit Issuer or such Bank to the Administrative Agent), setting forth the
basis for the determination of such additional amount or amounts necessary
to compensate the Letter of Credit Issuer or such Bank as aforesaid shall
be conclusive and binding on the Borrower absent manifest error, although
the failure to deliver any such certificate shall not release or diminish
any of the Borrower's obligations to pay additional amounts pursuant to
this Section 2.05 upon the subsequent receipt thereof.
2.06 Indemnities. The Borrower hereby agrees to reimburse and
indemnify the Letter of Credit Issuer 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 Letter
of Credit Issuer in performing its respective duties in any way relating to
or arising out of its issuance of Letters of Credit; provided that the
Borrower shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Letter of Credit Issuer's
gross negligence or willful misconduct. To the extent the Letter of Credit
Issuer is not indemnified by the Borrower, the Participants will reimburse
and indemnify the Letter of Credit Issuer, in proportion to their
respective "percentages" of the Total Commitment, 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 Letter
of Credit Issuer in performing its respective duties in any way relating to
or arising out of its issuance of Letters of Credit; provided that no
Participants shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Letter of Credit Issuer's
gross negligence or willful misconduct.
SECTION 3. Fees; Commitments.
3.01 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 Restatement Effective Date to, but not including, the date
the Total Commitment has been terminated, which Commitment Commission shall
be equal to the amount set forth below as determined by Holdings' Leverage
Ratio, as calculated for the last day of the fiscal quarter last ended,
computed at such rate for each day, on the daily amount of such Bank's
Unutilized Commitment; provided that, in the event a change in the
Commitment Commission is made, such change shall not become effective until
the date on which the Administrative Agent receives written notice from the
Borrower indicating that such change is warranted:
0.25% per annum If the Leverage Ratio is equal to or less than
0.25 to 1.00
0.35% per annum If the Leverage Ratio is greater than 0.25 to
1.00.
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 agrees to pay to the Administrative Agent for
the account of each Non-Defaulting Bank pro rata on the basis of their
respective Adjusted Percentages, a fee in respect of each Letter of Credit
(the "Letter of Credit Fee") computed at a rate per annum equal to the
Applicable Eurodollar Margin then in effect on the daily Stated Amount of
such Letter of Credit. Accrued Letter of Credit Fees shall be due and
payable quarterly in arrears on the first day of each January, April, July
and October of each year and on the date after the Total Commitment is
terminated and no Letters of Credit remain outstanding.
(c The Borrower agrees to pay to the Letter of Credit Issuer a
fee in respect of each Letter of Credit issued by it (the "Facing Fee")
computed at the rate of 1/8 of 1% per annum on the daily Stated Amount of
such Letter of Credit. Accrued Facing Fees shall be due and payable
quarterly in arrears on the first day of each January, April, July and
October of each year and on the date after the Total Commitment is
terminated and no Letters of Credit remain outstanding.
(d The Borrower agrees to pay directly to the Letter of Credit
Issuer upon request the amount of any charges or expenses incurred by the
Letter of Credit Issuer in connection with any confirmation of Letters of
Credit by local banks requested by the Borrower or any beneficiary of any
Letter of Credit.
(e The Borrower shall pay to the Administrative Agent (x) on
the Restatement 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.
(f All computations of Fees shall be made in accordance with
Section 12.07(b).
3.02 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 sum of (A)
the outstanding Loans of such Bank plus (B) such Bank's Adjusted Percentage
of Letter of Credit Outstandings, (y) any partial reduction pursuant to
this Section 3.02 shall be in the amount of at least $5,000,000 and (z) any
such reduction shall reduce the remaining Scheduled Commitment Reductions
pro rata based on the then remaining amounts of Scheduled Commitment
Reductions.
3.03 Mandatory Adjustments of Commitments, etc. (a The Total
Commitment shall terminate on the earlier of (i) the Maturity Date, (ii)
July 31, 1997, unless the Restatement Effective Date has occurred on or
before such date and (iii) unless the Required Banks otherwise consent, the
date on which any Change of Control occurs.
(b In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date set forth below, the Total
Commitment shall be permanently reduced by the amount set forth opposite
such date (each such reduction, as same may be further reduced in
accordance with Sections 3.02 and 3.03(d), a "Scheduled Commitment
Reduction"):
Date Amount
May 13, 1999 $37,000,000
November 13, 1999 $37,000,000
May 13, 2000 $37,000,000
November 13, 2000 $37,000,000
May 13, 2001 $37,000,000
Maturity Date Remaining
amount
of Total
Commitment
(c In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on the Business Day following the date of
receipt thereof by the Borrower and/or any of its Subsidiaries of the Cash
Proceeds from any Collateral Disposition, the Total Commitment then in
effect shall be permanently reduced by an amount equal to the Total
Commitment as in effect on the Restatement Effective Date multiplied by the
percentage set forth on Annex IV hereto adjacent to the name of the
Mortgaged Rig (other than the Jack Bates, the Paul B. Loyd, Jr. and the
Henry Goodrich) which is the subject of such Collateral Disposition under
the heading "Percentage Reduction", provided that, so long as no Default or
Event of Default then exists or would result therefrom, at the Borrower's
option, Rig 41 and the Earnings and Insurances of Rig 41 may be released
(and the Collateral Agent hereby agrees to take such action, at the
Borrower's expense, necessary to release Rig 41) from the Panamanian
Mortgage securing such Mortgaged Rig and the Security Agreement, as
applicable, without any reduction in the Total Commitment, so long as it is
promptly thereafter pledged exclusively to secure financing provided by, or
guaranteed by, the U.S. Maritime Administration under its Title XI
Shipbuilding Loan Guarantee Program (the "Title XI Financing") in
connection with the upgrade and/or refit of Rig 41.
(d Notwithstanding anything to the contrary contained herein,
and in addition to any other mandatory commitment reductions pursuant to
this Section 3.03, in the case of any Collateral Disposition involving the
Jack Bates, the Total Commitment then in effect shall be reduced by the
lesser of the Total Commitment then in effect or $130,000,000.
(e In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, in the case of any sale, disposition or loss
by Arcade Drilling AS ("Arcade") with respect to the Henry Goodrich or the
Paul B. Loyd, Jr. (collectively, the "Arcade Rigs") the Total Commitment
then in effect shall be reduced by the lesser of the Total Commitment then
in effect or $130,000,000 per rig.
(f Each reduction of the Total Commitment pursuant to this
Section 3.03 shall apply proportionately to the Commitment of each Bank.
Any reduction to the Total Commitment pursuant to this Section 3.03 shall
reduce the remaining Schedule Commitment Reductions pro rata based on the
then remaining amounts of Scheduled Commitment Reductions.
SECTION 4. Payments.
4.01 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 4.01 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 4.01, such prepayment
shall not be applied to any Loans of a Defaulting Bank.
4.02 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 and the Letter of
Credit Outstandings 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. If, after
giving effect to the repayment of all outstanding Loans of Non-Defaulting
Banks, the aggregate amount of Letter of Credit Outstandings exceeds the
Adjusted Total Commitment then in effect, the Borrower shall pay to the
Administrative Agent an amount in cash and/or Cash Equivalents equal to
such excess (up to the aggregate amount of the Letter of Credit
Outstandings at such time) and the Administrative Agent shall hold such
payment 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 (which shall permit
certain investments in Cash Equivalents satisfactory to the Administrative
Agent, until the proceeds are applied to the secured obligations).
(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
4.02, 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 4.02(B), if at any time the mandatory prepayment of Loans
pursuant to Section 4.02(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 9, any amounts held as cash collateral
pursuant to this Section 4.02(B) shall, subject to the requirements of
applicable law, be immediately applied to the Loans.
4.03 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.
4.04 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 4.04(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 12.04 (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
4.04(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
4.04(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. Notwithstanding anything to
the contrary contained in Section 4.04(a), but subject to Section 12.04(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
4.04(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 4.04(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 4.04 and
except as set forth in Section 12.04(b), the Borrower agrees to pay
additional amounts and to indemnify each Bank in the manner set forth in
Section 4.04(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 4.04 shall be subject to
Section 1.12(b) (to the extent applicable).
SECTION 5. Conditions Precedent. The obligation of the Banks to
make each Loan hereunder, and the obligation of the Letter of Credit Issuer
to issue Letters of Credit 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:
5.01 Execution of Agreement; Notes. The Restatement Effective
Date shall have occurred as provided in Section 12.10 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.
5.02 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).
5.03 Officer's Certificate. On the Restatement 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 5.02, 5.06, 5.07(a) and 5.08 exist as of
such date.
5.04 Opinions of Counsel. On the Restatement Effective Date,
the Administrative Agent shall have received opinions, addressed to the
Administrative Agent and each of the Banks and dated the Restatement
Effective Date, from (i) Wayne Hillin, Esq., General Counsel to the Credit
Parties, which opinion shall cover the matters contained in Exhibit E-1,
(ii) White & Case, special counsel to the Administrative Agent, which
opinion shall cover the matters contained in Exhibit E-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 pursuant 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.
5.05 Corporate Proceedings. (a) On the Restatement Effective
Date, the Administrative Agent shall have received from each Credit Party a
certificate, dated the Restatement Effective Date, signed by the President
or any Vice-President or other appropriate representative of such Credit
Party in the form of Exhibit F with appropriate insertions and deletions,
together with copies of the certificate of formation, the by-laws, or other
organizational 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 Restatement Effective Date, all corporate and legal
proceedings and all instruments and agreements in connection with the trans
actions contemplated 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
certificates and any other records of corporate proceedings and governmen
tal 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.
5.06 Adverse Change, etc. From December 31, 1996 to the
Restatement 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.
5.07 Litigation. On the Restatement 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.
5.08 Approvals. On the Restatement 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.
5.09 Fees. On the Restatement 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.
5.10 Security Agreement. On the Restatement Effective Date the
Security Agreement and Assignment of Earnings and Insurances in the form of
Exhibit G (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.
5.11 Subsidiary Guaranty. On the Restatement Effective Date,
the Subsidiary Guaranty in the form of Exhibit H (as modified, amended or
supplemented from time to time in accordance with the terms hereof and
thereof, the "Subsidiary Guaranty"), and the Subsidiary Guaranty shall
continue in full force and effect.
5.12 Mortgages. (a On the Restatement Effective Date, each of
the following documents (as modified, amended or supplemented from time to
time in accordance with the terms thereof and hereof, the "Mortgages")
shall have been amended (or, in the case of the Australian Mortgage, a
mortgage variation shall have been filed) (the "Mortgage Amendments") to
the satisfaction of the Collateral Agent or the Collateral Trustee (as
applicable) and shall otherwise be in full force and effect:
(i with respect to the US Rigs, substantially in the form of
Exhibit I-1 (as amended, modified or supplemented from time to time in
accordance with the terms hereof and thereof, the "US Mortgage");
(ii with respect to the Panamanian Rigs, substantially in the form
of Exhibit I-2 (as amended, modified or supplemented from time to time
in accordance with the terms hereof and thereof, the "Panamanian
Mortgage");
(iii with respect to the Australian Rig, substantially in the form
of Exhibit I-3 (as amended, modified or supplemented from time to time
in accordance with the terms hereof and thereof, the "Australian
Mortgage"); and
(b On the Restatement Effective Date, all actions necessary,
desirable or otherwise reasonably requested by the Collateral Agent to
provide the Collateral Agent with a perfected first priority security
interest in all Collateral purported to be covered by the Mortgages shall
have been taken.
5.13 Evidence of Filing of Mortgage Amendments; Variation of
Australian Mortgage, etc. Within one Business Day of the Restatement
Effective Date, the Administrative Agent shall have received evidence
satisfactory to the Administrative Agent that the Mortgage Amendments have
been filed and that the Mortgages, as so amended, are in full force and
effect.
5.14 Pledge Agreement. On the Restatement Effective Date, the
Pledge Agreement in the form of Exhibit J (as modified, supplemented or
amended from time to time, the "Pledge Agreement") shall be in full force
and effect.
5.15 Refinancing; Existing Credit Agreement. (a On the
Restatement Effective Date, concurrently with the incurrence of Loans
hereunder, (i) all loans under the Existing Credit Agreement shall have
been repaid in full with the proceeds of Loans hereunder, together with
accrued interest and fees thereon and (ii) all letters of credit issued
thereunder shall have been assumed hereunder and the Existing Credit
Agreement shall have been replaced by this Agreement, including with
respect to continuing indemnification obligations and reimbursement
obligations under letters of credit assumed hereunder.
5.16 Compliance Certificate. On the Restatement Effective Date,
and subject to Section 5.15 above, the Borrower shall have delivered to the
Administrative Agent 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.
The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by Holding and the Borrower 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 cer
tificates, legal opinions and other documents and papers referred to in
this Section 5, 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 6. Representations, Warranties and Agreements. In order
to induce the Banks to enter into this Agreement and to make the Loans and
issue and/or participate in Letters of Credit provided for herein, each of
Holdings and the Borrower 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 6
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 indi
cates 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):
6.01 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 Holdings, the
Borrower or any Subsidiary Guarantor 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.
6.02 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).
6.03 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, the Republic of Panama or
Australia, (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 Documents) result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the property
or assets of Holdings, the Borrower or any of their respective Subsidiaries
pursuant to the terms of, any material indenture, mortgage, deed of trust,
agreement or other instrument to which Holdings, the Borrower or any of
their respective Subsidiaries 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
Holdings, the Borrower or any of their respective Subsidiaries.
6.04 Litigation. There are no actions, suits or proceedings
pending or, to the best of Holding's or the Borrower's knowledge 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.
6.05 Use of Proceeds; Margin Regulations. (a The proceeds of
all Loans shall be utilized to provide for the general corporate purposes
of Holdings, the Borrower and their respective Subsidiaries.
(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.
6.06 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.
6.07 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.
6.08 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.
6.09 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 Holdings or the Borrower 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.
6.10 Financial Condition; Financial Statements; Projections.
(a) On and as of the Restatement 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 its business.
(b (i) The consolidated balance sheet of Holdings and its
Subsidiaries at December 31, 1995 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 June 30,
1996, copies of which have heretofore been furnished to each Bank, present
fairly the financial position of such entities at the dates of said state
ments 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 June 30, 1996 statements, sub
ject to normal and recurring year-end audit adjustment. All such financial
statements (other than the aforesaid balance sheet) have been prepared in
accordance with generally accepted accounting principles and practices con
sistently applied except to the extent provided in the notes to said
financial statements. Nothing has occurred since December 31, 1995 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 6.10(b), there were as of the
Restatement 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.
(d On and as of the Restatement Effective Date, the financial
projections, together with adjustments thereto, previously delivered to the
Administrative Agent and the Banks (the "Projections") have been prepared
on a basis consistent with the financial statements referred to in Section
6.10(a) (other than as set forth or presented in such Projections), and
there are no statements or conclusions in any of the Projections which are
based upon or include information known to Holdings or the Borrower to be
misleading in any material respect or which fail to take into account
material information not otherwise disclosed in writing to the
Administrative Agent and the Banks regarding the matters reported therein.
On the Restatement Effective Date, Holdings and the Borrower believed that
the Projections were reasonable and attainable.
6.11 Security Interests. On and after the Restatement Effective
Date, each of the Security Documents 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 applicable
Security Documents), the Ship Mortgage Act (as defined in the U.S.
Mortgages), or comparable provisions under the laws of the Republic of
Panama and Australia, and subject to no other Liens (except that the
Collateral may be subject to Permitted Liens), in favor of the Collateral
Agent or the Security Trustee, as the case may be, for the benefit of the
Banks. No filings or recordings are required in order to perfect the
security interests created under any Security Document except for filings
or recordings required in connection with any such Security Document 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.
6.12 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.
6.13 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 Subsidiary of the Borrower 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 the Borrower or any Subsidiary of
the Borrower 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 Sec
tion 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.
6.14 Subsidiaries. Annex V lists each Subsidiary of Holdings
(and the direct and indirect ownership interest of Holdings therein), in
each case existing on the Restatement Effective Date.
6.15 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 businesses taken as a whole
as presently conducted.
6.16 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 Restatement 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 Restatement Effective Date no Environmental Claims pending or, to
the best knowledge of Holdings and the Borrower, threatened, 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 transferability under any
Environmental Law, except in each such case, such Environmental 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 of Holdings' or the Borrower's knowledge, such occurrence or
event individually or in the aggregate is reasonably likely to have a
Material Adverse Effect.
6.17 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 6.10(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 VI sets forth all the offshore drilling rigs and other
vessels owned or chartered by Holdings and each of its Subsidiaries on the
Restatement 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 Restatement 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.
6.18 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 of Holdings' or the Borrower's knowledge, 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 of Holdings' or
the Borrower's knowledge, 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.
6.19 Existing Indebtedness. Annex VII sets forth a true and
complete list of all Indebtedness of Holdings and each of its Subsidiaries
on the Restatement Effective Date and which is to remain outstanding after
the Restatement Effective Date (excluding the Loans and the Letters of
Credit, 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 guaranteed such
debt.
6.20 Citizenship. The Mortgagors are qualified to own and
operate the Mortgaged Rigs under the laws of the United States, the
Republic of Panama and Australia, as may be applicable.
6.21 Rig Classification. Each offshore drilling rig owned or
leased by Holdings and its Subsidiaries is classified in the highest class
available for rigs of its age and type with the American Bureau of
Shipping, Inc. or another internationally recognized classification society
reasonably acceptable to the Collateral Agent, free of any material
outstanding requirements or recommendations, other than (i) with respect to
any Mortgaged Rig, as permitted under the Mortgage relating thereto and
(ii) with respect to any other rigs, such requirements or recommendations
which if not cured by the owner thereof would not materially diminish such
rig's value.
SECTION 7. Affirmative Covenants. Holdings and the Borrower
covenant and agree that on the Restatement Effective Date and thereafter
for so long as this Agreement is in effect (and until the Commitments have
terminated, no Letters of Credit or Notes are outstanding and the Loans and
Unpaid Drawings, together with interest, Fees and all other Obligations
incurred hereunder, are paid in full):
7.01 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) Forecast; etc. Not more than 60 days after the commencement
of each fiscal year of Holdings, a forecast which includes an income
statement, balance sheet and cash flow statement of Holdings and its
Subsidiaries for each of the four fiscal quarters of such fiscal year,
including a breakdown of revenues, operating expenses, utilizations
and Consolidated Capital Expenditure assumptions for each offshore
drilling rig owned or leased by Holdings and its Subsidiaries.
(e) Compliance Certificate. At the time of the delivery of the
financial statements provided for in Sections 7.01(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 K 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 8 as at the end of such
fiscal period or year, as the case may be.
(f) Notice of Default or Litigation. Promptly, and in any event
within (x) three Business Days after Holdings or the Borrower 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 the Borrower proposes to take with respect thereto and (y)
ten Business Days after the Borrower 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 Subsidiary
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 Holdings or the Borrower by its independent accountants
in connection with any annual, interim or special audit made by it of
the books of Holdings or the Borrower.
(h) Insurance Report. On or before each anniversary of the
Initial Borrowing Date, a report from Holdings and/or the Borrower's
independent maritime insurance broker as required by the Mortgages.
(i) Annual Rig Valuation Report. At the time of the delivery of
the financial statements provided for in Section 7.01(a), an updated
rig valuation report from an Approved Shipbroker setting forth the
current Market Value of each Mortgaged Rig.
(j) 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).
(k) 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.
7.02 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.
7.03 Insurance. In addition to any requirements set forth in
the Mortgages, 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 retentions as are in
accordance with normal industry practice for similarly situated insureds.
Holdings will, and will cause each of its Subsidiaries to, furnish on each
anniversary of the Initial Borrowing Date to the Administrative Agent a sum
mary of the insurance carried together with certificates of insurance and
other evidence of such insurance.
7.04 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.
7.05 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 8.02 will not constitute a breach of this
Section 7.05.
7.06 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.
7.07 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 8.02, 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.
7.08 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.
7.09 Use of Proceeds. All proceeds of the Loans shall be used
as provided in Section 6.05.
7.10 Earnings Concentration Account. The Borrower shall
maintain with Christiania Bank og Kreditkasse, Grand Cayman Branch, on
terms substantially similar to those in effect prior to the Restatement
Effective Date, an account (the "Concentration Account") into which the
Earnings of the Borrower and the Subsidiary Guarantors arising from the
operation of the Mortgaged Rigs shall be deposited and maintained as cash
collateral in accordance with the Security Agreement. Funds in the
Concentration Account shall be released from time to time to the Borrower
upon the Borrower's request (which request shall be implied by any
withdrawal by the Borrower of funds from the Concentration Account), unless
and until such time as the Administrative Agent, following the occurrence
of an Event of Default, requires that said monies be held as security or
applied by the Administrative Agent, for the benefit of itself and the
Banks, as it may direct, whereafter the Borrower shall procure such funds
and ensure that such funds are held as security or applied in accordance
with the directions of the Administrative Agent.
7.11 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 a written report setting forth the Market Value of each Mortgaged
Rig at such time. Holdings or the Borrower may retain a second Approved
Shipbroker of its own choosing at such time and at its own expense to sup
ply a second written report setting forth the Market Value of such
Mortgaged Rigs. Promptly upon receipt thereof Holdings and/or the Borrower
shall deliver copies of each such report to the Banks.
7.12 Further Assurances.
(a) Holdings and the Borrower will, and will cause each of their
respective 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, real
property surveys, reports and other assurances or instruments and take such
further steps relating to the Collateral as the Collateral Agent or the
Security Trustee, as the case may be, may reasonably require.
(b) Holdings and the Borrower agree that each action required
above by this Section 7.12 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 Holdings or the Borrower 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 7.12.
7.13 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 8. Negative Covenants. Holdings and the Borrower hereby
covenant and agree that as of the Restatement Effective Date and thereafter
for so long as this Agreement is in effect and until the Commitments have
terminated, no Letters of Credit or Notes are outstanding and the Loans and
Unpaid Drawings, together with interest, Fees and all other Obligations
incurred hereunder, are paid in full:
8.01 Changes in Business. Holdings and the Borrower will not,
and will not permit any of their respective Subsidiaries to, materially
alter the character of the business of Holdings and its Subsidiaries taken
as a whole from that conducted on the Restatement Effective Date (including
any material expansion outside of the offshore contract drilling and
production business), provided that this Section 8.01 shall not restrict
the engaging in business ancillary to the offshore contract drilling and
production business.
8.02 Consolidation, Merger or Sale of Assets, etc. Holdings and
the Borrower will not, and will not permit any of the Subsidiary Guarantors
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 8.02(a),
Holdings 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 and/or the Security Trustee in respect of the con
tinued 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) the
Total Commitment shall be reduced as required by Section 3.03(c) in
the case of the sale or disposition of assets constituting Collateral
and (y) 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 in the case of assets constituting Collateral and (z) 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 together; 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 8.02, such Collateral shall be sold or otherwise disposed of free
and clear of the Liens created by the Security Documents, and the
Administrative Agent, the Collateral Agent and the Security Trustee shall
be authorized to take any actions deemed appropriate in order to effect the
foregoing.
8.03 Liens on Collateral; Arcade Drilling. Holdings will not
permit Arcade to create, incur, assume or suffer to exist any Lien or
assign any right to receive income, or file or permit the filing of any UCC
Financing Statement or any other similar notice of Lien under any similar
recording or notice statute, and Holdings and the Borrowers will not, and
will not permit any of their respective Subsidiaries to, create, incur,
assume or suffer to exist any Lien upon or with respect to any Collateral,
whether now owned or hereafter acquired, or sell any such Collateral
subject to an understanding or agreement, contingent or otherwise, to
repurchase such Collateral (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 Collateral under
any similar recording or notice statute; except that the following shall be
permitted:
(a) 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;
(b) 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;
(c) Liens created by or pursuant to this Agreement or the other
Credit Documents;
(d) Liens permitted under the express terms of the Mortgages or
other Security Documents;
(e) Liens existing on the Restatement Effective Date and listed
on Annex VIII, 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 9.08;
(g) any interest or title of a lessor or charterer under any
lease or charter (i) in existence on the Restatement 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
election under, and in accordance with, the proviso contained in
Section 3.03(c).
8.04 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 of Arcade existing on the Restatement Effective
Date to the extent the same is listed on Annex VII, but no
refinancings or renewals thereof;
(iii) 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 8.04 does
not exceed $1,000,000 in the aggregate; and
(iv) Indebtedness subject to Liens permitted under Section 8.03(e).
8.05 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 redeem or repurchase common stock of Holdings (or
options to purchase such common stock) from (1) present or former
officers, employees and directors of Holdings, the Borrower, or any of
their Subsidiaries (or their estates) upon the death, permanent
disability, retirement or termination of employment of any such Person
or otherwise in accordance with any stock option plan or any employee
stock ownership plan, or (2) stockholders of Holdings so long as the
purpose of such purchase is to acquire common stock of Holdings for
reissuance to new officers, employees and directors (or their estates)
of Holdings, the Borrower or any of their respective Subsidiaries to
the extent so reissued within 12 months of any such purchase, provided
that in all such cases (x) no Default or Event of Default is then in
existence or would arise therefrom, (y) the aggregate amount of all
cash paid in respect of all such shares so redeemed or repurchased in
any calendar year does not exceed $15,000,000 plus proceeds of key man
life insurance used for the purpose of repurchasing such common stock
owned by such Person and, provided further, that in the event that
Holdings subsequently resells to any member of its, or any
Subsidiary's management, any shares redeemed or repurchased pursuant
to this clause (i), the amount of repurchases Holdings may make from
officers, employees and directors pursuant to this clause (i) shall be
increased by an amount equal to any cash received by Holdings upon the
resale of such shares;
(ii) So long as no Default or Event of Default exists or would
result therefrom, Holdings may make open market purchases of
outstanding common stock of Holdings in an aggregate amount not to
exceed $100,000,000.
(iii) Holdings may pay or make Dividends on (i) existing Class A
common stock (up to a maximum of $100 per annum) and (ii) any issue of
preferred stock whether now existing or hereafter issued;
(iv) 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; and
(v) so long as no Default or Event of Default exists or would
result therefrom, the Borrower may dividend to Holdings up to
$100,000,000 in the aggregate, so long as the entirety of such amount
is promptly used by Holdings to make open market repurchases of
outstanding common stock of Holdings pursuant to Section 8.05(a)(ii).
(b) Holdings and the Borrower will not, and will not permit any
of the Subsidiary Guarantors to, create or otherwise cause or suffer to
exist any encumbrance or restriction which prohibits or otherwise restricts
(A) the ability of any Subsidiary Guarantor to (a) pay dividends or make
other distributions or pay any Indebtedness owed to the Borrower or any
Subsidiary 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 Subsidiary Guarantor or (B) the ability of the Borrower or
any other Subsidiary Guarantor of the Borrower 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) applicable law;
(iii) customary non-assignment provisions entered into in the
ordinary course of business and consistent with past practices;
(iv) any restriction or encumbrance with respect to a Subsidiary
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 Subsidiary Guarantor, so long as such sale or
disposition is permitted under this Agreement; and
(v) 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.
8.06 Transactions with Affiliates. Holdings and the Borrower
will not, and will not permit any of their respective Subsidiaries to,
enter into any transaction or series of transactions after the Restatement
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.
8.07 Vessel Management; Registry. Holdings and the Borrower
will not, and will not permit any of their Subsidiaries to, (i) change the
overall management of any of the Mortgaged Rigs from Holdings or any of its
Subsidiaries or (ii) change the national registry of any Mortgaged Rig,
provided that, in the case of the US Rigs, the Borrower and/or its
Subsidiaries may, upon 60 day's prior written notice to the Collateral
Agent, elect to change the national registry of any or all of the US Rigs
from the United States of America to the Republic of Panama, provided
further that all steps necessary and proper in the opinion of the
Collateral Agent to continue, without interruption, the perfected security
interest of the Collateral Agent and/or Collateral Trustee in such US Rigs
shall have been taken, at the Borrower's expense, to the satisfaction of
the Collateral Agent.
8.08 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.
8.09 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.
8.10 Leverage Ratio. Holdings will not permit the Leverage
Ratio (i) at the end of any fiscal quarter ending prior to November 13,
1999 to be greater than 0.50:1.00 and (ii) at the end of any fiscal quarter
ending thereafter to be greater than 0.40:1.00; provided that from and
including the date upon which Holdings announces the repurchase by Holdings
of its common stock in an aggregate amount of not less than $50,000,000, to
and including November 13, 1998, the maximum Leverage Ratio pursuant to
this Section 8.10 shall be 0.60:1.00.
8.11 Collateral Maintenance. (a) Holdings shall not permit the
Market Value of the Mortgaged Rigs at any time to be less than 1.6 times
the Total Commitment in effect from time to time.
(b) Holdings will not (i) permit its percentage ownership of the
total capital stock of Arcade at any time to be reduced below 74.4% or (ii)
pledge any Arcade shares now held or hereafter acquired by Holdings or any
of its Subsidiaries to any Person other than the Collateral Agent.
SECTION 9. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
9.01 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 Unpaid Drawing, any
interest on the Loans or any Fees or any other amounts owing hereunder or
under any other Credit Document; or
9.02 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
9.03 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 7.08 or Section 8 or (b) default in the due
performance or observance by it of any term, covenant or agreement (other
than those referred to in Section 9.01, 9.02 or clause (a) of this Section
9.03) 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
9.04 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; or (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 9.04 unless the aggregate principal amount of such Indebtedness in
default exceeds $5,000,000 at any one time; or
9.05 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
9.06 Security Documents. (i) Any Security Document shall, after
the execution and delivery thereof, cease to be in full force and effect,
or shall cease to give the Collateral Agent or the Security Trustee, as the
case may be, the Liens, rights, powers and privileges purported to be
created thereby in favor of the Collateral Agent or the Security Trustee,
as the case may be, 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 any such Security Document
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
9.07 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
9.08 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
9.09 Citizenship. Any Mortgagor shall cease to be qualified to
own and operate the Mortgaged Rigs under the laws of the United States, the
Republic of Panama or Australia, as may be applicable; or
9.10 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
9.11 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 9.05
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 (including Unpaid Drawings) 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; (iv) terminate any Letter of Credit
which may be terminated in accordance with its terms; (v) direct the
Borrower to pay (and the Borrower hereby agrees upon receipt of such
notice, or upon the occurrence of any Event of Default specified in Section
9.05 in respect of the Borrower, it will pay) to the Collateral Agent at
the Payment Office such additional amounts of cash, to be held as security
for the Borrower's reimbursement obligations in respect of Letters of
Credit then outstanding equal to the aggregate Stated Amount of all Letters
of Credit then outstanding; and (vi) apply any amounts held as cash
collateral pursuant to Section 4.02 or this Section 9 to repay Obligations.
SECTION 10. 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 4.02(A)(a) or
otherwise, the sum of (i) the aggregate outstanding principal amount of
Loans of all Non-Defaulting Banks plus (ii) the Letter of Credit
Outstandings, exceeds the Adjusted Total Commitment; (B) the changes to the
Adjusted Percentage that would have become effective upon the occurrence of
a Bank Default but that did not become effective as a result of the pre
ceding clause (A) shall become effective on the first date after the
occurrence of the relevant Bank Default on which the sum of (i) the
aggregate outstanding principal amount of the Loans of all Non-Defaulting
Banks plus (ii) the Letter of Credit Outstandings 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, or of Unpaid Drawings with respect
to Letters of Credit, 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 plus such Bank's new Adjusted Percentage of the
outstanding principal amount of Letter of Credit Outstandings 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 11.09.
"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
from time to time modified, amended and/or supplemented.
"Applicable Eurodollar Margin" shall be equal to the percentage
per annum set forth below opposite Holdings' applicable Leverage Ratio, as
calculated for the last day of the fiscal quarter last ended; provided
that, in the event a change in the Applicable Eurodollar Margin is to be
made, such change shall not become effective until the date on which the
Administrative Agent receives written notice from the Borrower indicating
that such change is warranted:
Applicable
Leverage Ratio Eurodollar Margin
Equal to or less than
0.25:1.00 0.65% per annum
Greater than 0.25:1:00 0.85% per annum.
"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 IX, 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.
"Arcade Rigs" shall have the meaning provided in Section 3.03(e).
"Assignment and Assumption Agreement" shall mean the Assignment
and Assumption Agreement substantially in the form of Exhibit L
(appropriately completed).
"Australian Rig" shall mean the offshore drilling vessel Ron
Tappmeyer.
"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.
"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 to fund
its portion of any unreimbursed payment under Section 2.04(c) 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 or under
Section 2.04(c), 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
9.05.
"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.
"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 generally accepted
accounting principles) 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. ? 9601 et
seq.
"Change of Control" shall mean (a) Holdings shall at any time
cease to own 100% of the capital stock of the Borrower or, directly or
indirectly, any Subsidiary Guarantor, (b) 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 Holdings or (c) during any period of two consecutive
years individuals who at the beginning of such period constituted the Board
of Directors of Holdings (together with any new directors whose election by
such Board of Directors or whose nomination for election by the stock
holders of Holdings was approved by a vote of a majority of the directors
of Holdings 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 Holdings 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 Restatement 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,
the Pledged Stock as defined in the Pledge Agreement, the "Rig" as defined
in each of the Mortgages 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 (i) the sale, transfer or
other voluntary disposition by the Borrower or any Guarantor to any Person
other than the Borrower or any Guarantor of any asset of the Borrower or
such Guarantor constituting Collateral or (ii) any Total Loss of any
Mortgaged Rig.
"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 3.02, 3.03 and/or 9 or (y) adjusted from time to time
as a result of assignments to or from such Bank pursuant to Section 12.04.
"Commitment Commission" shall have the meaning provided in
Section 3.01(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) loss-es 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 and (iv) Consolidated Rent Expense, all
as determined on a consolidated basis in accordance with GAAP.
"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 8.10 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, 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.
"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.
"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.
"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, the
Security Documents and each Guaranty and any documents executed in
connection therewith.
"Credit Event" shall mean and include the making of a Loan or the
issuance of a Letter of Credit.
"Credit Party" shall mean Holdings, the Borrower and each
Subsidiary 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 8.05.
"Documentation Agents" shall have the meaning provided in the
first paragraph of this Agreement.
"Earnings" shall have the definition provided in the Security
Agreement.
"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. ? 1251 et seq.; the Toxic Substances Control Act, 15
U.S.C. ? 7401 et seq.; the Clean Air Act, 42 U.S.C. ? 7401 et seq.; the
Safe Drinking Water Act, 42 U.S.C. ? 3808 et seq.; the Oil Pollution Act of
1990, 33 U.S.C. ? 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 Restatement Effective Date and any subsequent provisions of
ERISA, amendatory 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 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 9.
"Existing Credit Agreement" shall mean the Credit Agreement,
dated as of November 13, 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 6.19.
"Existing Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Facility" shall mean the credit facility established under this
Agreement, evidenced by the Total Commitment.
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"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 3.01.
"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 8, including defined terms as used therein, are subject
(to the extent provided therein) to Section 12.07(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 and all reimbursement obligations and Unpaid
Drawings with respect to Letters of Credit, together with all the other
obligations and liabilities (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 each Subsidiary Guarantor and Holdings.
"Guaranty" shall mean the guaranty of Holdings pursuant to
Section 13 hereof and the Subsidiaries Guaranty.
"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 November 13, 1996.
"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.
"L/C Supportable Obligations" shall mean such obligations of the
Borrower, the Guarantors or their Subsidiaries (other than obligations in
respect of Indebtedness) as are not inconsistent with the policies of the
Letter of Credit Issuer.
"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.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Issuer" shall mean Christiania Bank og
Kreditkasse, New York Branch.
"Letter of Credit Outstandings" shall mean, at any time, the sum
of, without duplication, (i) the aggregate Stated Amount of all outstanding
Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in
respect of all Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in
Section 2.02(a).
"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
7.01(i) and Section 7.11, 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 November 13, 2001.
"Minimum Borrowing Amount" shall mean $1,000,000.
"Mortgage" shall have the meaning provided in Section 5.12(a).
"Mortgaged Rigs" shall mean and include the US Rigs, the
Panamanian Rigs and the Australian Rig.
"Mortgagor" shall mean each Credit Party to a Mortgage.
"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.
"Panamanian Mortgage" shall have the meaning provided in Section
5.12(a).
"Panamanian Rigs" shall mean the offshore drilling vessels
Charley Graves, J.W. McLean, and Rig 41.
"Participant" shall have the meaning provided in Section 2.04(a).
"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 8.03(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.
"Pledge Agreement" shall have the meaning provided in Section
5.14.
"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
6.10(d).
"RCRA" shall mean the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. ? 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.
"Register" shall have the meaning provided in Section 12.16.
"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 and Adjusted Percentage of Letter of Credit Outstandings)
constitute greater than 50% of the Adjusted Total Commitment (or, if after
the Total Commitment has been terminated, the total outstanding Loans of
Non-Defaulting Banks and the aggregate Adjusted Percentages of all Non-
Defaulting Banks of the total Letter of Credit Outstandings at such time).
"Restatement Effective Date" shall have the meaning provided in
Section 12.10.
"Scheduled Commitment Reduction" shall have the meaning provided
in Section 3.03(b).
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning provided
in Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning set forth in the
Security Documents.
"Security Agreement" shall have the meaning provided in Section
5.10.
"Security Agreement Collateral" shall mean all "Collateral" as
defined in the Security Agreement.
"Security Documents" shall mean and include the Security
Agreement, the Pledge Agreement and each Mortgage.
"Security Trustee" shall mean Christiania Bank og Kreditkasse,
New York Branch, as trustee for the Banks with respect to the U.S.
Mortgages, and any successor trustee appointed in accordance with the terms
hereof.
"Stated Amount" of each Letter of Credit shall mean the maximum
available to be drawn thereunder (regardless of whether any conditions for
drawing could then be met).
"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.
"Subsidiary Guarantor" shall mean each Subsidiary of the Borrower
which owns a Mortgaged Rig and executes the Subsidiary Guaranty.
"Subsidiary Guaranty" shall have the meaning provided in Section
5.11.
"Substitute Basis" shall have the meaning provided in Section
1.09(b).
"Taxes" shall have the meaning provided in Section 4.04(a).
"Title XI Financing" shall have the meaning provided in Section
3.03(c).
"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 Loss" shall mean any "Total Loss" as defined in any
Mortgage.
"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 plus the Letter of Credit Outstandings 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.
"Unpaid Drawing" shall have the meaning provided in Section
2.03(a).
"Unutilized Commitment" for each Bank, shall mean the excess of
(i) the Commitment of such Bank over (ii) the sum of (x) the aggregate out
standing principal amount of Loans made by such Bank plus (y) an amount
equal to such Bank's Adjusted Percentage of the Letter of Credit
Outstandings 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.
"US Mortgage" shall have the meaning provided in Section 5.12(a).
"US Rigs" shall mean the offshore drilling vessels Jack Bates,
D.R. Stewart, W.D. Kent, F.G. McClintock, Randolph Yost, J.T. Angel, Roger
W. Mowell, Harvey H. Ward, George H. Galloway and C.E. Thornton.
"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 11. The Administrative Agent and the Security Trustee.
11.01 Appointment of the Administrative Agent and the Security
Trustee. (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 authorize, 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) Each of the Banks irrevocably appoints Christiania Bank og
Kreditkasse, New York Branch as security trustee solely for the purpose of
holding legal title to the Mortgages of each of the U.S. Rigs on behalf of
the Banks with regard to the (i) security, powers, rights, titles, benefits
and interests (both present and future) constituted by and conferred on the
Banks or any of them or for the benefit thereof under or pursuant to the US
Mortgages (including, without limitation, the benefit of all covenants,
undertakings, representations, warranties and obligations given, made or
undertaken to any Bank in the US Mortgages), (ii) all moneys, property and
other assets paid or transferred to or vested in any Bank or any agent of
any Bank or received or recovered by any Bank or any agent of any Bank
pursuant to, or in connection with, the US Mortgages, whether from the
Borrower or any Guarantor or any other person and (iii) all money,
investments, property and other assets at any time representing or deriving
from any of the foregoing, including all interest, income and other sums at
any time received or receivable by any Bank or any agent of any Bank in
respect of the same (or any part thereof). CBK hereby accepts such
appointment as security trustee.
(c) For purposes of this Section 11, the term "Administrative
Agent" shall include CBK in its capacity as Collateral Agent,
Administrative Agent and Security Trustee.
11.02 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.
11.03 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 issuance and/or
participation in Letters of Credit 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.
11.04 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.
11.05 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).
11.06 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.
11.07 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.
11.08 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.
11.09 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 12. Miscellaneous.
12.01 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
special maritime counsel Watson, Farley & Williams) 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 or Letter of Credit Issuer),
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 proceeding (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 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) 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 indemnify, 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.
12.02 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 12.06(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.
12.03 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.
12.04 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 4.04 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 (it being understood that any waiver of the application of
any prepayment or the method of any application of any prepayment to, the
Scheduled Commitment Reductions shall not constitute an extension of the
final maturity date), 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 12.04(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 12.04(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 Restatement 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 12.04,
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 12 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.
12.05 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.
12.06 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, Unpaid Drawings 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 payment 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 12.06(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.
12.07 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 8, 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, 1995
historical financial statements of Holdings delivered to the Banks pursuant
to Section 6.10(b) and (y) that if at any time the computations determining
compliance with Section 8 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.
12.08 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 12.03, 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.
12.09 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.
12.10 Effectiveness. This Agreement shall become effective on
the date (the "Restatement 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 (con
firmed in writing), written telex or facsimile transmission notice (actu
ally received) at such office that the same has been signed and mailed to
it.
12.11 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.
12.12 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 (it being understood that any waiver
of the application of any prepayment of the Loans or the method of
application of any prepayment to the Scheduled Commitment Reductions, shall
not constitute any such extension), 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 Commitment of any Bank over
the amount thereof then in effect (it being understood 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) any Mortgaged Rig from the Lien of the respective
Security Documents or (y) the Guaranty of Holdings pursuant to Section 13
or the Guaranty of any Subsidiary Guarantor so long as such Subsidiary
Guarantor continues to own any Mortgaged Rig (except, in the case of both
(x) and (y) above, as expressly provided in the Credit Documents), (iv)
amend, modify or waive any provision of this Section 12.12, (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
Restatement 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 including, without limitation, a
Scheduled Commitment Reduction. No provision of Sections 2 or 11, or any
other provisions relating to the Letter of Credit Issuer or 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 12.12(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 termi-nation;
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
12.12(a)(ii).
12.13 Survival. All indemnities set forth herein including,
without limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.06 or 12.01 shall
survive the execution and delivery of this Agreement and the making and
repayment of the Loans.
12.14 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 4.04 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.
12.15 Confidentiality. Subject to Section 12.04, 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 12.15) 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.
12.16 Registry. The Borrower hereby designates the
Administrative Agent to serve as the Borrower's agent, solely for purposes
of this Section 12.16, 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 12.04(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 13. Holdings Guaranty.
13.01 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 from the proceeds of the Loans
and the issuance of the Letters of Credit, Holdings hereby agrees with the
Banks as follows: Holdings hereby unconditionally and irrevocably
guarantees as primary obligor and not merely as surety the full and prompt
payment when due, whether upon maturity, by acceleration or otherwise, of
any and all of the Guaranteed Obligations of the Borrower to the Secured
Creditors. If any or all of the Guaranteed Obligations of the Borrower to
the Secured Creditors becomes due and payable hereunder, Holdings uncondi
tionally promises to pay such indebtedness to the Secured Creditors, on
order, or demand, together with any and all reasonable expenses which may
be incurred by the Administrative Agent or the Secured Creditors in col
lecting any of the Guaranteed Obligations.
13.02 Bankruptcy. Additionally, Holdings unconditionally and
irrevocably guarantees the payment of any and all of the Guaranteed
Obligations of the Borrower to the Secured Creditors whether or not then
due or payable by the Borrower upon the occurrence in respect of the
Borrower of any of the events specified in Section 9.05, and uncondition
ally and irrevocably promises to pay such Guaranteed Obligations to the
Secured Creditors, on order, or demand, in lawful money of the United
States. Holdings' guaranty of the payment of any and all of the Guaranteed
Obligations hereunder shall constitute a guaranty of payment, and not of
collection.
13.03 Nature of Liability. The liability of Holdings hereunder
is exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations of the Borrower whether executed by Holdings, any
other guarantor or by any other party, and the liability of Holdings
hereunder shall not be 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
Administrative Agent or the Secured Creditors on the indebtedness which the
Administrative Agent or such Secured Creditors repay the Borrower pursuant
to court order in any bankruptcy, reorganization, arrangement, moratorium
or other debtor relief proceeding, and Holdings waives any right to the
deferral or modification of its obligations hereunder by reason of any such
proceeding.
13.04 Independent Obligation. The obligations of Holdings
hereunder are independent of the obligations of any other guarantor or the
Borrower, and a separate action or actions may be brought and prosecuted
against Holdings whether or not action is brought against any other guar
antor or the Borrower and whether or not any other guarantor or the
Borrower be joined in any such action or actions. Holdings waives, to the
fullest 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 Holdings.
13.05 Waiver of Notice, etc. Holdings hereby waives notice of
acceptance of this Guaranty and notice of any liability to which it may
apply, and waives promptness, diligence, presentment, demand of payment,
protest, notice of dishonor or nonpayment of any such liabilities, suit or
taking of other action by the Administrative Agent, any Bank, the Letter of
Credit Issuer, the Collateral Agent or the Security Trustee against, and
any other notice to, any party liable thereon (including Holdings, any
other guarantor or the Borrower).
13.06 Authorization. Holdings authorizes the Administrative
Agent and the Secured 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 Banks;
(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Secured Creditors
regardless of what liability or liabilities of Holdings or the
Borrower remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement or any of the instruments or agreements
referred to herein, or otherwise amend, modify or supplement this
Agreement 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 Holdings from its liabilities under this Section 13.
13.07 Reliance. It is not necessary for the Administrative Agent
or the Secured Creditors to inquire into the capacity or powers of the
Borrower or its Subsidiaries or the officers, directors, partners or agents
acting or purporting to act on its behalf, and any Guaranteed Obligations
made or created in reliance upon the professed exercise of such powers
shall be guaranteed hereunder.
13.08 Subordination. Any of the indebtedness of the Borrower
relating to the Guaranteed Obligations now or hereafter owing to Holdings
is hereby subordinated to the Guaranteed Obligations of the Borrower owing
to the Administrative Agent and the Secured Creditors; and if the
Administrative Agent so requests at a time when an Event of Default exists,
all such indebtedness relating to the Guaranteed Obligations of the
Borrower to Holdings shall be collected, enforced and received by Holdings
for the benefit of the Secured Creditors and be paid over to the
Administrative Agent on behalf of the Secured Creditors on account of the
Guaranteed Obligations of the Borrower to the Secured Creditors, but with
out affecting or impairing in any manner the liability of Holdings under
the other provisions of this Guaranty. Prior to the transfer by Holdings
of any note or negotiable instrument evidencing any of the indebtedness
relating to the Guaranteed Obligations of the Borrower to Holdings,
Holdings shall mark such note or negotiable instrument with a legend that
the same is subject to this subordination.
13.09 Waiver. (a) Holdings waives any right (except as shall be
required by applicable statute and cannot be waived) to require the
Administrative Agent or the Secured Creditors 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 the Administrative Agent's
or the Secured Creditors' power whatsoever. Holdings 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 liability of the Borrower other than payment in full
of the Guaranteed Obligations. The Administrative Agent and the Secured
Creditors may, at their election, foreclose on any security held by the
Administrative Agent, the Collateral Agent or the Secured Creditors 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
Administrative Agent and the Secured Creditors may have against the
Borrower or any other party, or any security, without affecting or im
pairing in any way the liability of Holdings hereunder except to the extent
the Guaranteed Obligations have been paid. Holdings waives any defense
arising out of any such election by the Administrative Agent and the
Secured Creditors, even though such election operates to impair or
extinguish any right of reimbursement or subrogation or other right or
remedy of Holdings against the Borrower or any other party or any security.
(b) Holdings 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. Holdings assumes
all responsibility for being and keeping itself informed of the Borrower's
financial condition and assets, and of all other circumstances bearing upon
the risk of nonpayment of the Guaranteed Obligations and the nature, scope
and extent of the risks which Holdings assumes and incurs hereunder, and
agrees that the Administrative Agent and the Secured Creditors shall have
no duty to advise Holdings of information known to them regarding such cir-
cum-stances or risks.
* * *
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:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH,
Individually and as Administrative Agent
By
Name:
Title:
By
Name:
Title:
CREDIT AGRICOLE INDOSUEZ,
Individually and as Documentation Agent
By
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
Individually and as Documentation Agent
By
Name:
Title:
SKANDINAVISKA ENSKILDA BANKEN AB (publ.),
Individually and as Co-Manager
By
Name:
Title:
THE FUJI BANK LIMITED,
Individually and as Co-Manager
By
Name:
Title:
BANK AUSTRIA
By
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD., HOUSTON AGENCY
By
Name:
Title:
MEESPIERSON N.V.
By
Name:
Title:
SANWA BANK
By
Name:
Title:
FIRST NATIONAL BANK OF COMMERCE
By
Name:
Title:
THE SUMITOMO BANK, LIMITED
By
Name:
Title:
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION
By
Name:
Title:
THE DAI-ICHI KANGYO BANK, LTD.
By
Name:
Title:
ANNEX I
COMMITMENTS
INSTITUTION COMMITMENT
Christiania Bank og Kreditkasse $65,000,000
Credit Agricole Indosuez $47,000,000
Credit Lyonnais $47,000,000
Skandinaviska-Enskilda $40,000,000
Fuji Bank $32,000,000
Bank Austria $26,500,000
Bank of Tokyo-Mitsubishi $26,500,000
Mees Pierson $26,500,000
Sumitomo $25,000,000
First NBC $18,500,000
Sanwa Bank $18,500,000
Dai-Ichi Kangyo $13,500,000
Wells Fargo $13,500,000
Total $400,000,000
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
Credit Lyonnais 1000 Louisiana
New York Branch Suite 5360
Houston, Texas 77002
Attn: Diane Scott
Tel. No.: (713) 751-0500
Fax No.: (713) 751-0307
Credit Agricole Indosuez Representative Office Norway
Ruselokkveien 6
0120 Oslo, Norway
Attn: Mr. Bjorn Hundevadt-Gulbrandsen
Mr. Hans Jorgen Wibstad
Tel. No.: 011 47 22 83 30 50
Fax No.: 011 47 22 83 30 55
Mees Pierson Camomile Court
23 Camomile Street
London EC3A 7PP
Attn: Harris Antoniou
Tel. No.: 44 171 444 8789
Fax No.: 44 171 444 8810
The Fuji Bank Limited Houston Agency
1 Houston Center, Suite 4100
1221 McKinney Street
Houston, TX 77010
Attn: Mark E. Polasek
Tel. No.: (713) 650-7863 or
(713) 759-1800
Fax No.: (713)759-0048
First National Bank of Commerce 210 Baronne Street
P.O. Box 60279
New Orleans, LA 70160-0279
Attn: Joshua C. Cummings
Mr. Jesse Shannon
Anthony Restell
Tel. No.: (504) 561-1361
Fax No.: (504) 561-1316
Sanwa Bank Dallas Agency 1
220 Ross Avenue
Suite 4100W
Dallas, TX 75201
Attn: Matt Patrick
Erik Reimer
Tel. No.: (214) 744-555
(214) 665-0243
Fax No.: (214) 741-6535
Bank Austria 565 Fifth Avenue
New York, NY 10017
Attn: Paul H. Deerin
Jonathan Bakker
Tel. No.: (212) 880-1033
(212) 880-1074
Fax No.: (212) 880-1040
Skandinaviska Enskilda Banken AB Rosenkrantz GT 22
Box 1843 Vika
N-0123 Oslo, Norway
Attn: Bjarte Boe
Snorre Krogstad
Tel. No.: 47 22 82 70 04
47 22 82 70 05
Fax No.: 47 22 82 71 11
The Bank of Tokyo-Mitsubishi Ltd. Houston Agency
1100 Louisiana, Suite 2800
Houston, TX 77002
Attn: Deanna Breland
Tel. No.: (713) 655-3810
Fax No.: (713) 65-0116
The Sumitomo Bank Limited Houston Agency
700 Louisiana Street, Suite 1750
Houston, TX 77002
Attn: Robert Johnson
William R. McKown
Tel. No.: (713) 238-8235
Fax No.: (713) 759-0020
Wells Fargo Bank (Texas), N.A. Energy Department
1000 Louisiana Street, 3rd Floor
Houston, TX 77002
Attn: Frank Schageman
Tel. No.: (713) 250-4352
Fax No.: (713) 250-7912
The Dai-Ichi Kangyo Bank, Ltd. 1100 Louisiana Street, #4940
Houston, TX 77002
Attn: Kelton Glasscock
Tel. No.: (713) 654-5055
Fax No.: (713) 654-1667
ANNEX IV
COMMITMENT REDUCTION SCHEDULE
Rig 41 10%
J.W. McLean 12%
C.E. Thornton 5%
F.G. McClintock 6%
Ron Tappmeyer 7%
Randolph Yost 7%
D.R. Stewart 7%
Harvey H. Ward 7%
J.T. Angel 7%
Roger W. Mowell 7%
George H. Galloway 7%
Charley Graves 2%
W.D. Kent 2%
EXHIBIT 10.159
===========================================================================
LIMITED LIABILITY COMPANY AGREEMENT
BETWEEN
CONOCO DEVELOPMENT II INC.
AND
RB DEEPWATER EXPLORATION II INC.
DATED APRIL 30, 1997
LIMITED LIABILITY COMPANY AGREEMENT
==========================================================================
TABLE OF CONTENTS
I. DEFINITIONS
1.1 Definitions
II. FORMATION OF COMPANY; FILINGS
2.1 Formation
2.2 Registered Office and Registered Agent.
2.3 Filings
2.4 Relationship of the Parties
III. NAME; PURPOSE; PLACE OF BUSINESS; TERM
3.1 Name
3.2 Purposes
3.3 Place of Business
3.4 Term
IV. MEMBERS; RESTRICTION ON DISPOSITION OF INTEREST; PREFERENTIAL RIGHT OF
PURCHASE
4.1 Members
4.2 Restrictions on the Disposition of an Interest
4.3 Preferential Right of Purchase
4.4 Disposition Documents
4.5 Legality
4.6 Status After Disposition
4.7 Disposition Costs
4.8 Limitation on Transfer
V. CONTRIBUTIONS; DISTRIBUTIONS; FAILURE TO MAKE CONTRIBUTIONS TIMELY;
SECURITY INTEREST
5.1 Initial Contributions
5.2 Cost Overrun Contributions.
5.3 Additional Contributions
5.4 Distributable Cash
5.5 Failure to Make Contributions
5.6 Grant of Security Interest
5.7 Secured Party.
VI. TAX MATTERS
6.1.1 Tax Matters
6.1.2 Information Request by TMP
6.1.3 TMP Agreements with IRS
6.1.4 Inconsistent Treatment of Company Item
6.1.5 Communication of Proceedings to Members
6.1.6 Requests for Administrative Adjustment
6.1.7 Judicial Proceedings
6.2 Income Tax Compliance and Capital Accounts
6.2.1 Tax Returns
6.2.2 Fair Market Value Capital Accounts
6.2.3 Information Request
6.3 Elections
6.3.1 General Elections
6.3.2 Other Elections or Consents
6.4 Capital Contributions and FMV Capital Accounts
6.4.1 Capital Contributions
6.4.2 FMV Capital Accounts
6.5 Company Allocations
6.5.1 FMV Capital Account Allocations
6.5.2 Tax Returns and Tax Basis Capital Account Allocation
6.6 Termination and Liquidating Distributions
6.6.1 Termination
6.6.2 Section 708(b)(1)(A) Termination
6.6.3 Balancing
6.6.4 Final Distribution
6.7 Transfers, Indemnification, and Correspondence
6.7.1 Transfers of Company Interests
6.7.2 Indemnification
6.7.3 Correspondence
6.8 No Interest
6.9 Return of Capital
VII. ADMINISTRATIVE MATTERS
7.1 Books and Records
7.2 Inspection
7.3 Bank Accounts; Investments
7.4 Monthly Progress Reports
VIII.MANAGEMENT; MEMBERS COMMITTEE; MANAGER; STANDARD OF CARE;
INDEMNIFICATION
8.1 Management
8.2 Members Committee
8.3 Manager
8.4 Standard of Care
8.5 Indemnification of the Representatives and the Manager
IX. VOLUNTARY WITHDRAWAL
9.1 Resignation by Member
9.2 Wrongful Withdrawal
X. [DELETED]
XI. DISSOLUTION; RECONSTITUTION; WINDING UP
11.1 Events Deemed to Cause Dissolution
11.2 Distribution of Assets
11.3 Termination
XII. [DELETED]
XIII.INSURANCE
13.1 Insurance Coverage
13.2 Certain Requirements
XIV. MISCELLANEOUS
14.1 Offset
14.2 Choice of Law; Submission to Jurisdiction
14.3 Notices
14.4 Entire Agreement
14.5 Effect of Waiver or Consent
14.6 Amendment or Modification
14.7 Binding Effect; Joinder of Additional Parties
14.8 Counterparts
14.9 Severability
14.10 Headings
14.11 Gender; Articles and Sections
14.12 Indemnity
14.13 Further Assurances
14.14 Independent Conduct
14.15 Deemed Assent
14.16 Signing Members; Certificate of Authority
14.17 Withholding or Granting of Consent
14.18 Waiver of Certain Rights
14.19 U.S. Currency
14.20 Dispute Resolution
14.21 Proprietary Information
14.22 Publicity
XV. DISSOLUTION
15.1 Dissolution
15.2 Ancillary Agreements
Exhibit "A" - Description of Drillship
Exhibit "B" - Indemnification Agreements
Exhibit "C" - Sharing Ratios
Exhibit "D" - Certificate of Formation
Exhibit "E" - Form of Demand Promissory Note (Equity Contributions)
Exhibit "F" - Form of Promissory Note (Loans)
Exhibit "G" - Marine Services Agreement
Exhibit "H" - Drilling Services Agreement
===========================================================================
LIMITED LIABILITY COMPANY AGREEMENT
This Limited Liability Company Agreement is made and entered into on
April 30, 1997 by and between Conoco Development II Inc., a Delaware
corporation having its principal office at 600 North Dairy Ashford,
Houston, Texas 77079 (sometimes referred to as "Conoco") and RB Deepwater
Exploration II Inc., a Nevada corporation having its principal office at
901 Threadneedle, Suite 200, Houston, Texas 77079 (sometimes referred to
as "Reading & Bates").
FOR AND IN CONSIDERATION of the mutual covenants, rights, and
obligations contained herein, the benefits to be derived therefrom, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Members hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms
shall have the respective meanings indicated:
"Act" means the Delaware Limited Liability Company Act, 6 Del.
C. Sections 18-101, et seq., as amended, from time to time.
"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.
"Assets" shall mean the Drillship and all other assets of the
Company of every kind whatsoever, real or personal, tangible or
intangible.
"Agreement" shall mean this Limited Liability Company
Agreement.
"Bankrupt" or "Bankruptcy" shall mean any of the events set out
in Section 18-304 of the Act happening with respect to a Member.
"Base Term" shall mean the period of time commencing on the
date of this Agreement and ending on the date one day after the
later of (i) the completion of the Drilling Contracts, including any
extensions or renewals thereof, or (ii) the complete discharge of
the Purchase Note, including all interest accrued thereon.
"Builder" shall mean collectively Samsung Heavy Industries Co.,
Ltd. and Samsung Corporation.
"Company" shall mean Deepwater Drilling II L.L.C.
"Control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under direct or indirect common
control") shall mean, with respect to a Person that is a
corporation, the right to the exercise, directly or indirectly, more
than 50% of the voting rights attributable to the shares of the
controlled Person normally entitled to vote for the election of
directors and, with respect to a Person that is not a corporation,
the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of the controlled
Person.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations issued thereunder.
"Default Interest Rate" shall mean a rate equal to the lesser
of (i) five (5) percentage points in excess of a varying rate per
annum that is equal to the interest rate publicly quoted by Texas
Commerce Bank, N.A., Houston, Texas, from time to time, as its prime
commercial rate, with adjustments in such varying rate to be made on
the same date as any change in the aforesaid prime rate, or (ii) the
maximum non-usurious rate permitted by applicable law.
"Delinquent Member" shall have the meaning attributed to it in
Section 5.5.
"Designated Representative" shall mean (a) when used with
respect to Reading & Bates, or any successor or permitted assign,
the chief executive officer of the ultimate parent of Reading &
Bates or any successor or permitted assign of Reading & Bates; and
(b) when used with respect to Conoco, or any successor or permitted
assign, a person who is at least a Vice President of Conoco Inc., or
the President of the successor or permitted assign of Conoco.
"Dispose" (or "Disposition") shall mean to sell or otherwise
transfer legal or beneficial ownership to any property or interest
in property, real or personal (or the act of such sale or transfer).
"Distributable Cash" means all cash of the Company in excess of
the amount which the Members Committee determines is required to
meet the Company's obligations (including reserves for projected
expenditures, working capital and contingencies).
"Disposition Notice" shall have the meaning attributed to it in
Section 4.3.
"Drilling Contracts" shall mean, collectively, the drilling
contracts (with options as provided therein) contemplated to be
awarded by Conoco Drilling Inc. and Reading & Bates Corporation to
the Company for the Drillship, for minimum terms, in the aggregate,
of five (5) years, such drilling contracts to be on terms and
conditions satisfactory to the Members.
"Drillship" shall mean the shipshape self-propelled offshore
drilling vessel described in Exhibit "A" hereto, together with all
of her machinery and equipment, including without limitation all
marine, drilling and production equipment, drill string, risers,
blowout prevention equipment, spare and repair parts, inventory,
whether located on the vessel or on shore, belonging to the vessel
(excluding, however, equipment to be leased from third parties).
"First Member" shall have the meaning attributed to it in
Section 4.3.
"Indemnification Agreement" shall mean, with respect to Reading
& Bates, the indemnification agreement to be executed by Reading &
Bates Corporation, and with respect to Conoco the indemnification
agreement to be executed by Conoco Inc., each such indemnification
agreement to be in the form attached as Exhibit "C".
"Independent Accountants" shall mean Price Waterhouse LLP,
Arthur Anderson LLP or such other firm of certified public
accountants, as may from time to time be designated by the Members
Committee.
"Manager" shall mean such Person as may be designated as
Manager from time to time by the Members Committee.
"Member " or "Members" shall mean the Persons named in Section
4.1 or any Member who is admitted as a substitute Member pursuant
hereto.
"Members Committee" shall mean the committee described in and
functioning according to Section 8.2.
"Membership Interest" shall mean the ownership interest of a
Member in the Company (which shall be considered personal property
for all purposes) consisting of (i) such Member's Sharing Ratio of
the entire ownership interests of the Company, (ii) such Member's
right to vote or grant or withhold consent with respect to Company
matters as provided herein or in the Act, and (iii) such Member's
other rights and privileges as herein provided or as provided in the
Act or otherwise at law.
"Non-Delinquent Member" shall have the meaning attributed to
it in Section 5.5(b).
"Person" shall mean an individual, corporation, trust,
unincorporated association, or other entity or association.
"Permitted Security Interest" means the security interest given
under Section 5.6 of the Agreement, any security interests given to
an interim construction lender or lenders to the Company, and any
other security interest in a Membership Interest given by one or
more Members which is consented to in writing by all other Members.
"Proprietary Information" means patents, trade secrets,
proprietary systems, designs, and processes, and technical or
business know-how, which is not in the public domain.
"Purchase Note" shall mean the promissory note or notes
constituting the permanent financing by the Company of the purchase
of the Drillship, such note or notes not to have a term greater than
five years from delivery of the Drillship by the Builder, or to be
in a principal amount to exceed eighty percent (80%) of the
acquisition cost of the Drillship, without the prior written
approval of the Members (such financing to be on a basis of recourse
limited to the Drillship, her earnings and insurances); Conoco or an
Affiliate has the option to provide such permanent financing for the
Company provided: (i) the interest rate is no greater than 25 basis
points in excess of that interest rate and on such other terms as
are comparable to any other permanent financing available to the
Company, and (ii) such option is exercised in writing by Conoco to
the Company no later than ninety (90) days prior to the scheduled
delivery of the Drillship by the Builder to the Company .
"Representatives" shall have the meaning attributed to it in
Section 8.2(c).
"Second Member" shall have the meaning attributed to it in
Section 4.3.
"Sharing Ratio" shall mean, with respect to each Member, as of
the date of this Agreement, the percentage set forth beside such
Member's name on Exhibit "C" to this Agreement.
"Shipbuilding Contract" means the Contract dated February 7,
1997 for the construction and sale of the Drillship between
Deepwater Drilling L.L.C. and Builder, to be assigned by Deepwater
Drilling L.L.C. to Company.
"TMP" shall have the meaning attributed to it in Section 6.1.
ARTICLE II
FORMATION OF COMPANY; FILINGS
2.1 Formation. The Company shall be organized by the Members upon
execution and delivery of this Agreement and the execution and filing of
the Certificate of Formation of the Company to the Delaware Secretary of
State in accordance with and pursuant to the Act, substantially in the form
attached as Exhibit "D" to this Agreement. Conoco or Reading & Bates shall
be an "authorized person" within the meaning of the Act for purposes of
executing the Certificate of Formation. The Manager may provide the
Members with written evidence of their Membership Interest in such form as
the Members Committee may from time to time determine, provided that, if
issued, such written evidence shall always indicate that a Member shall not
transfer its Membership Interest except in accordance with the terms of
this Agreement. Except as provided to the contrary in this Agreement, the
rights and obligations of the Members shall be governed by the provisions
of the Act.
2.2 Registered Office and Registered Agent. The Company's initial
registered office shall be at the office of its registered agent at 1209
Orange Street, Wilmington, Delaware 19801, and the name of its initial
registered agent at such address shall be The Corporation Trust Company.
The registered office and registered agent may be changed from time
to time by filing the address of the new registered office and/or the name
of the new registered agent with the Delaware Secretary of State pursuant
to the Act.
2.3 Filings. The Members, the Members Committee and/or the Manager,
as applicable, shall execute, deliver and file such additional documents
and perform such additional acts consistent with the terms of this
Agreement as may be necessary to comply with the requirements of law for
the formation, qualification, and operation of a limited liability company
in each jurisdiction in which the Company shall conduct business.
2.4 Relationship of the Parties. The Members understand and agree
that the arrangement and undertakings evidenced by the Agreement result in
a partnership for purposes of federal income taxation and certain state
income tax laws which incorporate or follow federal income tax principles.
For every other purpose of the Agreement, the Members understand and agree
that their legal relationship to each other and to any third parties under
applicable state law is that of members of a limited liability company and
not as a partnership.
ARTICLE III
NAME; PURPOSE; PLACE OF BUSINESS; TERM
3.1 Name. The name of the Company shall be "Deepwater Drilling II
L.L.C.", and the business of the Company shall be conducted under such name
or under any other name or names as the Members Committee may from time to
time elect, or as may be necessary to comply with the laws of each
jurisdiction in which the Company conducts, or proposes to conduct,
business.
3.2 Purposes. The purposes of the Company are (a) to cause the
Drillship to be built and equipped, as described in Exhibit "A", to take
delivery of the Drillship from the Builder, to operate the Drillship and
perform the Drilling Contracts and other drilling and related contracts
obtained by the Company for the Drillship, and to carry out any and all
modifications to the Drillship deemed necessary or appropriate by the
Members Committee (including modifications to the Drillship which might
change the overall use of same from a mobile offshore drilling unit to a
floating production, storage and offloading vessel), (b) to obtain the
necessary permanent and construction financing [it being understood and
agreed that with respect to the construction financing each of the Members
shall provide, or cause to be provided, the necessary cost overrun
guaranty, to the extent of its respective Sharing Ratio, to support such
financing for the Company from third parties to enable the Company to
acquire the Drillship (including entering into the Purchase Note)], and to
enter into from time to time such other financing arrangements as may be
necessary, appropriate, or advisable to enable the Company to accomplish
its purposes and to mortgage, pledge, assign, grant a security interest in,
or otherwise encumber the Drillship, its earnings and insurances, and any
or all of the other Company assets to secure the Purchase Note and such
other financing arrangements, (c) to sell, assign, lease, exchange, or
otherwise Dispose of, or refinance or additionally finance, all or
substantially all of the Company's interest in one or more or all of its
assets, (d) to maximize the profits of the Company, and (e) to engage in
all activities and to enter into, exercise the rights and enjoy the
benefits under, and discharge the obligations of the Company pursuant to,
all contracts, agreements, and documents that may be necessary,
appropriate, or advisable to enable the Company to accomplish the purposes
set forth in clauses (a), (b), (c) and (d) of this sentence, and (f) any
other lawful business purpose or activity that may be legally exercised by
a limited liability company under the Act, as the Members may agree.
3.3 Place of Business. The principal place of business of the
Company shall be at 901 Threadneedle, Suite 200, Houston, Texas 77079.
The Company may establish offices at such other places within or outside
the State of Texas as the Members Committee may from time to time
designate.
3.4 Term. The Company shall be deemed to have commenced effective
as of the date the Certificate of Formation of the Company is filed with
the Delaware Secretary of State. The Company shall continue until the
close of Company business on December 31, 2027, unless sooner terminated as
provided in this Agreement.
ARTICLE IV
MEMBERS; RESTRICTION ON DISPOSITION OF INTEREST;
PREFERENTIAL RIGHT OF PURCHASE
4.1 Members. Simultaneously with the execution of this Agreement,
Conoco and Reading & Bates are hereby admitted as Members of the Company.
4.2 Restrictions on the Disposition of an Interest. Each Member
shall be entitled from time to time, without the prior consent of the
Members Committee, but subject to the provisions of Sections 4.4, 4.5, 4.6,
and 4.7, to Dispose of all of its Membership Interest in the Company to an
Affiliate of such Member. Except as set forth in the immediately preceding
sentence, no Member shall have the right to effect a Disposition of all or
any part of its Membership Interest in the Company unless and until (i) the
consent of the Members Committee has been obtained and (ii) there has been
compliance with the provisions of Section 4.3, 4.4, 4.5, 4.6, and 4.7. If
the Members Committee consents to the Disposition of a Membership Interest
in the Company, the provisions of Section 4.3 shall then become applicable
to the Disposition in question. Any attempted Disposition by a Person of a
Membership Interest or right, or any part thereof, in or in respect of the
Company in contravention of this Section 4.2 shall be, and is hereby
declared, null and void ab initio.
4.3 Preferential Right of Purchase. (a) Subject to Section 4.2
should any Member at any time desire to Dispose of all or a portion of its
Membership Interest in the Company pursuant to a bona fide offer from
another Person (other than an Affiliate), such Member (the "First Member")
shall promptly give notice (the "Disposition Notice") thereof to the other
Member (hereinafter referred to as the "Second Member"). The Disposition
Notice shall set forth all relevant information in respect of the proposed
Disposition, including, without limitation, the name and address of the
prospective acquirer and each Person that Controls the prospective
acquirer, the purchase price (all of which must be payable in cash), and
the terms of any delayed payment of the purchase price. The Second Member
shall have the optional preferential right (to be exercised by notice to
the First Member given no later than ninety days after the Second Member's
receipt of the Disposition Notice) to acquire, for the same purchase price
and on the same terms of any delayed payment that are set forth in the
Disposition Notice, the Membership Interest that the First Member proposes
to Dispose. If the Second Member does not elect to exercise the optional
right set forth in the immediately preceding sentence within the time
period set forth therein, the First Member shall have the right, subject to
compliance with the provisions of Sections 4.2, 4.4, 4.5, 4.6 and 4.7, to
Dispose of the Membership Interest described in the Disposition Notice
strictly in accordance with the terms of the Disposition Notice for a
period of sixty-five days after the expiration of the above described
ninety day preferential right period. If the First Member fails so to
Dispose of the Membership Interest within such sixty-five day period, the
proposed Disposition shall again become subject to the preferential right
set forth in this Section 4.3.
(b) If the Second Member exercises the preferential right set forth
in Section 4.3(a), the closing of the acquisition by the Second Member of
the First Member's Membership Interest shall be held at the principal place
of business of the Company on a date mutually acceptable to the First
Member and the Second Member, but in no event more than sixty days after
receipt by the First Member of notice of the Second Member's election to
acquire the First Member's Membership Interest. At such closing the
following transactions shall occur:
(i)The First Member shall convey and assign by assignment with
general warranty of title to the Second Member, free and clear of all
liens, claims, and encumbrances (other than any lien, claim, or encumbrance
created pursuant to Section 5.6, set forth in the Disposition Notice, or
otherwise expressly permitted by the Second Member), the Membership
Interest in the Company described in the Disposition Notice and shall
execute and deliver to the Second Member all documents that may be
required to give effect to the Disposition and acquisition of such
interest; and
(ii) The Second Member shall pay to the First Member, in
accordance with the terms of payment set forth in the Disposition Notice
(that is, in cash, payable either 100% at the closing or in installments
over time, whichever is set forth in the Disposition Notice), the purchase
price specified in the Disposition Notice for the Membership Interest
described in the Disposition Notice whereupon such Second Member (or its
designee) shall be admitted as a substitute Member in respect of the
Membership Interest so purchased.
(c) If the Second Member exercises the preferential right set forth
in Section 4.3(a), in the notice to the First Member exercising such right
the Second Member shall be entitled to designate an Affiliate of the Second
Member to acquire the Membership Interest of the First Member. Upon such
designation, the designated Affiliate will be substituted in the place and
stead of the Second Member for purposes of the Disposition provided for in
Section 4.3(b)(i), but the Second Member will remain fully liable for
making any and all payments due under Section 4.3(b)(ii).
(d) It is expressly agreed that the remedy at law for breach of any
of the obligations set forth in this Section 4.3 is inadequate in view of
(i) the complexities and uncertainties in measuring the actual damages that
would be sustained by reason of the failure of a Member to comply fully
with each of said obligations, and (ii) the uniqueness of the Company
business and the relationship between the Members. Accordingly, each of
the aforesaid obligations shall be, and is hereby expressly made,
enforceable by specific performance.
4.4 Disposition Documents. Except as a result of the foreclosure of
a Permitted Security Interest in a Membership Interest, the Company shall
not recognize for any purpose any purported Disposition of all or any
portion of a Member's Membership Interest in the Company unless and until
the provisions of this Article have been satisfied and there shall have
been delivered to the Manager a dated notification of such Disposition (i)
executed and acknowledged by both the Member effecting such Disposition and
the Person to whom such Membership Interest is Disposed, (ii) if the Person
to whom such Membership Interest is Disposed is to become a Member in the
Company, containing the acceptance by such Person of all the terms and
provisions of this Agreement and an agreement by such Person to perform and
discharge timely all of the obligations and liabilities in respect of the
Membership Interest Disposed of that are attributable to the period on and
subsequent to the date of the Disposition, and (iii) containing a
representation that such Disposition was made in accordance with all
applicable laws and regulations. Any Disposition shall be effective as of
the first day of the calendar month immediately succeeding the month in
which the Manager actually receives the aforesaid notification of
Disposition.
4.5 Legality. Notwithstanding any provision of this Agreement to
the contrary, no Disposition by a Member shall be effective unless (i)
either (aa) the Membership Interest in the Company subject to such
Disposition shall have been registered under the Securities Act of 1933, as
amended, and any applicable state securities laws or (bb) the Company shall
have received a favorable opinion of the Company's legal counsel or of
other legal counsel acceptable to the Members Committee to the effect that
such Disposition is exempt from registration under such laws, and (ii)
unless waived by all of the other Members the Company shall have received a
favorable opinion of the Company's legal counsel or of other legal counsel
acceptable to the Members Committee, to the effect that such Disposition
would not (aa) when added to the total of all other sales, assignments, or
other Dispositions within the preceding twelve months, result in the
Company being considered to have terminated within the meaning of section
708 of the Code, or (bb) cause the Company to jeopardize its classification
as a partnership for federal income tax purposes.
4.6 Status After Disposition. Each Member shall have the right to
constitute the Person to whom its Membership Interest in the Company is
Disposed as a substituted Member if (i) the Disposition in question has
been effected in compliance with the provisions of this Article IV and (ii)
the preferential right of purchase set forth in Section 4.3 has not been
exercised. Each Member that Disposes of a Membership Interest in the
Company to a Member or to a Person that is admitted to the Company as a
Member contemporaneously with such Disposition shall, as between itself and
the other Members, remain responsible for the timely performance and
discharge of all obligations and liabilities in respect of the Membership
Interest Disposed of that are attributable to the period prior to the date
of its Disposition but shall, as between itself and the other Members, be
released from all other Company obligations and liabilities. Each Member
that Disposes of a Membership Interest in the Company to a Person that is
not a Member or that is not admitted to the Company as a Member
contemporaneously with such Disposition shall remain responsible for the
timely performance and discharge of all obligations and liabilities in
respect of the Membership Interest Disposed of, whether attributable to the
period prior or subsequent to the date of its Disposition.
4.7 Disposition Costs. All costs incurred by the Company in
connection with the Disposition of a Membership Interest in the Company
(including, without limitation, the legal fees incurred in connection with
the obtaining of the legal opinions referred to in Section 4.5) shall be
borne and paid by the Member effecting the Disposition within ten days
after the receipt by such Member of the Company's invoice for the amount
due.
4.8 Limitation on Transfer. Except as otherwise specifically
provided in this Agreement, no Member shall have the right without the
prior written consent of the other Member, to:
(i) other than through a Permitted Security Interest, dispose of,
assign, pledge, hypothecate, transfer, exchange or otherwise
transfer for consideration all or any part of its Membership
Interest in the Company; or
(ii) Give or otherwise transfer for no consideration (whether or not
by operation of law) all or part of its Membership Interest in
the Company.
In any agreement granting a Permitted Security Interest (including
this Agreement), provided all other Members agree in writing, a Member may
provide in such agreement that in the event of the foreclosure of such
Permitted Security Interest, the party foreclosing on same may become a
substituted Member of the Company. In addition, if and only if, the
foreclosing party is a Member, such Member may designate an Affiliate to
exercise its rights so as to avoid a single-Member limited liability
company.
Each Member covenants and agrees that it will not engage directly or
indirectly in any business other than the business arising out of its being
a Member of the Company; however, this provision is not intended in any
manner to prohibit an Affiliate of a Member from engaging in any business
whatsoever as further set out in Section 14.14.
If after the expiration of the Base Term a Member resigns (the
"Resigning Member"), the remaining Member (the "Non-Resigning Member")
shall have the option to purchase the Membership of the Resigning Member at
the then fair market value of the Resigning Member's Membership Interest.
The Non-Resigning Member shall have the right to designate an Affiliate to
exercise the rights provided in this Section. If a Non-Resigning Member
exercises the rights given in this Section, the Resigning Member and the
Non-Resigning Member shall close the sale of the Resigning Member's
Membership Interest to the Non-Resigning Member within twenty (20) days
after the 365 days written notice provided in Section 11.1(b), and the
Members shall follow the procedures set out in Section 4.3(b) in connection
with the sale of the Resigning Member's Membership Interest.
ARTICLE V
CONTRIBUTIONS; DISTRIBUTIONS; FAILURE
TO MAKE CONTRIBUTIONS TIMELY; SECURITY INTEREST
5.1 Initial Contributions and Loans. Conoco agrees it will make an
initial equity contribution to the Company of $20,000,000.--, and Reading &
Bates agrees it will make an initial equity contribution to the Company of
$30,000,000.--. The initial equity contributions represent the Sharing
Ratios of Conoco and Reading & Bates, and payment shall be made to the
Company by such Members on the earlier of (i) on February 28, 1999, (ii)
with the prior written approval of the Member's Committee, on demand, in
whole or in part, or (iii) as provided in the promissory notes referred to
in the next succeeding sentence. In order to secure its obligation to make
such initial equity contribution, each Member agrees upon execution of the
Drilling Contracts it will deliver to the Company a demand promissory note
in favor of the Company for the amount of its initial equity contribution,
as set out in the first sentence of this Section 5.1, each such demand
promissory note to allow the Company to make demands contemporaneously to
each of the Members for pro-rata payments of such notes on the Payment
Date. Such promissory notes shall be in the form attached as Exhibit "E"
to this Agreement and shall be payable as provided therein. It is
understood and agreed by the Members that any and all payments of such
initial equity contribution by a Member shall contemporaneously reduce the
principal of that Member's promissory note referred to in this Section 5.1
by the same amounts, and likewise any and all payments made by a Member
with respect to any demands made with respect to such Member's promissory
note shall contemporaneously be credited against such Member's obligation
to make its initial equity contribution under this Section 5.1.
In addition, Conoco agrees to loan the Company up to the sum of
$28,900,350.--, and Reading & Bates agrees to loan the Company up to the
sum of $43,350,540.--, in order to enable the Company to reimburse
Deepwater Drilling L.L.C. for $14,240,180.-- previously paid to the Builder
with respect to the first installment payment due under the Shipbuilding
Contract, and to enable to Company to pay the second installment payment
due under the Shipbuilding Contract amounting to $57,800,720.--, such loans
to be secured by promissory notes executed and delivered by the Company
substantially in the form attached as Exhibit "F" to this Agreement.
Further, the Members agree to loan to the Company their respective Sharing
Ratios of up to an additional $30,000,000.- to enable the Company to make
commitments for owner-furnished equipment required for the Drillship,
provided such commitments are approved by the Members Committee and/or the
Manager in accordance with policies and procedures established by the
Members Committee pursuant to the terms of this Agreement, each such loan
to be secured by a promissory note or notes executed and delivered by the
Company substantially in the form attached as Exhibit "F" to this
Agreement.
5.2 Cost Overrun Contributions. Each of the Members agrees, to the
extent required by the construction lender(s) of the Company with respect
to the Drillship, it will provide or cause to be provided by its Affiliate
a cost overrun guaranty (or other similar type guaranty) in favor of such
interim construction lender(s), in a form acceptable to the Members,
pursuant to which the respective guarantor for each Member would guarantee
that Member's respective Sharing Ratio percentage, so the Company will be
able to fund that amount of any cost overruns incurred by Company under the
Shipbuilding Contract, in order for the Company to take delivery of the
Drillship under the Shipbuilding Contract. Accordingly, the Members also
agree, within three business days after demand by any such interim
construction lenders, to contribute to the Company in cash, their
respective Member's Sharing Ratio of any and all such additional monies
necessary in order to enable Company to take delivery of the Drillship
under the Shipbuilding Contract (including owner furnished equipment) in
compliance with the terms of any such cost overrun guaranties (over and
above the amount of the promissory notes made by the Members referred to in
the first paragraph of Section 5.1 and the amount of the Purchase Note).
5.3 Additional Contributions. Except for initial working capital
for the Company to commence operations, the Members intend for the Company
operations to be self-sustaining, and after the Drillship goes into
service, for the Company to pay its costs and expenses from operating
revenues. However, without creating any rights, remedies, or claims in
favor of or enforceable by any third party, if at any time the Company, as
determined by the Members Committee, requires funds in excess of operating
revenues which are necessary to allow the Company to accomplish its
objectives and purposes, each Member shall, and hereby agrees to,
contribute to the Company, in cash, within ten days after receiving a
request therefor from the Manager, such Member's Sharing Ratio of all such
additional monies that are necessary to enable the Company to cause the
Assets to be properly operated and maintained and to discharge its costs,
expenses, obligations, and liabilities.
5.4 Distributable Cash. The Distributable Cash of the Company shall
be determined on a quarterly basis and the amount thereof shall be
distributed to the Members pro rata according to their Sharing Ratios
(except as otherwise required to effect and carry out the provisions of
Section 5.5(b)(iv), 14.1 and 14.12), provided however, that no distribution
will be made to the extent any such distribution will result in the minimum
equity capital of the Company falling below 3% of the total assets.
Amounts payable to any Member other than in its capacity as a Member, such
as for services rendered, goods purchased or money borrowed, shall not be
treated as distributions for purposes of this Section 5.4.
5.5 Failure to Make Contributions. If either Member fails to
contribute timely all or any portion of any monetary sum that it has agreed
to contribute to the Company pursuant to the provisions of Section 5.1, 5.2
or 5.3 the Company may exercise, by notice to such Member (the "Delinquent
Member") any one or more of the following rights or remedies:
(a) Taking such action (including, without limitation, the
filing of a lawsuit) as the Members Committee deems appropriate to
obtain payment by the Delinquent Member of that portion of its
agreed contribution that is in default, together with interest
thereon at the Default Interest Rate from the date that such
contribution was due until the date that such contribution is made,
at the cost and expense of the Delinquent Member;
(b) Permitting the other Members that desire to do so (the "Non-
Delinquent Members") to advance that portion of the contribution that
is in default, with the following results:
(i) The sum thus advanced shall be deemed to be a loan
from the Non-Delinquent Member to the Delinquent Member and a
contribution of such sum to the Company by the Delinquent Member
pursuant to Section 5.1, 5.2 or 5.3, as appropriate;
(ii) The principal balance of such loan and all accrued
unpaid interest thereon shall be due and payable in whole within
thirty days after written demand therefor has been given to the
Delinquent Member by the Non-Delinquent Member;
(iii) The loan shall bear interest at the Default Interest
Rate, from the date that the loan was made until the date that
such loan, together with all interest accrued thereon, is repaid
to the Non-Delinquent Member;
(iv) All distributions from the Company that would
otherwise be made to the Delinquent Member (whether before or
after dissolution of the Company) shall, instead, be paid to the
Non-Delinquent Member until the loan and all interest accrued
thereon have been repaid in full to the Non-Delinquent Member
(with all such payments being applied first to interest earned
and unpaid and then to principal); provided however, that for
purposes of Section 6.4, any amounts paid by the Company to the
Non-Delinquent Member shall nevertheless be treated as
adjustments to the Delinquent Member's Capital Account;
(v) The repayment of the loan and all interest accrued
thereon shall be secured by a security interest in the Delinquent
Member's interest in the Company, as more fully set forth in
Section 5.6, and
(vi) The Non-Delinquent Member shall have the right, in
addition to the other rights and remedies granted to it pursuant
to this Agreement or available to it at law or in equity, to take
such action (including, without limitation, the filing of a
lawsuit) as the Non-Delinquent Member deem appropriate to obtain
payment by the Delinquent Member of the principal balance of such
loan and all accrued and unpaid interest thereon, at the cost and
expense of the Delinquent Member;
(c) Exercising the rights of a secured party under the Uniform
Commercial Code of the State of Delaware, as more fully set forth in
Section 5.6;
(d) Dissolving the Company; or
(e) Exercising any other rights and remedies available at law or
in equity.
5.6 Grant of Security Interest. Each Member hereby grants to the
Company and to the Non-Delinquent Member, in respect of any loans made by
the Non-Delinquent Member to the Delinquent Member pursuant to Section
5.5(b), as security for (i) the payment of all contributions to be made by
such Member pursuant to this Agreement and (ii) the repayment of any loans
and all interest accrued thereon made by the Non-Delinquent Member to a
Delinquent Member pursuant to Section 5.5(b), a security interest in and to
its Membership Interest in the Company, all pursuant to and in accordance
with the provisions of the Uniform Commercial Code of the State of
Delaware, and agrees that in the event of any default in the payment of
such contributions or in the repayment of such loans and all interest
accrued thereon, the Company or the Non-Delinquent Member, as applicable,
shall have and are hereby granted all the rights and remedies of a secured
party under the Uniform Commercial Code of the State of Delaware with
respect to the security interest granted herein. Each Member further
agrees to execute and deliver to the other Members all such financing
statements and other instruments as may be required by the Members
Committee or the Non-Delinquent Members, as applicable, to effect and carry
out the provisions of the immediately preceding sentence and agrees that
this Agreement may serve as the necessary security agreement and financing
statement. The Company shall register on its books the security interests
given pursuant to this Section 5.6. The Members agree that the security
interests granted under this Section 5.6 shall be subordinate to any
security interests granted to any interim construction lender or lenders to
the Company.
5.7 Secured Party. A secured party of a Permitted Security Interest
with respect to any Member's Membership Interest shall not as the result of
the exercise of any of its rights as a secured party become liable for any
of the obligations of such Member under this Agreement.
ARTICLE VI
TAX MATTERS
6.1.1 Tax Matters Partner. The Members intend that the Company
shall be taxed as a partnership for federal, state, local and foreign
income tax purposes, and have agreed to certain provisions of this
Agreement with that intention in mind. The Members agree to take all
reasonable actions, including the amendment of this Agreement and the
execution of such other documents as may be reasonably required in order
for the Company to qualify and receive partnership treatment for federal,
state, local and foreign income tax purposes. At such time, if ever, as
final regulations are promulgated as heretofore proposed (61 F.R. Section
21989) under Section 7701 of the Code with respect to classification of an
entity as a partnership for federal income tax purposes, the Members shall
elect in compliance with such regulations that the Company be treated, for
federal income tax purposes, as a partnership and take such other actions
as may be reasonably necessary or desirable in connection therewith. The
Member from which the Manager is selected by the Members Committee is
designated as the Tax Matters Partner ("TMP"), as such term is defined in
Section 6231(a)(7) of the Internal Revenue Code of 1986, as amended,
("Code"). In the event of any change in the TMP, the Member serving as TMP
at the beginning of a given taxable year shall continue as TMP with respect
to all matters concerning such year. The TMP and other Members shall use
their best efforts to comply with responsibilities outlined in this section
and in Code Sections 6222 and 6233 and 6050K (and the Treasury Regulations
thereunder) and in doing so shall incur no liability to any other Member.
Notwithstanding the TMP's obligation to use its best efforts in the
fulfillment of its responsibilities, the TMP shall not be required to incur
any expenses for the preparation for, or pursuance of administrative, or
judicial proceedings, unless the Members agree on a method for sharing such
expenses.
6.1.2 Information Request by TMP. The Members shall furnish the TMP
within two weeks from the receipt of the request with such information
(including information specified in Code Sections 6230(e) on Member
identification and 6050K for transfers of Membership Interests) as the TMP
may reasonably request to permit it to provide the Internal Revenue Service
with sufficient information for purposes of Code Sections 6223(c) and 650K.
6.1.3 TMP Agreements with IRS.
6.1.3.1 The TMP shall not agree to any extension of the statute of
limitations for making assessments on behalf of the Company without
first obtaining the written consent of all Members. The TMP shall not
bind any other Member to a settlement agreement in tax audits without
obtaining the written concurrence of any such Member.
6.1.3.2 Any other Member who enters into a settlement agreement with
the Secretary of the Treasury with respect to any Company items, as
defined in Code Section 6231(a)(3), shall notify the other Members of
the terms within ninety (90) days from the date of such settlement.
6.1.4 Inconsistent Treatment of Company Item. If any Member intends
to file a notice of inconsistent treatment under Code Section 6222(b), such
Member shall, prior to the filing of such notice, notify the TMP of the
(actual or potential) inconsistency of the Member's intended treatment of a
Company item with the treatment of that item by the Company. Within one
week of receipt the TMP shall remit copies of such notification to other
Members to the Company. If an inconsistency notice is filed solely because
a Member has not received a Schedule K-1 in time for filing of its income
tax return, the TMP need not be notified.
6.1.5 Communication of Proceedings to Members. The TMP shall to the
extent and in the manner provided by regulations issued pursuant to Section
6223(g) of the Code, keep all Members informed of all administrative and
judicial proceedings for the adjustment at the Company level of Company
items.
6.1.6 Requests for Administrative Adjustment. No Member shall file a
request pursuant to Code Section 6227 for an administrative adjustment of
Company items without first notifying all other Members. If all other
Members agree with the requested adjustment, the TMP shall file the request
on behalf of the Company. If unanimous consent is not obtained within
thirty (30) days from such notice, or within the period required to timely
file the request for administrative adjustment, if shorter, any Member,
including the TMP, may file a request for administrative adjustment on its
own behalf.
6.1.7 Judicial Proceedings. Any Member intending to file a petition
under Code Sections 6226, 6228, or any other Code Section with respect to
any Company item, or other tax matters involving the Company, shall notify
the other Members, prior to such filing, of the nature of the contemplated
proceeding. In the case where the TMP is the Member intending to file such
petition, such notice shall be given within a reasonable time to allow the
other Members to participate in the choice of the forum for such petition.
If the Members do not agree on the appropriate forum, then the forum shall
be decided by majority vote. Each Member shall have a vote in accordance
with its percentage interest in the Company for the year under audit. If
a majority cannot agree, the TMP shall choose the forum. If a Member
intends to seek review of any court decision rendered as a result of such a
proceeding such Member shall notify the other Members, prior to seeking
such review.
6.2 Income Tax Compliance and Capital Accounts
6.2.1 Tax Returns. The TMP shall prepare and file all required
federal, state, and local partnership income tax returns, as well as all
sales, use and other excise tax returns. In preparing such returns the TMP
shall use its best efforts and in doing so shall incur no liability to any
other Member with regard to such returns. Not less than thirty (30) days
prior to the due date (including extensions) the TMP shall submit to each
Member a copy of the income tax returns and/or franchise tax returns as
proposed for review.
6.2.2 Fair Market Value Capital Accounts. The TMP shall establish
and maintain fair market value ("FMV") capital accounts and tax basis
capital accounts for each Member. Upon request, the TMP shall submit to
each Member along with a copy of any proposed partnership income tax return
an accounting of its respective FMV capital accounts as of the end of the
tax return period.
6.2.3 Information Request. Each Member agrees to furnish to the TMP
not later than sixty (60) days before the return due date (including
extensions) such information relating to the operations conducted under
this Agreement as may be required for the proper preparation of all such
tax returns and capital accounts.
6.3 Elections
6.3.1 General Elections. For both income tax return and capital
account purposes, the Company shall elect: (a) to use the maximum
allowable accelerated tax method and the shortest permissible tax life for
depreciation purposes, (b) the accrual method of accounting, (c) to treat
all organizational costs of the Company as deferred expenses amortizable
over a sixty (60) month period pursuant to Section 709(b) of the Code and
comparable provisions of state law, (d) to amortize start-up expenditures
over a sixty (60) month period pursuant to Section 195(d) of the Code and
comparable provisions of state law, and (e) to report income on a calendar
year basis.
6.3.2 Other Elections or Consents. In connection with any permitted
transfer of a Membership Interest in the Company under Article IV, the TMP
shall cause the Company, at the written request of a transferee or the
transferor, on behalf of the Company and at the time and manner provided
under Code Section 754 to adjust the basis of Company property with the
adjustments provided in Code Sections 734 for a distribution of property
and 743 for a transfer of a Membership Interest. In case of a distribution
of property, the TMP shall adjust all tax basis capital accounts. In case
of a transfer of an interest in the Company, the transferee shall, no later
than sixty (60) days prior to the due date of the Company tax return
(including extensions), cooperate with the TMP in the filing of tax returns
by providing the TMP with all reconciliations necessary to reflect such
basis adjustments on the tax return. Any election other than those
referred to above must be approved by the Members Committee.
6.4 Capital Contributions and FMV Capital Accounts
6.4.1 Capital Contributions. The respective capital contributions of
each Member to the Company shall be (a) any properties contributed to the
Company (net of liabilities that the Company assumes or takes the
properties subject to), and (b) all amounts paid by each Member
characterized as contributions to the Company or Company expenses borne and
paid by such Member on behalf of the Company.
6.4.2 FMV Capital Accounts. The FMV capital accounts shall be
increased and decreased as follows:
(a) The FMV capital accounts shall be increased by: (i) the amount
of money and the fair market value of any property contributed by each
Member, respectively, to the Company (net of liabilities assumed by
the Company or to which the contributed property is subject); (ii)
that Member's [Section 6.5.1] allocated share of Company income and
gains, or items thereof; and, (iii) that Member's share of Code
Section 705(a)(1)(B) items.
(b) The FMV capital accounts shall be decreased by: (i) the amount
of money and the fair market value of property distributed to each
Member (net of liabilities assumed by such Member or to which the
property is subject); (ii) that Member's [Section 6.5.1] allocated
share of Company loss and deductions, or items thereof; and, (iii)
that Member's share of Code Section 705(a)(2)(B) items and Code
Section 709 nondeductible and nonamortizable items.
(c) "Fair market value" when it applies to property contributed by or
distributed to a Member or other Company property shall be determined
by the Members Committee.
6.5 Company Allocations
6.5.1 FMV Capital Account Allocations. Each item of income, gain,
loss or deduction shall be allocated to each Member as follows:
(a) Operating and maintenance cost shall be allocated to each
Member in accordance with its respective contribution, or
obligation to contribute, to such cost;
(b) Depreciation shall be allocated to each Member in accordance
with its contribution, or obligation to contribute, to the cost
of the underlying asset;
(c) Loss (or simulated loss) upon the sale, exchange,
distribution, abandonment or other disposition of depreciable
property, shall be allocated to the Members in the ratio of their
respective FMV capital account adjusted basis in the depreciable
property;
(d) Gain (or simulated gain) upon the sale, exchange,
distribution, or other disposition of depreciable or depletable
property shall be allocated to the Members so that the FMV
capital account balances of the Members will most closely reflect
their respective percentage or fractional interests under the
Agreement;
(e) Costs or expenses of any other kind shall be allocated to
each Member in accordance with its respective contribution, or
obligation to contribute, to such costs or expenses; and,
(f) Any other income item shall be allocated to the Members in
accordance with the manner in which such income is realized by
each Member.
6.5.2 Tax Returns and Tax Basis Capital Account Allocation.
(a) Unless otherwise expressly provided herein the allocations
of Company items of income, gain, loss or deduction for tax
return and tax basis capital account purposes shall follow the
principles of allocation under Section 6.5.1. However, the
Company's gain or loss on the taxable disposition of any Company
property in excess of the gain or loss under Section 6.5.1, if
any, is allocated to the contributing Member to the extent of
such Member's pre-contribution gain or loss;
(b) Depreciation shall be allocated to each Member in accordance
with its contribution to the adjusted tax basis of the
depreciable asset;
(c) Any recapture of depreciation or any other item of deduction
or credit shall, to the extent possible, be allocated among the
Members in accordance with their sharing of the depreciation or
other item or deduction or credit which is recaptured;
(d) For Company properties with values different from their
adjusted tax bases, the Members intend that allocations described
in this Section 6.5.2 constitute a "reasonable method" of
allocating gain or loss under Treasury Regulations Section 1.704-
3(a)(1).
6.6 Termination and Liquidating Distributions
6.6.1 Termination. Termination shall occur on the earlier of the
events described in Code Sections 708(b)(1)(B) or 708 (b)(1)(A).
(a) Termination Under Code Section 708(b)(1)(B). Upon
termination under Code Section 708(b)(1)(B), each Member's FMV
capital account shall be adjusted as provided for in the
regulations, Section 1.704-1(b)(2)(iv)(1), and Section 6.6.3.
The distributions provided for in Sections 6.6.2 through 6.6.4
shall be deemed to have occurred, with the Company cash and
properties deemed contributed to a new limited liability company,
the terms of which are identical to those contained in this
Agreement.
(b) Termination Under Code Section 708(b)(1)(A). Upon
termination under Code Section 708(b)(1)(A), the business shall
be wound-up and concluded, and the assets shall be distributed to
the Members as described below by the end of such calendar year
(or, if later, within ninety (90) days after the date of such
termination). The assets shall be valued and distributed to the
creditors of the Company, if any, and to the Members in the order
provided in Sections 6.6.2 through 6.6.4.
6.6.2 Section 708(b)(1)(A) Termination. In the event of a Code
Section 708(b)(1)(A) termination, the assets shall be valued, and the
Company shall first comply with Section 18-804(a)(1) of the Act, and
second, all cash representing unexpended contributions by any Member
shall be returned to the contributor.
6.6.3 Balancing. Third, the FMV capital accounts of the Members
shall be determined under this Section 6.6.3. The TMP shall take the
actions specified under this Section 6.6.3 in order to cause the ratio
of the Members' FMV capital accounts to reflect as closely as possible
their Sharing Ratios under the Agreement. The ratio of a Member's FMV
capital account is represented by a fraction, the numerator of which
is the Member's FMV capital account balance and the denominator of
which is the sum of all Members' FMV capital account balances. This
is hereafter referred to as "balancing of the FMV capital accounts",
and when completed, the FMV capital accounts of the Members shall be
referred to as being "balanced". The manner in which the FMV capital
accounts of the Members are to be balanced under this Section 6.6.3
shall be determined as follows:
(a) The fair market value of all Company properties shall be
determined and the gain or loss for each property which would
have resulted if a sale thereof at such fair market value had
occurred shall be allocated in accordance with Section 6.5.1. If
thereafter any Member has a negative FMV capital account balance,
that is, a balance less than zero, in accordance with Treas. Reg.
Section 1.704-1(b)(2)(ii)(b)(3) such Member is obligated to
contribute an amount of cash to the Company to facilitate the
balancing of the FMV capital accounts. If after these
adjustments the FMV capital accounts are not balanced, Article
6.6.3(b) shall apply; or
(b) If all the Members consent, any cash or an undivided
interest in certain selected properties shall be distributed to
one or more Members as necessary for the purpose of balancing the
FMV capital accounts;
(c) Unless (b) above applies, an undivided interest in each and
every property shall be distributed to one or more Members in
accordance with the ratios of their FMV capital accounts;
(d) If a property is to be valued under (a) above or distributed
pursuant to (b) or (c) above, the fair market value of the
property shall be agreed to by the Members. In the event all of
the Members do not reach agreement as to the fair market value of
property, the TMP shall cause a nationally recognized independent
engineering firm to prepare an evaluation of fair market value of
such property.
6.6.4 Final Distribution. Fourth, after the FMV capital accounts of
the Members have been adjusted, pursuant to Section 6.6.3 above, all
other or remaining property and interest then held by the Company
shall be distributed to the Members in accordance with their positive
FMV capital account balances.
6.7 Transfers, Indemnification, and Correspondence.
6.7.1 Transfers of Company Interests. Transfers of Membership
Interests shall be governed by the Agreement. A Member transferring
its Membership Interest, or any part thereof, shall notify the TMP in
writing within two weeks of such transfer.
6.7.2 Indemnification. This Agreement does not provide for any
indemnification provisions to protect Members against any harm caused
by a Code Section 708(b)(1)(B) termination. However, the Members
agree that if any of them makes a sale or assignment of its Membership
Interest under this Agreement, such sale or assignment shall be
structured, if reasonably possible, to avoid causing an Code Section
708(b)(1)(B) termination.
6.7.3 Correspondence. All correspondence relating to the preparation
and filing of the Company's income tax returns and capital accounts
shall be forwarded to the TMP.
6.8 No Interest. No Member shall be entitled to be paid interest in
respect of either its capital account or any contributions made by it to
the Company.
6.9 Return of Capital. Except as set forth in Section 6.6.2 hereof
and notwithstanding anything in this Agreement to the contrary, no Member
is entitled to a return on any cash or property that it has contributed to
the capital of the Company, but shall look solely to distributions from the
Company. No unrepaid capital contribution shall be deemed or considered to
be a liability of the Company or of any Member. No Member shall be
required to contribute any cash or property to the Company to enable the
Company to return any Member's capital contribution.
ARTICLE VII
ADMINISTRATIVE MATTERS
7.1 Books and Records. The books and records of the Company shall be
kept, at the expense of the Company, by the Member from which the Manager
is appointed in accordance with this Agreement, following that Member's
normal accounting systems, procedures and practices, consistent with
generally accepted accounting principles, on a calendar year basis for all
purposes, and shall reflect all Company transactions and be appropriate and
adequate for recording and reporting the financial condition of the
Company. Within forty-five days following the end of each calendar
quarter, the Manager shall cause to be prepared and submitted to the
Members Committee and each Member an unaudited balance sheet and an
unaudited income statement of the Company and a comparison to budgets in
respect of such calendar quarter. In addition, on or before March 31 (or
as soon thereafter as may be practicable) of each year the Manager shall
cause to be delivered to each Member, in respect of the immediately
preceding year, an audited balance sheet, an audited income statement, an
audited annual statement of changes in financial position of the Company
together with a report by the Company's Independent Accountants to the
effect that such financial statements have been prepared in accordance with
generally accepted accounting principles and present fairly the Company's
financial position, results of operation, and changes in financial
position, and a report indicating each Member's share for federal income
tax purposes of the Company income, gain, credits, losses, and deductions
prepared, in each case, by the Company's Independent Accountants. A copy
of each Company tax return required to be filed with any governmental
authority shall be delivered to each Member at least ten days before such
return is filed.
7.2 Inspection. Each Member, at its sole cost and expense, shall
have the right to inspect, copy, and audit the books and records of the
Company during reasonable business hours at the principal place of business
of the Company. No Person other than a Member (or its duly authorized
representative) and the Company's Independent Accountants shall have any
right to inspect the books and records of the Company for any purpose
whatsoever. Each Person that inspects the books and records of the Company
shall maintain the confidentiality of the information received pursuant to
or in connection with such inspection.
7.3 Bank Accounts; Investments. All funds of the Company shall be
deposited in its name in an account or accounts maintained in one or more
national or state bank or banks designated from time to time by the Members
Committee. The funds of the Company shall not be commingled with the funds
of any other Person. Checks shall be drawn upon the Company account or
accounts only for the purposes of the Company and shall be signed by such
signatory party or parties as may be designated by the Members Committee.
The Manager shall have the obligation from time to time to deposit Company
funds that (i) are not required for the operation of the business of the
Company and (ii) should not, in the Manager's opinion, be used to repay
Company debt, in interest bearing bank accounts or to purchase commercial
paper, treasury bills, or other high grade short term instruments following
guidelines approved by the Members Committee.
7.4 Monthly Progress Reports. At least once a month, the Manager, at
Company expense, shall furnish to the Members a progress report regarding
the operations of the Company.
ARTICLE VIII
MANAGEMENT; MEMBERS COMMITTEE; MANAGER;
STANDARD OF CARE; INDEMNIFICATION
8.1 Management. (a) The management and control of the Company
business shall be vested in the Members, who shall exercise such management
and control through and by virtue of their selection of the Members
Committee in accordance with the succeeding provisions of this Article VIII
and their participation in the making of the decisions accorded to them
pursuant to this Agreement.
(b) The Members shall be entitled to delegate any powers and
authority required for the management of the Company to the Members
Committee, save that the Members reserve the following powers and authority
exclusively to themselves, namely:
(i) to amend the purposes of the Company, as set out in
Section 3.2;
(ii) to liquidate or otherwise dissolve the Company;
(iii) to approve the merger or consolidation of the Company with or
into an "other business entity," as such term is defined in
Section 18-209(a) of the Act, or the sale, exchange, or other
disposition of all, or substantially all of the Company's
assets which is to occur as part of a single transaction or
plan;
(iv) to designate from time to time the Company's
Independent Accountants; and
(v) to amend this Agreement.
(c) In the exercise of any powers and authority the Members may have
in connection with the management and control of the Company, all decisions
or actions of the Members must be unanimous.
8.2 Members Committee.
(a) The Members Committee (herein referred to as the "Members
Committee") shall be responsible for the making of decisions with respect
to the Company business that are not accorded to the Members or the Manager
pursuant to this Agreement.
(b) Without limiting the generality of paragraph (a) of this Section
and subject always to the provisions of Section 8.1(b), the Members
Committee shall have the power to delegate to the Manager of the Company
any powers and authority necessary for the day-to-day operation of the
business of the Company, except that the Members Committee reserves the
following powers and authority exclusively to itself, namely:
(i) to set the overall policy and vision of the Company in
accordance with the purposes set out in Section 3.2;
(ii) to recommend to the annual meeting of the Members the
distribution policy of the Company and the level of
distribution to be declared;
(iii) to elect or appoint the Manager;
(iv) to approve capital expenditures of the Company in
such amount as the Members may from time to time determine;
(v) to approve the business and strategic plans and the
annual operating plans of the Company;
(vi) to recommend approval by the Members of any of the
matters referred to in Section 8.1(b);
(vii) to approve from time to time the location of the Company's
principal executive office;
(viii) to determine the banking policy of the Company and further in
that regard: to grant financial authorization (including the
opening and closing of bank accounts and to designate
signatories for such accounts) to the Manager; to approve all
borrowings by the Company of sums of money within the
limitations regarding amount as the Members may from time to
time determine, from banks, other lending institutions, the
Members or Affiliates of the Members, on such terms as the
Members Committee deems appropriate, and, in connection
therewith, to hypothecate, encumber, and grant security
interests in the assets of the Company to secure repayment of
the borrowed sums. No debt shall be contracted or liability
incurred by or on behalf of the Company except to the extent
permitted under the Act by the Manager or authorized agents of
the Company expressly authorized by the Members Committee to
contract such debt or incur such liability;
(ix) to approve the purchase of liability and other
insurance to protect the Company's property and business;
(x) to establish guidelines for the Manager in connection
with the temporary investment of Company funds;
(xi) to approve the execution on behalf of the Company of
all instruments and documents with a value in excess of such
amount as the Members may from time to time determine,
including, without limitation: checks; drafts; notes and
other negotiable instruments; mortgages or deeds of trust;
security agreements; financing statements; documents providing
for the acquisition, mortgage or disposition of the Company's
property; assignments; bills of sale; leases; partnership
agreements; operating agreements of other limited liability
companies; agreements between the Company and either of the
Members or their Affiliates; and any other instruments or
documents necessary, in the opinion of the Members Committee
to the business of the Company;
(xii) to assess the performance of the Manager of the Company;
(xiii) to approve the commencement or settlement of litigation
directly or indirectly involving the Company, where the claim
or potential liability of the Company or the amount of such
settlement is in excess of such amount as the Members may from
time to time determine;
(xiv) to determine the accounting policies of the Company and to
recommend to the Members the appointment of the Company's
Independent Accountants;
(xv) to approve the ethics, safety and health and
environmental policies of the Company; and
(xvi) to review and approve the terms of any public announcement
proposed to be made by the Company, as determined from time to
time by the Members Committee.
(c) The Members Committee shall be comprised of six individuals,
three of whom shall be named by each Member (individually a
"Representative" and collectively "Representatives"). These
Representative(s) may be changed at any time by the Members appointing such
Representative(s) by written notice to the other Member.
(d) Meetings of the Members Committee may be held at such regular
times as may be specified by the Members Committee and, in addition, may be
called by any Representative by giving at least ten days prior notice
thereof to each of the other Representatives. Notice of each meeting shall
be in writing and shall state the date, time, and place at which such
meeting is to be held and the purposes for which such meeting is called.
Prior notice of a meeting need not be given, however, if such notice is
waived in writing by all of the Representatives or if the action in
question is taken pursuant to the provisions of the second succeeding
sentence. In addition, the attendance in person or by a Person having the
written proxy of a Representative at a meeting shall constitute a waiver of
notice of such meeting, except where the Representative attends the meeting
for the express purpose of objecting to the transaction of any business on
the ground that the meeting is not lawfully called or convened.) Any
action required or permitted to be taken at a meeting of the Members
Committee may be taken (i) by means of a telephone conference (notice of
which shall be given to each of the Representatives) in which all
Representatives participating in the meeting in person or by a Person
having the written proxy and constituting a quorum can hear and speak to
each other (with the action taken during such telephone conference to be
reduced to writing and filed in the records of the Members Committee), or
(ii) by means of one Representative submitting to the other Representatives
in accordance with the provisions of Section 14.3 a statement of the matter
to be voted on, the purposes thereof, and the period within which the
Representatives must respond either in the affirmative or in the negative
to the matter in respect of which the vote is requested (which response
period shall not be less than seven business days nor more than twenty
business days from the date on which the Representative in question is
deemed to have received such request pursuant to Section 14.3). All action
taken pursuant to the immediately preceding sentence shall be deemed for
all purposes to have been taken at a meeting of the Members Committee. The
Members Committee shall conduct its proceedings in accordance with such
rules as it may from time to time establish and shall keep appropriate
records of the action taken by it.
(e) At all meetings of the Members Committee, at least one
Representative representing each Member shall constitute a quorum for the
transaction of business, and subject to this Section 8.2, the unanimous act
of all of the Member Representatives present at any meeting at which there
is a quorum shall be the act of the Members Committee, except as set forth
in Section 8.2(f). If a quorum shall not be present at any meeting of the
Members Committee, the meeting may be rescheduled by any Representative by
giving seven days prior notice thereof to each of the other
Representatives.
(f) Notwithstanding any provision of this Agreement to the contrary:
(i) neither a Member nor a Representative appointed by any Member that is
the subject of a vote with respect to the exercise of remedies relating to
such Member's delinquency or default under this Agreement, in the case of a
vote with respect to such matters; (ii) neither a Member nor a
Representative appointed by any Member that attempts to effect a
Disposition of an interest or right, or any part thereof, in or in respect
of the Company in willful contravention of Article IV, or in the case of
any vote with respect to any matter whatsoever subsequent to such attempted
Disposition; or (iii) neither a Delinquent Member nor the Representative
appointed by any Delinquent Member, in the case of any vote occurring
during the period in which such Delinquent Member is a Delinquent Member;
will be entitled to vote on the issue in question, and such Representative
shall not be counted for voting or quorum purposes in respect of the vote
in question or the Members Committee meeting at which the vote is taken.
Instead, a quorum in respect of the vote in question shall be comprised of
one or more of all Representatives other than those that are not entitled
to vote on such issue, and the decisions in respect of such issue shall be
made by the unanimous vote of all Representatives present that are entitled
to vote on such issue.
8.3 Manager. The Manager (who shall be an employee of a Member or of
an Affiliate of a Member) shall be appointed by, and shall serve at the
pleasure of, the Members Committee, subject to the direction of the
Members Committee, and shall be responsible for the general supervision
and management of the business, affairs, and property of the Company and
for the implementation of the decisions of the Members Committee, and
shall have, as may be delegated by the Members Committee, the authority to
conduct the day-to-day affairs of the Company. Without limitation of the
generality of the preceding provisions of this Section, the Manager shall
have (subject to the limitations of Sections 8.1 and 8.2 and to budgetary
limitations and such other limitations as may be imposed from time to time
by the Members Committee) the authority, the right, and the power, on
behalf of the Company:
(a) to enter into, make, and perform all contracts, agreements, and
other undertakings binding the Company as may be necessary, appropriate, or
advisable in furtherance of the purposes of the Company as the Manager may
determine in his or her discretion;
(b) to open, maintain, and close bank accounts, to designate and
change signatories on such accounts, and to draw checks and other orders
for the payment of monies;
(c) to maintain the assets of the Company in good order and repair;
(d) to collect all sums due the Company;
(e) to prepare and file all Company tax returns and to make all
elections for the Company thereunder in accordance with the instructions of
the TMP and the Members Committee;
(f) to the extent that funds of the Company are available therefor,
to pay as they become due all debts and obligations of the Company
(including, without limitation, the Purchase Note); and
(g) within any limitations as may be imposed from time to time by the
Members Committee, to take any and all other action that may be necessary,
appropriate, or advisable in furtherance of the purposes of the Company.
In addition, the Company shall reimburse the Manager, on a monthly
basis, for all reasonable out-of-pocket transportation, lodging and
entertainment expenses, incurred in connection with the business of the
Company, consistent with the normal reimbursement policies of the Member
which is providing the individual to be Manager of the Company.
8.4 Standard of Care. In the performance of their respective duties
under this Agreement, the Representatives and the Manager shall use
reasonable efforts to conduct the business of the Company in a good and
businesslike manner and in accordance with good practice within the
industry. Notwithstanding any provision of this Agreement to the contrary,
however, neither any Representative nor the Manager shall be held liable or
responsible to any Member or to the Company for any losses sustained, or
liabilities incurred, in connection with, or attributable to, errors in
judgment, negligence, or other fault of such individual, except that which
is caused by such Person's bad faith or willful misconduct.
8.5 Indemnification of the Representatives and the Manager. The
Company hereby agrees to defend, indemnify and hold harmless the
Representatives and the Manager from and against any and all claims,
damages, liabilities, costs (including, without limitation, the costs of
litigation and reasonable attorneys' fees), damages, and causes of action
arising out of, resulting from, or attributable to the Representatives' and
the Manager's management of the Company affairs, except where the claim at
issue is based upon the bad faith or willful misconduct of the
Representative in question or the Manager. The indemnification rights
herein contained shall be (i) cumulative of, and in addition to, any and
all rights, remedies, and recourses to which the Representatives and the
Manager shall be entitled at law or in equity, and (ii) shall only be for
the benefit of the Company, the Representatives, and the Manager, to the
exclusion of all other purported third party beneficiaries.
ARTICLE IX
VOLUNTARY WITHDRAWAL
9.1 Resignation by Member.
Each of the Members acknowledges:
(i) the unique nature of the business the Company will
engage in and the expertise and skills each of the Members
brings to the business and management of the Company;
(ii) the commitment of the Company to fully perform the
terms and conditions of the Drilling Contracts and the
Purchase Note; and
(iii) the need for the Company to enter into the Purchase Note and
to assure any lenders of the Company's commitment to the
business of the Company.
In furtherance of those objectives, the Members agree that no Member will
have the right to, and each Member agrees that it will not, resign or
withdraw from the Company prior to the expiration of the Base Term. In the
event any Member, prior to the expiration of the Base Term, resigns from
the Company, or otherwise takes any action having the effect of a
withdrawal or termination of its participation as a Member of the Company
(a "Wrongful Withdrawal"), such withdrawal shall be null and void and such
Member shall remain fully liable as a Member hereunder. In the event the
Company is required by law to recognize a Wrongful Withdrawal, the
withdrawing Member will:
(w) pay to the Company the withdrawing Member's Sharing Ratio of
the Company's then known, outstanding and due obligations
and liabilities, including amounts then due and owing under
the Purchase Note, at the time of such Wrongful Withdrawal;
(x) as they thereafter become known, pay to the Company its Sharing
Ratio of the Company's liabilities that arose, or resulted from
activities of the Company, prior to the Wrongful Withdrawal;
(y) forfeit its Membership Interest in the Company to the other
Members on a pro-rata basis based on their respective Sharing
Ratios; and
(z) be liable for all damages attributable to the withdrawing
Member's breach of this Agreement.
Pursuant to Section 18-603 of the Act, the Members agree that no Member may
resign from the Company prior to the expiration of the Base Term, and
thereafter any Member may resign from the Company in accordance with this
Agreement.
9.2 Wrongful Withdrawal. If a Wrongful Withdrawal occurs, then within
a reasonable time after the expiration of the Base Term, there will be a
winding up of the Company and a distribution of the assets in accordance
with Section 11.2 of this Agreement, provided that, (i) the non-withdrawing
Member will act as the liquidating trustee under Section 11.2, (ii) no
adjustment will be made to the capital account of the Member who wrongfully
withdrew, and (iii) the wrongfully withdrawing Member's Membership Interest
in the Company to be forfeited to the other Members will be valued to the
non-withdrawing Member at the amount of such withdrawing Member's
contributions to the Company pursuant to Sections 5.1 and 5.2 hereof.
ARTICLE X
[INTENTIONALLY DELETED]
ARTICLE XI
DISSOLUTION; RECONSTITUTION; WINDING UP
11.1 Events Deemed to Cause Dissolution. Unless the business of the
Company is continued either by the consent of all remaining Members within
90 days following the occurrence of any such event or pursuant to a right
to continue provided under this Agreement, the Company shall be dissolved
upon the first to occur of the following:
(a) The expiration of the term provided in Section 3.4;
(b) The resignation of a Member upon 365 days prior written
notice given after the expiration of the Base Term, provided
however, the Company shall not be dissolved if the Non-
Resigning Member exercises its rights under Section 4.8;
(c) the Bankruptcy of a Member;
(d) The sale of all or substantially all of the assets of the
Company;
(e) The unanimous vote of the Members to dissolve the Company;
(f) Unless the Members otherwise agree in writing, the failure
of one or more of the events set out in Section 15.1 to
occur on or before April 30, 1997;
(g) By order of a court of competent jurisdiction pursuant to
Section 18-802 of the Act, at such time as specified in such
order; or
(h) Upon the dissolution of either Member or any other event
that terminates the membership of a Member in the Company.
or otherwise as provided in Section 9.1 with respect to a Wrongful
Withdrawal. Subject to the provisions of Section 9.1 with respect to
Wrongful Withdrawal, dissolution of the Company shall be effective on
the day on which the event occurs giving rise to such dissolution, but
the Company shall not terminate until the assets of the Company have
been distributed as provided in Section 11.2.
11.2 Distribution of Assets. If the Company is dissolved pursuant to
this Article XI, an accounting of the Company assets, liabilities, and
operations through the last day of the month in which the dissolution
occurs shall be made by the Company's Independent Accountants, and the
affairs of the Company shall be wound up and terminated. The Members
Committee shall serve as the liquidating trustee. The liquidating trustee
shall be responsible for winding up and terminating the affairs of the
Company and shall determine all matters in connection therewith (including,
without limitation, the arrangements to be made with creditors, whether and
to what extent and under what terms of assets of the Company are to be sold
or distributed in kind to the Members, and, after consultation with the
Company's Independent Accountants, the amount or necessity of cash reserves
to cover contingent liabilities) as the liquidating trustee deems advisable
and proper; provided, however, that all decisions of the liquidating
trustee shall be made in accordance with the fiduciary duty owed by the
liquidating trustee to the Company and to each of the Members.
All assets remaining after the payment (or provision for payment) of
Company obligations to third parties shall be distributed to the Members
(i) first, in such amounts and proportions as may be necessary to effect
and carry out the provisions of Sections 5.5(b)(iv), 14.1 and 14.12, (ii)
second, in such amounts and proportions as may be necessary to cause the
ratios of the Members' respective capital accounts to be equal to the
Members' respective Sharing Ratios, and (iii) third, in the proportion of
the Members' respective Sharing Ratios then in effect.
The distribution (if any) to the Members of an interest in the Company
assets may be subject to such liens, encumbrances, and restrictions, and to
such leases, contracts, and agreements as in effect on the date of such
distribution.
11.3 Termination. After all of the assets of the Company have been
distributed, the Company shall terminate, and the Members shall (i) cause a
certificate of cancellation to be filed with the Delaware Secretary of
State, and (ii) file appropriate documentation reflecting such termination
in all other jurisdictions in which the Company may be qualified to do
business.
ARTICLE XII
[INTENTIONALLY DELETED]
ARTICLE XIII
INSURANCE
13.1 Insurance Coverage. The Company shall carry the following
insurance or such other insurance as the Members Committee may deem
appropriate (to the extent in each case that same is obtainable on
reasonably commercial terms) for the protection of the Company and the
Members:
(a) Insurance which shall comply with all applicable worker's
compensation and occupational disease laws and which shall cover all
employees of the Company engaged in operations under this Agreement;
if applicable, such insurance shall include coverage for claims under
the United States Longshoremen's and Harbor Worker's Act;
(b) Employer's liability insurance with a limit of not less than
$500,000 per occurrence , including maritime employer's liability
coverage with respect to the Jones Act, and general maritime liability
(if not covered by the protection & indemnity coverage referred to in
Section 13.1(f) below);
(c) Comprehensive general liability insurance with a combined
single limit of not less than $1,000,000 per occurrence;
(d) Automobile liability insurance with a combined single limit
of not less than $1,000,000 per occurrence;
(e) Marine "all risk" hull and machinery insurance (including
war risks, confiscation, nationalization and deprivation coverage for
operations outside the United States of America) to the full value of
the Drillship;
(f) Marine protection and indemnity insurance, or equivalent
coverage, including war risk protection and indemnity insurance for
operations outside the United States of America, to the full value of
the Drillship;
(g) Excess liability insurance (over the insurances set forth in
subparagraphs (b), (c), (d) and (f) above) with limits of not less
than $50,000,000 per occurrence;
(h) Contingent Operators Extra Expense Energy Exploration and
Development (well control and blowout) insurance including costs to
regain control of a well including underground blowout; costs to
restore or redrill a well as a result of a blowout, crater, or fire;
costs to remove, clean up, or contain pollution and contaminating
substances emanating from a well; legal liability costs for bodily
injury and/or loss of life, damage to, or loss to use of property
caused by contaminating substances from a well; with limits of not
less than $50,000,000; and
(i) Such other insurance as the Members Committee may deem
necessary, appropriate, or advisable in furtherance of the purposes of
the Company.
13.2 Certain Requirements. All insurance shall be placed through
underwriters and/or insurance companies which are financially sound and
responsible, and licensed to do business in all jurisdictions where such
licensing is required. Each policy of insurance [except that policy
referred to in Section 13.1(a)] shall, to the extent that the Members
Committee deems same practicable, either on its face or by appropriate
endorsement, (i) name the Company as a named insured and each Member as an
additional named assured, (ii) provide for reasonable deductibles
acceptable to the Members Committee, (iii) provide that it shall not be
cancelled or amended or its coverage reduced except upon thirty days prior
notice to the Company (seven (7) days in the case of war risk coverages),
and (iv) contain waiver of subrogation provisions pursuant to which each
underwriter and/or insurer waives all express and implies rights of
subrogation against the Company and each Member.
13.3 The types, limits and terms of insurance coverages set out in
this Article may be modified as deemed appropriate by the Members
Committee.
ARTICLE XIV
MISCELLANEOUS
14.1 Offset. In the event that any sum is payable to any Member
pursuant to this Agreement, any amounts owed by said Member to the Company
shall be deducted from said sum before payment to said Member.
14.2 Choice of Law; Submission to Jurisdiction. This Agreement shall
be subject to and governed by the laws of the State of Delaware, excluding
any conflicts-of-law rule or principle that might refer to the construction
or interpretation of this Agreement to the laws of another state. Each
Member hereby submits to the jurisdiction of the state and federal courts
in the State of Delaware and to venue in Wilmington, New Castle County,
Delaware.
14.3 Notices. All notices or requests or consents provided for or
permitted to be given pursuant to this Agreement must be in writing and
must be given by depositing same in the United States mail, addressed to
the Person to be notified, postpaid, and registered or certified with
return receipt requested or by delivering such notice in person to such
party. Notices given or served pursuant hereto shall be effective upon
receipt by the Person to be notified. All notices to be sent to the
Members shall be sent to or made at the addresses given under the
respective parties' signatures below, or such other addresses as such
parties may stipulate to the other parties in the manner provided in this
Section 14.3.
14.4 Entire Agreement. This Agreement constitutes the entire
agreement of the Members relating to the matters contained herein,
superseding all prior contracts or agreements, whether oral or written.
14.5 Effect of Waiver or Consent. No waiver or consent, express or
implied, by any Member to or of any breach or default by any Person in the
performance by such Person of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in
the performance by such Person of the same or any other obligations of such
Person hereunder. Failure on the part of a Member to complain of any act
of any Person or to declare any Person in default, irrespective of how long
such failure continues, shall not constitute a waiver by such Member of its
rights hereunder until the applicable statute of limitation period has run.
14.6 Amendment or Modification. This Agreement may be amended or
modified from time to time only by the unanimous vote of all the Members.
Each such instrument shall be reduced to writing and shall be designated on
its face an "Amendment" or an "Addendum" to this Agreement.
14.7 Binding Effect; Joinder of Additional Parties. Subject to the
restrictions on Dispositions set forth herein, this Agreement shall be
binding upon and shall inure to the benefit of the Members and their
respective successors and assigns.
14.8 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signatory parties had signed
the same document. All counterparts shall be construed together and shall
constitute one and the same instrument.
14.9 Severability. It is the express intention of the Members that,
except to the extent a provision of this Agreement expressly incorporates
federal income tax rules by reference to the Code or is expressly
prohibited or ineffective under the Act, this Agreement shall govern the
relations among the Members in their capacities as such. If any provision
of this Agreement or the application thereof to any Member or circumstance
shall be held invalid or unenforceable to any extent, (a) such provision
shall be ineffective to the extent, and only to the extent, of such
unenforceability or prohibition and shall be enforced to the extent
permitted by law; (b) such unenforceability or prohibition in any
jurisdiction shall not invalidate or render unenforceable such provision as
applied (i) to any other Member or circumstance or (ii) in any other
jurisdiction; and (c) such unenforceability or prohibition shall not
affect or invalidate any other provision of this Agreement. To the extent
any provision of this Agreement is prohibited or ineffective under the Act,
this Agreement shall be considered amended to the least degree possible in
order to make this Agreement effective under the Act. In the event the Act
is subsequently amended or interpreted in such a way as to make valid any
provision of this Agreement that was formerly invalid, such provision shall
be considered to be valid from the effective date of such interpretation or
amendment. To the extent any provision of this Agreement is held invalid
or unenforceable, the Members shall negotiate, in good faith, concerning an
amendment to the Agreement that will achieve, to the extent possible
consistent with applicable law, the intended effect of the invalid or
unenforceable provision.
14.10 Headings. The headings in this Agreement are inserted for
convenience and identification only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement
or any provision hereof.
14.11 Gender; Articles and Sections. Whenever the context
requires, the gender of all words used in this Agreement shall include the
masculine, feminine, and neuter, and the number of all words shall include
the singular and the plural. All references to article and section numbers
refer to articles and sections of this Agreement.
14.12 Indemnity. Each Member hereby agrees to defend, indemnify,
and hold harmless the Company and the other Members from and against any
and all losses, costs (including, without limitation, the costs of
litigation and attorneys' fees), claims, causes of action, damages, and
liabilities that are attributable to the breach by the indemnifying Member
of any of the provisions of this Agreement (including, without limitation,
the provisions of Section 9.1 hereof); provided however, the indemnity
provided in this Section 14.12 shall be only for the benefit of the Company
and other Members, to the exclusion of all other purported third party
beneficiaries.
14.13 Further Assurances. In connection with this Agreement, as
well as all transactions contemplated by this Agreement, each signatory
party hereto agrees to execute and deliver such additional documents and
instruments and to perform such additional acts as may be necessary or
appropriate to effect, carry out, and perform all of the terms, provisions,
and conditions of this Agreement and all such transactions.
14.14 Independent Conduct. The Representatives and the Manager
shall not be required to manage the Company as their sole and exclusive
function and such Manager and Representatives and Affiliates of any Member
may have other business interests and may engage in other investments or
activities in addition to those relating to the Company, irrespective of
whether some may be in competition with the business and activities of the
Company. Neither the Company nor any Member shall have any right, by
virtue of this Agreement, to share or participate in such other business
interests, investments or activities of a Manager or a Representative or an
Affiliate of a Member, or to the income or proceeds derived therefrom. No
Manager or Representative shall incur liability to the Company or to any
Member solely by reason of engaging in any such other business, investment
or activity. Nothing in this Agreement shall affect any obligations and
liabilities of a Member Representative to the Member that selected such
Member Representative.
14.15 Deemed Assent. The failure of a Representative to respond,
within the response period set forth in the request in question (which
response period shall not be less than seven (7) business days nor more
than twenty (20) business days for from the date on which the
Representative in question is deemed to have received such request pursuant
to Section 14.3) either in the affirmative or in the negative, to any
request it receives from another Representative relating to a proposed act
in respect of which such Representative is entitled to vote pursuant to
this Agreement, shall conclusively be deemed for all purposes to be a vote
by such Representative in favor of any act set forth in such request.
14.16 Signing Members; Certificate of Authority. The Members
Committee shall designate from time to time one or more of the Members to
execute (when requested to do so by the Manager) documents on behalf of the
Company. Each Member agrees to execute (and acknowledge, if requested) and
deliver such documents and instruments as the Members Committee may request
to evidence and confirm to third parties the power, authority, and right of
the Members Committee, the Manager, and the Members designated pursuant to
the immediately preceding sentence to act on behalf of and bind the Company
(but only to the extent, in each case, that the action in question is one
that the Members Committee or Manager or Member in question is entitled to
take pursuant to, and not in violation of, this Agreement).
14.17 Withholding or Granting of Consent. Each Member and the
Members Committee may, with respect to any consent or approval that it is
entitled to grant pursuant to this Agreement, grant or withhold such
consent or approval in its sole and uncontrolled discretion, with or
without cause, and subject to such conditions as it shall deem appropriate.
14.18 Waiver of Certain Rights. Each Member irrevocably waives
the right it might have to maintain any action for partition of the
property of the Company.
14.19 U.S. Currency. All sums and amounts payable or to be
payable pursuant to the provisions of this Agreement shall be payable in
coin or currency of the United States of America that, at the time of
payment, is legal tender for the payment of public and private debts in the
United States of America.
14.20 Dispute Resolution. In the event the Members Committee
cannot reach a decision as to any matter concerning the business of the
Company and remains unable to do so with respect to any such matter for a
period of not less than 30 days, it shall refer such matter to the
Designated Representative of each of the Members for resolution.
14.21 Proprietary Information. Each of the Members acknowledges
and agrees that, to the extent in the performance of this Agreement and the
conduct of the business and operations of the Company, it receives
Proprietary Information from the other Member, it will exert reasonable
efforts to hold such Proprietary Information confidential and not disclose
the same to any third party without the prior written consent of the other
Member hereto. Neither Member shall by virtue of this Agreement acquire
any right, title or interest in the Proprietary Information belonging to
the other Member.
14.22 Publicity. Except as otherwise required by applicable
federal or state securities laws, regulations or rules or the rules of any
national stock exchange, neither of the Members will issue any press
release or other form of publicity without the prior written consent of the
other Member, such consent not to be unreasonably withheld.
ARTICLE XV
DISSOLUTION
15.1 Dissolution. Unless the Members otherwise agree in writing, and
as provided in Section 11.1(f), the Company shall be dissolved if on or
before April 30, 1997 all of the following events have not occurred:
a. The execution and delivery of this Agreement have been ratified
by the board of directors of Conoco, and Conoco shall have
notified Reading & Bates in writing of such ratification;
b. The execution and delivery of this Agreement have been ratified
by the board of directors of Reading & Bates, and Reading & Bates
shall have notified Conoco in writing of such ratification;
c. The execution and delivery of an assignment of all rights, title
and interests of Deepwater Drilling L.L.C. in and to the
Shipbuilding Contract (together with the related Unit Rate Letter
Agreement dated February 7, 1997 between the Builder and
Deepwater Drilling L.L.C. and the Commission Agreement of the
same date between Samsung Heavy Industries Co., Ltd. and
Deepwater Drilling L.L.C.) to the Company; and
d. Conoco Drilling Inc. and Reading & Bates Corporation shall have
entered into the Drilling Contracts with the Company.
15.2 Ancillary Agreements. Upon the last to occur of the events set
out in Sections 15.1.a, 15.1.b, 15.1.c and 15.1.d above, the Company shall
enter into the following agreements:
a. the Marine Services Agreement with Conoco Shipping Company, or
one of its Affiliates, in substantially the form attached as
Exhibit "G" to this Agreement; and
b. the Drilling Services Agreement with Reading & Bates Drilling
Co., or one of its Affiliates, substantially in the form
attached as Exhibit "H" to this Agreement.
EXECUTED on this 30th day of April, 1997.
MEMBERS
CONOCO DEVELOPMENT II INC.
By:
Its:
600 North Dairy Ashford
Houston, Texas 77079
Attention: President
Telecopy No.: (713) 293-3700
RB DEEPWATER EXPLORATION II INC.
By:
Its:
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: President
Telecopy No.: (713) 496-0285
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE me, , a Notary Public, on this day personally
appeared , , of
Conoco Development II Inc., a corporation, known to me to be the person
whose name is subscribed to the foregoing instrument, and acknowledged to
me that he executed said instrument for the purposes and consideration
therein expressed.
Given under my hand and seal of office this day of ,
1997 in .
My commission expires:
Notary Public
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE me, , a Notary Public, on this day personally
appeared , , of
RB Deepwater Exploration II Inc., a corporation, known to me to be the
person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed said instrument for the purposes and
consideration therein expressed.
Given under my hand and seal of office this day of ,
1997 in .
My commission expires:
Notary Public
EXHIBIT "A" - DESCRIPTION OF DRILLSHIP
EXHIBIT "B" - INDEMNIFICATION AGREEMENTS
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") dated as of
April 30, 1997, is made by CONOCO INC., a Delaware corporation ("Conoco")
in favor of RB DEEPWATER EXPLORATION II INC., a Nevada corporation ("RB").
WHEREAS, RB and Conoco Development II Inc., a Delaware
corporation ("CDC") have entered into a Limited Liability Company Agreement
(the "LLC Agreement") dated of even date with respect to the formation of
Deepwater Drilling II L.L.C. (the "Company") herewith;
WHEREAS, RB has requested Conoco execute and deliver this
Indemnification Agreement as partial consideration for RB's entering into
the LLC Agreement.
NOW THEREFORE, in consideration of the premises and in order to
induce RB to enter into the LLC Agreement, Conoco hereby agrees as follows:
SECTION 1. Indemnification. Conoco hereby agrees to pay,
protect, indemnify, hold harmless and defend RB from any failure of CDC to
make any equity contribution to the Company, as and when required under
Sections 5.1 and 5.2 of the LLC Agreement, and agrees that in the event of
such failure, Conoco will promptly pay on behalf of CDC any such amounts
due under Sections 5.1 or 5.2 of the LLC Agreement. No payment required to
be made by Conoco under this Section 1 shall be subject to any right of set
off, counterclaim, defense, abatement, suspension, deferment or reduction.
Capitalized terms not otherwise defined in this Agreement shall have the
meanings ascribed to them in the LLC Agreement.
SECTION 2. Representations and Warranties. Conoco represents
and warrants to RB as follows:
(a) Conoco (i) is a corporation duly organized, validly existing
and in good standing under the law of its jurisdiction of
incorporation and is in good standing in all jurisdictions in which
failure to be or remain in good standing would have a material adverse
effect upon its ability to perform its duties, obligations or
liabilities hereunder and (ii) has all requisite corporate power to
conduct its business and to execute and deliver and perform its
obligations under this Indemnification Agreement.
(b) The execution, delivery and performance by Conoco of this
Indemnification Agreement has been duly authorized and approved by all
necessary corporate action on the part of Conoco. This
Indemnification Agreement constitutes the legal, valid and binding
obligation of Conoco and is enforceable against Conoco in accordance
with its terms, except insofar as enforceability may be limited by
applicable debtor relief laws or subject to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(c) No order, consent, approval, license, permit, franchise,
waiver, exemption, authorization of or validation of, or filing,
recording or registration with (except those that have been heretofore
obtained or made and of which RB has heretofore been given written
notice) or exemption by, any person or tribunal is required to
authorize, or is required in connection with, the execution, delivery,
performance, legality, validity, binding effect or enforceability of
this Indemnification Agreement.
(d) No bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
with respect to Conoco or any of its subsidiaries has been commenced
in any jurisdiction.
(e) There are no actions, suits or proceedings pending or to
Conoco's knowledge, threatened against or affecting Conoco or any of
its subsidiaries before any court or arbitrator which is reasonably
likely to have a material adverse effect on the financial condition,
business or operations of Conoco and its subsidiaries, taken as a
whole, or would impair the validity or enforceability of this
Agreement.
SECTION 3. Amendments, Etc. No amendment or waiver of any
provision of this Indemnification Agreement nor consent to any departure by
Conoco therefrom shall in any event be effective unless the same shall be
in writing and signed by RB, and each such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given.
SECTION 4. Notices, Etc. All notices and other communications
provided for herein shall be given or made in writing and addressed, if to
Conoco, at its address set forth under its signature below, or if to RB, at
its address set forth under its signature below, such notice or notices to
be effective only upon receipt by the party to which such notice is
addressed.
SECTION 5. No Waiver; Remedies. No failure on the part of RB to
exercise, and no delay in exercising, any right hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of
any other right. No course of dealing between Conoco and RB shall operate
as a waiver of any right of RB. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law, admiralty,
equity or otherwise.
SECTION 6. Separability. Should any clause, sentence,
paragraph, sub-section or Section of this Indemnification Agreement be
judicially declared to be invalid, unenforceable or void, such decision
will not have the effect of invalidating or voiding the remainder of this
Indemnification Agreement, and Conoco agrees that the part or parts of the
Indemnification Agreement so held to be invalid, unenforceable or void will
be deemed to have been stricken herefrom and the remainder will have the
same force and effectiveness as if such part or parts had never been
included herein.
SECTION 7. Captions. The captions in this Indemnification
Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this Indemnification Agreement.
SECTION 8. Successors and Assigns; Assignment. This
Indemnification Agreement shall (a) remain in full force and effect until
CDC has met its obligations under Sections 5.1 and 5.2 of the LLC
Agreement; (b) be binding upon Conoco, its successors and assigns; provided
that Conoco's rights and obligations hereunder may not be assigned without
the prior written consent of RB; and (c) inure to the benefit of and be
enforceable only by RB and its successors and assigns.
SECTION 9. Limitation by Law. All rights, remedies and powers
provided in this Indemnification Agreement may be exercised only to the
extent that the exercise thereof does not violate any applicable provision
of law, and all the provisions of this Indemnification Agreement are
intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they
will not render the Indemnification Agreement invalid, unenforceable, in
whole or in part, or not entitled to be recorded, registered or filed under
the provisions of any applicable law.
SECTION 10. Survival of Covenants, Representations and
Warranties. All covenants, representations and warranties contained in
this Indemnification Agreement shall survive the execution and delivery of
this Indemnification Agreement and shall continue until CDC has met all of
its obligations under Sections 5.1 and 5.2 of the LLC Agreement. Any
investigation by RB shall not diminish in any respect whatsoever its right
to rely on such covenants, representations and warranties.
SECTION 11. Fees and Expenses. Conoco shall pay all costs, fees
and expenses (including, but not limited to, reasonable attorneys' fees and
disbursements) incurred by RB in collecting or enforcing Conoco's
obligations or RB's rights or remedies under this Indemnification
Agreement.
SECTION 12. Governing Law. This Indemnification Agreement shall
be governed by and construed in accordance with the laws of the state of
Delaware, without regard to principles of conflict of laws.
SECTION 13. Final Agreement. This Indemnification Agreement
represents the final agreement between RB and Conoco with respect to the
subject matter hereof. Each of Conoco and RB hereby represents and
warrants that it is not relying on any statement, representation, warranty,
covenant or agreement of any kind except for those set forth in this
Indemnification Agreement.
IN WITNESS WHEREOF, Conoco has caused this Indemnification
Agreement to be duly executed by its officer thereunto duly authorized, as
of the date first above written.
CONOCO INC.
By:
Name:
Title:
600 North Dairy Ashford
Houston, Texas 77079
Attention:
Telecopier No. (281)
ACCEPTED THIS 30TH DAY
OF APRIL 1997.
RB DEEPWATER EXPLORATION II INC.
By:
Name:
Title:
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Chief Financial Officer
Telecopier No. (281) 496-0285
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") dated as of
April 30, 1997, is made by READING & BATES CORPORATION, a Delaware
corporation ("RB") in favor of CONOCO DEVELOPMENT II INC., a Delaware
corporation ("Conoco").
WHEREAS, Conoco and RB Deepwater Exploration II Inc., a Nevada
corporation ("Reading & Bates") have entered into a Limited Liability
Company Agreement (the "LLC Agreement") dated of even date herewith with
respect to the formation of Deepwater Drilling II L.L.C. (the "Company");
WHEREAS, Conoco has requested RB execute and deliver this
Indemnification Agreement as partial consideration for Conoco's entering
into the LLC Agreement.
NOW THEREFORE, in consideration of the premises and in order to
induce Conoco to enter into the LLC Agreement, RB hereby agrees as follows:
SECTION 1. Indemnification. RB hereby agrees to pay, protect,
indemnify, hold harmless and defend Conoco from any failure of Reading &
Bates to make any equity contribution to the Company, as and when required
under Sections 5.1 and 5.2 of the LLC Agreement, and agrees that in the
event of such failure, RB will promptly pay on behalf of Reading & Bates
any such amounts due under Sections 5.1 or 5.2 of the LLC Agreement. No
payment required to be made by RB under this Section 1 shall be subject to
any right of set off, counterclaim, defense, abatement, suspension,
deferment or reduction. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the LLC Agreement.
SECTION 2. Representations and Warranties. RB represents and
warrants to Conoco as follows:
(a) RB (i) is a corporation duly organized, validly existing and
in good standing under the law of its jurisdiction of incorporation
and is in good standing in all jurisdictions in which failure to be or
remain in good standing would have a material adverse effect upon its
ability to perform its duties, obligations or liabilities hereunder
and (ii) has all requisite corporate power to conduct its business and
to execute and deliver and perform its obligations under this
Indemnification Agreement.
(b) The execution, delivery and performance by RB of this
Indemnification Agreement has been duly authorized and approved by all
necessary corporate action on the part of RB. This Indemnification
Agreement constitutes the legal, valid and binding obligation of RB
and is enforceable against RB in accordance with its terms, except
insofar as enforceability may be limited by applicable debtor relief
laws or subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
(c) No order, consent, approval, license, permit, franchise,
waiver, exemption, authorization of or validation of, or filing,
recording or registration with (except those that have been heretofore
obtained or made and of which Conoco has heretofore been given written
notice) or exemption by, any person or tribunal is required to
authorize, or is required in connection with, the execution, delivery,
performance, legality, validity, binding effect or enforceability of
this Indemnification Agreement.
(d) No bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
with respect to RB or any of its subsidiaries has been commenced in
any jurisdiction.
(e) There are no actions, suits or proceedings pending or to
RB's knowledge, threatened against or affecting RB or any of its
subsidiaries before any court or arbitrator which is reasonably likely
to have a material adverse effect on the financial condition, business
or operations of RB and its subsidiaries, taken as a whole, or would
impair the validity or enforceability of this Agreement.
SECTION 3. Amendments, Etc. No amendment or waiver of any
provision of this Indemnification Agreement nor consent to any departure by
RB therefrom shall in any event be effective unless the same shall be in
writing and signed by Conoco, and each such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given.
SECTION 4. Notices, Etc. All notices and other communications
provided for herein shall be given or made in writing and addressed, if to
RB, at its address set forth under its signature below, or if to Conoco, at
its address set forth under its signature below, such notice or notices to
be effective only upon receipt by the party to which such notice is
addressed.
SECTION 5. No Waiver; Remedies. No failure on the part of
Conoco to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. No course of dealing between RB and Conoco
shall operate as a waiver of any right of Conoco. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law,
admiralty, equity or otherwise.
SECTION 6. Separability. Should any clause, sentence,
paragraph, sub-section or Section of this Indemnification Agreement be
judicially declared to be invalid, unenforceable or void, such decision
will not have the effect of invalidating or voiding the remainder of this
Indemnification Agreement, and RB agrees that the part or parts of the
Indemnification Agreement so held to be invalid, unenforceable or void will
be deemed to have been stricken herefrom and the remainder will have the
same force and effectiveness as if such part or parts had never been
included herein.
SECTION 7. Captions. The captions in this Indemnification
Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this Indemnification Agreement.
SECTION 8. Successors and Assigns; Assignment. This
Indemnification Agreement shall (a) remain in full force and effect until
Reading & Bates has met its obligations under Sections 5.1 and 5.2 of the
LLC Agreement; (b) be binding upon RB, its successors and assigns; provided
that RB's rights and obligations hereunder may not be assigned without the
prior written consent of Conoco; and (c) inure to the benefit of and be
enforceable only by Conoco and its successors and assigns.
SECTION 9. Limitation by Law. All rights, remedies and powers
provided in this Indemnification Agreement may be exercised only to the
extent that the exercise thereof does not violate any applicable provision
of law, and all the provisions of this Indemnification Agreement are
intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they
will not render the Indemnification Agreement invalid, unenforceable, in
whole or in part, or not entitled to be recorded, registered or filed under
the provisions of any applicable law.
SECTION 10. Survival of Covenants, Representations and
Warranties. All covenants, representations and warranties contained in
this Indemnification Agreement shall survive the execution and delivery of
this Indemnification Agreement and shall continue until Reading & Bates has
met all of its obligations under Sections 5.1 and 5.2 of the LLC Agreement.
Any investigation by Conoco shall not diminish in any respect whatsoever
its right to rely on such covenants, representations and warranties.
SECTION 11. Fees and Expenses. RB shall pay all costs, fees and
expenses (including, but not limited to, reasonable attorneys' fees and
disbursements) incurred by Conoco in collecting or enforcing RB's
obligations or Conoco's rights or remedies under this Indemnification
Agreement.
SECTION 11. Governing Law. This Indemnification Agreement shall
be governed by and construed in accordance with the laws of the state of
Delaware, without regard to principles of conflict of laws.
SECTION 12. Final Agreement. This Indemnification Agreement
represents the final agreement between Conoco and RB with respect to the
subject matter hereof. Each of RB and Conoco hereby represents and
warrants that it is not relying on any statement, representation, warranty,
covenant or agreement of any kind except for those set forth in this
Indemnification Agreement.
IN WITNESS WHEREOF, RB has caused this Indemnification Agreement
to be duly executed by its officer thereunto duly authorized, as of the
date first above written.
READING & BATES CORPORATION
By:
Name:
Title:
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Chief Financial Officer
Telecopier No. (281) 496-0285
ACCEPTED THIS 30TH DAY
OF APRIL 1997.
CONOCO DEVELOPMENT II INC.
By:
Name:
Title:
600 North Dairy Ashford
Houston, Texas 77079
Attention: President
Telecopier No. (281)
EXHIBIT "C" - SHARING RATIOS
Conoco Development II Inc. 0.40 (40%)
RB Deepwater Exploration II Inc. 0.60 (60%)
EXHIBIT "D" - CERTIFICATE OF FORMATION
CERTIFICATE OF FORMATION
OF
DEEPWATER DRILLING II L.L.C.
The Certificate of Formation of Deepwater Drilling II L.L.C. (the
"Company") is being executed by the undersigned for the purpose of forming
a limited liability company pursuant to the Delaware Limited Liability
Company Act.
(a) The name of the Company is Deepwater Drilling II L.L.C.
(b) The address of the registered office of the Company in Delaware is
1209 Orange Street, Wilmington, Delaware 19801. The Company's
registered agent at that address is The Corporation Trust Company.
(c) Any rights of indemnification or guaranties provided for or referred
to in the Company's Limited Liability Company Agreement shall only be
for the benefit of the Company, the Members, the Members'
Representatives or the Manager, as applicable, to the exclusion of all
other purported third party beneficiaries.
IN WITNESS WHEREOF, the undersigned, each an authorized person of the
Company, have caused this Certificate of Formation to be duly executed as
of the day of , 1997.
RB DEEPWATER EXPLORATION II INC., CONOCO DEVELOPMENT II INC.,
An Authorized Person An Authorized Person
By: By:
Name: Name:
Title: Title:
EXHIBIT "E" - FORM OF DEMAND PROMISSORY NOTE
DEMAND PROMISSORY NOTE
$ [Houston, Texas]
[ , 1997]
This Demand Promissory Note is given the day and year first above
written and made and executed by
("Maker"), a corporation. Capitalized terms used herein and
not defined herein will have the respective meanings assigned thereto in
the Limited Liability Company Agreement dated April 30, 1997 between Conoco
Development II Inc. and RB Deepwater Exploration II Inc. (the "Agreement").
For value received, Maker hereby promises to pay to the order of
Deepwater Drilling II L.L.C. ("Payee"), on the earlier of (i) demand, as
set out in the Agreement, or (ii) February 28, 1999, or (iii) one business
day prior to delivery of the Drillship (in each case the "Maturity"), the
principal amount of Dollars ($ ). Payee may
make demand for the entire principal amount or for any part thereof, and if
only a part thereof is demanded, Payee shall be entitled to make subsequent
demand(s) for the balance, or any portion thereof prior to Maturity, with
the remaining balance, if any, due on Maturity. All amounts due hereunder
will paid to Payee in New York, New York, at such bank as Payee may
designate by written notice to Maker, as provided in the Agreement.
No interest shall accrue under this Demand Promissory Note unless or
until the earlier of demand or Maturity, and if a demand is made only with
respect to a portion of the principal amount, interest shall accrue only
with respect to that portion not paid on demand. Any interest accruing
under this Demand Promissory Note shall accrue at the lesser of (i) the
interest rate publicly quoted by Texas Commerce Bank, N.A., Houston, Texas,
as its prime commercial rate, plus five percent (5%), or (ii) the maximum
non-usurious interest rate permitted by applicable law. Such interest will
accrue only if payment of the principal amount hereunder, or in the event
of a demand for a portion thereof, such portion, is not paid forthwith by
Maker, and such interest will continue to accrue thereafter until such time
as the unpaid amount has been paid.
This Demand Promissory Note is delivered in accordance with the terms
and the conditions of the Agreement.
THIS DEMAND PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Maker
By:
Name:
Its:
EXHIBIT "F"
PROMISSORY NOTE
$ Houston, Texas
April , 1997
This Promissory Note is given the day and year first above written and
made and executed by Deepwater Drilling II L.L.C. ("Maker"), a Delaware
limited liability company. Capitalized terms used herein and not defined
herein will have the respective meanings assigned thereto in the Limited
Liability Company Agreement dated April 30, 1997 between Conoco Development
II Inc. and RB Deepwater Exploration II Inc. ("Agreement").
For value received, Maker hereby promises to pay to the order of
[Insert name of Payee]("Payee"), on the earlier of (i) the date the Maker
receives construction financing proceeds with respect to the Drillship,
(ii) the date the Maker receives the applicable refund of prior
installment(s) from the Builder following termination of the Shipbuilding
Contract for the Drillship, or (iii) October 15, 1997 (in each case the
"Maturity"), the principal amount of Dollars
($ ). All amounts due hereunder will paid to Payee in New
York, New York, at such bank as Payee may designate by written notice to
Maker.
No interest shall accrue under this Promissory Note unless or until
Maturity. After Maturity, interest on the amount or amounts outstanding
shall accrue at the lesser of (x) the interest rate publicly quoted by
Texas Commerce Bank, N.A., Houston, Texas, as its prime commercial rate,
plus five percent (5%), or (y) the maximum non-usurious interest rate
permitted by applicable law, until such time as the unpaid amount, and
accrued interest thereon, has been paid.
This Promissory Note is delivered in accordance with the terms and the
conditions of the Agreement.
THIS DEMAND PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
DEEPWATER DRILLING II L.L.C.
Maker
By:
Name:
Its:
EXHIBIT "G"
MARINE SERVICES AGREEMENT
This Agreement is made as of April 30, 1997, by and between
DEEPWATER DRILLING II L.L.C., a limited liability company under the laws of
the state of Delaware and having an office in Houston, Texas, hereinafter
called "the Company", and CONOCO SHIPPING COMPANY, a corporation
incorporated under the laws of Liberia with a registered office at 80 Broad
Street, Monrovia, Liberia, hereinafter called "Contractor".
WITNESSETH
WHEREAS, the Company desires to provide offshore drilling services to
the oil and gas industry utilizing the dynamically positioned drillship
under construction by Samsung Heavy Industries Co., Ltd. and Samsung
Corporation at Koje Island, Korea, Builder's Hull No. 1231, hereinafter
called "the Drilling Unit", to be delivered to the Company upon completion
of such construction;
WHEREAS, the Company intends to enter into drilling contracts with
Conoco Drilling Inc. ("Conoco") and Reading & Bates Corporation ("Reading &
Bates") having a term of two and one-half (2-1/2) years, or an aggregate of
five (5) years, plus options as further set out therein, hereinafter called
the "Drilling Contracts", to provide drilling services utilizing the
Drilling Unit upon completion of construction and mobilization of the
Drilling Unit to a U.S. Gulf of Mexico port;
WHEREAS, the group of companies of which Contractor is a member has
been engaged in operating tankers and other vessels for many years and has
acquired a qualified and experienced operational, marketing, technical and
administrative staff with the knowledge, skill and experience to assist the
Company in the marine aspects of the construction and operations of the
Drilling Unit;
WHEREAS, the Company desires to avail itself of certain operational,
marketing, technical and administrative staff of Contractor and has
requested Contractor to provide certain services and personnel to the
Company; and
WHEREAS, Contractor has agreed to provide such services and personnel
to the Company in accordance with the following terms and conditions.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. Services to be Provided by Contractor
Pursuant to the terms of this Agreement Contractor agrees to
provide the following services as requested from time to time by
the Company.
A. Engineering and related technical services in the
mechanical, electrical, structural and marine engineering
disciplines, pertaining to the construction, installation,
testing, commissioning and operation of the marine systems
applicable to the Drilling Unit.
B. Assistance to the Company for the procurement and delivery
of necessary equipment, spare parts and supplies applicable
to the marine system of the Drilling Unit in a timely
manner.
C. Policies, procedures and systems for project management,
management information, safety, preventive maintenance and
inventory control applicable to the marine systems of the
Drilling Unit.
D. Assistance in the recruitment of qualified and experienced
marine personnel for the Drilling Unit by the Company and
for the training of marine personnel to be assigned to the
Drilling Unit.
E. Project management, inspection and related technical
assistance services applicable to the marine systems of the
Drilling Unit prior to delivery of the Drilling Unit from
the shipyard.
If Contractor is unable to provide the services requested for
whatever reason, (i) Contractor shall promptly advise Company of
same in writing, (ii) Contractor will owe no further obligation
to Company with respect to Contractor providing the requested
services, and (iii) Contractor agrees that it will at the
Company's request provide assistance to the Company in
identifying and procuring direct for the Company's account other
contractors who may be able to provide such services.
All services provided by Contractor under this Agreement shall be
in conformance with good and accepted marine practice and
standard operating procedures and practices of the industry.
2. Personnel
Contractor agrees to provide, or cause to be provided, to the
Company all marine and support personnel in the categories set
out in Exhibit A to this Agreement, as may be reasonably
requested by the Company from time to time, to assist the Company
in connection with the construction, installation, testing and
commissioning and operation of the marine system of the Drilling
Unit, and in order for the Company to meet the requirements of
any drilling contract for the Drilling Unit. With respect to the
Drilling Contracts, Contractor agrees to provide at the request
of the Company the marine personnel set out in Appendix B of the
Drilling Contracts.
If Contractor is unable to provide the personnel requested for
whatever reason, (i) Contractor shall promptly advise Company of
same in writing, (ii) Contractor will owe no further obligation
to Company with respect to Contractor providing such personnel,
and (iii) Contractor agrees that it will at the Company's request
provide assistance to the Company in identifying and procuring
direct for the Company's account other contractors who may be
able to provide such personnel.
3. Other Services
Contractor further agrees to provide, or assist the Company in
procuring for its own account, administrative, financial,
technical, marketing and other support services as the Company
may request in connection with the Company's business and as
Contractor may be able to reasonably provide.
4. Remuneration
A. In consideration of the services being provided hereunder,
the Company agrees to pay Contractor, on a monthly basis in
arrears, a sum not to exceed U.S. $1,000 per day commencing on
the Commencement Date of the Drilling Contract under which the
Drilling Unit first commences operation and continuing for the
duration of the Drilling Contracts, such rate to be based
initially on the level of services Company has requested and
Contractor is providing, and such rate to be adjusted quarterly
based on changes in the Consumer Price Index, as published in the
Survey of Current Business Bulletin by the U.S. Department of
Labor, commencing with the index for the month of March, 1999.
The parties agree to negotiate, in good faith, adjustments in
such rate from time to time, based on the level of marine
services Contractor provides to Company and the level of marine
services provided to Contractor by third parties.
B. The Company agrees to reimburse Contractor for:
(1) Any and all payroll and payroll burden costs incurred
by Contractor in providing personnel to the Company
pursuant to Section 2 of this Agreement from and
after April 25, 1997, such payroll and payroll burden
costs to be in conformance with Contractor's normal
accounting practices and employee benefits in effect
from time to time;
(2) Any and all third party costs incurred by Contractor
in the procurement of equipment, materials, supplies,
spare parts or personnel requested by the Company,
including all relevant transportation, travel and
insurance costs.
C. As additional consideration for the services provided
hereunder, the Company agrees to pay, on a monthly basis in
arrears, to Contractor an amount equal to one percent (1%)
of the monthly revenues accruing to Company under the
Drilling Contracts excluding, however, amounts for which
Company is entitled to cost reimbursement under the terms of
the Drilling Contracts.
5. Payment
A. The Company shall pay all amounts due to Contractor under
this Agreement by wire transfer, in freely available funds,
to a bank to be designated by Contractor in ,
for credit to Contractor's account.
B. All such amounts shall be paid within twenty days following
receipt by the Company of monthly invoices supported by
reasonable documentation. All amounts not paid when due
shall earn interest until paid at the rate of 50 basis
points over the 3 month LIBOR in effect, from time to time,
as published in the "Wall Street Journal".
6. Confidential Information
Any proprietary or confidential information, documents, manuals,
systems, designs, drawings or other like or unlike material or
information made available to the Company by Contractor is for the use
only by the Company for use with the services to be provided by
Contractor pursuant to this Agreement and shall be so designated at
the time of disclosure. Title to all such material and information
shall at all times be in Contractor, and the Company shall not have
any rights with respect to such material and information except the
use provided by this Agreement. During the term of this Agreement and
thereafter for five years after the expiration or earlier termination
thereof or the date of disclosure of such information, whichever is
earlier, the Company will not permit the use of any such information
by a third party and will at all times keep it in the strictest
confidence. Upon the expiration or earlier termination of this
Agreement, the Company shall return to Contractor all such material
received from Contractor or prepared by Contractor pursuant to this
Agreement and shall neither retain any copy of such material nor
thereafter use any such information. It is expressly agreed that the
obligation of the Company under this section will continue and survive
any expiration or earlier termination of this Agreement, provided that
this section shall not apply to information which is:
A. Contained in a publication of general circulation;
B. Disclosed in good faith by a third party not in privity with
the party originally disclosing such information which has a
bona fide right to disclose such information; or
C. Information substantially acquired or developed for, or
from, the operations or maintenance of the Drilling Unit;
save that the Company shall be entitled, after reasonable prior notice
to Contractor, to disclose any such confidential information, report
or document:
(a) in connection with any proceedings arising out of or in
connection with this Agreement to the extent necessary to
protect its interests;
(b) to any prospective assignee of any interest in the Company
subject to it obtaining an undertaking from such prospective
assignee in the terms of this section;
(c) if required to do so by an order of any court of competent
jurisdiction;
(d) in pursuance of any procedure for discovery of documents in
any proceedings before any such court;
(e) pursuant to any law or regulation having the force of law or
any national stock exchange requirement;
(f) pursuant to a requirement of any authority being an
authority with whose requirement, of the nature and to the
extent in question, it is accustomed to comply; or
(g) to the technical or legal advisers of the Company subject to
it obtaining an undertaking from such advisers in the terms
of this section;
and the Company shall be entitled so to disclose or use any such
information, report or document if the information contained therein
shall have emanated in conditions free from confidentiality bona fide
from some person other than Contractor or the agent of Contractor and
such party would, but for the preceding provisions of this sub-
section, be free so to disclose or use the same; provided that the
Company shall use all reasonable endeavors to avoid disclosure to any
third party in accordance with sub-sections (c) (d) (e) and (f) above.
7. Term
A. This Agreement shall remain in effect until the expiration
or earlier termination of the Drilling Contracts as same may
be amended or extended from time to time, and shall be
automatically renewed on an annual basis thereafter unless
either party gives six months' prior written notice of its
intention to terminate this Agreement or renegotiate its
terms to the other party. If such notice is given, the
parties agree to meet promptly and discuss in good faith
such termination or renegotiation, as the case may be, and
if mutual agreement is not reached regarding same, this
Agreement may be terminated by either party, effective upon
expiration of such six month period.
B. In case of termination of this Agreement, Contractor shall
be entitled to any payments with respect to services
performed or costs or expenses incurred prior to such
termination.
C. If either party materially defaults in the fulfillment of
any obligation under this Agreement without reasonable
justification therefor, the other party will not have any
further obligation to fulfil its obligations until such
default has been cured. If such default continues for a
period of more than 30 days, the non-defaulting party shall
have the option to terminate this Agreement, without
prejudice to any other rights it may have.
8. Taxes
The remuneration payable under Sections 3.A and 3.B has been
calculated on the basis that Contractor will be liable for all federal
and state income and franchise taxes on the profits arising to it
under this Agreement but no other taxes. Any and all such other taxes
that may be imposed by any governmental authority shall be borne by
the Company.
9. Assignment
Neither party shall assign or transfer any of its right, title or
interest in or to this Agreement (except to a successor to
substantially all of such party's business or to a corporation owned
by or under common ownership with such party which agrees to assume
all obligations of such party, provided that the assigning party shall
not thereby be released from its obligations hereunder) without the
prior written consent of the other party, and any such attempt to
assign or transfer without such consent shall have no effect.
Contractor may subcontract for any services requested by Company
hereunder, provided Company has approved any such subcontract, such
approval not to be unreasonably withheld.
10. Notices
Any notice or other communication for which this Agreement
provides shall be in writing and will be delivered to the addressee
thereof or sent to the address thereof by electronic facsimile
communication or by registered or certified mail, return receipt
requested, or by other method which will constitute adequate evidence
of delivery, as follows:
If to the Company:
Deepwater Drilling II L.L.C.
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Manager
If to Contractor:
Conoco Shipping Company
% Conoco Inc.
600 N. Dairy Ashford
Houston, Texas 77079
Attention: President
or addressed at such other address as the addressee thereof may have
designated for that purpose by written notice given as above provided.
Any notice given in conformance with this clause will be considered as
received for all purposes on the date of delivery.
11. Governing Law
This Agreement shall be governed by and construed in accordance
with the general maritime law of the United States and to the extent
state law may be applicable by the internal laws of Texas and the
parties hereto submit to the non-exclusive jurisdiction of the federal
and state courts in Harris County, Texas.
12. Consequential Damages
In no event shall either party to this Agreement be liable to the
other party for loss of profits or other incidental, consequential or
special damages.
13. Indemnity
A. Contractor agrees to defend, indemnify and hold harmless the
Company, to the extent the Company is not insured or
otherwise indemnified, for all losses, claims, liabilities,
obligations or the like incurred by the Company or any
member in the Company either directly or through the Company
arising from Contractor's failure to perform its obligations
hereunder according to good marine practice and consistent
with the standard operating procedures and practices of the
industry, whether such obligations are to be performed by
itself or through an affiliate or sub-contractor appointed
by it. Further, it is agreed that Contractor's liability,
if any, under this paragraph shall not in any event exceed
U.S. $100,000.00 per occurrence, not to exceed U.S.
$1,000,000 in any one year.
B. Notwithstanding the foregoing it is agreed that Contractor
shall have no liability to the Company for pollution, well
control costs, reservoir or underground damage or loss of
hole, regardless of how caused, including, but not limited
to, the sole, joint or concurrent negligence, or gross
negligence of Contractor, its employees or sub-contractors.
14. Additional Insured and Waiver of Subrogation
The Company agrees to cause the relevant insurance policies and
cover notes being maintained at the expense of the Company for the
benefit of both parties to include both parties as named insureds and
to cause the interested underwriters to waive all rights of
subrogation against the parties hereto.
15. Force Majeure
The obligations (other than any obligations to pay money) of
either party to the Agreement shall be suspended (and failure to carry
out the same shall not constitute a breach of this Agreement) to the
extent, and during the period, that such party is prevented from
carrying out is obligations by virtue of any act or event outside the
reasonable control of that party.
16. Amendment
This Agreement may be amended, from time to time, only by mutual
agreement of the parties in writing.
IN WITNESS WHEREOF, the parties thereto have caused this Agreement to
be executed by its duly authorized representatives in Houston, Texas on
April 30, 1997.
CONOCO SHIPPING AND MARINE
DEVELOPMENT COMPANY
By:
Its:
DEEPWATER DRILLING II L.L.C.
By:
Its:
EXHIBIT "H"
DRILLING SERVICES AGREEMENT
This Agreement is made as of April 30, 1997, by and between DEEPWATER
DRILLING II L.L.C., a limited liability company under the laws of the state
of Delaware and having an office in Houston, Texas, hereinafter called "the
Company", and READING & BATES DRILLING CO., a corporation incorporated
under the laws of Oklahoma and having an office in Houston, Texas,
hereinafter called "Contractor".
WITNESSETH
WHEREAS, the Company desires to provide offshore drilling services to
the oil and gas industry utilizing the dynamically positioned drillship
under construction by Samsung Heavy Industries Co., Ltd. and Samsung
Corporation at Koje Island, Korea, Builder's Hull No. 1231, hereinafter
called "the Drilling Unit", to be delivered to the Company upon completion
of such construction;
WHEREAS, the Company intends to enter into drilling contracts with
Conoco Drilling Inc. ("Conoco") and Reading & Bates Corporation ("Reading &
Bates") having a term of two and one-half years (2-1/2), or an aggregate of
five (5) years, plus options as further set out therein, hereinafter called
the "Drilling Contracts", to provide offshore drilling services utilizing
the Drilling Unit upon completion of construction and mobilization of the
Drilling Unit to a U.S. Gulf of Mexico port;
WHEREAS, the group of companies of which Contractor is a member has
been engaged in operating offshore drilling units for many years and has
acquired a qualified and experienced operational, marketing, technical and
administrative staff with the knowledge, skill and experience to assist the
Company in the drilling aspects of the construction and operations of the
Drilling Unit;
WHEREAS, the Company desires to avail itself of certain operational,
marketing, technical and administrative staff of Contractor and has
requested Contractor to provide certain services and personnel to the
Company; and
WHEREAS, Contractor has agreed to provide such services and personnel
to the Company in accordance with the following terms and conditions.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. Services to be Provided by Contractor
Pursuant to the terms of this Agreement Contractor agrees to
provide the following services as requested from time to time by
the Company.
A. Engineering and related technical services in the
mechanical, electrical, structural and marine engineering
disciplines, pertaining to the construction, installation,
testing, commissioning and operation of the drilling and
topsides systems of the Drilling Unit.
B. Assistance to the Company's purchasing organization for the
procurement and delivery of necessary equipment, spare parts
and supplies applicable to the marine system of the Drilling
Unit in a timely manner.
C. Policies, procedures and systems for project management,
management information, safety, preventive maintenance and
inventory control applicable to the drilling and topsides
systems of the Drilling Unit.
D. Assistance in the recruitment of qualified and experienced
drilling personnel for the Drilling Unit by the Company and
for the training of drilling personnel to be assigned to the
Drilling Unit.
E. Project management, inspection and related technical
assistance services applicable to the drilling systems of
the Drilling Unit prior to delivery of the Drilling Unit
from the shipyard.
If Contractor is unable to provide the services requested for
whatever reason, (i) Contractor shall promptly advise Company of
same in writing, (ii) Contractor will owe no further obligation
to Company with respect to Contractor providing the requested
services, and (iii) Contractor agrees that it will at the
Company's request provide assistance to the Company in
identifying and procuring direct for the Company's account other
contractors who may be able to provide such services.
All services provided by Contractor under this Agreement shall be in
conformance with good and accepted oilfield practice and standard
operating procedures and practices of the industry.
2. Personnel
Contractor agrees to provide, or cause to be provided, to the
Company all drilling and support personnel in the categories set
out in Exhibit A to this Agreement, as may be reasonably
requested by the Company from time to time, to assist the Company
in connection with the construction, installation, testing,
commissioning and operation of the drilling and topsides systems
of the Drilling Unit, and in order for the Company to meet the
requirements of any drilling contract for the Drilling Unit.
With respect to the Drilling Contracts, Contractor agrees to
provide at the request of the Company the drilling and support
personnel set out in Appendix B of the Drilling Contracts.
If Contractor is unable to provide the personnel requested for
whatever reason, (i) Contractor shall promptly advise Company of
same in writing, (ii) Contractor will owe no further obligation
to Company with respect to Contractor providing such personnel,
and (iii) Contractor agrees that it will at the Company's request
provide assistance to the Company in identifying and procuring
direct for the Company's account other contractors who may be
able to provide such personnel.
3. Other Services
Contractor further agrees to provide, or assist the Company in
procuring for its own account, administrative, financial,
technical, marketing and other support services as the Company
may request in connection with the Company's business and as
Contractor may be able to reasonably provide.
3. Remuneration
A. In consideration of the services being provided hereunder,
the Company agrees to pay Contractor, on a monthly basis in
arrears, a sum not to exceed U.S. $2,500 per day commencing on
the Commencement Date of the Drilling Contract under which the
Drilling Unit first commence operations and continuing for the
duration of the Drilling Contracts, such rate to be based
initially on the level of services Company has requested and
Contractor is providing, and such rate to be adjusted quarterly
based on changes in the Consumer Price Index, as published in the
Survey of Current Business Bulletin by the U.S. Department of
Labor, commencing with the index for the month of March, 1999.
The parties agree to negotiate, in good faith, adjustments to
such rate based on the level of drilling services Contractor
provides to Company as compared to drilling services obtained by
the Company from third parties.
B. The Company agrees to reimburse Contractor for:
(1) Any and all payroll and payroll burden costs incurred
by Contractor in providing personnel to the Company
pursuant to the Section 2 of this Agreement from and
after April 25, 1997, such payroll and payroll burden
costs to be in conformance with Contractor's normal
accounting practices and employee benefits in effect
from time to time;
(2) Any and all third party costs incurred by Contractor
in the procurement of equipment, materials, supplies,
spare parts or personnel requested by the Company,
including all relevant transportation, travel and
insurance costs.
C. As additional consideration for the services provided in
construction hereunder the Company agrees to pay, on a
monthly basis in arrears, to Contractor an amount equal to
one percent (1%) of the monthly revenues accruing to Company
under the Drilling Contract (excluding, however, amounts for
which Company is entitled to cost reimbursement under the
terms of the Drilling Contracts).
5. Payment
A. The Company shall pay all amounts due to Contractor under
this Agreement by wire transfer, in freely available funds,
to a bank to be designated by Contractor in New York, New
York for credit to Contractor's account.
B. All such amounts shall be paid within twenty days following
receipt by the Company of monthly invoices supported by
reasonable documentation. All amounts not paid when due
shall earn interest until paid at the rate of 50 basis
points over the 3 month LIBOR in effect, from time to time,
as published in the "Wall Street Journal".
6. Confidential Information
Any proprietary or confidential information, documents, manuals,
systems, designs, drawings or other like or unlike material or
information made available to the Company by Contractor is for the use
only by the Company for use with the services to be provided by
Contractor pursuant to this Agreement and shall be so designated at
the time of disclosure. Title to all such material and information
shall at all times be in Contractor, and the Company shall not have
any rights with respect to such material and information except the
use provided by this Agreement. During the term of this Agreement and
thereafter for five years after the expiration or earlier termination
thereof or the date of disclosure of such information, whichever is
earlier, the Company will not permit the use of any such information
by a third party and will at all times keep it in the strictest
confidence. Upon the expiration or earlier termination of this
Agreement, the Company shall return to Contractor all such material
received from Contractor or prepared by Contractor pursuant to this
Agreement and shall neither retain any copy of such material nor
thereafter use any such information. It is expressly agreed that the
obligation of the Company under this section will continue and survive
any expiration or earlier termination of this Agreement, provided that
this section shall not apply to information which is:
A. Contained in a publication of general circulation;
B. Disclosed in good faith by a third party not in privity with
the party originally disclosing such information which has a
bona fide right to disclose such information; or
C. Information substantially acquired or developed for, or
from, the operations or maintenance of the Drilling Unit;
save that the Company shall be entitled, after reasonable prior notice
to Contractor, to disclose any such confidential information, report
or document:
(a) in connection with any proceedings arising out of or in
connection with this Agreement to the extent necessary to
protect its interests;
(b) to any prospective assignee of any interest in the Company
subject to it obtaining an undertaking from such prospective
assignee in the terms of this section;
(c) if required to do so by an order of any court of competent
jurisdiction;
(d) in pursuance of any procedure for discovery of documents in
any proceedings before any such court;
(e) pursuant to any law or regulation having the force of law or
any national stock exchange requirement;
(f) pursuant to a requirement of any authority being an
authority with whose requirement, of the nature and to the
extent in question, it is accustomed to comply; or
(g) to the technical or legal advisers of the Company subject to
it obtaining an undertaking from such advisers in the terms
of this section;
and the Company shall be entitled so to disclose or use any such
information, report or document if the information contained therein
shall have emanated in conditions free from confidentiality bona fide
from some person other than Contractor or the agent of Contractor and
such party would, but for the preceding provisions of this sub-
section, be free so to disclose or use the same; provided that the
Company shall use all reasonable endeavors to avoid disclosure to any
third party in accordance with sub-sections (c) (d) (e) and (f) above.
7. Term
A. This Agreement shall remain in effect until the expiration
or earlier termination of the Drilling Contracts, as same
may be amended or extended from time to time, and shall be
automatically renewed on an annual basis thereafter unless
either party gives six months' prior written notice of its
intention to terminate this Agreement or renegotiate its
terms to the other party. If such notice is given, the
parties agree to meet promptly and discuss in good faith
such termination or renegotiation, as the case may be, and
if mutual agreement is not reached regarding same, this
Agreement may be terminated by either party, effective upon
expiration of such six month period.
B. In case of termination of this Agreement, Contractor shall
be entitled to any payments with respect to services
performed or costs or expenses incurred prior to such
termination.
C. If either party materially defaults in the fulfillment of
any obligation under this Agreement without reasonable
justification therefor, the other party will not have any
further obligation to fulfil its obligations until such
default has been cured. If such default continues for a
period of more than 30 days, the non-defaulting party shall
have the option to terminate this Agreement, without
prejudice to any other rights it may have.
8. Taxes
The remuneration payable under Sections 3.A and 3.B has been
calculated on the basis that Contractor will be liable for all federal
and state income and franchise taxes on the profits arising to it
under this Agreement but no other taxes. Any and all such other taxes
that may be imposed by any governmental authority shall be borne by
the Company.
9. Assignment
Neither party shall assign or transfer any of its right, title or
interest in or to this Agreement (except to a successor to
substantially all of such party's business or to a corporation owned
by or under common ownership with such party which agrees to assume
all obligations of such party, provided that the assigning party shall
not thereby be released from its obligations hereunder) without the
prior written consent of the other party, and any such attempt to
assign or transfer without such consent shall have no effect.
Contractor may subcontract for any services requested by the Company
hereunder, provided Company has approved any such subcontract, such
approval not to be unreasonably withheld.
10. Notices
Any notice or other communication for which this Agreement
provides shall be in writing and will be delivered to the addressee
thereof or sent to the address thereof by electronic facsimile
communication or by registered or certified mail, return receipt
requested, or by other method which will constitute adequate evidence
of delivery, as follows:
If to the Company:
Deepwater Drilling II L.L.C.
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Manager
If to Contractor:
Reading & Bates Drilling Co.
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: President
or addressed at such other address as the addressee thereof may have
designated for that purpose by written notice given as above provided.
Any notice given in conformance with this clause will be considered as
received for all purposes on the date of delivery.
11. Governing Law
This Agreement shall be governed by and construed in accordance
with the general maritime law of the United States and to the extent
state law may be applicable by the internal laws of Texas and the
parties hereto submit to the non-exclusive jurisdiction of the federal
and state courts in Harris County, Texas.
12. Consequential Damages
In no event shall either party to this Agreement be liable to the
other party for loss of profits or other incidental, consequential or
special damages.
13. Indemnity
A. Contractor agrees to defend, indemnify and hold harmless the
Company, to the extent the Company is not insured or
otherwise indemnified, for all losses, claims, liabilities,
obligations or the like incurred by the Company or any
member in the Company either directly or through the Company
arising from Contractor's failure to perform its obligations
hereunder according to good oil field practice and
consistent with the standard operating procedures and
practices of the industry, whether such obligations are to
be performed by itself or through an affiliate or sub-
contractor appointed by it. Further, it is agreed that
Contractor's liability, if any, under this paragraph shall
not in any event exceed U.S. $100,000.00 per occurrence, not
to exceed U.S. $1,000,000 in any one year.
B. Notwithstanding the foregoing it is agreed that Contractor
shall have no liability to the Company for pollution, well
control costs, reservoir or underground damage or loss of
hole, regardless of how caused, including, but not limited
to, the sole, joint or concurrent negligence, or gross
negligence of Contractor, its employees or sub-contractors.
14. Additional Insured and Waiver of Subrogation
The Company agrees to cause the relevant insurance policies and
cover notes being maintained at the expense of the Company for the
benefit of both parties to include both parties as named insureds and
to cause the interested underwriters to waive all rights of
subrogation against the parties hereto.
15. Force Majeure
The obligations (other than any obligations to pay money) of
either party to the Agreement shall be suspended (and failure to carry
out the same shall not constitute a breach of this Agreement) to the
extent, and during the period, that such party is prevented from
carrying out is obligations by virtue of any act or event outside the
reasonable control of that party.
16. Amendment
This Agreement may be amended, from time to time, only by mutual
agreement of the parties in writing.
IN WITNESS WHEREOF, the parties thereto have caused this Agreement to
be executed by its duly authorized representatives in Houston, Texas on
April 30, 1997.
READING & BATES DRILLING CO.
By:
Its:
DEEPWATER DRILLING II L.L.C.
By:
Its:
EXHIBIT 10.165
===========================================================================
CONTRACT
FOR
CONSTRUCTION AND SALE
OF
VESSEL
(HULL NO. HRBS6)
BETWEEN
RB EXPLORATION CO.
AND
HYUNDAI HEAVY INDUSTRIES CO., LTD.
AND
HYUNDAI CORPORATION
=========================================================================
INDEX
PREAMBLE
ARTICLE I - DESCRIPTION AND CLASS
1. Description:
2. Dimensions and Characteristics:
3. The Classification, Rules and Regulations:
4. Registration:
ARTICLE II - CONTRACT PRICE, TERMS OF PAYMENT & OPTIONS
1. Contract Price:
2. Adjustment of Contract Price:
3. Currency:
4. Terms of Payment:
5. Method of Payment:
6. Notice of Payment before Delivery:
7. Expenses:
8. Prepayment:
9. Options
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
1. Delivery:
2. Displacement:
3. Weight Control
4. Effect of Rescission:
ARTICLE IV - APPROVAL OF PLANS ANDDRAWINGS AND INSPECTION DURING
CONSTRUCTION
1. Approval of Plans and Drawings:
2. Appointment of OWNER's Supervisor:
3. Inspection by the Supervisor:
4. Facilities:
5. Liability of BUILDER and OWNER:
6. Responsibility of OWNER:
7. Delivery and Construction Schedule:
8. Responsibility of BUILDER:
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
1. How Effected:
2. Changes in Rules of Classification Society, Regulations, etc.:
3. Substitution of Materials:
ARTICLE VI - TRIALS AND ACCEPTANCE
1. Notice:
2. Weather Condition:
3. How Conducted:
4. Method of Acceptance or Rejection:
5. Effect of Acceptance:
6. Disposition of Surplus Consumable Stores:
ARTICLE VII - DELIVERY
1. Time and Place:
2. When and How Effected:
3. Documents to be delivered to OWNER:
4. Tender of VESSEL:
5. Title and Risk:
6. Removal of VESSEL:
ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)
1. Causes of Delay (Force Majeure):
2. Notice of Delay:
3. Definition of Permissible Delay:
4. Right to Rescind for Excessive Delay:
ARTICLE IX - WARRANTY OF QUALITY
1. Guarantee:
2. Notice of Defects:
3. Remedy of Defects:
4. Extent of BUILDER's Responsibility:
5. Guarantee Engineer:
ARTICLE X - RESCISSION BY OWNER
1. Notice:
2. Refundment by BUILDER:
3. Discharge of Obligations:
ARTICLE XI - OWNER'S DEFAULT
1. Definition of Default:
2. Effect of Default on or before Delivery of VESSEL:
3. Disposal of VESSEL:
4. Dispute:
ARTICLE XII - ARBITRATION
1. Decision by the Classification Society:
2. Proceedings of Arbitration:
3. Notice of Award:
4. Expenses:
5. Entry in Court:
6. Alteration of Delivery Date:
ARTICLE XIII - SUCCESSOR AND ASSIGNS
ARTICLE XIV - TAXES AND DUTIES
1. Taxes and Duties Incurred in Korea:
2. Taxes and Duties Incurred Outside Korea:
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
1. Patents:
2. General Plans, Specifications and Working Drawings:
ARTICLE XVI - OWNER'S SUPPLIES
1. Responsibility of OWNER:
2. Responsibility of BUILDER:
3. Title:
4. OWNER's Supplies Refundment:
ARTICLE XVII - INSURANCE
1. Extent of Insurance Coverage:
2. Application of the Recovered Amounts:
3. Termination of BUILDER's Obligation to Insure:
ARTICLE XVIII - NOTICE
1. Address:
2. Language:
3. Effective Date of Notice:
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT
ARTICLE XX - INTERPRETATION
1. Laws Applicable:
2. Discrepancies:
3. Entire Agreement:
4. Amendments and Supplements:
ARTICLE XXI - CONFIDENTIALITY
END OF CONTRACT
EXHIBIT "A" LETTER OF REFUNDMENT GUARANTEE
EXHIBIT "B" OPTION VESSEL PRICE AND DELIVERY
===========================================================================
THIS CONTRACT, made and entered into on this 14th day of November,
1997 by and between RB EXPLORATION CO., a corporation existing under the
laws of Nevada, and having an office at 901 Threadneedle, Houston, Texas
77079-2902 (hereinafter called the "OWNER"), on the one part and HYUNDAI
HEAVY INDUSTRIES CO., LTD., a corporation incorporated and existing under
the laws the Republic of Korea, having its registered office at #1, Cheonha-
Dong, Ulsan, Korea and HYUNDAI CORPORATION, a corporation incorporated and
existing under the laws the Republic of Korea, having its registered office
at 140-2 Kye-Dong, Chongro-Ku, Seoul, Korea (hereinafter collectively
called the "BUILDER"), on the other part.
W I T N E S S E T H:
In consideration of the mutual covenants herein contained, the BUILDER
agrees to build One (1) VESSEL as described in the specification attached
hereto as Exhibit 1 of this Contract (hereinafter referred to as the
"VESSEL") and in accordance with (i) the BUILDER's Approved Vendor List
attached hereto as Exhibit 2, (ii) the Delivery and Construction Schedule
attached hereto as Exhibit 3 and (iii) the BUILDER's Unit Rates attached
hereto as Exhibit 4 (said Exhibits 1 through 4 being hereinafter
collectively called the "Specifications") which Specifications have been
initialed by representatives of the parties hereto for identification and
which Specifications hereby are each incorporated herein by reference
hereto and made an integral part of this Contract, at the BUILDER's
shipyard located in Ulsan, Korea (hereinafter referred to as the
"Shipyard") and to deliver and sell the same to the OWNER, and the OWNER
hereby agrees to purchase and accept delivery of the VESSEL from the
BUILDER, upon the terms and conditions hereinafter set forth.
===========================================================================
ARTICLE I - DESCRIPTION AND CLASS
1. Description:
The VESSEL, having the BUILDER's Hull No. HRBS6, shall be
constructed, equipped and completed in accordance with the provisions
of this Contract, and the Specifications (as heretofore defined),
which Specifications are an integral part of this Contract as
heretofore provided.
2. Dimensions and Characteristics:
NOTE: U. S. Units are approximate
Metric Units U.S. Units
Overall Structure
Length 109 .0 m 357.61 ft.
Breadth 78.0 m 255.91 ft.
Upper Hull
Length 74.0 m 242.78 ft.
Breadth 61.0 m 200.13 ft.
Depth 8.5 m 27.89 ft.
Pontoons (two each)
Length 109.0 m 357.61 ft.
Breadth (amidship) 13.4 m 43.96 ft.
Breadth (ends) 16.5 m 54.13 ft.
Depth 9.1 m 29.86 ft.
Corner Radius 3.0 m 9.84 ft.
Transverse Distance (c. to c.)61.50 m 201.77 ft.
Draft
Operating Condition 23.0 m 75.46 ft.
Survival Condition 16.50 m 54.13 ft.
Transit Condition 8.80 m 28.87 ft.
SURVIVAL CONDITION (DRAFT 16.5 M) Weight KG
Lightweight 21,900 t 26.3 m
VDL 6,800 t 35.4 m
Pontoon Load 1,100 t 4.6 m
Vert. Mooring Force 1,250 t 23.5 m
Water Ballast 6,520 t 4.0 m
Displacement Guaranteed 37,560 t
KG 23.5 m
KB 5.7 m
GOML 2.3 m
GOMT 4.1 m
OPERATING CONDITION (DRAFT 23.0 M) Weight KG
Lightweight 21,900 t 26.3 m
VDL 6,800 t 36.3 m
Pontoon Load 1,100 t 4.6 m
Vert. Mooring Force 1,370 t 23.5 m
Water Ballast 12,110 t 4.2 m
Displacement Guaranteed 43,280 t
KG 21.0 m
KB 7.6 m
GOML 6.7 m
GOMT 4.4 m
The details of the aforementioned particulars, as well as the
definitions and the methods of measurements and calculations shall be
as indicated in the Specifications and shall be subject to adjustment
with design development.
3. The Classification, Rules and Regulations:
The Vessel, including hull, machinery, equipment and outfitting,
shall be constructed in accordance with the Rules and Regulations
(edition and amendments thereto being in effect as of the signing date
of the Contract) of the Classification Society and under survey of the
Classification Society (hereinafter called as "the Class") and shall
be distinguished in register by symbol of:
American Bureau of Shipping
+A1 (M), "Semisubmersible Drilling Unit", CDS, P, PAS
ABS statement of fact for UK/Den/HSE compliance, and
Drilling System Compliance.
Decisions of the Classification Society as to compliance or non-
compliance with the classification rules and regulations shall be
final and binding upon both parties hereto. Details of Class
notation shall be in accordance with the Specifications.
The VESSEL shall also comply with the rules, regulations and
requirements of the regulatory bodies as described and listed in the
Specifications.
The VESSEL will be built and delivered (i) in accordance with the
terms of this Contract and the Specifications, (ii) in full compliance
and certification to and with the IMO MODU code with amendments, (iii)
in full compliance with the regulations, provisions, and requirements
included in the Specifications, (iv) in full compliance with the
requirements of the Classification Society so as to be classed with
the Classification Society as a MODU, and (v) so that the VESSEL will
be approved to operate worldwide. BUILDER will take all action
necessary, and remedy at its cost and expense, any deficiency which
constitutes a failure to comply with the above requirements.
All the fees and charges incidental to the Classification Society
and in respect to compliance with the above referred rules,
regulations and requirements, as well as all VESSEL design fees and/or
royalties (except for any fees and/or royalties for the basic design,
specifications and OWNER's Supplies), shall be for account of the
BUILDER.
BUILDER shall be responsible for obtaining the Classification
Society's approval of all required plans and drawings of the VESSEL.
4. Registration:
The VESSEL, at the time of its delivery and acceptance, shall be
registered at the port of registry by the OWNER under the flag of the
United States of America at the OWNER's expense.
(End of Article)
ARTICLE II - CONTRACT PRICE, TERMS OF PAYMENT & OPTIONS
1. Contract Price:
The purchase price of the VESSEL, net receivable by the BUILDER
and exclusive of the OWNER's Supplies (as defined in Paragraph 1 of
Article XVI hereof) is United States Dollars One Hundred and Thirty-
Eight Million Nine Hundred Thousand (US$138,900,000) (hereinafter
referred to as the "Contract Price"). The Contract Price shall be
subject to upward or downward adjustment, if any, as hereinafter set
forth in this Contract.
2. Adjustment of Contract Price:
Increase or decrease of the Contract Price, if any, due to
adjustments thereof made in accordance with the provisions of this
Contract shall be adjusted by way of addition to or subtraction from
the Contract Price upon delivery of the VESSEL in the manner as
hereinafter provided.
3. Currency:
Any and all payments by the OWNER to the BUILDER, or vice versa
if any which are due under this Contract shall be made in United
States Dollars.
4. Terms of Payment:
The Contract Price shall be due and payable by the OWNER to the
BUILDER in the installments as follows:
(a) First Installment:
The First Installment amounting to United States Dollars Thirteen
Million Eight Hundred Ninety Thousand (10%, US$13,890,000) shall
be due and payable within five (5) banking days after execution
of this Contract, provided that the Letter of Refundment
Guarantee required under Article X has been received by the OWNER
or its designee.
(b) Second Installment:
The Second Installment amounting to United States Dollars
Thirteen Million Eight Hundred Ninety Thousand (10%,
US$13,890,000) shall be due and payable seven (7) months after
execution of the Contract.
(c) Third Installment:
The Third Installment amounting to United States Dollars Thirty-
Four Million Seven Hundred and Twenty-five Thousand (25%,
US$34,725,000) shall be due and payable nine (9) months after
execution of the Contract.
(d) Fourth Installment:
The Fourth Installment amounting to United States Dollars Thirty-
Four Million Seven Hundred and Twenty-Five Thousand (25%,
US$34,725,000) shall be due and payable twenty (20) months after
execution of the Contract.
(e) Fifth Installment:
The Fifth Installment amounting to United States Dollars Forty-
One Million Six Hundred and Seventy Thousand (30%, US$41,670,000)
plus any increase or minus any decrease due to adjustment of the
Contract Price under and pursuant to the provisions of this
Contract, shall be due and payable upon delivery of the VESSEL or
upon tender for delivery of the VESSEL pursuant to Paragraph 4 of
Article VII of this Contract.
5. Method of Payment:
(a) First Installment:
Within five (5) banking days after the date of execution of this
Contract, the OWNER shall remit by telegraphic transfer the first
installment to the BUILDER's account number in the Korea Exchange
Bank or to the banks which the BUILDER may designate (hereinafter
referred to as the "BUILDER's BANK") in favor of Hyundai Heavy
Industries, Co., Ltd.
(b) Second, Third, and Fourth Installments:
Upon the due date of the second, third and fourth installments,
in accordance with Article II, 4 (b), (c), (d) and (e) as
appropriate, the OWNER shall remit by telegraphic transfer each
of the respective installments to the account at the BUILDER's
BANK in favor of Hyundai Heavy Industries Co., Ltd.
(c) Fifth Installment:
At the time of delivery of the Vessel to the OWNER pursuant to
Section 2 of Article VII of this Contract, the OWNER shall remit
by telegraphic transfer the fifth installment to the account at
the BUILDER's BANK in favor of Hyundai Heavy Industries, Co.,
Ltd., with an irrevocable instruction that the amount so remitted
shall be payable to the BUILDER against presentation by the
BUILDER to the BUILDER's BANK of a copy of PROTOCOL OF DELIVERY
and ACCEPTANCE OF THE VESSEL executed by the OWNER and the
BUILDER.
No payment due under this Contract shall be delayed, suspended or
withheld by the OWNER on account of any dispute or disagreement
between the parties hereto. Any claim which the OWNER may have
against the BUILDER hereunder shall be settled and liquidated
separately from any payment by the OWNER to the BUILDER of the
Contract Price hereunder.
6. Notice of Payment before Delivery:
With the exception of the first installment, the BUILDER shall
give the OWNER Ten (10) banking days prior notice in writing or telex
or telefax confirmed in writing by registered mail of the anticipated
due date and amount of each installment payable before delivery of the
VESSEL.
7. Expenses:
Expenses and bank charges for remitting payments and any taxes
(other than taxes on income imposed on the BUILDER), duties, expenses
and fees applicable to remitting such payment shall be for account of
the OWNER.
8. Prepayment:
The OWNER may prepay any or all of the installments of the
Contract Price, provided that the OWNER declares the OWNER's intention
to do so in writing or by telex confirmed in writing stating in
advance the intended date of such prepayment, subject to the BUILDER's
acceptance, which shall not be unreasonably withheld.
9. Options
The BUILDER hereby grants to the OWNER options to purchase two
(2) additional deepwater semisubmersible drilling units (the "OPTION
VESSEL(S)") of the same size and Specifications as the VESSEL. In the
event OWNER exercises either option, the purchase price of the OPTION
VESSEL(S) shall be United States Dollars One Hundred and Forty-four
Million Nine Hundred Thousand (US$144,900,000) for the first OPTION
VESSEL and United States Dollars One Hundred and Forty-eight Million
Four Hundred Thousand (US$148,400,000) for the second OPTION VESSEL,
however, the price of each option vessel shall be reduced by the
amount of United States Dollars Two Hundred and Fifty Thousand
(US$250,000) should OWNER elect not to register the OPTION VESSEL(s)
under the flag of the United States of America. The notice period for
exercising such options, the delivery date for the OPTION VESSEL(S)
and the alternative of dynamically positioned VESSEL(S) shall be as
charted in Exhibit B, attached hereto. All other contract terms and
conditions shall, except as may otherwise be specifically modified
herein, be on the same terms and conditions as are set out in this
Contract for the VESSEL, mutatis mutandis. The specifications for the
OPTION VESSEL(S) shall be the same as the "Specifications" identified
and defined in this Contract. Any extras or change orders made to the
Specifications of the VESSEL subsequent to the date of this Contract
shall not be included in the specifications for the OPTION VESSEL(S)
but OWNER shall be entitled to request same pursuant to the
shipbuilding contract for the OPTION VESSEL(S) with appropriate
credits for design, engineering and other non-recurring costs and any
other price and delivery date adjustment or consequence.
(End of Article)
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
The Contract Price shall be subject to adjustment, as hereinafter set
forth, in the event of the following contingencies (it being understood by
both parties that any reduction of the Contract Price is by way of
liquidated damages and not by way of penalty):
1. Delivery:
(a) No adjustment shall be made and the Contract Price shall remain
unchanged for the first Thirty (30) days of delay in delivery of
the VESSEL beyond the Delivery Date as defined in Article VII
hereof (ending as of twelve o'clock midnight of the Thirtieth
(30th) day of delay).
(b) If the delivery of the VESSEL is delayed more than Thirty (30)
days after the Delivery Date, then, in such event, beginning at
twelve o'clock midnight of the Thirtieth (30th) day after the
Delivery Date, the Contract Price shall be reduced by the sum of
Twenty Thousand United Dollars (US$20,000) for each full day
thereafter for which delivery is delayed.
However, the total reduction in the Contract Price pursuant to
this Paragraph (b) shall not be more than as would be the case
for a delay of One Hundred Fifty (150) days counting from
midnight of the Thirtieth (30th) day after the Delivery Date at
the above specified rate of reduction.
(c) However, if the delay in delivery of the VESSEL should continue
for a period of One Hundred Eighty (180) days from the Delivery
Date in Paragraph 1 of Article VII, then in such event, and after
such period has expired, the OWNER may, at its option, rescind
this Contract in accordance with the provisions of Article X
hereof.
The BUILDER may, at any time after the expiration of the
aforementioned One Hundred Eighty (180) days of delay in
delivery, if the OWNER has not served notice of rescission as
provided in Article X hereof, demand in writing that the OWNER
shall make an election, in which case the OWNER shall, within
Twenty (20) days after such demand is received by the OWNER,
notify the BUILDER of its intention either to rescind this
Contract or to consent to the acceptance of the VESSEL at a
specified future date which date BUILDER represents to OWNER is
the earliest date BUILDER can deliver the VESSEL to OWNER under
this Contract, based on the circumstances then known. If the
OWNER shall not make an election within Twenty (20) days as
provided hereinabove, the OWNER shall be deemed to have accepted
such extension of the Delivery Date to the future delivery date
indicated by the BUILDER and it being understood by the parties
hereto that if the VESSEL is not delivered by such specified
date, the OWNER shall have the same right of rescission upon the
same terms and conditions as hereinabove provided.
(d) In addition to any liquidated damages provided for in subsection
(b) above, BUILDER shall reimburse OWNER for any demurrage paid
to the company towing the VESSEL from Korea to the United States
Gulf of Mexico, subject to the OWNER providing notice (well in
advance), to the BUILDER of the anticipated tow commencement date
at the time of the signing of a towage contract between the OWNER
and towing company, with such tow commencement date not to be
earlier than the DELIVERY DATE.
After the Delivery Date, should OWNER decide to keep the VESSEL
at BUILDER's facility prior to tow-out, OWNER shall pay to
BUILDER the reasonable cost of any services associated with the
VESSEL's stay during such period of time.
(e) If the delivery of the VESSEL is made more than thirty (30) days
earlier than the Delivery Date, then, in such event, beginning
with the thirty-first (31) day prior to the Delivery Date, the
Contract Price of the VESSEL shall be increased by adding thereto
Twenty Thousand United States Dollars (US$20,000) for each full
day. However, the total increase in the Contract Price pursuant
to this Paragraph (d) shall not be more than as would be the case
for an early delivery of Sixty (60) days counting from the Thirty-
first (31) day prior to the Delivery Date at the above specified
rate of increase.
(f) For the purpose of this Article, the delivery of the VESSEL shall
be deemed to be delayed when and if the VESSEL, after taking into
account all postponements of the Delivery Date by reason of
permissible delay as defined in Article VIII and/or any other
reason under this Contract, is not delivered by the date upon
which delivery is required under the terms of this Contract.
2. Displacement:
(a) The guaranteed displacement of the VESSEL is 37,560 metric tons
at 16.5 meters draft and 43,280 metric tons at 23.0 meters draft,
subject to adjustment with design development.
(b) In the event of a discrepancy (whether higher or lower) in either
guaranteed displacement of the VESSEL being one thousand (1,000)
metric tons or more, then, the OWNER may, at its option, reject
the VESSEL and rescind this Contract in accordance with the
provisions of Article X hereof or accept the VESSEL at a
reduction in the Contract Price of One Million United States
Dollars (US$ 1,000,000).
3. Weight Control
The BUILDER shall negotiate reasonable steel weight tolerances
with the mill to meet minimum ABS scantling requirements and appraise
the OWNER of this value.
The BUILDER shall develop and implement a weight control
procedure in accordance with the Specifications and track actual
weights by periodically weighing some of the major assemblies as they
are being completed.
The BUILDER shall earn a weight performance bonus of United
States Dollars Two Thousand (US$2,000) per ton steel of actual
lightship weight below the agreed contract lightship weight.
Likewise, the BUILDER shall accrue a weight penalty of United States
Dollars Two Thousand (US$2,000) per ton steel of actual lightship
weight over agreed contract lightship weight. Actual lightship weight
shall be determined on the basis of the ABS approved inclining test.
The agreed lightship weight will be set by the BUILDER and the
OWNER within four (4) months following ABS approval of the basic
design package.
4. Effect of Rescission:
It is expressly understood and agreed by the parties that in any
case, if the OWNER rescinds this Contract under this Article, the
OWNER shall not be entitled to any liquidated damages, or any other
recourse unless by means of the provisions of Article X hereof.
(End of Article)
ARTICLE IV - APPROVAL OF PLANS AND
DRAWINGS AND INSPECTION DURING CONSTRUCTION
1. Approval of Plans and Drawings:
The BUILDER shall obtain the approval of the OWNER for the plans
and drawings in accordance with the procedures set forth in the
Specifications.
2. Appointment of OWNER's Supervisor:
The OWNER may send to and maintain at the Shipyard and/or the
Engineering Office, at the OWNER's own cost and expense, one
supervisor (herein called the "Supervisor") who shall be duly
authorized in writing by the OWNER, which authorization shall be
described in a separate letter to be sent to the BUILDER prior to the
Supervisor's arrival, to act on behalf of the OWNER in connection with
the modifications of the Specifications, adjustments of the Contract
Price and Delivery Date in writing, approval of the plans and
drawings, attendance to the tests and inspections relating to the
VESSEL, its machinery, equipment and outfitting, and any other matters
for which he is specifically authorized by the OWNER. The Supervisor
may appoint assistant(s) to attend at the Shipyard and/or the
Engineering Office for the purposes as aforesaid.
3. Inspection by the Supervisor:
The necessary inspections of the VESSEL, its machinery, equipment
and outfitting shall be carried out by the Classification Society,
other regulatory bodies and/or the Supervisor throughout the entire
period of construction in order to ensure that the construction of the
VESSEL is duly performed in accordance with the Specifications. The
Supervisor shall have, during construction of the VESSEL, the right to
attend such tests and inspections of the VESSEL, its machinery and
equipment within the premises of either the BUILDER or its
subcontractors. Detailed procedures of the inspection and the tests
thereof shall be in accordance with Specifications.
The Supervisor shall, within the limits of the authority
conferred upon him by the OWNER, make decisions or give advice to the
BUILDER on behalf of the OWNER promptly on all problems arising out
of, or in connection with, the construction of the VESSEL and
generally act in a reasonable manner with a view to cooperating to the
utmost with the BUILDER in the construction process of the VESSEL.
The decision, approval or advice of the Supervisor within the
limits of authority conferred on the Supervisor by the OWNER shall be
deemed to have been given by the OWNER. THE OWNER's Supervisor shall
notify the BUILDER promptly in writing of his discovery of any
construction or materials, which he believes do not or will not
conform to the requirements of the Contract or the Specifications and
likewise advise and consult with the BUILDER on all matters
pertaining to the construction of the VESSEL, as may be required by
the BUILDER, or as he may deem necessary.
However, if the Supervisor fails to submit to the BUILDER
promptly any such demand concerning alterations or changes with
respect to the construction, arrangement or outfit of the VESSEL which
the Supervisor has examined, inspected or attended at the test thereof
under this Contract or the Specifications, the Supervisor shall be
deemed to have approved the same and shall be precluded from making
any demand for alterations, changes, or complaints with respect
thereto at a later date.
The BUILDER shall comply with any such demand which is not
contradictory to this Contract, provided that any and all such demands
by the Supervisor with regard to construction, arrangement and outfit
of the VESSEL shall be submitted in writing to the authorized
representative of the BUILDER. The BUILDER shall notify the
Supervisor of the names of the persons who are from time to time
authorized by the BUILDER for this purpose.
It is agreed upon between the OWNER and the BUILDER that the
modifications, alterations or changes and other measures necessary to
comply with such demand may be effected at a convenient time and place
at the BUILDER's reasonable discretion in view of the construction
schedule of the VESSEL.
In the event that the Supervisor shall advise the BUILDER that he
has discovered and believes the construction or materials do not or
will not conform to the requirements of this Contract and the BUILDER
shall not agree with the views of the Supervisor in such respect,
either the OWNER or the BUILDER may either seek an opinion of the
Classification Society or request an arbitration in accordance with
the provisions of Article XII hereof. The Classification Society or
the Arbitration Board shall determine whether or not a nonconformity
with the provisions of this Contract exist. If the Classification
Society or the Arbitration Board enters a determination in favor of
the OWNER, then in such case the BUILDER shall make the necessary
alterations or changes, or if such alterations or changes cannot be
made in time to meet the construction schedule for the VESSEL the
BUILDER shall make fair and reasonable adjustment of the Contract
Price in lieu of such alterations and changes. If the Classification
Society or the Arbitration Board enters a determination in favor of
the BUILDER, then the time for delivery of the VESSEL shall be
extended for a period of delay in construction, if any, occasioned by
such proceedings, and the OWNER shall compensate the BUILDER for the
proven loss and damages (always excluding consequential damages)
incurred to the BUILDER as a result of the dispute herein referred to.
OWNER's Supervisor, at his discretion, may refuse to inspect or
attend tests where adequate safety measures have not been implemented
and in such event such tests/inspections shall not be deemed complete.
4. Facilities:
(a) The BUILDER shall furnish the Supervisor and his staff with
adequate office space and such other reasonable facilities
according to the BUILDER's practice at or in the immediate
vicinity of BUILDER's Offshore Yard and its Engineering Office as
may be necessary to enable them to effectively carry out their
duties. The OWNER shall pay for all such facilities other than
office space at the BUILDER's normal rate of charge. BUILDER
shall advise OWNER in advance of BUILDER's normal rate of charge
for any facilities for which OWNER will be required to pay.
(b) The BUILDER shall make available for OWNER's personnel at the
OWNER's request, during the VESSEL's construction, a minimum of
15 two or three bedroom apartments furnished with the BUILDER's
standard furniture, electrical facilities and utilities. If the
OWNER requests the BUILDER to provide the OWNER with special
furniture and facilities beyond the BUILDER's standard, any
additional costs which may result therefrom, if any, will be
borne by OWNER. Costs for such housing, on a monthly rental
basis, will be presented to OWNER prior to occupation and shall
be reimbursed by OWNER, along with metered utility and telephone
charges. The BUILDER will use best efforts to furnish additional
apartments requested by the OWNER.
5. Liability of BUILDER and OWNER:
The BUILDER agrees to fully protect, defend, indemnify and hold
OWNER harmless from and against all liabilities, obligations, claims
or actions for personal injury or death arising out of performance by
BUILDER or OWNER of their obligations hereunder prior to the
acceptance by OWNER of the VESSEL, and asserted by or on behalf of,
(i) any employee, agent, contractor, or subcontractor of
BUILDER, or
(ii) any employee of any agent, contractor, or subcontractor of
BUILDER,
regardless of the basis of such claims and even if such claims should
arise out of the sole or concurrent fault or negligence of OWNER, or
any employee, agent, contractor or subcontractor of OWNER.
Similarly, the OWNER agrees to fully protect, defend, indemnify and
hold BUILDER harmless from and against all liabilities, obligations,
claims or actions for personal injury or death arising out of
performance by BUILDER or OWNER of their obligations hereunder prior
to the acceptance by OWNER of the VESSEL, and asserted by or on behalf
of,
(i) any employee, agent, contractor, or subcontractor of OWNER,
or
(ii) any employee of any agent, contractor, or subcontractor of
OWNER,
regardless of the basis of such claims and even if such claims should
arise out of the sole or concurrent fault or negligence of BUILDER, or
any employee, agent or subcontractor of BUILDER.
6. Responsibility of OWNER:
The OWNER shall undertake and assure that the Supervisor shall
carry out his duties hereunder in accordance with the normal
shipbuilding practice of the BUILDER, which BUILDER represents and
confirms is in all material respects in accordance with good
international shipbuilding practice and in such a way so as to avoid
any unnecessary increase in building cost, delay in the construction
of the VESSEL, and/or any disturbance in the construction schedule of
the BUILDER. The BUILDER has the right to request the OWNER to
replace the Supervisor who is deemed unsuitable and unsatisfactory for
the proper progress of the VESSEL's construction.
The OWNER shall investigate the situation by sending its
representative(s) to the Shipyard if necessary, and if the OWNER
considers that such BUILDER's request is justified, the OWNER shall
effect such replacement as soon as conveniently arrangeable.
7. Delivery and Construction Schedule:
Attached hereto as Exhibit 4 is a tentative Delivery and
Construction Schedule, and within Sixty (60) days after the date of
this Contract, BUILDER shall deliver or cause to be delivered to OWNER
a final Delivery and Construction Schedule (herein, as from time to
time amended with the knowledge of OWNER, referred to as the
"Schedule"), prepared in reasonable detail and setting forth the
estimated time table for the construction of the VESSEL, it being
understood that the Schedule may be used by OWNER for purposes of
verifying and measuring the progress being made under the terms of
this Contract.
8. Responsibility of BUILDER:
(a) BUILDER personnel and subcontractors which, in the sole opinion
of OWNER, are found to be in violation of the safety policies
established by BUILDER or those specially in place during the
construction of the VESSEL, may be requested to be removed from
the project by the OWNER's Supervisor. BUILDER will immediately
take such actions as necessary to comply with OWNER's reasonable
request.
(b) The BUILDER is to assign a dedicated safety supervisor and a
sufficient number of safety inspectors to remain in effect
throughout the Contract to monitor employee and subcontractor
safety, scaffolding and safety netting, tank entry, work
permitting procedures, electrical safety, etc. Upon request by
the OWNER, the safety supervisor shall participate in OWNER's
daily safety and quality meetings.
(c) The BUILDER shall provide a 24 hour fire-watch at the VESSEL
construction site. In addition, at various locations around the
site, fire alarm stations will be situated whereby a manual alarm
may be sounded and a local emergency response team is notified
and activated.
(d) BUILDER shall immediately report to OWNER all incidents and/or
accidents involving injury, no matter the level of severity,
including first aid, loss of property, no matter the value, as
well as any identified hazards and/or near misses occurring.
Any and all reports of hazards, accidents, incidents, or near
misses will result in the immediate and full ceasing of
construction activities in the affected area until such time as
adequate precautions have been implemented.
(e) BUILDER hereby agrees that the cranes and other related lifting
gear of the VESSEL will not be used by BUILDER during
construction (except for the testing and commissioning stage),
without the prior written approval of OWNER. Should such
approval be given, BUILDER shall return such cranes to normal in
functional respect of operation, including, but not limited to
the changing of all wires.
(f) It is agreed by BUILDER and OWNER that no more than twenty
percent (20%), by number, of all blocks fabricated for
construction of the VESSEL will be built outside of BUILDER's own
yard and then only by local subcontractors. In case more than
twenty percent (20%) of all blocks for the VESSEL is required by
the BUILDER to be fabricated outside of BUILDER's own yard, then
the BUILDER shall obtain the OWNER's prior written consent.
(g) All initial spare parts for equipment furnished by the BUILDER,
("BUILDER Furnished Equipment"), including those necessary for
shipyard start-up testing and for the commissioning of equipment,
shall be provided by BUILDER at BUILDER's cost. Further, BUILDER
shall provide to OWNER a listing of all critical spare parts (any
long lead item and those spares causing equipment to be out of
service for extended periods of time) and two years operating
spare parts. In addition, BUILDER agrees to specifically
identify on the listing any and all ABS required spare parts.
BUILDER will provide such spare parts listing to OWNER as soon as
an order for equipment is placed, but in no case later than 90
days prior to VESSEL delivery. The OWNER is responsible for
supplying all the equipment and material in accordance with the
OWNER's Supplies list made part of the Specifications including
the spare/service parts for start-up testing and commissioning
and specialized tools and initial consumables for the OWNER's
Supplies.
(h) Attached hereto as Exhibit 2 is BUILDER's approved vendor list.
BUILDER agrees that any material and/or supplies not fabricated
by the BUILDER will originate from a vendor so specified in
Exhibit 2. In the event procurement of material and/or supplies
from the approved vendors are not available due to shortage or
delay in delivery thereof to meet the BUILDER's overall
construction schedule of the VESSEL, the BUILDER may mobilize and
originate from other equivalent with the OWNER's consent, which
shall not be unreasonably withheld.
(i) The BUILDER shall, on a monthly basis, provide OWNER with a
written progress report regarding the construction of the VESSEL
based on the BUILDER's standards in accordance with their
procedure. Such report is to include a summary of the progress
to date, the progress since the previous report and a report on
weight control. In a form and frequency to be agreed, the
BUILDER will furnish the OWNER a simple written report updating
the progress on major milestones in the production schedule.
Informal oral reports shall be furnished to the OWNER by the
BUILDER upon request.
In addition, BUILDER shall include a limited number of color
photographs relevant to the fabrication process for the
construction period of the VESSEL in the progress report.
Photographs are to be 5 x 7 inches, bound in books with dates and
descriptive captions. As soon as each volume is available,
BUILDER shall furnish three (3) sets of books of photographs and
one (1) set of negatives to the OWNER.
(j) It is the intent of the BUILDER to seek third party engineering
services in order to assist with the detailed engineering of the
VESSEL. In this regard, the BUILDER agrees that it will seek the
prior consent of the OWNER before the selection of a qualified
engineering consultant company is made. The BUILDER shall
establish a detailed scope and schedule for any such third party
work and submit same to the OWNER for approval.
(End of Article)
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
1. How Effected:
The Specifications may be modified and/or changed by written
request of the OWNER subject to BUILDER's approval (which approval
shall not be unreasonably withheld) provided that any modifications
and/or changes requested by the OWNER (or an accumulation of such
modifications and/or changes) will not adversely affect the BUILDER's
other commitments. In the event of an adverse effect, the BUILDER and
the OWNER shall first agree in writing, before such modifications
and/or changes are carried out, to any adjustment in the Contract
Price, time for delivery of the VESSEL or other terms and conditions
of this Contract occasioned by or resulting from such modifications
and/or changes. The BUILDER hereby agrees to exert its best efforts
to accommodate any reasonable request by the OWNER so that the said
changes and/or modifications may be made at a reasonable cost and
within the shortest period of time which is reasonably possible. Any
such agreement for modifications and/or changes shall include an
agreement as to the increase or decrease, if any, in the Contract
Price of the VESSEL together with an agreement as to any extension or
reduction in the time of delivery, or any other alterations in this
Contract occasioned by such modifications and/or changes. The
aforementioned agreement may be effected by an exchange of letters
signed by the authorized representatives of the parties hereto, or
telex or telefax confirmed in writing, manifesting such agreement.
Such letters and confirmed telex and telefax exchanged by the parties
hereto pursuant to the foregoing shall constitute an amendment, and
such letters and telex and telefax shall be incorporated into this
Contract and made a part hereof. The BUILDER may make minor changes
to the Specifications, if found necessary for introduction of improved
production methods or otherwise, provided that the BUILDER shall first
obtain the OWNER's written approval which shall not be unreasonably
withheld.
2. Changes in Rules of Classification Society, Regulations, etc.:
If, after the date of signing this Contract, any requirements as
to Classification Society, or as to the rules and regulations to which
the construction of the VESSEL is required to conform, are altered or
changed by the Classification Society or regulatory bodies authorized
to make such alterations or changes, either of the parties hereto,
upon receipt of information thereof, shall transmit such information
in full to the other party in writing, thereupon within twenty-one
(21) days after receipt of the said notice from the other party, the
OWNER shall instruct the BUILDER in writing if such alterations or
changes shall be made in the VESSEL or not, in the OWNER's sole
discretion.
The BUILDER shall promptly comply with such alterations or
changes, if any, in the construction of the VESSEL, provided that the
OWNER shall first agree:
(a) To any increase or decrease in the Contract Price of the VESSEL
that is reasonably occasioned by the cost of such compliance;
(b) To any reasonable extension in the time of delivery of the VESSEL
that is necessary due to such compliance;
(c) To any reasonable deviation in the contractual displacement of
the VESSEL, if compliance results in an altered displacement, or
any other reasonable alterations in the terms of this Contract or
of the Specifications or both, if compliance makes such
alterations of terms necessary.
Such agreement of the OWNER may be effected in the same manner as
provided in Paragraph 1 of this Article for modifications and/or
changes of the Specifications.
3. Substitution of Materials:
In the event that any of the materials required by the
Specifications or otherwise under this Contract for the construction
of the VESSEL can not be procured in time to effect delivery of the
VESSEL, or are in short supply, the BUILDER may, provided the OWNER so
agrees in writing, supply other materials and equipment of the best
available and like quality, capable of meeting the requirements of the
Classification Society and of the rules, regulations, requirements and
recommendations with which the construction of the VESSEL must comply.
Any agreement as to such substitution of materials shall be effected
in the manner as provided in Paragraph 1 of this Article, and shall,
likewise, include decrease or increase in the Contract Price and other
terms and conditions of this Contract affected by such substitution.
(End of Article)
ARTICLE VI - TRIALS AND ACCEPTANCE
1. Notice:
The sea trial shall start when the VESSEL is reasonably completed
in all material respects according to the Specifications.
The BUILDER shall give the OWNER at least Twenty(20) days
estimated prior notice and Seven (7) days confirming prior notice in
writing or by telex or telefax confirmed in writing of the time and
place of the trial run of the VESSEL, and the OWNER shall promptly
acknowledge receipt of such notice. The OWNER shall have its
representative and his assistant(s) on board the VESSEL to witness
such trial run.
Failure in attendance of the OWNER's representative at the trial
run of the VESSEL for any reason whatsoever after due notice to the
OWNER as above provided shall be deemed to be a waiver by the OWNER of
its right to have its representative on board the VESSEL at the trial
run, and the BUILDER may conduct the trial run without attendance of
the OWNER's representative, and in such case the OWNER shall be
obligated to accept the VESSEL on the basis of certificates of the
Classification Society and a certificate of the BUILDER stating that
the VESSEL, upon trial run, is found to conform to this Contract.
2. Weather Condition:
The trial run shall be carried out under the weather condition
which is deemed favorable enough by the judgement of both the OWNER
and the BUILDER. In the event of unfavorable weather on the date
specified for the trial run, the same shall take place on the first
available day thereafter that the weather condition permits. It is
agreed that, if during the trial run of the VESSEL, the weather should
suddenly become so unfavorable that orderly conduct of the trial run
can no longer be continued, the trial run shall be discontinued and
postponed until the first favorable day next following, unless the
OWNER shall assent in writing to acceptance of the VESSEL on the basis
of the trial run already made before such discontinuance has occurred.
Any delay of trial run caused by such unfavorable weather
condition shall operate to postpone the Delivery Date by the period of
the delay involved and such delay shall be deemed as permissible delay
in the delivery of the VESSEL.
3. How Conducted:
(a) The VESSEL shall run the official trial run in the manner as
specified in the Specifications.
(b) All expenses in connection with the trial run are to be for
account of the BUILDER and the BUILDER shall provide, at its own
expense, the necessary crew to comply with conditions of safe
navigation.
(c) OWNER shall furnish complete procedures and supervision for the
installation, testing and recommissioning for the BOP stack.
4. Method of Acceptance or Rejection:
(a) Upon completion of the trial run, the BUILDER shall give the
OWNER a notice by telex confirmed in writing of completion of the
trial run, as and if the BUILDER considers that the results of
trial run indicate conformity of the VESSEL to this Contract and
the Specifications. The OWNER shall, within Five (5) days after
receipt of such notice from the BUILDER, notify the BUILDER by
telex or telefax confirmed in writing of its acceptance or
rejection of the trial results.
(b) However, if the result of the trial run is unacceptable, or if
the VESSEL, or any part or equipment thereof, (except a defect in
the OWNER's Supplies not the responsibility of the BUILDER) does
not conform to the requirements of this Contract and/or the
Specifications, or if the BUILDER is in agreement to non-
conformity as specified in the OWNER's notice of rejection, then,
the BUILDER shall take necessary steps to correct such non-
conformity.
The VESSEL may be redocked in the event of unsatisfactory sea-
trial results for the dynamic positioning and/or thruster
systems, or other major system malfunction which cannot be
repaired afloat.
Upon completion of correction of such non-conformity, and re-test
or trial if necessary, the BUILDER shall give the OWNER notice
thereof by telex or telefax confirmed in writing.
The OWNER shall, within Five (5) days after receipt of such
notice from the BUILDER, notify the BUILDER of its acceptance or
rejection of the VESSEL's conformity by telex or telefax
confirmed in writing.
(c) If any event that the OWNER rejects the VESSEL, the OWNER shall
indicate in detail in its notice of rejection in what respect the
VESSEL, or any part or equipment thereof (except a defect in the
OWNER's Supplies not the responsibility of the BUILDER) does not
conform to this Contract and/or the Specifications.
(d) In the event that the OWNER fails to notify the BUILDER by telex
or telefax confirmed in writing of the acceptance of or the
rejection together with the reason therefor of the VESSEL within
the period as provided in the above Sub-paragraph (a) or (b), the
OWNER shall be deemed to have accepted the trial results and/or
the VESSEL, as appropriate.
(e) Any dispute between the BUILDER and the OWNER as to the
conformity or non-conformity of the VESSEL to the requirements of
this Contract and/or the Specifications shall be submitted for
final decision in accordance with Article XII hereof.
5. Effect of Acceptance:
Acceptance of the VESSEL as above provided in Paragraphs 4(a) or
4(b) of this Article VI shall be final and binding so far as
conformity of the VESSEL to this Contract is concerned and shall
preclude the OWNER from refusing formal delivery of the VESSEL as
hereinafter provided, if the BUILDER complies with all other
procedural requirements for delivery as provided in Article VII
hereof. However, the OWNER's acceptance of the VESSEL shall not
affect the OWNER's rights under Article IX hereof.
6. Disposition of Surplus Consumable Stores:
Any fuel oil furnished and paid for by the BUILDER for trial runs
remaining on board the VESSEL, at the time of acceptance of the VESSEL
by the OWNER, shall be bought by the OWNER from the BUILDER at the
BUILDER's purchase price for such supply and payment by the OWNER
thereof shall be made at the time of delivery of the VESSEL. The
BUILDER shall pay the OWNER at the time of delivery of the VESSEL an
amount for the consumed quantity of any lubricating oil and greases
which were furnished and paid for by the OWNER at the OWNER's purchase
price thereof.
(End of Article)
ARTICLE VII - DELIVERY
1. Time and Place:
The VESSEL shall be delivered by the BUILDER to the OWNER at the
Shipyard in Ulsan, Korea within November 1, 1999(unless delays occur
in the construction of the VESSEL or in any performance required under
this Contract due to causes which under the terms of this Contract
permit postponement of the date of delivery, in which event, the
aforementioned date for delivery of the VESSEL shall be changed
accordingly) or, such earlier date after completion of the VESSEL
according to this Contract and the Specifications.
The aforementioned date, or such earlier or later date to which
the requirement of delivery is advanced or postponed pursuant to this
Contract, is herein called the "DELIVERY DATE".
2. When and How Effected:
Provided that the BUILDER and the OWNER shall have fulfilled all
of their obligations stipulated under this Contract, the delivery of
the VESSEL shall be effected forthwith by the concurrent remittance of
the fifth installment in accordance with Article II, Section 5(c) and
delivery by each of the parties hereto to the other of the PROTOCOL OF
DELIVERY AND ACCEPTANCE, acknowledging delivery of the VESSEL by the
BUILDER and acceptance thereof by the OWNER.
3. Documents to be delivered to OWNER:
Upon delivery and acceptance of the VESSEL, the BUILDER shall
deliver to the OWNER the following documents, which shall accompany
the PROTOCOL OF DELIVERY AND ACCEPTANCE:
(a) PROTOCOL OF TRIALS of the VESSEL made pursuant to the
Specifications;
(b) PROTOCOL OF INVENTORY of the equipment of the VESSEL, including
spare parts and the like, as specified in the Specifications;
(c) PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under
paragraph 6 of Article VI hereof;
(d) ALL CERTIFICATES, including the BUILDER's CERTIFICATE required to
be furnished upon delivery of the VESSEL pursuant to this
Contract and the Specifications;
It is agreed that if, through no fault on the part of the
BUILDER, the Classification certificates and/or other
certificates are not available at the time of delivery of the
VESSEL, provisional certificates shall be accepted by the OWNER,
provided that the BUILDER shall furnish the OWNER with the formal
certificates as promptly as possible after such certificates have
been issued.
Application and certificate for statutory inspections by the
United States Coast Guard shall be arranged by the OWNER at its
expense.
(e) DECLARATION OF WARRANTY of the BUILDER that the VESSEL is
delivered to the OWNER free and clear of any liens, charges,
claims, mortgages, or other encumbrances upon the OWNER's title
thereto, and in particular that the VESSEL is absolutely free of
all burdens in the nature of imposts, taxes or charges imposed by
Governmental Authorities, as well as all liabilities of the
BUILDER to its subcontractors, employees and crew, and of the
liabilities arising from the operation of the VESSEL in trial
runs, or otherwise, prior to delivery;
(f) DRAWINGS AND PLANS pertaining to the VESSEL as stipulated in the
Specifications;
(g) COMMERCIAL INVOICE;
(h) Necessary export licenses, permits, and clearances by the Korean
Government to enable the VESSEL to sail from Ulsan, Korea
following delivery; and
(i) DRAWINGS/OPERATING MANUALS. All documentation, including, but
not limited to complete, as-built drawings, operations manuals,
commissioning reports, inclining reports, major/minor equipment
certifications, sea trial reports, spare parts list and BUILDER's
vendor's documentation will be furnished by BUILDER to OWNER on
or before the delivery of the VESSEL.
4. Tender of VESSEL:
If the OWNER fails to take delivery of the VESSEL after
completion thereof according to this Contract and the Specifications
without any justifiable reason, the BUILDER shall have the right to
tender delivery of the VESSEL after accomplishment of all BUILDER's
obligations as provided herein.
5. Title and Risk:
Title to and risk of loss of the VESSEL shall pass to the OWNER
only upon the delivery and acceptance thereof having been completed as
stated above; it being expressly understood that, until such delivery
is effected, title to and risk of damage to or loss of the VESSEL and
her equipment shall be in the BUILDER.
6. Removal of VESSEL:
The OWNER shall take possession of the VESSEL immediately upon
delivery and acceptance thereof and shall remove the VESSEL from the
premises of the Shipyard within Seven (7) days after delivery and
acceptance thereof is effected.
If the OWNER shall not remove the VESSEL from the premises of the
Shipyard within the aforesaid Seven (7) days, in such event, the OWNER
shall pay to the BUILDER the reasonable mooring charges of the VESSEL.
(End of Article)
ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR
DELIVERY (FORCE MAJEURE)
1. Causes of Delay (Force Majeure):
If, at any time either the construction or delivery of the VESSEL
or any performance required hereunder as a prerequisite to the
delivery thereof is delayed by any of the following events; namely
war, acts of state or government, blockade, revolution, insurrections,
mobilization, civil commotion, riots, strikes, sabotage, lockouts,
Acts of God or the public enemy, plague or other epidemics,
quarantines, prolonged failure of electric current, freight embargoes,
or defects in major forgings or castings, if any, or shortage of
materials, machinery or equipment in inability to obtain delivery or
delays in delivery of materials, machinery or equipment, provided that
at the time of ordering the same could reasonably be expected by the
BUILDER to be delivered in time, or defects in materials, machinery or
equipment which could not have been detected by the BUILDER using
reasonable care, or earthquakes, tidal waves, typhoons, hurricanes,
prolonged or unusually severe weather conditions or delay in the
construction of the BUILDER's other newbuilding projects in the same
yard due to any such causes as described in this Article which in turn
delay the keel laying and eventual delivery of the VESSEL in view of
the Shipyard's overall building program or the BUILDER's performance
under this Contract, or by destruction of the premises or works of the
BUILDER or its sub-contractors, or of the VESSEL, or any part thereof,
by fire, landslides, flood, lightning, explosion, or other causes
beyond the control of the BUILDER, or its sub-contractors, as the case
may be, or for any other causes which, under terms of this Contract,
authorize and permit extension of the time for delivery of the VESSEL,
then, in the event of delays due to the happening of any of the
aforementioned contingencies, the Delivery Date of the VESSEL under
this Contract shall be extended for a period of time which shall not
exceed the total accumulated time of all such delays.
2. Notice of Delay:
Within Fourteen (14) days after the date of occurrence of any
cause of delay, on account of which the BUILDER claims that it is
entitled under this Contract to a postponement of the Delivery Date,
the BUILDER shall notify the OWNER in writing or by telex or telefax
confirmed in writing of the date when such cause of delay occurred.
Likewise, within Fourteen (14) days after the date of ending of such
cause of delay, the BUILDER shall notify the OWNER in writing or by
telex or telefax confirmed in writing of the date when such cause of
delay ended. The BUILDER shall also notify promptly the OWNER of the
period, by which the Delivery Date is postponed by reason of such
cause of delay. If the BUILDER does not give the timely advice as
above, the BUILDER shall lose the right to claim such delays as
permissible delay.
Failure of the OWNER to acknowledge the BUILDER's claim for
postponement of the Delivery Date within fourteen (14) days after
receipt by the OWNER of such notice of claim shall be deemed to be a
waiver by the OWNER of its right to object to such postponement of the
Delivery Date.
3. Definition of Permissible Delay:
Delays on account of such causes as specified in Paragraph 1 of
this Article and any other delay which under the terms of this
Contract permits postponement of the Delivery Date shall be understood
to be permissible delays and are to be distinguished from unauthorized
delays on account of which the Contract Price is subject to adjustment
as provided for in Article III hereof.
4. Right to Rescind for Excessive Delay:
(a) If the total accumulated time of all delays claimed by the
BUILDER on account of the causes specified in Paragraph 1 of this
Article, excluding other delays of the nature which under the
terms of this Contract permit postponement of the Delivery Date,
amounts to One Hundred Eighty (180) days or more, then, in such
event, the OWNER may rescind this Contract in accordance with the
provisions of Article X hereof.
The BUILDER may, at any time after the accumulated time of the
aforementioned delays justifying rescission by the OWNER, demand
in writing that the OWNER shall make an election, in which case
the OWNER shall, within fourteen (14) working days after such
demand is received by the OWNER either notify the BUILDER of its
intention to rescind this Contract, or consent to a postponement
of the Delivery Date to a specified future date, which date
BUILDER represents to OWNER is the earliest date BUILDER can
deliver the VESSEL to OWNER, based on the circumstances then
known, it being understood by the parties hereto that if the
VESSEL is not delivered by such future date, the OWNER shall have
the same right of rescission upon the same terms and conditions
as hereinabove provided.
(b) If at any time during the term of this Contract, BUILDER falls
more than 270 days behind in the construction of the VESSEL
according to the Delivery and Construction Schedule, for any
reason whatsoever, and whether as a result of permissible delay
or otherwise, OWNER shall be entitled to give written notice to
BUILDER that OWNER considers BUILDER in material default of its
obligations under this Contract, and if BUILDER has not cured
such default within Thirty (30) days after receipt of such
notice, OWNER shall have the right to rescind this Contract in
accordance with the provisions of Article X hereof.
(End of Article)
ARTICLE IX - WARRANTY OF QUALITY
1. Guarantee:
The BUILDER, for the period of Twelve (12) months after delivery
of the VESSEL (hereinafter called "Guarantee Period"), guarantees the
VESSEL and her engines, including all parts and equipment
manufactured, furnished or installed by the BUILDER or its
subcontractors under this Contract, and including the machinery,
equipment and appurtenances thereof (including the installation work
performed or required to be performed by BUILDER under this Contract
for the OWNER supplied or furnished equipment), under the Contract but
excluding any item which is supplied or designated by the OWNER or by
any other bodies on behalf of the OWNER, against all defects and all
damages to the VESSEL resulting therefrom occurring within the
Guarantee Period which are due to defective material, design and/or
poor workmanship or negligent or other improper acts or omissions on
the part of the BUILDER or its subcontractors (hereinafter called the
"Defect" or "Defects") and are not a result of accident, ordinary wear
and tear, misuse, mismanagement, negligent or other improper acts or
omissions or neglect on the part of the OWNER, its employee or agents.
The BUILDER shall arrange for the OWNER to obtain a five (5) year
guarantee after delivery of the VESSEL for the paint materials and the
ballast tank coatings through the paint manufacturer selected by the
BUILDER. But, the BUILDER's guarantee for the ballast tank coating
shall be in no event longer than one (1) year after delivery of the
VESSEL unless major repairs as defined in Clause 3 of this Article
have arisen. Such additional extended guarantee shall proceed between
the OWNER and the selected manufacturer arranged by the BUILDER. Final
selection of the ballast tank coatings manufacturer is subject to the
approval of the OWNER, not to be unreasonably withheld.
2. Notice of Defects:
The OWNER shall notify the BUILDER in writing, or by telex
confirmed in writing, of any Defect for which claim is made under this
guarantee, as promptly as possible after discovery thereof. The
OWNER's written notice shall describe in detail the nature, cause and
extent of the Defects.
The BUILDER shall have no obligation for any Defect discovered
prior to the expiry date of the Guarantee Period, unless notice of
such Defect or any damage resulting therefrom is received by the
BUILDER not later than Ten (10) BUILDER's working days after the
expiry date of the Guarantee Period.
3. Remedy of Defects:
(a) The BUILDER shall remedy, at its expense, any Defect against
which the VESSEL is guaranteed under this Article, by making all
necessary repairs or replacements at the Shipyard.
(b) However, if it is impracticable to bring the VESSEL to the
Shipyard, the OWNER may cause the necessary repairs or
replacements to be made elsewhere which is deemed suitable for
the purpose, provided that, in such event, the BUILDER may
forward or supply replacement parts or materials to the VESSEL,
unless forwarding or supplying thereof to the VESSEL would impair
or delay the operation or working schedule of the VESSEL. In the
event that the OWNER proposes to cause the necessary repairs or
replacements for the VESSEL to be made at any other shipyard or
works than the Shipyard, the OWNER shall first, but in all events
as soon as possible, give the BUILDER notice in writing or by
telex or telefax confirmed in writing of the time and place when
and where such repairs will be made, and if the VESSEL is not
thereby delayed, or her operation or working schedule is not
thereby impaired, the BUILDER shall have the right to verify by
its own representative(s) the nature, cause and extent of the
Defects complained of. The BUILDER shall, in such case, promptly
advise the OWNER by telex or telefax, after such examination has
been completed, of its acceptance or rejection of the Defects as
ones that are covered by the guarantee herein provided. Upon the
BUILDER's acceptance of the Defects as justifying remedy under
this Article, or upon award of the arbitration so determining,
the BUILDER shall pay to the OWNER for such repairs or
replacements a sum equal to the reasonable cost of making the
same repairs or replacements in a first class Korean shipyard, at
the prices prevailing at the time of such repairs or replacements
are made. The guarantee works shall be settled regularly during
the Guarantee Period. The actual reimbursement for the guarantee
shall be made in a lump sum at the expiry of the Guarantee
Period.
(c) In any case, the VESSEL shall be taken, at the OWNER's cost and
responsibility, to the place elected, ready in all respects for
such repairs or replacement.
(d) Any dispute under this Article shall be referred to arbitration
in accordance with the provisions of Article XII hereof.
(e) Repairs under this Article are guaranteed for the balance of the
period set out in paragraph 1 of this Article but for major
repairs are guaranteed for the longer of the balance of the
period set out in paragraph 1 of this Article or 6 months from
the date of completion of major repairs, but in no event longer
than 18 months after the Delivery Date. For purposes hereof,
"major repairs" shall be defined as a repair costing more than
One Hundred Fifty Thousand United States Dollars (US$150,000)
4. Extent of BUILDER's Responsibility:
(a) The BUILDER shall have no responsibility or liability for any
other defect whatsoever in the VESSEL other than the Defects
specified in Paragraph 1 of this Article, other than to repair
all damages to the VESSEL discovered within the Guarantee Period
and resulting from or caused by the Defects which are not
attributable to the OWNER's (i) improper acts or omissions, (ii)
negligence, or (iii) misuse.
Nor shall the BUILDER in any circumstances be responsible or
liable for any consequential or special loss, damage or expense,
including, but not limited to, loss of time, loss of profit or
earnings or demurrage directly or indirectly occasioned to the
OWNER by reason of the Defects specified in Paragraph 1 of this
Article or due to repairs or other works done to the VESSEL to
remedy such Defects.
(b) The BUILDER shall not be responsible for any defect in any part
of the VESSEL which may, subsequently to delivery of the VESSEL,
have been replaced or repaired in any way by any other
contractor, unless done pursuant to Paragraph 3 (b) of this
Article, or for any defect which have been caused or aggravated
by omission or improper use and maintenance of the VESSEL on the
part of the OWNER, its servants or agents or by ordinary wear and
tear or by any other cause beyond control of the BUILDER (other
than aggravation of defect or results of defect resulting from
the use or operation of the VESSEL after knowledge of same by
OWNER, where such continued use or operation was unavoidable to
preserve or protect the safety of the VESSEL or her crew).
(c) The guarantee contained as hereinabove in this Article replaces
and excludes any other liability, guarantee, warranty and/ or
condition imposed or implied by the law, customary, statutory or
otherwise, by reason of the construction and sale of the VESSEL
by the BUILDER for and to the OWNER.
5. Guarantee Engineer:
The BUILDER shall, at the request of the OWNER, appoint a maximum
of two (2) Guarantee Engineers to serve on the VESSEL as its
representative for a period of up to Three (3) months from the date
the VESSEL is delivered. However, if the OWNER shall deem it
necessary to keep the Guarantee Engineers on the VESSEL for a longer
period, then they shall remain on board the VESSEL after the said
three (3) months, up to but not longer than Six (6) months from the
delivery of the VESSEL.
The OWNER, and its employees, shall give such Guarantee Engineers
full cooperation in carrying out their duties as the representative of
the BUILDER on board the VESSEL.
The OWNER shall accord the Guarantee Engineers treatment
comparable to the VESSEL's Chief Engineer, and shall provide board and
lodging at no cost to the BUILDER or the Guarantee Engineers. The
BUILDER and the OWNER shall, prior to delivery of the VESSEL, execute
a separate agreement regarding the Guarantee Engineers, including an
appropriate mutual hold harmless agreement.
While the Guarantee Engineers are on board the VESSEL, the OWNER
shall pay to the Guarantee Engineers the sum of US$5,000 per month,
the expenses of their repatriation to Korea by air upon termination of
their service, the expenses of their communication with the BUILDER
incurred in performing their duties and expenses, if any, of their
medical and hospital care in the VESSEL's hospital.
BUILDER will have the option, at BUILDER's sole risk and expense,
to place a maximum of two (2) Guarantee Engineers on board the VESSEL
for a period of up to six (6) months. The OWNER will provide board,
lodging, communications and general working support services at no
cost to the BUILDER or the Guarantee Engineers but all other expenses
shall be for the sole account of BUILDER.
(End of Article)
ARTICLE X - RESCISSION BY OWNER
1. Notice:
The payments made by the OWNER prior to delivery of the VESSEL
shall be in the nature of advances to the BUILDER, and in the event
that the VESSEL after sea trial is rejected by the OWNER or the
Contract is rescinded by the OWNER in accordance with the terms of
this Contract under and pursuant to any of the provisions of this
Contract specifically permitting the OWNER to do so, then the OWNER
shall notify the BUILDER in writing or by telex confirmed in writing,
and such rescission shall be effective as of the date when notice
thereof is received by the BUILDER.
2. Refundment by BUILDER:
In case the BUILDER receives the notice stipulated in Paragraph 1
of this Article, the BUILDER shall promptly refund to the OWNER the
full amount of all sums paid by the OWNER to the BUILDER on account of
the VESSEL, together with the interest thereon, unless the BUILDER
proceeds to the arbitration under the provisions of Article XII
hereof.
In the event of such rescission by the OWNER, the BUILDER shall
pay the OWNER interest at the rate of Eight percent (8%) per annum on
the amount required herein to be refunded to the OWNER, computed from
the date following the respective date on which such sums were paid by
the OWNER to the BUILDER to the date of remittance by transfer of such
refund to the OWNER by the BUILDER, provided, however, that if the
said rescission by the OWNER is made under the provisions of Paragraph
4 of Article VIII hereof, then in such event the BUILDER shall pay the
OWNER interest at the rate of Four percent (4%) per annum on the sums
refundable.
As security for refund of installments prior to delivery of the
VESSEL, the BUILDER shall furnish to OWNER, prior to the due date of
the first installment, with a letter of guarantee covering the amount
of such pre-delivery installments and issued by the BUILDER's BANK in
favor of the OWNER. Such letter of guarantee shall have substantially
the same form and substance as Exhibit "A" annexed hereto.
3. Discharge of Obligations:
Upon such refund by the BUILDER to the OWNER, all obligations,
duties and liabilities of each of the parties hereto to the other
under this Contract shall be forthwith completely discharged, without
prejudice, however, to any claims either party may have resulting from
the other party's breach of any of its obligations under this
Contract.
(End of Article)
ARTICLE XI - OWNER'S DEFAULT
1. Definition of Default:
The OWNER shall be deemed to be in default of its performance of
obligations under this Contract in the following cases:
(a) If the first, second, third, or fourth installment is not paid by
the OWNER to the BUILDER within Five (5) banking days in New York
after such installment becomes due and payable as provided in
Article II hereof; or
(b) If the fifth installment is not paid by the OWNER to the BUILDER
in New York at the time such installment becomes due and payable
upon delivery of the Vessel as provided in Article II hereof; or
(c) If the increased amount in the Contract Price as adjusted due and
payable upon delivery of the VESSEL is not paid by the OWNER
concurrently with delivery of the VESSEL as provided in Article
II hereof; or
(d) If the OWNER, when the VESSEL is duly tendered for delivery by
the BUILDER in accordance with the provisions of this Contract,
fails to accept the VESSEL within Five (5) days from the tendered
date without any specific and valid ground thereof under this
Contract.
2. Effect of Default on or before Delivery of VESSEL:
(a) Should the OWNER make default in payment of any installment of
the Contract Price on or before delivery of the VESSEL, the OWNER
shall pay the installment(s) in default plus accrued interest
thereon at the rate of eight percent (8%) per annum computed from
the due date of such installment to the date when the BUILDER
receives the payment, and, for the purpose of Paragraph 1 of
Article VII hereof, the Delivery Date of the VESSEL shall be
automatically extended by a period of continuance of such default
by the OWNER.
In any event of default by the OWNER, the OWNER shall also pay all charges
and expenses incurred to the BUILDER in direct consequence of such default.
(b) If any default by the OWNER continues for a period of Ten (10)
days, the BUILDER may, at its option, rescind this Contract by
giving notice of such effect to the OWNER by telex or telefax
confirmed in writing.
Upon dispatch by the BUILDER of such notice of rescission, this
Contract shall be forthwith rescinded and terminated. In the
event of such rescission of this Contract, the BUILDER shall be
entitled to retain any installment or installments already paid
by the OWNER to the BUILDER on account of this Contract and the
OWNER's Supplies, if any.
3. Disposal of VESSEL:
(a) In the event that this Contract is rescinded by the BUILDER under
the provisions of Paragraph 2(b) of this Article, the BUILDER
must, at its sole discretion, either complete the VESSEL and sell
the same, or sell the VESSEL in its incomplete state, free of any
right or claim of the OWNER. Such sale of the VESSEL by the
BUILDER shall be either by public auction or private contract at
the BUILDER's sole discretion and on such terms and conditions as
the BUILDER shall deem fit.
(b) On sale of the VESSEL, the amount of the sale proceeds received
by the BUILDER shall be applied firstly to all expenses attending
such sale or otherwise incurred to the BUILDER as a result of the
OWNER's default, secondly to the payment of all costs and
expenses of construction of the VESSEL incurred to the BUILDER
less OWNER's Supplies and the installments already paid by the
OWNER, and then to the compensation to the BUILDER for a
reasonable loss of profit due to rescission of this Contract, and
finally to the repayment to the OWNER if any balance is obtained.
(c) If the proceeds of sale are insufficient to pay such total costs
and loss of profit as aforesaid, the OWNER shall promptly pay the
deficiency to the BUILDER upon request.
4. Dispute:
Any dispute under this Article shall be referred to arbitration
in accordance with the provisions of Article XII hereof.
(End of Article)
ARTICLE XII - ARBITRATION
1. Decision by the Classification Society:
If any dispute arises between the parties hereto in regard to the
design and/or construction of the VESSEL, its machinery and equipment,
and/or in respect of the materials and/or workmanship thereof and/or
thereon, and/or in respect of interpretations of this Contract, the
parties may by mutual agreement refer the dispute to the
Classification Society or to such other expert as may be mutually
agreed between the parties hereto, and whose decision shall be final,
conclusive and binding upon the parties hereto.
2. Proceedings of Arbitration:
In the event that the parties hereto do not agree to settle a
dispute according to Paragraph 1 of this Article and/or in the event
of any other dispute of any kind whatsoever between the parties and
relating to this Contract or its rescission or any stipulation herein,
such dispute shall be submitted to arbitration in London. Each party
shall appoint an arbitrator and the two arbitrators so appointed shall
appoint an Umpire. If the two arbitrators are unable to agree upon an
Umpire within Twenty (20) days after appointment of the second
arbitrator, either of the said two arbitrators may apply to the
President for the time being of the London Maritime Arbitrators
Association to appoint the Umpire, and the two arbitrators and the
Umpire shall constitute the Arbitration Board. Such arbitration shall
be in accordance with and subject to the provisions of the British
Arbitration Act 1979, or any statutory modification or re-enactment
thereof for the time being in force.
Either party may demand arbitration of any such dispute by giving
notice to the other party. Any demand for arbitration by either of
the parties hereto shall state the name of the arbitrator appointed by
such party and shall also state specifically the question or questions
as to which such party is demanding arbitration. Within Fourteen (14)
days after receipt of notice of such demand for arbitration, the other
party shall in turn appoint a second arbitrator and give notice in
writing of such appointment to the party demanding arbitration. If a
party fails to appoint an arbitrator as aforementioned within Fourteen
(14) days following receipt of notice of demand for arbitration by the
other party, the party failing to appoint an arbitrator shall be
deemed to have accepted and appointed, as its own arbitrator, the
arbitrator appointed by the party demanding arbitration and the
arbitration shall proceed before this sole arbitrator who alone in
such event shall constitute the Arbitration Board.
The award of the Arbitration Board shall be final and binding on
both parties.
3. Notice of Award:
The award decision shall immediately be communicated to the OWNER
and the BUILDER by facsimile and confirmed in writing.
4. Expenses:
The Arbitration Board shall determine which party shall bear the
expenses of the arbitration or the portion of such expenses which each
party shall bear.
5. Entry in Court:
In case of failure by either party to respect the award of the
Arbitration Board, the judgement may be entered in any proper court
having jurisdiction thereof to enforce such award.
6. Alteration of Delivery Date:
In the event of reference to arbitration of any dispute arising
out of matters occurring prior to delivery of the VESSEL, the award
may include any adjustment of the Delivery Date which the Arbitration
Board may deem appropriate.
(End of Article)
ARTICLE XIII - SUCCESSOR AND ASSIGNS
Neither of the parties hereto shall assign this Contract to any other
individual or company unless prior consent of the other party is given in
writing, such consent not to be unreasonably withheld, provided however,
that the OWNER shall be freely entitled to assign this Contract to an
Affiliated Company without the prior approval of BUILDER. For the purposes
of any such assignment, "Affiliated Company" means a company or other legal
entity which controls or is controlled by OWNER, or which is controlled by
an entity which controls the OWNER. For purposes hereof, control means the
ownership, directly or indirectly, of fifty percent (50%) or more of the
shares or voting rights in a company or legal entity. Upon giving notice
to the BUILDER of such assignment, the assignor shall, to the extent
assigned, have no further obligation thereunder. The notice given by OWNER
of such assignment shall include a reasonable explanation of the purpose of
the assignment and shall provide sufficient information so as to allow the
BUILDER to advise the BUILDER's Bank regarding any amendment of the name of
the beneficiary of the Refund Guarantee provided for in Article X hereof.
Upon such assignment, the OWNER shall provide to BUILDER a copy of any
assignment made pursuant hereto.
In the event of any assignment pursuant to the terms of this Contract,
the assignee shall succeed to all of the assigned rights, responsibilities,
duties and obligations of the assignor under this Contract and, to the
extent assigned, the assignor shall have no further right or obligation
hereunder. Should OWNER assign this Contract, any assignee or subsequent
assignee of this Contract shall succeed to the rights of the OWNER to
further assign this Contract under this Article XIII.
(End of Article)
ARTICLE XIV - TAXES AND DUTIES
1. Taxes and Duties Incurred in Korea:
The BUILDER shall bear and pay all taxes, duties, stamps and fees
incurred in Korea in connection with execution and/or performance of
this Contract as the BUILDER, and any taxes and duties imposed in
Korea upon the OWNER's Supplies resulting from the failure
attributable to the BUILDER in taking all appropriate action to have
such OWNER's Supplies imported into Korea under bond for ultimate
export with the VESSEL following delivery.
2. Taxes and Duties Incurred Outside Korea:
The OWNER shall bear and pay all taxes (other than taxes on
income imposed on BUILDER), duties, stamps and fees incurred outside
Korea in connection with execution and/or performance of this Contract
as the OWNER, except for taxes and duties imposed upon those items
(other than OWNER's Supplies) to be procured by or for the BUILDER for
construction of the VESSEL which shall be the responsibility of the
BUILDER.
(End of Article)
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
1. Patents:
Except as to OWNER's provided basic design, specifications and
OWNER's Supplies, BUILDER agrees to defend, indemnify and hold OWNER
harmless from any liability or claims of patent infringement of any
nature or kind (including legal fees and expenses) relating to the
infringement or claimed infringement of patent rights of any third
party with respect to any material, service, process, or apparatus
covered by this Contract, or their use for their intended purpose.
With regards to the performance of the current Contract, OWNER
shall defend, indemnify and hold BUILDER harmless from all claims of
infringement of patent rights of any third party related to (i)
processes supplied by OWNER or (ii) OWNER's Supplies.
Except as otherwise provided for in this Agreement, nothing
contained herein shall be construed as transferring any rights in any
patents, trademarks or copyrights utilized in the performance of this
Contract.
2. General Plans, Specifications and Working Drawings:
(a) The OWNER retains the right to use the Specifications to inspect
and/or verify the work performed by the BUILDER hereunder or to
make repairs or modifications to the VESSEL or to use or operate
the VESSEL .
(b) It is specifically agreed that the Contract Price does not
include provision for BUILDER's obtaining or having obtained any
and all necessary design rights from Reading & Bates Drilling Co.
and Ishikawajima-Harima Heavy Industries Co., Ltd. and/or their
parent, affiliated or subsidiary companies (hereinafter
"Designer") nor payment of any and all design and/or royalty fees
and that same has or will be obtained/paid by OWNER.
3. License
The VESSEL is being constructed pursuant to a design supplied by OWNER
and ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES CO., LTD. ("IHI"). It is
agreed between OWNER and BUILDER that BUILDER will not construct
another rig of the RBS6 design without seeking the agreement of OWNER
and IHI, nor will BUILDER disclose RBS6 design to any third parties
who are not related to the execution of this Contract, without prior
consent of both OWNER and IHI.
BUILDER and OWNER agree on the following principals regarding the
licensing of the OWNER/IHI design:
(a) OWNER and IHI (referred in this article collectively as
"LICENSORS") are the joint owners of the design of "RBS6" Type
semisubmersible Drilling Unit.
(b) In order to protect the rights of the LICENSORS as joint owners
of RBS6 design, LICENSORS agree to grant BUILDER a non-exclusive
license to construct and to sell RBS6 designed Drilling Units
only to OWNER.
(c) The license granted to BUILDER shall not confer the right to
grant a sublicense to any third party.
(d) The arrangement and outfitting of RBS6 may be modified by BUILDER
to suit their production facilities or for the requirement of
OWNER or by normal detail design progress.
(e) BUILDER agrees to maintain confidential all information provided
which is the property of LICENSORS and such information will be
returned upon LICENSORS' request.
(End of Article)
ARTICLE XVI - OWNER'S SUPPLIES
1. Responsibility of OWNER:
(a) The OWNER shall, at its own risk, cost and expense, supply and
deliver to the BUILDER all of the items to be furnished by the
OWNER as specified in the Specifications (herein called the
OWNER's Supplies) to a first point of arrival (the port of Pusan
or other places as may be agreed between the parties) in Korea in
good condition. Once delivered to the first point of arrival in
Korea, the OWNER's Supplies will be at the BUILDER's risk. Upon
transportation of the OWNER's Supplies to the shipyard and after
customs clearance, the BUILDER shall make a visual inspection of
OWNER's Supplies and report to OWNER any apparent damage to the
OWNER's Supplies. OWNER and BUILDER shall inspect the OWNER's
Supplies after customs clearance and upon arrival thereof at the
Shipyard to determine through visual examination whether the
OWNER's Supplies comply with the contractual specifications or
have been damaged during the transportation. If as the result of
such inspections, (i) any defect to the OWNER's Supplies is
found, or (ii) any damage to the OWNER's Supplies occurring prior
to arrival at the shipyard is found, then all the remedies and
replacements thereof are the responsibility of the OWNER. Any
delay or direct expenses regarding the construction of the VESSEL
resulting solely from OWNER's failure to have the OWNER's
Supplies delivered in Korea as agreed herein shall be the OWNER's
responsibility. Risk of transportation within Korea to the
Shipyard and risk of offloading, uncrating and storage of the
OWNER's Supplies upon their arrival at the Shipyard will be with
BUILDER. However, the cost for inland transportation, customs
clearance, insurance for inland transportation and other costs,
if any, for the OWNER's Supplies shall be one half of one percent
(0.5%) of the OWNER's Supplies amount on the C.I.F. value basis
for those delivered to Mipo port outside the shipyard, Ulsan or
one percent (1.0%) for those delivered to Pusan Port, Pusan,
which shall be paid by the OWNER to the BUILDER together with the
payment of the 5th installment pursuant to Article II hereof. In
case such OWNER's Supplies are delivered directly to the Shipyard
or Mipo Port in the Offshore Yard by the OWNER, the applicable
cost (rate) shall be reduced to zero point zero percent (0.0%) of
the OWNER's Supplies amount on the basis of C.I.F. value, except
OWNER will pay for customs clearance or any third party costs.
OWNER's Supplies sent to ports nearby the Shipyard will be
assessed charges for transportation, customs clearance fee,
harbor union fee, pilotage and other costs that are incurred by
the BUILDER to facilitate delivery of the OWNER's Supplies to the
Shipyard. These fees will be charged at actual direct cost. Any
loss of or damage to the OWNER's Supplies after they are in the
custody of the BUILDER will be for the account of the BUILDER and
BUILDER will replace or repair any OWNER's Supplies that may be
lost or damaged, and a subsequent delay due to the foregoing and
resulting cost impact will be the BUILDER's responsibility.
BUILDER agrees and acknowledges that any or all of the OWNER's
Supplies may arrive at the Shipyard in individual parts or as
component parts to be placed in or made a part of a larger system
or module. The BOP is to arrive in not more than four (4) main
components.
(b) In order to facilitate detailed design and installation by the
BUILDER of the OWNER's Supplies in or on the VESSEL, the OWNER
shall furnish the BUILDER with necessary specifications, plans,
drawings, instruction books, manuals, test reports and
certificates required by the rules and regulations of the
Specifications. If so requested by the BUILDER, the OWNER,
without any charge to the BUILDER, shall cause the
representatives of the manufacturers of the OWNER's Supplies to
advise the BUILDER in installation thereof in or on the VESSEL.
(c) Any and all of the OWNER's Supplies shall be subject to the
BUILDER's reasonable right of rejection, as and if they are found
to be unsuitable or in improper condition for installation.
(d) The insurance for the OWNER's Supplies during storage,
construction and installation at the Shipyard is covered and
handled by the BUILDER at its cost and responsibility.
(e) A preliminary Delivery Schedule of the OWNER's Supplies and
vendor data specific to the VESSEL (Hull No. HRBS6) showing the
BUILDER's requested delivery dates is attached to the
Specifications. The Delivery Schedule of the OWNER's Supplies
and vendor data shall be mutually agreed, finalized and settled
within Sixty (60) calendar days from the date of contract
signing. The delivery dates agreed to on the Delivery Schedule
will be the date OWNER's Supplies are required at the shipyard.
Should the OWNER fail to deliver any of the OWNER's Supplies
within Twenty (20) days of the time designated by the Delivery
Schedule, the Delivery Date shall be automatically extended for a
period not to exceed the actual delay, beyond twenty (20) days,
incurred by the BUILDER. If no delay in the delivery of the
VESSEL is incurred by the BUILDER, the Delivery Date shall not
change.
(f) If delay in delivery of any of the OWNER's Supplies exceeds
thirty(30) days, then, the BUILDER shall be entitled to proceed
with construction of the VESSEL without installation thereof in
or on the VESSEL as hereinabove provided, and the OWNER shall
accept and take delivery of the VESSEL so constructed, unless
such delay is caused by Force Majeure in which case the provision
Paragraph 1(e) of this Article shall apply.
2. Responsibility of BUILDER:
The BUILDER shall be responsible for storing and handling with
reasonable care of the OWNER's Supplies after delivery thereof at the
Shipyard, and shall, at its own cost and expense, install them in or
on the VESSEL, unless otherwise provided herein or agreed by the
parties hereto, provided, always, that the BUILDER shall not be
responsible for quality, efficiency and/or performance of any of the
OWNER's Supplies (other than to install same in accordance with the
manufacturer's specifications and requirements, copies of which have
been provided to BUILDER by OWNER).
It will be the BUILDER's responsibility at no cost to OWNER to:
(i) assemble the OWNER's Supplies, bulk material and
provide modularization and/or engineering, except
procurement engineering related to the OWNER's
Supplies, at the Shipyard;
(ii) test the OWNER's Supplies as necessary or appropriate;
(iii) construct modules from the OWNER's Supplies as
appropriate;
(iv) test and pre-commission the modules containing the
OWNER's Supplies and to generally test all of the
OWNER's Supplies;
(v) install the OWNER's Supplies on the VESSEL, in modules,
as required, or otherwise as required, and to integrate
the OWNER's Supplies into the overall designed system
of the VESSEL;
(vi) test and pre-commission the integrated modules and
systems; and
(vii) complete and test the entire drilling system where
practicable (i.e., equipment functional test only, not
full operational load test) to insure that it works
harmoniously as a part of the drilling process and the
VESSEL so as to be able to accomplish its intended
purpose.
In no event will BUILDER charge any additional cost for any of the
above. Pre-commission or pre-commissioning as used in this Contract
or the Specifications means the putting into service or the
commissioning to be done at the Shipyard prior to delivery and
acceptance. Pre-commission or pre-commissioning does not mean
commissioning that occurs elsewhere.
3. Title:
Title to OWNER's Supplies shall at all times remain with OWNER
during the Contract; however, BUILDER shall have the risk of loss of
or damage to such OWNER's Supplies from the time set out in
subparagraph 1(a) of this Article until delivery of the VESSEL.
4. OWNER's Supplies Refundment:
Notwithstanding anything else contained in this Contract, BUILDER
agrees that if for any reason whatsoever the VESSEL is not delivered
to OWNER, other than as a result of OWNER's default under Article XI
of this Contract, then BUILDER shall remit to OWNER the full value of
all OWNER's Supplies which have been delivered to the Shipyard or
which BUILDER has taken custody of under this Article XVI. BUILDER
shall remit all amounts due under this paragraph 4 upon written demand
by OWNER and upon BUILDER's request, OWNER will furnish BUILDER with
reasonable documentation showing OWNER's cost of OWNER's Supplies.
BUILDER shall remit all amounts due within thirty (30) days of demand.
(End of Article)
ARTICLE XVII - INSURANCE
1. Extent of Insurance Coverage:
From the time of the launching until delivery of the VESSEL, the
BUILDER shall, at its own cost and expense, keep the VESSEL and all
machinery, materials and equipment delivered to the Shipyard for the
VESSEL or built into or installed in or upon the VESSEL (except the
OWNER's Supplies) fully insured with first class insurance companies
or underwriters in Korea with coverage corresponding to the Institute
of London Underwriter's Clauses for BUILDER's Risks. From the time of
the first arrival of the OWNER's Supplies in the shipyard until
delivery of the VESSEL, the BUILDER shall keep the OWNER's Supplies
fully insured with the aforementioned insurance companies or
underwriters to cover BUILDER's Risk.
The amount of such insurance coverage shall, up to the date of
delivery of the VESSEL, be an amount at least equal to, but not
limited to, the aggregate of the payments made by the OWNER to the
BUILDER plus Eighty Million United States Dollars (US$80,000,000) to
cover OWNER's Supplies in the custody of the Shipyard.
The policy referred to in this paragraph for the OWNER's Supplies
shall be taken out in the name of the BUILDER and OWNER, as their
interests may appear, and all losses under such policy shall be
payable to the BUILDER and OWNER, as their interests may appear.
Prior to the commencement of construction of the VESSEL, the BUILDER
shall obtain, at its own cost and expense, and furnish certificates or
copies thereof to the OWNER, the following policies of insurance:
(a) Worker's compensation (including occupational disease) and
employer's liability insurance with Maritime and In Rem coverage
and in accordance with the applicable statutory requirements of
the country of Korea, with limits on the employer's liability
coverage of not less than U.S. $500,000 for bodily injury per
person, with excess liability limits of U.S. $10,000,000;
(b) Comprehensive public liability, including broad form contractual
liability coverage, with limits of not less than U.S. $500,000
for bodily injury per occurrence, and U.S. $500,000 for property
damage per occurrence with excess liability limits of U.S.
$10,000,000;
(c) All-Risk BUILDER's Risk policy, including protection and
indemnity, relating to the VESSEL and OWNER Supplies and in an
amount equal to the aggregate of the payments made by the OWNER
to the BUILDER plus Eighty Million United States Dollars
(US$80,000,000) to cover OWNER's Supplies in the custody of the
Shipyard. At any time during the period of this Agreement, the
OWNER has the right by giving prior written notice to the BUILDER
to increase the amount of the insurance provided hereunder and
the OWNER will promptly reimburse the BUILDER for any premiums
resulting from such increase based on the published Lloyds of
London rates at the time of such increase. Should the Delivery
Date be later than March 1, 2000 for any cause attributable to
the OWNER, any additional premium charged to continue the policy
shall be borne solely by the OWNER to the extent that the delay
is caused by the OWNER. The OWNER agrees that the BUILDER has
the right of settlement of all losses (except for damages to or
losses of OWNER Supplies) applicable under this Paragraph 2(c)
with the underwriters provided such losses do not exceed U.S.
$300,000 each. All deductibles under the All-Risk BUILDER's Risk
policy shall be for the account of the BUILDER; and
(d) Automobile liability insurance covering automobile equipment used
in the performance of the work under this Agreement with limits
of not less than U.S. $500,000 for bodily injury per occurrence
and U.S. $500,000 for property damage per occurrence with excess
liability limits of U.S. $10,000,000;
All insurance policies shall, either on the face thereof or by
appropriate endorsement: (w) name (except for the policy specified in
Paragraph (a) hereinabove) the BUILDER and the OWNER as unqualified
assureds and provide that payments thereunder shall be made to the
extent that their respective interests may appear; (x) provide that
they shall not be cancelled or their coverage reduced except upon
thirty days' prior written notice to the BUILDER and the OWNER (if
such cancellation or reduction should be caused by the BUILDER's
failure to pay any premium when due, the OWNER will have the right to
pay any such premium within such thirty days to maintain the coverage
in effect for the benefit of the OWNER; the OWNER retains the right to
be reimbursed by the BUILDER); (y) contain waiver of subrogation
provisions pursuant to which the insurer waives all express or implied
rights of subrogation against the BUILDER and the OWNER, the BUILDER
and the OWNER hereby waiving any rights to subrogate against each
other; and (z) be maintained in full force and effect by the BUILDER
from commencement of construction until the Delivery Date.
2. Application of the Recovered Amounts:
In the event that the VESSEL shall be damaged from any insured
cause at any time before delivery of the VESSEL, and in the further
event that such damage shall not constitute an actual or constructive
total loss of the VESSEL, the amount received in respect of the
insurance shall be applied by the BUILDER in repair of such damage,
satisfactory to the Classification requirements, and the OWNER shall
accept the VESSEL under this Contract if completed in accordance with
this Contract and the Specifications, however, subject to the
extension of delivery time under Article VIII hereof (except in case
of negligence of the BUILDER).
Should the VESSEL from any cause become an actual or constructive
total loss, the BUILDER shall either:
(a) Proceed in accordance with the terms of this Contract, in which
case the amount received in respect of the insurance shall be
applied to the construction and repair of damage of the VESSEL,
provided the parties hereto shall have first agreed thereto in
writing and to such reasonable extension of delivery time as may
be necessary for the completion of such reconstruction and
repair; or
(b) Refund promptly to the OWNER the full amount of all sums paid by
the OWNER to the BUILDER as installments in advance of delivery
of the VESSEL, and deliver to the OWNER all OWNER's Supplies (or
the insurance proceeds paid with respect thereto), in which case
this Contract shall be deemed to be automatically terminated and
shall be deemed rescinded for purposes of Article X hereof and
all rights, duties, liabilities and obligations of each of the
parties to the other shall forthwith cease and terminate.
3. Termination of BUILDER's Obligation to Insure:
The BUILDER shall be under no obligation to insure the VESSEL
hereunder after delivery of the VESSEL.
(End of Article)
ARTICLE XVIII - NOTICE
1. Address:
Any and all notices and communications in connection with this
Contract shall be addressed as follows:
To the OWNER:
RB Exploration Co.
901 Threadneedle
Houston, Texas 77079-2902
Attn: Project Director
Facsimile No.: (281)589-5189
To the BUILDER:
Hyundai Heavy Industries, Co. Ltd.
1, Choenha-Dong
Ulsan, Korea
Attn: Project Director
Facsimile No.: (82)522-50-1998
2. Language:
Any and all notices and communications in connection with this
Contract shall be written in the English language.
3. Effective Date of Notice:
The notice in connection with this Contract shall become
effective from the date when such notice is received by the OWNER or
by the BUILDER except otherwise described in the Contract. In case
any notice is made by facsimile confirmed in writing, the date when
the facsimile is received shall govern.
(End of Article)
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT
This Contract shall become effective upon signing by the parties
hereto.
(End of Article)
ARTICLE XX - INTERPRETATION
1. Laws Applicable:
The parties hereto agree that the validity and the interpretation
of this Contract and of each Article and part thereof shall be
governed by the General Maritime Law of the United States of America,
not including, however, any of its conflicts of law rules which would
direct or refer to the laws of any jurisdiction.
2. Discrepancies:
All general language or requirements embodied in the
Specifications are intended to amplify, explain and implement the
requirements of this Contract. However, in the event that any
language or requirements so embodied permit an interpretation
inconsistent with any provision of this Contract text, then, in each
and every such event, the applicable provisions of this Contract text
shall prevail and govern. In the event of conflict between the
Specifications and Plans, the Specifications shall prevail and govern.
3. Entire Agreement:
This Contract contains the entire agreement and understanding
between the parties hereto and supersedes all prior negotiations,
representations, undertakings and agreements on any subject matter of
this Contract.
4. Amendments and Supplements:
Any supplement, memorandum of understanding or amendment,
whatsoever form it may be in relating to this Contract, to be made and
signed among parties hereof after signing this Contract, shall be the
integral part of this Contract and shall be predominant over the
respective corresponding Article and/or Paragraph of this Contract
when clearly identified as such.
(End of Article)
ARTICLE XXI - CONFIDENTIALITY
BUILDER and OWNER agree that the terms and conditions of this Contract
shall remain confidential and neither party shall disclose any such terms
and conditions of this Contract to any third party without first obtaining
the prior written consent of the other, provided however, that either party
shall be entitled to disclose any or all of the terms and conditions of the
Contract to the extent it is necessary to do so to implement, effectuate
and comply with the terms of the Contract or to otherwise exercise any
right or discharge any obligation that party may have pursuant to this
Contract or to comply with any law, rule, regulation of any governmental
entity having jurisdiction over a party or of a stock exchange, securities
commission and such on which stock of a party or its affiliate is traded.
BUILDER shall require the engine maker/manufacturer to sign
confidentiality agreements agreeing to keep strictly confidential all
information furnished to such party or developed in connection with the
performance of this Contract.
(End of Article)
IN WITNESS WHEREOF, the parties hereto have caused this Contract to
be duly executed on the day and year first above written.
OWNER: BUILDER:
RB EXPLORATION CO. HYUNDAI HEAVY INDUSTRIES CO., LTD.
By: Andrew Bakonyi By: Youn Jae Lee
Title: President Title: Chief Operating Officer
HYUNDAI CORPORATION
By: Dong Soo Han
Title: Senior Vice President
EXHIBIT "A"
LETTER OF REFUNDMENT GUARANTEE NO.
Gentlemen:
We hereby open our irrevocable letter of guarantee No. in favor of RB
Exploration Co. (hereinafter called the "OWNER") for account of
___________________, as follows in consideration of the shipbuilding
contract dated __________________, 1997 (hereinafter called the "Contract")
made by and among the OWNER and _______________ (hereinafter called the
"BUILDER") for the construction of one (1)VESSEL having BUILDER's Hull No.
___________ (hereinafter called the "VESSEL").
If in connection with the terms of the Contract the OWNER shall become
entitled to a refund of the advance payment(s) made to the BUILDER prior to
the delivery of the VESSEL, we hereby irrevocably guarantee the repayment
of the same to the OWNER immediately on demand _________________________
(Say _______________________ only) together with interest thereon at the
rate of _________ per cent per annum from the date following the date of
receipt by the BUILDER to the date of remittance by telegraphic transfer of
such refund.
The amount of this guarantee will be automatically increased, not more
than four (4 ) times, upon BUILDER's receipt of the respective installment:
each time by the amount of installment of USD ________________, USD
___________________, USD _____________________, USD and USD
_______________________ and respectively, plus interest thereon as provided
in the Contract, but in any eventuality the amount of this guarantee shall
not exceed the total sum of ____________________ (Say _________________
only) plus interest thereon at the rate of eight per cent (8%) per annum
from the date following the date of BUILDER's receipt of each installment
to the date of remittance by telegraphic transfer of the refund.
In case any refund is made to you by the BUILDER or by us under this
guarantee, our liability hereunder shall be automatically reduced by the
amount of such refund.
In the event of rescission of the Contract being based on delays due
to force majeure or other causes beyond the control of the BUILDER, as
required by Article X of the Contract, interest shall be paid at the rate
of four percent (4%) per annum from the date following the date of
BUILDER's receipt of each installment to the date of remittance by
telegraphic transfer of the refund.
This letter of guarantee is available against OWNER's simple receipt
and signed statement certifying that OWNER's demand for refund has been
made in conformity with Article X of the Contract and the BUILDER has
failed to make the refund within Thirty (30) days after your demand to the
BUILDER. Refund shall be made to you by telegraphic transfer in
__________________.
This letter of guarantee shall expire and become null and void upon
receipt by the OWNER of the sum guaranteed hereby or upon acceptance by the
OWNER of delivery of the VESSEL in accordance with the terms of the
Contract and, in either case, this letter of guarantee shall be returned to
us. This guarantee is valid from the date of this letter of guarantee
until delivery or in the event of delayed delivery until such time as the
VESSEL is delivered by the BUILDER to the OWNER in accordance with the
terms of the Contract.
Notwithstanding the provisions hereinabove, in case we receive
notification from you or the BUILDER confirmed by the Arbitration Board
stating that your claim to rescind the Contract or your claim for
refundment thereunder has been disputed and referred to Arbitration in
accordance with the provisions of the Contract, the period of validity of
this guarantee shall be extended until Thirty (30) days after the final
award shall be rendered in the Arbitration and a copy thereof acknowledged
by the Arbitration Board. In such case, this guarantee shall not be
available unless and until such acknowledged copy of the final award in the
Arbitration justifying your claim is presented to us.
This guarantee shall not be affected by any extension of time or
concession granted by the OWNER to the BUILDER or any delay or failure of
the OWNER in enforcing its rights under the Contract.
The OWNER shall have the right to assign this guarantee and all of its
benefits to any assignee to whom the Contract is assigned.
This guarantee shall be governed by the General Maritime Law of the
United States of America, not including, however, any of its conflicts of
law rules which would direct or refer to the laws of any jurisdiction.
Very truly yours,
___________________________________
EXHIBIT "B"
OPTION VESSEL PRICE AND DELIVERY
VESSEL # DELIVERY DATE NOTICE PERIOD PRICE
- --------- ---------------- ------------------------------------- --------
Vessel #2 December 1, 1999 November 1, 1997 to December 31, 1997 US$144.9
million
23 Months after January 1, 1998 to April 30, 1998 US$144.9
option exercise million
22 Months after May 1, 1998 to October 31, 1998 US$144.9
option exercise million
Vessel #3 May 1, 2000 November 1,1997 to June 30, 1998 US$148.4
million
22 Months after July 1, 1998 to October 31, 1998 US$148.4
option exercise million
Note 1) OWNER has the option to place the order for an option vessel
with dynamic positioning. In such case, delivery date will be
increased by one month and price will be increased by US$1
million.
The additional work warranted by the option for dynamic
positioning shall include:
- installation of 8 OWNER furnished thrusters, engines and
transformers
- installation of piping, cabling and any other utilities
and control systems as required
- associated tests and trials
Note 2) The above prices and delivery dates for Vessel #2 and #3 are
based on the same size, drawings and specifications as the
first vessel.
Note 3) BUILDER agrees to complete a study to evaluate the impact of
compliance with NMD/NPD certification and the use of DNV for
class in connection with any option vessel(s).
Note 4) The price of the OPTION VESSELS shall be reduced by the amount
United States Dollars Two Hundred and Fifty Thousand
(US$250,000) should OWNER decided not to register the VESSEL
under the flag of the United States of America.
EXHIBIT 10.166
===========================================================================
CONTRACT
FOR
CONSTRUCTION AND SALE
OF
A 103,000 METRIC TONS DISPLACEMENT
DRILLSHIP
(HULL NO. 1255)
BETWEEN
READING & BATES DRILLING CO.
AND
SAMSUNG HEAVY INDUSTRIES CO., LTD.
AND
SAMSUNG CORPORATION
===========================================================================
INDEX
PREAMBLE
ARTICLE I - DESCRIPTION AND CLASS
1. Description .......................................
2. Dimensions and Characteristics ....................
3. Classification, Rules and Regulations .............
4. Registration ......................................
5. Specifications of Drillship .......................
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT
1. Contract Price ....................................
2. Adjustment of Contract Price ......................
3. Currency ..........................................
4. Terms of Payment ..................................
5. Method of Payment .................................
6. Notice of Payment before Delivery .................
7. Expenses ..........................................
8. Prepayment ........................................
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
1. Delivery ..........................................
2. Speed .............................................
3. Fuel Consumption for the Diesel
Generator Prime Drivers ...........................
4. Capacity of Extended Well Test Tanks ..............
5. Displacement ......................................
6. Effect of Rescission ..............................
ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION
DURING CONSTRUCTION
1. Approval of Plans and Drawings ....................
2. Appointment of BUYER's Supervisor .................
3. Inspection by the Supervisor ......................
4. Facilities ........................................
5. Liability of BUILDER ..............................
6. Responsibility of BUYER ...........................
7. Delivery and Construction Schedule.................
8. Responsibility of BUILDER .........................
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
1. How Effected ......................................
2. Change in Rules of Classification Society,
Regulations, etc. .................................
3. Substitution of Materials .........................
ARTICLE VI - TRIALS AND ACCEPTANCE
1. Notice ............................................
2. Weather Condition .................................
3. How Conducted .....................................
4. Method of Acceptance or Rejection .................
5. Effect of Acceptance ..............................
6. Disposition of Surplus Consumable Stores ..........
ARTICLE VII - DELIVERY
1. Time and Place ....................................
2. When and How Effected .............................
3. Documents to be Delivered to BUYER ................
4. Tender of DRILLSHIP ...............................
5. Title and Risk ....................................
6. Removal of DRILLSHIP ..............................
ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY
(FORCE MAJEURE)
1. Causes of Delay (Force Majeure) ...................
2. Notice of Delay ...................................
3. Definition of Permissible Delay ...................
4. Right to Rescind for Excessive Delay ..............
ARTICLE IX - WARRANTY OF QUALITY
1. Guarantee .........................................
2. Notice of Defects .................................
3. Remedy of Defects .................................
4. Extent of BUILDER's Responsibility ................
5. Guarantee Engineer ................................
ARTICLE X - RESCISSION BY BUYER
1. Notice ............................................
2. Refundment by BUILDER .............................
3. Discharge of Obligations ..........................
ARTICLE XI - BUYER'S DEFAULT
1. Definition of Default .............................
2. Effect of Default on or before Delivery of
DRILLSHIP .......................................
3. Disposal of DRILLSHIP .............................
4. Dispute............................................
ARTICLE XII - ARBITRATION
1. Decision by Classification Society ................
2. Proceedings of Arbitration ........................
3. Notice of Award ...................................
4. Expenses ..........................................
5. Entry in Court ....................................
6. Alteration of Delivery Date .......................
ARTICLE XIII - SUCCESSOR AND ASSIGNS ....................
ARTICLE XIV - TAXES AND DUTIES
1. Taxes and Duties Incurred in Korea ................
2. Taxes and Duties Incurred Outside Korea ...........
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
1. Patents ...........................................
2. General Plans, Specifications and Working
Drawings ..........................................
3. Exceptions ........................................
ARTICLE XVI - BUYER'S SUPPLIES
1. Responsibility of BUYER ...........................
2. Responsibility of BUILDER .........................
3. Title..............................................
4. BUYER's Supplies Refundment .......................
ARTICLE XVII - INSURANCE
1. Extent of Insurance Coverage ......................
2. Application of the Recovered Amounts ..............
3. Termination of BUILDER's Obligation to Insure .....
ARTICLE XVIII - NOTICE
1. Address ...........................................
2. Language ..........................................
3. Effective Date of Notice ..........................
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT ...............
ARTICLE XX - INTERPRETATION
1. Laws Applicable ...................................
2. Discrepancies .....................................
3. Entire Agreement ..................................
4. Amendments and Supplements ........................
ARTICLE XXI - CONFIDENTIALITY ..........................
END OF CONTRACT ........................................
EXHIBIT "A" LETTER OF REFUNDMENT GUARANTEE .............
===========================================================================
THIS CONTRACT, made and entered into on this 5th day of September,
1997 by and between READING & BATES DRILLING CO., a corporation existing
under the laws of Oklahoma, and having an office at 901 Threadneedle,
Houston, Texas 77079-2902(hereinafter called the "BUYER"), on the one part
and SAMSUNG CORPORATION, a corporation incorporated and existing under the
laws of the Republic of Korea, having its registered office at 250, 2-ka,
Taepyung-ro, Chung-ku, Seoul, Korea, and SAMSUNG HEAVY INDUSTRIES CO.,
LTD., a corporation incorporated and existing under the laws of the
Republic of Korea of having its registered office at 890-25 Daechi-Dong,
Kangnam-Ku, Seoul, Korea(hereinafter collectively called the "BUILDER"), on
the other part.
W I T N E S S E T H:
In consideration of the mutual covenants herein contained, the BUILDER
agrees to build One (1) Drillship composed of hull part as described in the
specification attached hereto as Exhibit 1 of this Contract (hereinafter
referred to as the "VESSEL") and topside part as described in the
specification attached hereto as Exhibit 2 of this Contract (hereinafter
referred to as "TOPSIDE") (the VESSEL and TOPSIDE being hereinafter
collectively referred to as the "DRILLSHIP") and in accordance with (i) the
BUILDER's Approved Vendor List attached hereto as Exhibit 3, and (ii) the
Delivery and Construction Schedule attached hereto as Exhibit 4 (said
Exhibits 1 through 4 being hereinafter collectively called the
"Specifications") which Specifications have been initialed by
representatives of the parties hereto for identification and which
Specifications hereby are each incorporated herein by reference hereto and
made an integral part of this Contract, at the BUILDER's shipyard located
in Koje Island, Korea (hereinafter referred to as the "Shipyard") and to
deliver and sell the same to the BUYER, and the BUYER hereby agrees to
purchase and accept delivery of the DRILLSHIP from the BUILDER, upon the
terms and conditions hereinafter set forth.
ARTICLE I - DESCRIPTION AND CLASS
1. Description:
The DRILLSHIP, having the BUILDER's Hull No. 1255, shall be
constructed, equipped and completed in accordance with the provisions
of this Contract, and the Specifications (as heretofore defined),
which Specifications are an integral part of this Contract as
heretofore provided.
2. Dimensions and Characteristics:
Length, overall Max. 221.5 meters
Length, between perpendiculars abt. 213.0 meters
Breadth, moulded abt. 42.0 meters
Depth, moulded abt. 20.0 meters
Scantling draft, moulded abt. 13.0 meters
The Generator Prime Driver will be manufactured by Wartsila at their
facility in Finland.
Thruster Motor: 4 MW with 77 tons thrust
and 3.8 meter diameter
Displacement, guaranteed: 103,000 metric tons at the
scantling
draft, moulded, of 13.0 meters.
Speed, guaranteed: The trial speed shall not be less than 12.0 knots
on the transit draught of 8.5 meters and at propulsion shaft power of
20,870 KW
Fuel Consumption, guaranteed, Diesel Generator Prime Drivers:
183.8g/k Wh with engine driven pumps at manufacturer's shop
trial, with burning of the marine diesel having the lower
calorific value of 42,700kJ/Kg, at 85% MCR of engine under the
environment condition of ISO 3046/1-1986 specified in the
Specifications.
Cargo tank capacity, guaranteed:
The total capacity of the Extended Well Test ("EWT") tanks
including slop tanks will not be less than 15,500 cubic meters at
the full levels (100% volume) of EWT tanks.
The details of the aforementioned particulars, as well as the
definitions and the methods of measurements and calculations
shall be as indicated in the Specifications.
3. The Classification, Rules and Regulations:
The DRILLSHIP, including its machinery, equipment and outfittings
shall be constructed and classified in accordance with the rules and
regulations (the editions and amendments thereto being in force as of
the signing date of this Contract) of and under special survey of the
American Bureau of Shipping (hereinafter called the "Classification
Society"), and shall be distinguished in the register by the symbol of
+A1 E, "Ship Type Drilling Unit", FSO where applicable, +AMS, +ACCU,
+DPS-3, DLA.
Decisions of the Classification Society as to compliance or non-
compliance with the classification rules and regulations shall be
final and binding upon both parties hereto. Details of Class notation
shall be in accordance with the Specifications.
The DRILLSHIP shall also comply with the rules, regulations and
requirements of the regulatory bodies as described and listed in the
Specifications.
The DRILLSHIP will be built and delivered (i) in accordance with the
terms of this Contract and the Specifications, (ii) in full compliance
and certification to and with the IMO MODU code with amendments, (iii)
in full compliance with the regulations, provisions, and requirements
included in the Specifications, (iv) in full compliance with the
requirements of the classification Society so as to be classed with
the Classification Society as a MODU/FSO, and (v) so that the
DRILLSHIP will be approved to operate in the United States Gulf of
Mexico/the Outer Continental Shelf of the United States. BUILDER will
take all action necessary, and remedy at its cost and expense, any
deficiency which constitutes a failure to comply with the above
requirements.
All the fees and charges incidental to the Classification Society
and in respect to compliance with the above referred rules,
regulations and requirements, as well as all DRILLSHIP design fees
and/or royalties (except any royalties for the BUYER's Supplies),
shall be for account of the BUILDER.
BUILDER shall be responsible for obtaining the Classification
Society's approval of all required plans and drawings of the
DRILLSHIP.
4. Registration:
The DRILLSHIP, at the time of its delivery and acceptance, shall
be registered at the port of registry by the BUYER under the
Panamanian flag at the BUYER's expense.
5. Specifications of Drillship:
The Contract Price set out in Article II, Paragraph 1, is based on the
Specifications of the DRILLSHIP being the same as the "Specifications"
identified in the shipbuilding contract for Hull No. 1220 as in effect
on October 31, 1996 (the "Hull 1220 Specifications") with such
changes as may be appropriate to reflect different delivery schedules
for BUYER's Supplies, vendor data, and the Delivery and Construction
Schedule of the Drillship. Any extras or change orders made to the
specifications of the BUILDER's hull no.1220 after the date of October
31, 1996, shall not be included in the specifications for the
DRILLSHIP but the BUYER shall be entitled to request the same pursuant
to the shipbuilding contract for the drillships of BUILDER's hull no.s
1220 and/or 1231. In such case, Article V hereof shall be applied.
Any adjustments to the Contract Price based on any changes to the
Specifications as agreed by BUYER shall be handled as changes under
this Contract and any adjustments to the Contract Price will be made
at the time of the payment of the Sixth Installment.
(End of Article)
----------------------------------------
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT
1. Contract Price:
The purchase price of the DRILLSHIP, net receivable by the
BUILDER and exclusive of the BUYER's Supplies (as defined in Paragraph
1 of Article XVI hereof) is One Hundred Forty-Eight Million Seven
Hundred Eighty Five Thousand Eight Hundred United States Dollars
(US$148,785,800) (hereinafter referred to as the "Contract Price").
The Contract Price shall be subject to upward or downward adjustment,
if any, as hereinafter set forth in this Contract.
Pricing for all change orders for the DRILLSHIP identical to
change orders submitted by the buyers of the BUILDER's hull no.s 1220
and/or 1231 for the construction of the drillships, shall not include
a provision for the payment of design and engineering services
previously performed by the BUILDER and the buyer's behalf of the
BUILDER's hull no.s 1220 and/or 1231 contract(s).
2. Adjustment of Contract Price:
Increase or decrease of the Contract Price, if any, due to
adjustments thereof made in accordance with the provisions of this
Contract shall be adjusted by way of addition to or subtraction from
the Contract Price upon delivery of the DRILLSHIP in the manner as
hereinafter provided.
3. Currency:
Any and all payments by the BUYER to the BUILDER, or vice versa
if any which are due under this Contract shall be made in United
States Dollars.
4. Terms of Payment:
The Contract Price shall be due and payable by the BUYER to the
BUILDER in the installments as follows:
(a) First Installment:
The First Installment amounting to Thirty-Seven Million One
Hundred Ninety Six Thousand Four Hundred Fifty United States
Dollars (25%, US$37,196,450) shall be due and payable within
three (3) banking days after execution of this Contract,
provided that the Letter of Refundment Guarantee required under
Article X has been received by the BUYER or its designee of the
refund guarantee to be issued by a Korean bank.
(b) Second Installment:
The Second Installment amounting to Thirty-Seven Million One
Hundred Ninety Six Thousand Four Hundred Fifty United States
Dollars (25%, US$37,196,450) shall be due and payable upon March
4, 1998.
(c) Third Installment:
The Third Installment amounting to Fourteen Million Eight Hundred
Seventy Eight Thousand Five Hundred and Eighty United States
Dollars (10%, US$14,878,580) shall be due and payable upon
November 12, 1998.
(d) Fourth Installment:
The Fourth Installment amounting to Fourteen Million Eight
Hundred Seventy Eight Thousand Five Hundred and Eighty United
States Dollars (10%, US$14,878,580) shall be due and payable upon
January 24, 1999.
(e) Fifth Installment:
The Fifth Installment amounting to Fourteen Million Eight Hundred
Seventy Eight Thousand Five Hundred and Eighty United States
Dollars (10%, US$14,878,580) shall be due and payable upon June
6, 1999.
(f) Sixth Installment:
The Sixth Installment amounting to Twenty Nine Million Seven
Hundred Fifty Seven Thousand One Hundred and Sixty United States
Dollars (20%,US$29,757,160) plus any increase or minus any
decrease due to adjustment of the Contract Price under and
pursuant to the provisions of this Contract, shall be due and
payable upon delivery of the DRILLSHIP or upon tender for
delivery of the DRILLSHIP referred to in Paragraph 4 of Article
VII of this Contract.
5. Method of Payment:
(a) First Installment:
Within three (3) banking days after the date of execution of this
Contract, the BUYER shall remit by telegraphic transfer the first
first installment to the account of The Export/Import Bank of
Korea, Head Office, Seoul, Korea (Account No. 04-029-695,Head
Office with Bankers Trust Company, New York) or to the banks
which the BUILDER may designate (hereinafter referred to as the
"BUILDER's BANK") in favour of Samsung Heavy Industries Co., Ltd.
(b) Second, Third, Fourth and Fifth Installments:
Upon the due date of the second, third and fourth installments,
in accordance with Article II, 4 (b), (c), (d) and (e) as
appropriate, the BUYER shall remit by telegraphic transfer each
of the respective installments to the account at the BUILDER's
BANK in favor of Samsung Heavy Industries Co., Ltd.
(c) Sixth Installment:
At the time of delivery of the Vessel to the Buyer pursuant to
Section 2 of Article VII of this Contract, the BUYER shall remit
by telegraphic transfer the fifth installment to the account at
the BUILDER's BANK in favour of Samsung Heavy Industries Co.,
Ltd. with an irrevocable instruction that the amount so remitted
shall be payable to the BUILDER against presentation by the
BUILDER to the BUILDER's BANK of a copy of PROTOCOL OF DELIVERY
and ACCEPTANCE OF THE DRILLSHIP executed by the BUYER and the
BUILDER.
No payment due under this Contract shall be delayed, suspended or
withheld by the BUYER on account of any dispute or disagreement
between the parties hereto. Any claim which the BUYER may have
against the BUILDER hereunder shall be settled and liquidated
separately from any payment by the BUYER to the BUILDER
hereunder.
6. Notice of Payment before Delivery:
With the exception of the first installment, the BUILDER shall give
the BUYER Ten (10) banking days prior notice in writing or telex
confirmed in writing by registered mail of the anticipated due date
and amount of each installment payable before delivery of the
DRILLSHIP.
7. Expenses:
Expenses and bank charges for remitting payments and any taxes (other
than taxes on income imposed on the BUILDER), duties, expenses and
fees applicable to remitting such payment shall be for account of the
BUYER.
8. Prepayment:
The BUYER may prepay any or all of the installments of the Contract
Price, provided that the BUYER declares the BUYER's intention to do so
in writing or by telex confirmed in writing stating in advance the
intended date of such prepayment, subject to the BUILDER's acceptance,
which shall not be unreasonably withheld.
(End of Article)
---------------------------------------
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
The Contract Price shall be subject to adjustment, as hereinafter set
forth, in the event of the following contingencies (it being understood by
both parties that any reduction of the Contract Price is by way of
liquidated damages and not by way of penalty):
1. Delivery:
(a) No adjustment shall be made and the Contract Price shall
remain unchanged for the first Thirty (30) days of delay in
delivery of the DRILLSHIP beyond the Delivery Date as defined in
Article VII hereof (ending as of twelve o'clock midnight of the
Thirtieth (30th) day of delay).
(b) If the delivery of the DRILLSHIP is delayed more than Thirty
(30) days after the Delivery Date, then, in such event, beginning
at twelve o'clock midnight of the Thirtieth (30th) day after the
Delivery Date, the Contract Price shall be reduced by the sum of
Ten Thousand United Dollars (US$10,000) for each full day for
which thereafter delivery is delayed.
However, the total reduction in the Contract Price pursuant to
this Paragraph (b) shall not be more than as would be the case
for a delay of One Hundred Fifty (150) days counting from mid-
night of the Thirtieth (30th) day after the delivery date at the
above specified rate of reduction.
(c) However, if the delay in delivery of the DRILLSHIP should
continue for a period of One Hundred Eighty (180) days from the
Delivery Date in Paragraph 1 of Article VII, then in such event,
and after such period has expired, the BUYER may, at its option,
rescind this Contract in accordance with the provisions of
Article X hereof.
The BUILDER may, at any time after the expiration of the
aforementioned One Hundred Eighty (180) days of delay in
delivery, if the BUYER has not served notice of rescission as
provided in Article X hereof, demand in writing that the BUYER
shall make an election, in which case the BUYER shall, within
Twenty (20) days after such demand is received by the BUYER,
notify the BUILDER of its intention either to rescind this
Contract or to consent to the acceptance of the DRILLSHIP at a
specified future date which date BUILDER represents to BUYER is
the earliest date BUILDER can deliver the DRILLSHIP to BUYER
under this Contract, based on the circumstances then known. If
the BUYER shall not make an election within Twenty (20) days as
provided hereinabove, the BUYER shall be deemed to have accepted
such extension of the delivery date to the future delivery date
indicated by the BUILDER and it being understood by the parties
hereto that if the DRILLSHIP is not delivered by such specified
date, the BUYER shall have the same right of rescission upon the
same terms and conditions as hereinabove provided.
(d) If the delivery of the DRILLSHIP is made more than thirty
(30) days earlier than the Delivery Date, then, in such event,
beginning with the thirty-first (31) day prior to the Delivery
Date, the Contract Price of the DRILLSHIP shall be increased by
adding thereto Ten Thousand United States Dollars US$10,000) for
each full day. However, the total increase in the Contract Price
pursuant to this Paragraph (d) shall not be more than as would be
the case for an early delivery of Sixty (60) days counting from
the Thirty-first (31) day prior to the Delivery Date at the above
specified rate of increase.
(e) For the purpose of this Article, the delivery of the
DRILLSHIP shall be deemed to be delayed when and if the
DRILLSHIP, after taking into account all postponements of the
Delivery Date by reason of permissible delay as defined in
Article VIII and/or any other reason under this Contract, is not
delivered by the date upon which delivery is required under the
terms of this Contract.
2. Speed:
(a) The Contract Price shall not be affected or changed by
reason of the trial speed (as determined according to the
Specifications) being more or less than the guaranteed speed, if
such variation is not more than two (2) knots.
(b) If the deficiency in the speed upon final sea trial is more
than Two (2) knots below the guaranteed speed of the DRILLSHIP,
then the BUYER may, at its option, reject the DRILLSHIP and
rescind this Contract in accordance with the provisions of
Article X hereof, or may accept the DRILLSHIP at a reduction
in the Contract Price to be agreed, provided that the price
reduction shall not be less than Two Hundred Thousand United
States Dollars.(US$200,000)
3. Fuel Consumption for the Diesel Generator Prime Drivers:
(a) The Contract Price shall not be affected or changed in case
the actual fuel consumption, as determined by the shop trial as
specified in the Specifications, is not more than Three percent
(3%) in excess of the guaranteed fuel consumption specified in
Paragraph 2 of Article I.
(b) However, in the event that the actual fuel consumption at
the shop trial is in excess of Three (3%) of the guaranteed fuel
consumption, the Contract Price shall be reduced by the sum of
Ten Thousand United States Dollars (US$10,000) for each full
gramme per metric bhp per hour in excess of the Three percent(3%)
(but disregarding fractions of One (1) gramme) of the guaranteed
fuel consumption.
(c) BUYER has an option to reject the DRILLSHIP and rescind the
Contract in accordance with the provisions of Article X hereof in
the event the actual fuel consumption is more than Ten percent
(10%) in excess of the guaranteed fuel consumption.
4. Capacity of Extended Well Test Tanks
(a) In the event the capacity of the Extended Well Test tanks,
including slop tanks, ("EWT tanks") as determined in accordance
with the Specifications is 14,310 cubic meters or less, then the
BUYER may, at its option, (i) reject the DRILLSHIP and rescind
this Contract in accordance with the provisions of Article X
hereof, or (ii) accept the DRILLSHIP with such deficiency.
(b) There will be no increase or decrease of the Contract Price
in the event the capacity of the EWT tanks is more than or less
than the guaranteed capacity of the EWT tanks as specified in
Paragraph 2 of Article I, but BUYER shall have the option of
rescission as provided for in Subparagraph (a) of this paragraph
4 of Article III.
5. Displacement:
(a) The guaranteed displacement of the DRILLSHIP is 103,000
metric tons at 13.0 meters.
(b) In the event of a discrepancy (whether higher or lower) in
the actual displacement of the DRILLSHIP being three thousand
five hundred (3,500) metric tons or more, then, the BUYER may, at
its option, reject the DRILLSHIP and rescind this Contract in
accordance with the provisions of Article X hereof or accept the
DRILLSHIP at a reduction in the Contract Price of Six Hundred
thousand United States Dollars (US$600,000).
6. Effect of Rescission:
It is expressly understood and agreed by the parties that in any case,
if the BUYER rescinds this Contract under this Article, the BUYER
shall not be entitled to any liquidated damages, or any other recourse
unless by means of the provisions of Article X hereof.
(End of Article)
-----------------------------------
ARTICLE IV - APPROVAL OF PLANS AND
DRAWINGS AND INSPECTION DURING CONSTRUCTION
1. Approval of Plans and Drawings:
It is agreed by the parties that the BUILDER shall apply and use as
its basis for construction of the DRILLSHIP's drawings for the
BUILDER's hull no. 1220 and/or 1231 previously approved by the buyers
of the BUILDER's hull no. 1220 and/or 1231 which shall be deemed to
have been approved by the BUYER for the DRILLSHIP except for those
drawings which may require alteration for new approvals by the
Classification Society and/or the statutory bodies in connection with
change of the rules and regulations and/or the DRILLSHIP's
registration by the BUYER. Such drawings required for new approvals
shall be submitted by the BUILDER to the BUYER for the BUYER's
reference upon obtaining the approvals. Notwithstanding the above
BUILDER will supply to the BUYER a complete set of as built
drawings/documents with Hull No. 1255 so indicated thereon.
2. Appointment of BUYER's Supervisor:
The BUYER may send to and maintain at the Shipyard, at the BUYER's own
cost and expense, one supervisor (herein called the "Supervisor") who
shall be duly authorized in writing by the BUYER, which authorization
shall be described in a separate letter to be sent to the BUILDER
prior to the Supervisor's arrival, to act on behalf of the BUYER in
connection with the modifications of the Specifications, adjustments
of the Contract Price and Delivery Date in writing, approval of the
plans and drawings, attendance to the tests and inspections relating
to the DRILLSHIP, its machinery, equipment and outfittings, and any
other matters for which he is specifically authorized by the BUYER.
The Supervisor may appoint assistant(s) to attend at the Shipyard for
the purposes as aforesaid.
3. Inspection by the Supervisor:
The necessary inspections of the DRILLSHIP, its machinery, equipment
and outfittings shall be carried out by the Classification Society,
other regulatory bodies and/or the Supervisor throughout the entire
period of construction in order to ensure that the construction of the
DRILLSHIP is duly performed in accordance with the Specifications.
The Supervisor shall have, during construction of the DRILLSHIP, the
right to attend such tests and inspections of the DRILLSHIP, its
machinery and equipment within the premises of either the BUILDER or
its subcontractors. Detailed procedures of the inspection and the
tests thereof shall be in accordance with Specifications.
The Supervisor shall, within the limits of the authority conferred
upon him by the BUYER, make decisions or give advice to the BUILDER on
behalf of the BUYER promptly on all problems arising out of, or in
connection with, the construction of the DRILLSHIP and generally act
in a reasonable manner with a view to cooperating to the utmost with
the BUILDER in the construction process of the DRILLSHIP.
The decision, approval or advice of the Supervisor within the limits
of authority conferred on the Supervisor by the BUYER shall be deemed
to have been given by the BUYER. The BUYER's Supervisor shall notify
the BUILDER promptly in writing of his discovery of any construction
or materials, which he believes do not or will not conform to the
requirements of the Contract or the Specifications and likewise
advise and consult with the BUILDER on all matters pertaining to the
construction of the DRILLSHIP, as may be required by the BUILDER, or
as he may deem necessary.
However, if the Supervisor fails to submit to the BUILDER promptly any
such demand concerning alterations or changes with respect to the
construction, arrangement or outfit of the DRILLSHIP which the
Supervisor has examined, inspected or attended at the test thereof
under this Contract or the Specifications, the Supervisor shall be
deemed to have approved the same and shall be precluded from making
any demand for alterations, changes, or complaints with respect
thereto at a later date.
The BUILDER shall comply with any such demand which is not
contradictory to this Contract or the Specifications, provided that
any and all such demands by the Supervisor with regard to
construction, arrangement and outfit of the DRILLSHIP shall be
submitted in writing to the authorized representative of the
BUILDER. The BUILDER shall notify the Supervisor of the names of the
persons who are from time to time authorized by the BUILDER for this
purpose.
It is agreed upon between the BUYER and the BUILDER that the
modifications, alterations or changes and other measures necessary to
comply with such demand may be effected at a convenient time and place
at the BUILDER's reasonable discretion in view of the construction
schedule of the vessel.
In the event that the Supervisor shall advise the BUILDER that he has
discovered and believes the construction or materials do not or will
not conform to the requirements of this Contract or the
Specifications, and the BUILDER shall not agree with the views of the
Supervisor in such respect, either the BUYER or the BUILDER may either
seek an opinion of the Classification Society or request an
arbitration in accordance with the provisions of Article XII hereof.
The Classification Society or the Arbitration Board shall determine
whether or not a nonconformity with the provisions of this Contract
and the Specifications exist. If the Classification Society or the
Arbitration Board enters a determination in favour of the BUYER, then
in such case the BUILDER shall make the necessary alterations or
changes, or if such alterations or changes cannot be made in time to
meet the construction schedule for the DRILLSHIP the BUILDER shall
make fair and reasonable adjustment of the Contract Price in lieu of
such alterations and changes. If the Classification Society or the
Arbitration Board enters a determination in favour of the BUILDER,
then the time for delivery of the DRILLSHIP shall be extended for a
period of delay in construction, if any, occasioned by such
proceedings, and the BUYER shall compensate the BUILDER for the proven
loss and damages (always excluding consequential damages) incurred to
the BUILDER as a result of the dispute herein referred to.
BUYER's Supervisor, at his discretion, may refuse to inspect or attend
tests where adequate safety measures have not been implemented and in
such event such tests/inspections shall not be deemed complete.
4. Facilities:
(a) The BUILDER shall furnish the Supervisor and his
assistant(s) with adequate office space and such other
reasonable facilities according to the BUILDER's practice at or
in the immediate vicinity of the Shipyard as may be necessary to
enable them to effectively carry out their duties. The BUYER
shall pay for all such facilities other than office space at the
BUILDER's normal rate of charge. BUILDER shall advise BUYER in
advance of BUILDER's normal rate of charge for any facilities for
which BUYER will be required to pay.
(b) The BUILDER shall make available for BUYER's personnel at
the BUYER's request, during the DRILLSHIP's construction, a
minimum of 8 two or three bedroom apartments furnished with the
BUILDER's standard furniture, electrical facilities and
utilities. If BUYER requests BUILDER to provide the BUYER with
special furniture and facilities beyond the BUILDER's standard,
any additional costs which may result therefrom, if any, will be
borne by BUYER. Costs for such housing, on a monthly rental
basis, will be presented to BUYER prior to occupation and shall
be reimbursed by BUYER, along with metered utility and telephone
charges. The BUILDER will use best efforts to furnish additional
apartments requested by the BUYER.
5. Liability of BUILDER:
The BUILDER agrees to fully protect, defend, indemnify and hold
BUYER harmless from and against all liabilities, obligations,
claims or actions for personal injury or death arising out of
performance by BUILDER or BUYER of their obligations hereunder
prior to the acceptance by BUYER of the DRILLSHIP, and asserted by
or on behalf of,
(i) any employee, agent, contractor, or
subcontractor of BUILDER, or
(ii) any employee of any agent, contractor, or subcontractor of
BUILDER,
regardless of the basis of such claims and even if such claims
should arise out of the sole or concurrent fault or negligence of
BUYER, or any employee, agent, contractor or subcontractor of
BUYER.
Similarly, the BUYER agrees to fully protect, defend, indemnify
and hold BUILDER harmless from and against all liabilities,
obligations, claims or actions for personal injury or death arising
out of performance by BUILDER or BUYER of their obligations
hereunder prior to the acceptance by BUYER of the DRILLSHIP, and
asserted by or on behalf of,
(i) any employee, agent, contractor, or subcontractor of BUYER,
or
(ii) any employee of any agent, contractor, or subcontractor of
BUYER,
regardless of the basis of such claims and even if such claims should
arise out of the sole or concurrent fault or negligence of BUILDER, or
any employee, agent or subcontractor of BUILDER.
6. Responsibility of BUYER:
The BUYER shall undertake and assure that the Supervisor shall
carry out his duties hereunder in accordance with the normal
shipbuilding practice of the BUILDER, which BUILDER represents and
confirms is in all material respects in accordance with good
international shipbuilding practice and in such a way so as to avoid
any unnecessary increase in building cost, delay in the construction
of the DRILLSHIP, and/or any disturbance in the construction schedule
of the BUILDER. The BUILDER has the right to request the BUYER to
replace the Supervisor who is deemed unsuitable and unsatisfactory for
the proper progress of the DRILLSHIP's construction.
The BUYER shall investigate the situation by sending its
representative(s) to the Shipyard if necessary, and if the BUYER
considers that such BUILDER's request is justified, the BUYER shall
effect such replacement as soon as conveniently arrangeable.
7. Delivery and Construction Schedule:
Attached hereto as Exhibit 4 is a tentative Delivery and
Construction Schedule, and within Sixty (60) days after the date of
this Contract, BUILDER shall deliver or cause to be delivered to BUYER
a final Delivery and Construction Schedule (herein, as from time to
time amended with the knowledge of BUYER, referred to as the
"Schedule"), prepared in reasonable detail and setting forth the
estimated time table for the construction of the DRILLSHIP, it being
understood that the Schedule may be used by BUYER for purposes of
verifying and measuring the progress being made under the terms of
this Contract.
8. Responsibility of BUILDER:
(a) BUILDER personnel and subcontractors which, in the sole
opinion of BUYER, are found to be in violation of the safety
policies established by BUILDER or those specially in place
during the construction of the DRILLSHIP, may be requested to be
removed from the project by the BUYER's Supervisor. BUILDER
will immediately take such actions as necessary to comply with
BUYER's request.
(b) The BUILDER is to assign a dedicated safety supervisor and a
sufficient number of safety inspectors to remain in effect
throughout the Contract to monitor employee and subcontractor
safety, scaffolding and safety netting, tank entry, work
permitting procedures, electrical safety, etc. Upon request by
the BUYER, the safety supervisor shall participate in BUYER's
daily safety and quality meetings.
(c) The BUILDER shall provide a 24 hour fire-watch at the
DRILLSHIP construction site. In addition, at various locations
around the site, fire alarm stations will be situated whereby a
manual alarm may be sounded and a local emergency response team
is notified and activated.
(d) BUILDER shall immediately report to BUYER all incidents
and/or accidents involving injury, no matter the level of
severity, including first aid, loss of property, no matter the
value, as well as any identified hazards and/or near misses
occurring.
Any and all reports of hazards, accidents, incidents, or
near misses will result in the immediate and full ceasing of
construction activities in the affected area until such time as
adequate precautions have been implemented.
(e) BUILDER hereby agrees that the cranes and other related
lifting gear of the DRILLSHIP will not be used by BUILDER during
construction, without the prior written approval of BUYER.
BUIlDER and BUYER recognize that the lifting gear of the
DRILLSHIP will be used to install the BOP stack. Should such
approval be given, BUILDER shall make such cranes to normal in
functional respect of operation, including, but not limited to
the changing of all wires.
(f) It is agreed by BUILDER and BUYER that no more than twenty
percent (20%), by number, of all blocks fabricated for
construction of the VESSEL will be built outside of BUILDER's own
yard. In case more than twenty percent (20%) of all blocks for
the VESSEL is required by the BUILDER to be fabricated outside
of BUILDER's own yard, then the BUILDER shall obtain the BUYER's
prior written consent. Pursuant to the above, the only
facilities to be used other than BUILDER's are the Hanae and
Sungnae fabrication yards, provided however, funnel and/or casing
may be fabricated at Oriental Fitting Co.
It is agreed that all TOPSIDE fabrication will be done at
BUILDER's facility.
(g) All initial spare parts for BUILDER Furnished Equipment,
including those necessary for shipyard start-up testing and for
the commissioning of equipment, shall be provided by BUILDER at
BUILDER's cost. Further, BUILDER shall provide to BUYER a
listing of all critical spare parts (any long lead item and those
spares causing equipment to be out of service for extended
periods of time) and two years operating spare parts. In
addition, BUILDER agrees to specifically identify on the listing
any and all ABS required spare parts. BUILDER will provide such
spare parts listing to BUYER as soon as an order for equipment is
placed, but in no case later than 90 days prior to DRILLSHIP
delivery. The BUYER is responsible for supplying all the
equipment and material in accordance with the BUYER's Supplies
list attached hereto including the spare/service parts and
specialized tools and initial consumables for the BUYER's
Supplies.
(h) Attached hereto as Exhibit 3 is BUILDER's approved vendor
list. BUILDER agrees that any material and/or supplies not
fabricated by the BUILDER will originate from a vendor so
specified in Exhibit 3. The manufactures and specifications of
machinery and equipment for the DRILLSHIP shall be the same as
the BUILDER's hull no.1231, subject to a change(s) if agreed by
the BUILDER and the BUYER. In the event procurement of material
and/or supplies from the approved vendors are not available
due to shortage or delay in delivery thereof to meet the
BUILDER's overall construction schedule of the DRILLSHIP, the
BUILDER may mobilize and originate from other equivalent with the
BUYER's consent, which shall not be unreasonably withheld.
(i) The BUILDER shall, on a monthly basis, provide BUYER with a
written progress report regarding the construction of the VESSEL
based on the BUILDER's standards in accordance with their ISO9001
procedure. Such report is to include a summary of the progress
to date as well as the progress since the previous report. In a
form and frequency to be agreed, the BUILDER will furnish the
BUYER a simple written report updating the progress on major
milestones in the production schedule. Informal oral reports
shall be furnished to the BUYER by the BUILDER upon request.
In addition, BUILDER shall include a limited number of color
photographs relevant to the fabrication process for the construction period
of the DRILLSHIP in the progress report. Photographs are to be 5 x 7
inches, bound in books with dates and descriptive captions. As soon as
each volume is available, BUILDER shall furnish three (3) sets of books of
photographs and one (1) set of negatives to the BUYER.
(End of Article)
---------------------------------------
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
1. How Effected:
The Specifications may be modified and/or changed by written
request of the BUYER subject to BUILDER's approval (which approval
shall not be unreasonably withheld) and provided that any
modifications and/or changes requested by the BUYER or an accumulation
of such modifications and/or changes will not adversely affect the
BUILDER's other commitments and the BUYER shall first agree in
writing, before such modifications and/or changes are carried out, to
any adjustment in the Contract Price, time for delivery of the
DRILLSHIP or other terms and conditions of this Contract or the
Specifications occasioned by or resulting from such modifications
and/or changes. The BUILDER hereby agrees to exert its best efforts
to accommodate such reasonable request by the BUYER so that the said
changes and/or modifications may be made at a reasonable cost and
within the shortest period of time which is reasonably possible. Any
such agreement for modifications and/or changes shall include an
agreement as to the increase or decrease, if any, in the Contract
Price of the DRILLSHIP together with an agreement as to any extension
or reduction in the time of delivery, or any other alterations in this
Contract or the Specifications occasioned by such modifications and/or
changes. The aforementioned agreement to modify and/or change the
Specifications may be effected by an exchange of letters signed by the
authorized representatives of the parties hereto, or telex confirmed
in writing, manifesting such agreement. Such letters and confirmed
telex exchanged by the parties hereto pursuant to the foregoing shall
constitute an amendment of the Specifications, and such letters and
telex shall be incorporated into this Contract and made a part hereof.
The BUILDER may make minor changes to the Specifications, if found
necessary for introduction of improved production methods or
otherwise, provided that the BUILDER shall first obtain the BUYER's
written approval which shall not be unreasonably withheld.
2. Changes in Rules of Classification Society, Regulations, etc.:
If, after the date of signing this Contract, any requirements as
to Classification Society, or as to the rules and regulations to which
the construction of the DRILLSHIP is required to conform, are altered
or changed by the Classification Society or regulatory bodies
authorized to make such alterations or changes, either of the parties
hereto, upon receipt of information thereof, shall transmit such
information in full to the other party in writing, thereupon within
Twenty-One (21) days after receipt of the said notice from the other
party, the BUYER shall instruct the BUILDER in writing if such
alterations or changes shall be made in the DRILLSHIP or not, in the
BUYER's sole discretion.
The BUILDER shall promptly comply with such alterations or
changes, if any, in the construction of the DRILLSHIP, provided that
the BUYER shall first agree:
(a) To any increase or decrease in the Contract Price of the
DRILLSHIP that is reasonably occasioned by the cost of such
compliance;
(b) To any reasonable extension in the time of delivery of the
DRILLSHIP that is necessary due to such compliance;
(c) To any reasonable deviation in the contractual displacement
of the DRILLSHIP, if compliance results in an altered
displacement, or any other reasonable alterations in the terms of
this Contract or of the Specifications or both, if compliance
makes such alterations of terms necessary.
Such agreement of the BUYER shall be effected in the same manner
as provided in Paragraph 1 of this Article for modifications and/
or changes of the Specifications.
3. Substitution of Materials:
In the event that any of the materials required by the
Specifications or otherwise under this Contract for the construction
of the DRILLSHIP can not be procured in time to effect delivery of the
DRILLSHIP, or are in short supply, the BUILDER may, provided the BUYER
so agrees in writing, supply other materials and equipment of the best
available and like quality, capable of meeting the requirements of the
Classification Society and of the rules, regulations, requirements and
recommendations with which the construction of the DRILLSHIP must
comply. Any agreement as to such substitution of materials shall be
effected in the manner as provided in Paragraph 1 of this Article, and
shall, likewise, include decrease or increase in the Contract Price
and other terms and conditions of this Contract affected by such
substitution.
(End of Article)
------------------------------------------
ARTICLE VI - TRIALS AND ACCEPTANCE
1. Notice:
The sea trial shall start when the DRILLSHIP is reasonably
completed in all material respects according to the Specifications.
The BUILDER shall give the BUYER at least Twenty(20) days
estimated prior notice and Seven(7) days confirming prior notice in
writing or by telex confirmed in writing of the time and place of
the trial run of the DRILLSHIP, and the BUYER shall promptly
acknowledge receipt of such notice. The BUYER shall have its
representative and his assistant(s) on board the DRILLSHIP to
witness such trial run.
Failure in attendance of the BUYER's representative at the trial
run of the DRILLSHIP for any reason whatsoever after due notice to
the BUYER as above provided shall be deemed to be a waiver by the
BUYER of its right to have its representative on board the
DRILLSHIP at the trial run, and the BUILDER may conduct the trial
run without attendance of the BUYER's representative, and in such
case the BUYER shall be obligated to accept the DRILLSHIP on the
basis of certificates of the Classification Society and a
certificate of the BUILDER stating that the DRILLSHIP, upon trial
run, is found to conform to this Contract and the Specifications.
2. Weather Condition:
The trial run shall be carried out under the weather condition
which is deemed favorable enough by the judgement of both the BUYER
and the BUILDER. In the event of unfavorable weather on the date
specified for the trial run, the same shall take place on the first
available day thereafter that the weather condition permits. It is
agreed that, if during the trial run of the DRILLSHIP, the weather
should suddenly become so unfavorable that orderly conduct of the
trial run can no longer be continued, the trial run shall be
discontinued and postponed until the first favorable day next
following, unless the BUYER shall assent in writing to acceptance
of the DRILLSHIP on the basis of the trial run already made before
such discontinuance has occurred.
Any delay of trial run caused by such unfavorable weather
condition shall operate to postpone the Delivery Date by the period
of the delay involved and such delay shall be deemed as permissible
delay in the delivery of the DRILLSHIP.
3. How Conducted:
(a) The DRILLSHIP shall run the official trial run in the manner
as specified in the Specifications.
(b) All expenses in connection with the trial run are to be for
account of the BUILDER and the BUILDER shall provide, at its own
expense, the necessary crew to comply with conditions of safe
navigation.
(c) BUYER shall furnish complete procedures and supervision for
the installation, testing and precommissioning for the BOP stack.
4. Method of Acceptance or Rejection.
(a) Upon completion of the trial run, the BUILDER shall give the
BUYER a notice by telex confirmed in writing of completion of the
trial run, as and if the BUILDER considers that the results of
trial run indicate conformity of the DRILLSHIP to this Contract
and the Specifications. The BUYER shall, within Five (5) days
after receipt of such notice from the BUILDER, notify the BUILDER
by telex or telefax confirmed in writing of its acceptance or
rejection of the trial results.
(b) However, if the result of the trial run is unacceptable, or
if the DRILLSHIP, or any part or equipment thereof, (except a
defect in the BUYER's Supplies not the responsibility of the
BUILDER) does not conform to the requirements of this Contract
and/or the Specifications, or if the BUILDER is in agreement to
non- conformity as specified in the BUYER's notice of rejection,
then, the BUILDER shall take necessary steps to correct such non-
conformity.
The DRILLSHIP may be redocked in the event of unsatisfactory
sea-trial results for the dynamic positioning and thruster
systems, or other major system malfunction which cannot be
repaired afloat.
Upon completion of correction of such non-conformity, and re-
test or trial if necessary, the BUILDER shall give the BUYER
notice thereof by telex or telefax confirmed in writing.
The BUYER shall, within Five (5) days after receipt of such
notice from the BUILDER, notify the BUILDER of its acceptance or
rejection of the DRILLSHIP's conformity by telex or telefax
confirmed in writing.
(c) If any event that the BUYER rejects the DRILLSHIP, the BUYER
shall indicate in detail in its notice of rejection in what
respect the DRILLSHIP, or any part or equipment thereof (except a
defect in the BUYER's Supplies not the responsibility of the
BUILDER) does not conform to this Contract and/or the
Specifications.
(d) In the event that the BUYER fails to notify the BUILDER by
telex or telefax confirmed in writing of the acceptance of or the
rejection together with the reason therefor of the DRILLSHIP
within the period as provided in the above Sub-paragraph (a) or
(b), the BUYER shall be deemed to have accepted the trial results
and/or the DRILLSHIP, as appropriate.
(e) Any dispute between the BUILDER and the BUYER as to the
conformity or non-conformity of the DRILLSHIP to the requirements
of this Contract and/or the Specifications shall be submitted for
final decision in accordance with Article XII hereof.
5. Effect of Acceptance:
Acceptance of the DRILLSHIP as above provided in Paragraphs 4(a)
or 4(b) of this Article VI shall be final and binding so far as
conformity of the DRILLSHIP to this Contract and the
Specifications is concerned and shall preclude the BUYER from
refusing formal delivery of the DRILLSHIP as hereinafter
provided, if the BUILDER complies with all other procedural
requirements for delivery as provided in Article VII hereof.
However, the BUYER's acceptance of the DRILLSHIP shall not affect
the BUYER's rights under Article IX hereof.
6. Disposition of Surplus Consumable Stores:
Any fuel oil furnished and paid for by the BUILDER for trial runs
remaining on board the DRILLSHIP, at the time of acceptance of
the DRILLSHIP by the BUYER, shall be bought by the BUYER from the
BUILDER at the BUILDER's purchase price for such supply in Korea
and payment by the BUYER thereof shall be made at the time of
delivery of the DRILLSHIP. The BUILDER shall pay the BUYER at the
time of delivery of the DRILLSHIP an amount for the consumed
quantity of any lubricating oil and greases which were furnished
and paid for by the BUYER at the BUYER's purchase price thereof.
(End of Article)
------------------------------------------
ARTICLE VII - DELIVERY
1. Time and Place:
The DRILLSHIP shall be delivered by the BUILDER to the BUYER at
the Shipyard on August 31, 1999(unless delays occur in the
construction of the DRILLSHIP or in any performance required under
this Contract due to causes which under the terms of this Contract
permit postponement of the date of delivery, in which event, the
aforementioned date for delivery of the DRILLSHIP shall be changed
accordingly) or, such earlier date after completion of the
DRILLSHIP according to this Contract and the Specifications.
The aforementioned date, or such earlier or later date to which
the requirement of delivery is advanced or postponed pursuant to
this Contract, is herein called the "Delivery Date".
2. When and How Effected:
Provided that the BUILDER and the BUYER shall have fulfilled all
of their obligations stipulated under this Contract, the delivery
of the DRILLSHIP shall be effected forthwith by the concurrent
remittance of the fifth installment in accordance with Article II,
Section 5(c) and delivery by each of the parties hereto to the
other of the PROTOCOL OF DELIVERY AND ACCEPTANCE, acknowledging
delivery of the DRILLSHIP by the BUILDER and acceptance thereof by
the BUYER.
3. Documents to be delivered to BUYER:
Upon delivery and acceptance of the DRILLSHIP, the BUILDER shall
deliver to the BUYER the following documents, which shall accompany
the PROTOCOL OF DELIVERY AND ACCEPTANCE.
(a) PROTOCOL OF TRIALS of the DRILLSHIP made pursuant to the
Specifications.
(b) PROTOCOL OF INVENTORY of the equipment of the DRILLSHIP,
including spare parts and the like, as specified in the
Specifications.
(c) PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under
paragraph 6 of Article VI hereof.
(d) ALL CERTIFICATES, including the BUILDER's CERTIFICATE
required to be furnished upon delivery of the DRILLSHIP pursuant
to this Contract and the Specifications.
It is agreed that if, through no fault on the part of the
BUILDER, the Classification certificates and/or other
certificates are not available at the time of delivery of the
DRILLSHIP, provisional certificates shall be accepted by the
BUYER, provided that the BUILDER shall furnish the BUYER with
the formal certificates as promptly as possible after such
certificates have been issued.
Application and certificate for statutory inspections by
Panamanian Government shall be arranged by the BUYER at its
expense.
(e) DECLARATION OF WARRANTY of the BUILDER that the DRILLSHIP is
delivered to the BUYER free and clear of any liens, charges,
claims, mortgages, or other encumbrances upon the BUYER's title
thereto, and in particular that the DRILLSHIP is absolutely free
of all burdens in the nature of imposts, taxes or charges imposed
by Korean Governmental Authorities, as well as all liabilities
of the BUILDER to its subcontractors, employees and crew, and of
the liabilities arising from the operation of the DRILLSHIP in
trial runs, or otherwise, prior to delivery.
(f) DRAWINGS AND PLANS pertaining to the DRILLSHIP as stipulated
in the Specifications.
(g) COMMERCIAL INVOICE.
(h) Necessary export licenses, permits, and clearances by Korean
Government to enable the DRILLSHIP to sail from Korea following
delivery.
(i) DRAWINGS/OPERATING MANUALS. All documentation, including,
but not limited to complete, as-built drawings, operations
manuals, commissioning reports, inclining reports, major/minor
equipment certifications, sea trial reports, spare parts list and
BUILDER's vendor's documentation will be furnished by BUILDER to
BUYER on or before the delivery of the DRILLSHIP.
4. Tender of DRILLSHIP:
If the BUYER fails to take delivery of the DRILLSHIP after
completion thereof according to this Contract and the
Specifications without any justifiable reason, the BUILDER shall
have the right to tender delivery of the DRILLSHIP after
accomplishment of all BUILDER's obligations as provided herein.
5. Title and Risk:
Title to and risk of loss of the DRILLSHIP shall pass to the
BUYER only upon the delivery and acceptance thereof having been
completed as stated above; it being expressly understood that,
until such delivery is effected, title to and risk of damage to or
loss of the DRILLSHIP and her equipment shall be in the BUILDER.
6. Removal of DRILLSHIP:
The BUYER shall take possession of the DRILLSHIP immediately upon
delivery and acceptance thereof and shall remove the DRILLSHIP from
the premises of the Shipyard within Seven (7) days after delivery
and acceptance thereof is effected.
If the BUYER shall not remove the DRILLSHIP from the premises of
the Shipyard within the aforesaid Seven (7) days, in such event,
the BUYER shall pay to the BUILDER the reasonable mooring charges
of the DRILLSHIP.
(End of Article)
------------------------------------------
ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR
DELIVERY (FORCE MAJEURE)
1. Causes of Delay (Force Majeure):
If, at any time either the construction or delivery of the
DRILLSHIP or any performance required hereunder as a prerequisite
to the delivery thereof is delayed by any of the following events;
namely war, acts of state or government, blockade, revolution,
insurrections, mobilization, civil commotion, riots, strikes,
sabotage, lockouts, Acts of God or the public enemy, plague or
other epidemics, quarantines, prolonged failure of electric
current, freight embargoes, or defects in major forgings or
castings, if any, or shortage of materials, machinery or equipment
in inability to obtain delivery or delays in delivery of materials,
machinery or equipment, provided that at the time of ordering the
same could reasonably be expected by the BUILDER to be delivered in
time, or defects in materials, machinery or equipment which could
not have been detected by the BUILDER using reasonable care, or
earthquakes, tidal waves, typhoons, hurricanes, prolonged or
unusually severe weather conditions or delay in the construction of
the BUILDER's other newbuilding projects in the same drydock due to
any such causes as described in this Article which in turn delay
the keel laying and eventual delivery of the DRILLSHIP in view of
the Shipyard's overall building programme or the BUILDER's
performance under this Contract, or by destruction of the premises
or works of the BUILDER or its sub-contractors, or of the
DRILLSHIP, or any part thereof, by fire, landslides, flood,
lightning, explosion, or other causes beyond the control of the
BUILDER, or its sub-contractors, as the case may be, or for any
other causes which, under terms of this Contract, authorize and
permit extension of the time for delivery of the DRILLSHIP, then,
in the event of delays due to the happening of any of the
aforementioned contingencies, the Delivery Date of the DRILLSHIP
under this Contract shall be extended for a period of time which
shall not exceed the total accumulated time of all such delays.
2. Notice of Delay:
Within Fourteen (14) days after the date of occurrence of any
cause of delay, on account of which the BUILDER claims that it is
entitled under this Contract to a postponement of the Delivery
Date, the BUILDER shall notify the BUYER in writing or by telex or
telefax confirmed in writing of the date when such cause of delay
occurred. Likewise, within Fourteen (14) days after the date of
ending of such cause of delay, the BUILDER shall notify the BUYER
in writing or by telex confirmed in writing of the date when such
cause of delay ended. The BUILDER shall also notify promptly the
BUYER of the period, by which the Delivery Date is postponed by
reason of such cause of delay. If the BUILDER does not give the
timely advice as above, the BUILDER shall lose the right to claim
such delays as permissible delay.
Failure of the BUYER to acknowledge to the BUILDER's claim for
postponement of the Delivery Date within Fourteen (14) days after
receipt by the BUYER of such notice of claim shall be deemed to be
a waiver by the BUYER of its right to object to such postponement
of the Delivery Date.
3. Definition of Permissible Delay:
Delays on account of such causes as specified in Paragraph 1 of
this Article and any other delay of a nature which under the terms
of this Contract permits postponement of the Delivery Date shall be
understood to be permissible delays and are to be distinguished
from unauthorized delays on account of which the Contract Price is
subject to adjustment as provided for in Article III hereof.
4. Right to Rescind for Excessive Delay:
(a) If the total accumulated time of all delays claimed by the
BUILDER on account of the causes specified in Paragraph 1 of this
Article, excluding other delays of the nature which under the
terms of this Contract permit postponement of the Delivery Date,
amounts to One Hundred Eighty (180) days or more, then, in such
event, the BUYER may rescind this Contract in accordance with the
provisions of Article X hereof.
The BUILDER may, at any time after the accumulated time of the
aforementioned delays justifying rescission by the BUYER, demand
in writing that the BUYER shall make an election, in which case
the BUYER shall, within Fourteen (14) BUILDER's working days
after such demand is received by the BUYER either notify the
BUILDER of its intention to rescind this Contract, or consent to
a postponement of the Delivery Date to a specified future date,
which date BUILDER represents to BUYER is the earliest date
BUILDER can deliver the DRILLSHIP to BUYER, based on the
circumstances then known, it being understood by the parties
hereto that if the DRILLSHIP is not delivered by such future
date, the BUYER shall have the same right of rescission upon the
same terms and conditions as hereinabove provided.
(b) If at any time during the term of this Contract, BUILDER
falls more than 270 days behind in the construction of the
DRILLSHIP according to the Delivery and Construction Schedule,
for any reason whatsoever, and whether as a result of permissible
delay or otherwise, BUYER shall be entitled to give written
notice to BUILDER that BUYER considers BUILDER in material
default of its obligations under this Contract, and if BUILDER
has not cured such default within Thirty (30) days after receipt
of such notice, BUYER shall have the right to rescind this
Contract in accordance with the provisions of Article X hereof.
(End of Article)
------------------------------------------
ARTICLE IX - WARRANTY OF QUALITY
1. Guarantee:
The BUILDER, for the period of Twelve (12) months after delivery
of the DRILLSHIP (hereinafter called "Guarantee Period"),
guarantees the DRILLSHIP and her engines, including all parts and
equipment manufactured, furnished or installed by the BUILDER or
its subcontractors under this Contract, and including the
machinery, equipment and appurtenances thereof (including the
installation work performed or required to be performed by BUILDER
under this Contract for the BUYER supplied or furnished
equipment), under the Contract but excluding any item which is
supplied or designated by the BUYER or by any other bodies on
behalf of the BUYER, against all defects and all damages to the
DRILLSHIP resulting therefrom occurring within the Guarantee Period
which are due to defective material, design and/or poor workmanship
or negligent or other improper acts or commissions on the part of
the BUILDER or its subcontractors (hereinafter called the "Defect"
or "Defects") and are not a result of accident, ordinary wear and
tear, misuse, mismanagement, negligent or other improper acts or
omissions or neglect on the part of the BUYER, its employee or
agents.
The BUILDER shall arrange for the BUYER to obtain three (3) years
guarantee after delivery of the DRILLSHIP for the paint materials
in the ballast tank coatings through the paint manufacturer
selected by the BUILDER. But, the BUILDER's guarantee for the
ballast tank coating shall be in no event longer than one (1) year
after delivery of the DRILLSHIP unless major repairs as defined in
Clause 3 of this Article have arisen. Such additional extended
guarantee shall proceed between the BUYER and the selected
manufacturer arranged by the BUILDER. Final selection of the
ballast tank coatings manufacturer is subject to the approval of
the BUYER, not to be unreasonably withheld.
2. Notice of Defects:
The BUYER shall notify the BUILDER in writing, or by telex
confirmed in writing, of any Defect for which claim is made under
this guarantee, as promptly as possible after discovery thereof.
The BUYER's written notice shall describe in detail the nature,
cause and extent of the Defects.
The BUILDER shall have no obligation for any Defect discovered
prior to the expiry date of the Guarantee Period, unless notice of
such Defect or any damage resulting therefrom is received by the
BUILDER not later than Ten (10) BUILDER's working days after the
expiry date of the Guarantee Period.
3. Remedy of Defects:
(a) The BUILDER shall remedy, at its expense, any Defect against
which the DRILLSHIP is guaranteed under this Article, by making
all necessary repairs or replacements at the Shipyard.
(b) However, if it is impracticable to bring the DRILLSHIP to
the Shipyard, the BUYER may cause the necessary repairs or
replacements to be made elsewhere which is deemed suitable for
the purpose, provided that, in such event, the BUILDER may
forward or supply replacement parts or materials to the
DRILLSHIP, unless forwarding or supplying thereof to the
DRILLSHIP would impair or delay the operation or working schedule
of the DRILLSHIP. In the event that the BUYER proposes to cause
the necessary repairs or replacements for the DRILLSHIP to be
made at any other shipyard or works than the Shipyard, the BUYER
shall first, but in all events as soon as possible, give the
BUILDER notice in writing or by telex confirmed in writing of the
time and place when and where such repairs will be made, and if
the DRILLSHIP is not thereby delayed, or her operation or working
schedule is not thereby impaired, the BUILDER shall have the
right to verify by its own representative(s) the nature, cause
and extent of the Defects complained of. The BUILDER shall, in
such case, promptly advise the BUYER by telex, after such
examination has been completed, of its acceptance or rejection of
the Defects as ones that are covered by the guarantee herein
provided. Upon the BUILDER's acceptance of the Defects as
justifying remedy under this Article, or upon award of the
arbitration so determining, the BUILDER shall pay to the BUYER
for such repairs or replacements a sum equal to the reasonable
cost of making the same repairs or replacements in a first class
Korean shipyard, at the prices prevailing at the time of such
repairs or replacements are made. The guarantee works shall be
settled regularly during the Guarantee Period. The actual
reimbursement for the guarantee shall be made in a lump sum at
the expiry of the Guarantee Period.
(c) In any case, the DRILLSHIP shall be taken, at the BUYER's
cost and responsibility, to the place elected, ready in all
respects for such repairs or replacement.
(d) Any dispute under this Article shall be referred to
arbitration in accordance with the provisions of Article XII
hereof.
(e) Repairs under this Article are guaranteed for the balance of
the period set out in paragraph 1 of this Article but for major
repairs are guaranteed for the longer of the balance of the
period set out in paragraph 1 of this Article or 6 months from
the date of completion of major repairs, but in no event longer
than 18 months after the Delivery Date. For purposes hereof,
"major repairs" shall be defined as a repair costing more than
One Hundred Fifty Thousand United States Dollars (US$150,000).
4. Extent of BUILDER's Responsibility:
(a) The BUILDER shall have no responsibility or liability for
any other defect whatsoever in the DRILLSHIP other than the
Defects specified in Paragraph 1 of this Article, other than to
repair all damages to the DRILLSHIP discovered within the
Guarantee Period and resulting from or caused by the Defects
which are not attributable to the BUYER's (i) improper acts or
omissions, (ii) negligence, or (iii) misuse.
Nor shall the BUILDER in any circumstances be responsible or
liable for any consequential or special loss, damage or expense,
including, but not limited to, loss of time, loss of profit of
earnings or demurrage directly or indirectly occasioned to the
BUYER by reason of the Defects specified in Paragraph 1 of this
Article or due to repairs or other works done to the DRILLSHIP to
remedy such Defects.
(b) The BUILDER shall not be responsible for any defect in any
part of the DRILLSHIP which may, subsequently to delivery of the
DRILLSHIP, have been replaced or repaired in any way by any other
contractor, unless done pursuant to Paragraph 3 (b) of this
Article, or for any defect which have been caused or aggravated
by omission or improper use and maintenance of the DRILLSHIP on
the part of the BUYER, its servants or agents or by ordinary wear
and tear or by any other cause beyond control of the BUILDER
(other than aggravation of defect or results of defect resulting
from the use or operation of the DRILLSHIP after knowledge of
same by BUYER, where such continued use or operation was
unavoidable to preserve or protect the safety of the DRILLSHIP or
her crew).
(c) The guarantee contained as hereinabove in this Article
replaces and excludes any other liability, guarantee, warranty
and/ or condition imposed or implied by the law, customary,
statutory orotherwise, by reason of the construction and sale of
the DRILLSHIP by the BUILDER for and to the BUYER.
5. Guarantee Engineer:
The BUILDER shall, at the request of the BUYER, appoint a maximum
of two (2) Guarantee Engineers to serve on the DRILLSHIP as its
representative for a period of up to Three (3) months from the date
the DRILLSHIP is delivered. However, if the BUYER shall deem it
necessary to keep the Guarantee Engineers on the DRILLSHIP for a
longer period, then he shall remain on board the DRILLSHIP after
the said up to Three (3) months, up to but not longer than Six (6)
months from the delivery of the DRILLSHIP.
The BUYER, and its employees, shall give such Guarantee Engineers
full cooperation in carrying out his duties as the representative
of the BUILDER on board the DRILLSHIP.
The BUYER shall accord the Guarantee Engineers treatment
comparable to the DRILLSHIP's Chief Engineer, and shall provide
board and lodging at no cost to the BUILDER or the Guarantee
Engineers. The BUILDER and the BUYER shall, prior to delivery of
the DRILLSHIP, execute a separate agreement regarding the Guarantee
Engineers.
While the Guarantee Engineers are on board the DRILLSHIP, the
BUYER shall pay to the Guarantee Engineers the sum of US$5,000 per
month, the expenses of his repatriation to Seoul, Korea by air upon
termination of his service, the expenses of his communication with
the BUILDER incurred in performing his duties and expenses, if any,
of his medical and hospital care in the DRILLSHIP's hospital.
BUILDER will have the option, at BUILDER's sole risk and expense,
to place a maximum of two (2) Guarantee Engineers on board the
DRILLSHIP for a period of up to six (6) months. The BUYER will
provide board, lodging, communications and general working support
services at no cost to the BUILDER or the Guarantee Engineers but
all other expenses shall be for the sole account of BUILDER.
(End of Article)
------------------------------------------
ARTICLE X - RESCISSION BY BUYER
1. Notice:
The payments made by the BUYER prior to delivery of the DRILLSHIP
shall be in the nature of advances to the BUILDER, and in the event
that the DRILLSHIP after sea trial is rejected by the BUYER or the
Contract is rescinded by the BUYER in accordance with the terms of
this Contract under and pursuant to any of the provisions of this
Contract specifically permitting the BUYER to do so, then the BUYER
shall notify the BUILDER in writing or by telex confirmed in
writing, and such rescission shall be effective as of the date when
notice thereof is received by the BUILDER.
2. Refundment by BUILDER:
In case the BUILDER receives the notice stipulated in Paragraph 1
of this Article, the BUILDER shall promptly refund to the BUYER the
full amount of all sums paid by the BUYER to the BUILDER on account
of the DRILLSHIP, together with the interest thereon, unless the
BUILDER proceeds to the arbitration under the provisions of Article
XII hereof.
In the event of such rescission by the BUYER, the BUILDER shall
pay the BUYER interest at the rate of Eight percent (8%) per annum
on the amount required herein to be refunded to the BUYER, computed
from the date following the respective date on which such sums were
paid by the BUYER to the BUILDER to the date of remittance by
transfer of such refund to the BUYER by the BUILDER, provided,
however, that if the said rescission by the BUYER is made under the
provisions of Paragraph 4 of Article VIII hereof, then in such
event the BUILDER shall pay the BUYER interest at the rate of Four
percent (4%) per annum on the sums refundable.
As security for refund of installments prior to delivery of the
DRILLSHIP, the BUILDER shall furnish to BUYER, prior to the due
date of the first installment, with a letter of guarantee covering
the amount of such pre-delivery installments and issued by the
BUILDER's BANK in favour of the BUYER. Such letter of guarantee
shall have substantially the same form and substance as Exhibit "A"
annexed hereto.
The BUILDER represents and warrants that Korean law no longer
requires issuance of an Export License on the Option Vessel in
connection with issuance of, or payment under, the Refund
Guarantee, and shall remain responsible to provide to the BUYER any
such Export License as and to the extent required by Korean law,
whether now or in the future.
3. Discharge of Obligations:
Upon such refund by the BUILDER to the BUYER, all obligations,
duties and liabilities of each of the parties hereto to the other
under this Contract shall be forthwith completely discharged,
without prejudice, however, to any claims either party may have
resulting from the other party's breach of any of its obligations
under this Contract.
(End of Article)
------------------------------------------
ARTICLE XI - BUYER'S DEFAULT
1. Definition of Default:
The BUYER shall be deemed to be in default of its performance of
obligations under this Contract in the following cases:
(a) If the first, second, third, fourth or fifth installment is
not paid by the BUYER to the BUILDER within Three(3) banking days
in New York after such installment becomes due and payable as
provided in Article II hereof; or
(b) If the sixth installment is not paid by the BUYER to the
BUILDER in New York at the time such installment becomes due and
payable upon delivery of the Vessel as provided in Article II
hereof; or
(c) If the increased amount in the Contract Price as adjusted
due and payable upon delivery of the DRILLSHIP is not paid by the
BUYER concurrently with delivery of the DRILLSHIP as provided in
Article II hereof; or
(d) If the BUYER, when the DRILLSHIP is duly tendered for
delivery by the BUILDER in accordance with the provisions of this
Contract, fails to accept the DRILLSHIP within Five (5) days from
the tendered date without any specific and valid ground thereof
under this Contract.
2. Effect of Default on or before Delivery of DRILLSHIP:
(a) Should the BUYER make default in payment of any installment
of the Contract Price on or before delivery of the DRILLSHIP, the
BUYER shall pay the installment(s) in default plus accrued
interest thereon at the rate of eight percent (8%) per annum
computed from the due date of such installment to the date when
the BUILDER receives the payment, and, for the purpose of
Paragraph 1 of Article VII hereof, the Delivery Date of the
DRILLSHIP shall be automatically extended by a period of
continuance of such default by the BUYER.
In any event of default by the BUYER, the BUYER shall also
pay all charges and expenses incurred to the BUILDER in direct
consequence of such default.
(b) If any default by the BUYER continues for a period of Ten
(10) days, the BUILDER may, at its option, rescind this Contract
by giving notice of such effect to the BUYER by telex confirmed
in writing.
Upon dispatch by the BUILDER of such notice of rescission, this
Contract shall be forthwith rescinded and terminated. In the event
of such rescission of this Contract, the BUILDER shall be entitled
to retain any installment or installments already paid by the BUYER
to the BUILDER on account of this Contract and the BUYER's
Supplies, if any.
3. Disposal of DRILLSHIP:
(a) In the event that this Contract is rescinded by the BUILDER
under the provisions of Paragraph 2(b) of this Article, the
BUILDER may, at its sole discretion, either complete the
DRILLSHIP and sell the same, or sell the DRILLSHIP in its
incomplete state, free of any right or claim of the BUYER. Such
sale of the DRILLSHIP by the BUILDER shall be either by public
auction or private contract at the BUILDER's sole discretion and
on such terms and conditions as the BUILDER shall deem fit.
(b) In the event of such sale of the DRILLSHIP, the amount of
the sale received by the BUILDER shall be applied firstly to all
expenses attending such sale or otherwise incurred to the BUILDER
as a result of the BUYER's default, secondly to the payment of
all costs and expenses of construction of the DRILLSHIP incurred
to the BUILDER less BUYER's Supplies and the installments already
paid by the BUYER, and then to the compensation to the BUILDER
for a reasonable loss of profit due to rescission of this
Contract, and finally to the repayment to the BUYER if any
balance is obtained.
(c) If the proceeds of sale are insufficient to pay such total
costs and loss of profit as aforesaid, the BUYER shall promptly
pay the deficiency to the BUILDER upon request.
4. Dispute:
Any dispute under this Article shall be referred to arbitration
in accordance with the provisions of Article XII hereof.
(End of Article)
------------------------------------------
ARTICLE XII - ARBITRATION
1. Decision by the Classification Society:
If any dispute arises between the parties hereto in regard to the
design and/or construction of the DRILLSHIP, its machinery and
equipment, and/or in respect of the materials and/or workmanship
thereof and/or thereon, and/or in respect of interpretations of
this Contract or the Specifications, the parties may by mutual
agreement refer the dispute to the Classification Society or to
such other expert as may be mutually agreed between the parties
hereto, and whose decision shall be final, conclusive and binding
upon the parties hereto.
2. Proceedings of Arbitration:
In the event that the parties hereto do not agree to settle a
dispute according to Paragraph 1 of this Article and/or in the
event of any other dispute of any kind whatsoever between the
parties and relating to this Contract or its rescission or any
stipulation herein, such dispute shall be submitted to arbitration
in London. Each party shall appoint an arbitrator and in the event
that they cannot agree, the two arbitrators so appointed shall
appoint an Umpire. If the two arbitrators are unable to agree upon
an Umpire within Twenty (20) days after appointment of the second
arbitrator, either of the said two arbitrators may apply to the
President for the time being of the London Maritime Arbitrators
Association to appoint the Umpire, and the two arbitrators and the
Umpire shall constitute the Board of Arbitration. Such arbitration
shall be in accordance with and subject to the provisions of the
British Arbitration Act 1979, or any statutory modification or re-
enactment thereof for the time being in force.
Either party may demand arbitration of any such dispute by giving
notice to the other party. Any demand for arbitration by either of
the parties hereto shall state the name of the arbitrator appointed
by such party and shall also state specifically the question or
questions as to which such party is demanding arbitration. Within
Fourteen (14) days after receipt of notice of such demand for
arbitration, the other party shall in turn appoint a second
arbitrator and give notice in writing of such appointment to the
party demanding arbitration. If a party fails to appoint an
arbitrator as aforementioned within Fourteen (14) days following
receipt of notice of demand for arbitration by the other party, the
party failing to appoint an arbitrator shall be deemed to have
accepted and appointed, as its own arbitrator, the arbitrator
appointed by the party demanding arbitration and the arbitration
shall proceed before this sole arbitrator who alone in such event
shall constitute the Arbitration Board.
The award of the arbitrators and/or Umpire shall be final and
binding on both parties.
3. Notice of Award:
The award decision shall immediately be communicated to the BUYER
and the BUILDER by facsimile and confirmed in writing.
4. Expenses:
The Arbitration Board shall determine which party shall bear the
expenses of the arbitration or the portion of such expenses which each
party shall bear.
5. Entry in Court:
In case of failure by either party to respect the award of the
arbitration, the judgement may be entered in any proper court having
jurisdiction thereof.
6. Alteration of Delivery Date:
In the event of reference to arbitration of any dispute arising
out of matters occurring prior to delivery of the DRILLSHIP, the award
may include any adjustment of the Delivery Date which the Arbitration
Board may deem appropriate.
(End of Article)
------------------------------------------
ARTICLE XIII - SUCCESSOR AND ASSIGNS
Neither of the parties hereto shall assign this Contract to any other
individual or company unless prior consent of the other party is given in
writing, such consent not to be unreasonably withheld, provided however,
that subsequent to the payment of the first installment of the Contract
Price, BUYER, upon giving notice in writing to the BUILDER, shall be freely
entitled to assign, in whole or in part, its rights and obligations under
this Contract to any person, company or entity whatsoever. The notice
given by BUYER of such assignment shall include a reasonable explanation of
the purpose of the assignment and shall provide sufficient information so
as to allow the BUILDER to advise the BUILDER's Bank regarding any
amendment of the name of the beneficiary of the Refund Guarantee provided
for in Article X hereof. Upon such assignment, the BUYER shall provide to
BUILDER a copy of any assignment made pursuant hereto.
In the event of any assignment pursuant to the terms of this Contract,
the assignee shall succeed to all of the assigned rights and obligations of
the assignor under this Contract and, to the extent assigned, the assignor
shall have no further right or obligation hereunder. Should BUYER assign
this Contract, any assignee or subsequent assignee of this Contract shall
succeed to the rights of the BUYER to further assign this Contract under
this Article XIII.
(End of Article)
------------------------------------------
ARTICLE XIV - TAXES AND DUTIES
1. Taxes and Duties Incurred in Korea:
The BUILDER shall bear and pay all taxes, duties, stamps and fees
incurred in Korea in connection with execution and/or performance
of this Contract as the BUILDER, and any taxes and duties imposed
in Korea upon the BUYER's Supplies resulting from the failure
attributable to the BUILDER in taking all appropriate action to
have such BUYER's Supplies imported into Korea under bond for
ultimate export with the DRILLSHIP following delivery.
2. Taxes and Duties Incurred Outside Korea:
The BUYER shall bear and pay all taxes (other than taxes on
income imposed on BUILDER), duties, stamps and fees incurred
outside Korea in connection with execution and/or performance of
this Contract as the BUYER, except for taxes and duties imposed
upon those items (other than BUYER's Supplies) to be procured by or
for the BUILDER for construction of the DRILLSHIP which shall be
the responsibility of the BUILDER.
(End of Article)
------------------------------------------
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
1. Patents:
Except as to BUYER's Supplies, BUILDER agrees to defend,
indemnify and hold BUYER harmless from any liability or claims of
patent infringement of any nature or kind (including legal fees and
expenses) relating to the infringement or claimed infringement of
patent rights of any third party with respect to any material,
service, process, or apparatus covered by this Contract, or their
use for their intended purpose.
With regards to the performance of the current Contract, BUYER
shall defend, indemnify and hold BUILDER harmless from all claims
of infringement of patent rights of any third party related to (i)
processes supplied by BUYER or (ii) BUYER's Supplies.
Except as otherwise provided for in this Agreement, nothing
contained herein shall be construed as transferring any rights in
any patents, trademarks or copyrights utilized in the performance
of this Contract.
2. General Plans, Specifications and Working Drawings:
The BUILDER retains all rights with respect to the
Specifications, and plans and working drawings, technical
descriptions, calculations, test results and other data,
information and documents concerning the design and construction of
the DRILLSHIP except for such technical documents which have been
provided solely by the BUYER or its agents or servants to the
BUILDER in connection with design and construction of the
DRILLSHIP, and the BUYER undertakes therefore not to disclose the
same or divulge any information contained therein to any third
parties, without the prior written consent of the BUILDER (such
consent not to be unreasonably withheld) except where such
disclosure is necessary for usual operation, repair and maintenance
of the DRILLSHIP.
3. Exceptions:
(a) Notwithstanding anything else contained in this Article XV,
the BUILDER agrees that it will not, without the prior written
consent of the BUYER, no to be unreasonably withheld, disclose
any information or data or material of any nature and in whatever
form concerning or regarding the following:
Topside Specification (Exhibit 2)
This provision XV.3.(a) shall be in effect for 12 months
from Contract signing.
(b) Notwithstanding anything else contained in this Article XV,
the BUILDER agrees that the BUYER may use any information, data,
or material of any nature and in whatever form concerning or
regarding the power distribution design and management of the
DRILLSHIP and the topside Specifications for its own benefit.
(End of Article)
--------------------------------------------------
ARTICLE XVI - BUYER'S SUPPLIES
1. Responsibility of BUYER:
(a) The BUYER shall, at its own risk, cost and expense, supply
and deliver to the BUILDER all of the items to be furnished by
the BUYER as specified in the Specifications(herein called the
BUYER's Supplies) to a first point of arrival (mainly the port of
Pusan, Korea or other places as may be agreed between the
parties) in Korea in good condition. Once delivered to the
first point of arrival in Korea, the BUYER's Supplies will be at
the BUILDER's risk. Prior to the transportation of the BUYER's
Supplies within Korea, the BUILDER shall make a visual inspection
of BUYER's Supplies and report to BUYER any apparent damage to
the BUYER's Supplies. BUYER and BUILDER shall inspect the BUYER's
Supplies upon arrival thereof at the Shipyard to determine
whether the BUYER's Supplies comply with the contractual
specifications or have been damaged during the transportation.
If as the result of such inspections, (i) any defect to the
BUYER's Supplies is found, or (ii) any damage to the BUYER's
Supplies occurring prior to arrival at the first point in Korea
is found, then all the remedies and replacements thereof are
the responsibility of the BUYER. Any delay or direct expenses
regarding the construction of the DRILLSHIP resulting solely
from BUYER's failure to have the BUYER's Supplies delivered in
Korea as agreed herein shall be the BUYER's responsibility.
Risk of transportation within Korea to the Shipyard and risk of
offloading, uncrating and storage of the BUYER's Supplies upon
their arrival at the Shipyard will be with BUILDER. However, the
cost for inland transportation, customs clearance, insurance for
inland transportation and other costs, if any, for the BUYER's
Supplies shall be one point eight percent (1.8%) of the BUYER's
Supplies amount on the C.I.F. value basis, which shall be paid by
the BUYER to the BUILDER together with the payment of the 5th
installment pursuant to Article II hereof. In case such BUYER's
Supplies are delivered directly to the Koje Shipyard by the
BUYER, the applicable cost (rate) shall be reduced to zero point
zero percent (0.0%) of the BUYER's Supplies amount on the basis
of C.I.F. value, except BUYER will pay for customs clearance or
any third party costs. BUYER's Supplies sent to ports nearby
Koje Shipyard (like Changsengpo and Okpo) will be assessed
charges for transportation, customs clearance fee, harbor union
fee, pilotage and other costs that are incurred by the BUILDER to
facilitate delivery of the BUYER's Supplies to Koje Shipyard.
These fees will be charged at actual direct cost. Any loss of or
damage to the BUYER's Supplies after they are in the custody of
the BUILDER will be for the account of the BUILDER and BUILDER
will replace or repair any BUYER's Supplies that may be lost or
damaged, and a subsequent delay due to the foregoing and
resulting cost impact will be the BUILDER's responsibility.
BUILDER agrees and acknowledges that any or all of the BUYER's
Supplies may arrive at the Shipyard in individual parts or as
component parts to be placed in or made a part of a larger system
or module. The BOP is to arrive in not more than four (4) main
components.
(b) In order to facilitate installation by the BUILDER of the
BUYER's Supplies in or on the DRILLSHIP, the BUYER shall furnish
the BUILDER with necessary specifications, plans, drawings,
instruction books, manuals, test reports and certificates
required by the rules and regulations of the Specifications. If
so requested by the BUILDER, the BUYER, without any charge to the
BUILDER, shall cause the representatives of the manufacturers of
the BUYER's Supplies to advise the BUILDER in installation
thereof in or on the DRILLSHIP.
(c) Any and all of the BUYER's Supplies shall be subject to the
BUILDER's reasonable right of rejection, as and if they are found
to be unsuitable or in improper condition for installation.
(d) A preliminary Delivery Schedule of the BUYER's Supplies and
vendor data specific to the DRILLSHIP (Hull No. 1255) showing the
BUILDER's requested delivery dates is attached to the
Specifications. The Delivery Schedule of the BUYER's Supplies
and vendor data shall be mutually agreed, finalized and settled
within Sixty (60) calendar days from the date of contract
signing. The delivery dates agreed to on the Delivery Schedule
will be the dates BUYER's Supplies are required at first point in
Korea. Should the BUYER fail to deliver any of the BUYER's
Supplies within Ten (10) days of the time designated by the
Delivery Schedule, the Delivery Date shall be automatically
extended for a period not to exceed the actual delay, beyond
ten(10) days, incurred by the BUILDER. If no delay in the
delivery of the DRILLSHIP is incurred by the BUILDER, the
Delivery Date shall not change.
(e) If delay in delivery of any of the BUYER's Supplies exceeds
thirty (30) days, then, the BUILDER shall be entitled to proceed
with construction of the DRILLSHIP without installation thereof
in or on the DRILLSHIP as hereinabove provided, and the BUYER
shall accept and take delivery of the DRILLSHIP so constructed,
unless such delay is caused by Force Majeure in which case the
provision Paragraph 1(d) of this Article shall apply.
(f) The insurance for the BUYER's Supplies during storage,
construction and installation at the Shipyard is covered and
handled by the BUILDER at its cost and responsibility.
2. Responsibility of BUILDER:
The BUILDER shall be responsible for storing and handling with
reasonable care of the BUYER's Supplies after delivery thereof at
the Shipyard, and shall, at its own cost and expense, install them
in or on the DRILLSHIP, unless otherwise provided herein or agreed
by the parties hereto, provided, always, that the BUILDER shall not
be responsible for quality, efficiency and/or performance of any of
the BUYER's Supplies (other than to install same in accordance with
the manufacturer's specifications and requirements, copies of which
have been provided to BUILDER by BUYER).
It will be the BUILDER's responsibility at no cost to BUYER to:
(i) assemble the BUYER's Supplies, bulk material and provide
modularization and integration engineering, except procurement
engineering related to the BUYER's Supplies, at the Shipyard; (ii)
test the BUYER's Supplies as necessary or appropriate; (iii)
construct modules from the BUYER's Supplies as appropriate; (iv)
test and pre-commission the modules containing the BUYER's Supplies
and to generally test all of the BUYER's Supplies; (v) install the
BUYER's Supplies on the DRILLSHIP, in modules, as required, or
otherwise as required, and to integrate the BUYER's Supplies into
the overall designed system of the DRILLSHIP; (vi) test and pre-
commission the integrated modules and systems; and (vii) complete
and test the entire drilling system where practicable (i.e.,
equipment functional test only, not full operational load test) to
insure that it works harmoniously as a part of the drilling process
and the DRILLSHIP so as to be able to accomplish its intended
purpose. In no event will BUILDER charge any additional cost for
any of the above. Pre-commission or pre-commissioning as used in
this Contract or the Specifications means the putting into service
or the commissioning to be done at the Shipyard prior to delivery
and acceptance. Pre-commission or pre-commissioning does not mean
commissioning that occurs elsewhere.
3. Title:
Title to BUYER's Supplies shall at all times remain with BUYER
during the Contract; however, BUILDER shall have the risk of loss
of or damage to such BUYER's Supplies from the time set out in
subparagraph 1(a) of this Article until delivery of the DRILLSHIP.
4. BUYER's Suppplies Refundment:
Notwithstanding anything else contained in this Contract, BUILDER
agrees that if for any reason whatsoever the DRILLSHIP is not
delivered to BUYER, other than as a result of BUYER's default
under Article XI of this Contract, then BUILDER shall remit to
BUYER the full value of all BUYER's Supplies which have been
delivered to the Shipyard or which BUILDER has taken custody of
under this Article XVI. BUILDER shall remit all amounts due under
this paragraph 4 upon written demand by BUYER and upon BUILDER's
request, BUYER will furnish BUILDER with reasonable documentation
showing BUYER's cost of BUYER's Supplies. BUILDER shall remit all
amounts due within thirty (30) days of demand.
(End of Article)
--------------------------------------------------
ARTICLE XVII - INSURANCE
1. Extent of Insurance Coverage:
From the time of the launching until delivery of the DRILLSHIP,
the BUILDER shall, at its own cost and expense, keep the DRILLSHIP
and all machinery, materials and equipment delivered to the
Shipyard for the DRILLSHIP or built into or installed in or upon
the DRILLSHIP (except the BUYER's Supplies) fully insured with
first class insurance companies or underwriters in Korea with
coverage corresponding to the Institute of London Underwriter's
Clauses for Builder's Risks. From the time of the first arrival of
the BUYER's Supplies in Korea until delivery of the DRILLSHIP, the
BUILDER shall keep the BUYER's Supplies fully insured with the
aforementioned insurance companies or underwriters to cover
Builder's Risk.
The amount of such insurance coverage shall, up to the date of
delivery of the DRILLSHIP, be an amount at least equal to, but not
limited to, the aggregate of the payments made by the BUYER to the
BUILDER plus Fifty Million United States Dollars (US$50,000,000) to
cover BUYER's Supplies in the custody of the Shipyard.
The policy referred to in this paragraph for the BUYER's Supplies
shall be taken out in the name of the BUILDER and BUYER, as their
interests may appear, and all losses under such policy shall be
payable to the BUILDER and BUYER, as their interests may appear.
2. Application of the Recovered Amounts:
In the event that the DRILLSHIP shall be damaged from any insured
cause at any time before delivery of the DRILLSHIP, and in the
further event that such damage shall not constitute an actual or
constructive total loss of the DRILLSHIP, the amount received in
respect of the insurance shall be applied by the BUILDER in repair
of such damage, satisfactory to the Classification requirements,
and the BUYER shall accept the DRILLSHIP under this Contract if
completed in accordance with this Contract and the Specifications,
however, subject to the extension of delivery time under Article
VIII hereof (except in case of negligence of the BUILDER).
Should the DRILLSHIP from any cause become an actual or
constructive total loss, the BUILDER shall either:
(a) Proceed in accordance with the terms of this Contract, in
which case the amount received in respect of the insurance shall
be applied to the construction and repair of damage of the
DRILLSHIP, provided the parties hereto shall have first agreed
thereto in writing and to such reasonable extension of delivery
time as may be necessary for the completion of such
reconstruction and repair; or
(b) Refund promptly to the BUYER the full amount of all sums
paid by the BUYER to the BUILDER as installments in advance of
delivery of the DRILLSHIP, and deliver to the BUYER all BUYER's
Supplies (or the insurance proceeds paid with respect thereto),
in which case this Contract shall be deemed to be automatically
terminated and shall be deemed rescinded for purposes of Article
X hereof and all rights, duties, liabilities and obligations of
each of the parties to the other shall forthwith cease and
terminate.
3. Termination of BUILDER's Obligation to Insure:
The BUILDER shall be under no obligation to insure the DRILLSHIP
hereunder after delivery of the DRILLSHIP.
(End of Article)
--------------------------------------------------
ARTICLE XVIII - NOTICE
1. Address:
Any and all notices and communications in connection with this
Contract shall be addressed as follows:
To the BUYER:
Reading & Bates Drilling Co.
901 Threadneedle
Houston, Texas 77079-2902
Facsimile No.:(281)589-5189
To the BUILDER:
Samsung Heavy Industries Co., Ltd.
Dongnam Tower Building
850-25, Daichi-dong, Kangnam-ku,
Seoul, Korea
Facsimile No.: (822) 3458 6503
(822) 3458 6501
or preferably to its Koje Yard:
Samsung Heavy Industries Co., Ltd.
P.O. Box Gohyun 9
530, Jangpyung-ri, Sinhyun-up,
Koje-gun, Kyungnam, Korea
Telex No.: K52213
Facsimile No.: (82558) 32 2160 (Design Department)
(82558) 636 2560 (Customer Coordination Team)
2. Language:
Any and all notices and communications in connection with this
Contract shall be written in the English language.
3. Effective Date of Notice:
The notice in connection with this Contract shall become
effective from the date when such notice is received by the BUYER
or by the BUILDER except otherwise described in the Contract. In
case any notice is made by facsimile confirmed in writing, the date
when the facsimile is received shall govern.
(End of Article)
------------------------------------------
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT
This Contract shall become effective upon signing by the parties
hereto.
In the event the refund guarantee has not been issued by
September 15, 1997 and the BUYER provided same, the BUYER shall
have the right to terminate the Shipbuilding Contract by written
notice to BUILDER within five business days thereafter. If the
BUYER exercises such option, neither party shall have any liability
or obligation to the other under this Contract.
(End of Article)
--------------------------------------------------
ARTICLE XX - INTERPRETATION
1. Laws Applicable:
The parties hereto agree that the validity and the interpretation
of this Contract and of each Article and part thereof shall be
governed by the laws of England.
2. Discrepancies:
All general language or requirements embodied in the
Specifications are intended to amplify, explain and implement the
requirements of this Contract. However, in the event that any
language or requirements so embodied permit an interpretation
inconsistent with any provision of this Contract, then, in each and
every such event, the applicable provisions of this Contract shall
prevail and govern. In the event of conflict between the
Specifications and Plans, the Specifications shall prevail and
govern.
3. Entire Agreement:
This Contract contains the entire agreement and understanding
between the parties hereto and supersedes all prior negotiations,
representations, undertakings and agreements on any subject matter
of this Contract.
4. Amendments and Supplements:
Any supplement, memorandum of understanding or amendment,
whatsoever form it may be relating to this Contract, to be made and
signed among parties hereof after signing this Contract, shall be
the integral part of this Contract and shall be predominant over
the respective corresponding Article and/or Paragraph of this
Contract.
(End of Article)
--------------------------------------------------
ARTICLE XXI - CONFIDENTIALITY
BUILDER and BUYER agree that the terms and conditions of this Contract
shall remain confidential and neither party shall disclose any such terms
and conditions of this Contract to any third party without first obtaining
the prior written consent of the other, provided however, that either party
shall be entitled to disclose any or all of the terms and conditions of the
Contract to the extent it is necessary to do so to implement, effectuate
and comply with the terms of the Contract or to otherwise exercise any
right or discharge any obligation that party may have pursuant to this
Contract.
BUILDER shall require the engine maker/manufacturer (Wartsila) and the
maker/manufacturer of the positioning system to sign confidentiality
agreements agreeing to keep strictly confidential all information furnished
to such party or developed in connection with the performance of this
Contract.
(End of Article)
--------------------------------------------------
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
duly executed on the day and year first above written.
BUYER: BUILDER:
READING & BATES DRILLING CO. SAMSUNG HEAVY INDUSTRIES CO.,
LTD.
By: By:
Title: Title:
SAMSUNG CORPORATION
By:
Title:
--------------------------------------------------
EXHIBIT "A"
LETTER OF REFUNDMENT GUARANTEE NO.
Gentlemen:
We hereby open our irrevocable letter of guarantee No. in favour of
___________________________ (hereinafter called the "BUYER") for account of
Samsung Corporation, Seoul, Korea as follows in consideration of the
shipbuilding contract dated __________________, 1997 (hereinafter called
the "Contract") made by and among the BUYER and Samsung Corporation as the
contractor and Samsung Heavy Industries Co., Ltd. as its subcontractor
(hereinafter collectively called the "BUILDER") for the construction of one
(1) drillship composed of hull part and topside part, having BUILDER's
Hull No. ___________ (hereinafter called the "DRILLSHIP").
If in connection with the terms of the Contract the BUYER shall become
entitled to a refund of the advance payment(s) made to the BUILDER prior to
the delivery of the DRILLSHIP, we hereby irrevocably guarantee the
repayment of the same to the BUYER immediately on demand
_________________________ (Say _______________________ only) together with
interest thereon at the rate of _________ per cent per annum from the date
following the date of receipt by the BUILDER to the date of remittance by
telegraphic transfer of such refund.
The amount of this guarantee will be automatically increased, not more
than ______ ( ) times, upon BUILDER's receipt of the respective
installment: each time by the amount of installment of USD
________________, USD ___________________, USD _____________________, USD
_______________________ and USD ___________________ respectively, plus
interest thereon as provided in the Contract, but in any eventuality the
amount of this guarantee shall not exceed the total sum of
____________________ (Say _________________ only) plus interest thereon at
the rate of eight per cent (8%) per annum from the date following the date
of BUILDER's receipt of each installment to the date of remittance by
telegraphic transfer of the refund.
In case any refund is made to you by the BUILDER or by us under this
guarantee, our liability hereunder shall be automatically reduced by the
amount of such refund.
In the event of rescission of the Contract being based on delays due
to force majeure or other causes beyond the control of the BUILDER, as
required by Article X of the Contract, interest shall be paid at the rate
of four percent (4%) per annum from the date following the date of
Builder's receipt of each installment to the date of remittance by
telegraphic transfer of the refund.
This letter of guarantee is available against BUYER's simple receipt
and signed statement certifying that BUYER's demand for refund has been
made in conformity with Article X of the Contract and the BUILDER has
failed to make the refund within Thirty (30) days after your demand to the
BUILDER. Refund shall be made to you by telegraphic transfer in
__________________.
This letter of guarantee shall expire and become null and void upon
receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the
BUYER of delivery of the DRILLSHIP in accordance with the terms of the
Contract and, in either case, this letter of guarantee shall be returned to
us. This guarantee is valid from the date of this letter of guarantee
until delivery or in the event of delayed delivery until such time as the
DRILLSHIP is delivered by the BUILDER to the BUYER in accordance with the
terms of the Contract.
Notwithstanding the provisions hereinabove, in case we receive
notification from you or the BUILDER confirmed by the Arbitration Board
stating that your claim to rescind the Contract or your claim for
refundment thereunder has been disputed and referred to Arbitration in
accordance with the provisions of the Contract, the period of validity of
this guarantee shall be extended until Thirty (30) days after the final
award shall be rendered in the Arbitration and a copy thereof acknowledged
by the Arbitration Board. In such case, this guarantee shall not be
available unless and until such acknowledged copy of the final award in the
Arbitration justifying your claim is presented to us.
This guarantee shall not be affected by any extension of time or
concession granted by the BUYER to the BUILDER or any delay or failure of
the BUYER in enforcing its rights under the Contract.
The BUYER shall have the right to assign this guarantee and all of its
benefits to any assignee to whom the Contract is assigned.
This guarantee shall be governed by the laws of England.
Very truly yours,
_____________________________________
EXHIBIT 10.176
FIRST AMENDMENT TO CREDIT AGREEMENT
(Revolving Loans Credit Facility)
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "Amendment") dated
October 3, 1997, is by and among FALCON DRILLING COMPANY, INC. a Delaware
corporation ("Falcon Drilling or Borrower"), BANQUE PARIBAS, a bank organized
under the laws of the Republic of France, ARAB BANKING CORPORATION (B.S.C.),
banking corporation organized under the laws of Bahrain, and ING (U.S.)
CAPITAL CORPORATION, a banking corporation organized under the laws of the
Netherlands.
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Banks are parties to the Credit
Agreement dated as of November 12, 1996 (as amended, the "Credit Agreement")
relating to a $25,000,000 Revolving Loans Credit Facility, pursuant to which,
inter alia, the Banks agreed to make certain loans available to the Borrower
upon the terms and conditions contained in the Credit Agreement;
WHEREAS, Borrower desires that the Banks modify and amend certain terms
and provisions of the Credit Agreement; and
WHEREAS, the parties hereto desire to amend the Credit Agreement in
accordance with the terms and provisions of this Amendment;
NOW, THEREFORE, for and in consideration of these premises and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Agent and the Banks hereby agree as follows:
1. Terms. All capitalized terms defined in the Credit Agreement and
not otherwise defined herein shall have the same definitions when used herein
as set forth in the Credit Agreement as amended by this Amendment.
2. Amendment to Section 1.1 of the Credit Agreement.
(a) Amendment to Definition of Applicable Margin. The definition
of "Applicable Margin" contained in Section 1.1 of the Credit Agreement
is hereby amended and restated to read in its entirety as follows:
"Applicable Margin" means (a) 0.00% per annum with respect to
ABR Loans and (b) 1.00% per annum with respect to Eurodollar Loans.
(b) Amendment to Definition of Change of Control. The definition
of "Change of Control" contained in Section 1.1 of the Credit Agreement
is hereby amended by adding at the end thereof the following proviso:
"provided, however (i) the R&B Merger shall not constitute a Change of
Control and (ii) following the R&B Merger a change in the Board of
Directors of Falcon Drilling shall in no event constitute a Change of
Control."
(c) Addition of Definition of R&B Merger. Section 1.1 of the
Credit Agreement is hereby amended by adding the following definition:
"R&B Merger" means the proposed combination of the Borrower
with Reading & Bates Corporation, which combination will be
effected by merging one subsidiary of R&B Falcon Corporation into
Borrower and another subsidiary of R&B Falcon Corporation into
Reading & Bates Corporation, following which Borrower and Reading &
Bates Corporation will be wholly owned subsidiaries of R&B Falcon
Corporation, and the former shareholders of Borrower and Reading &
Bates Corporation will own all of the outstanding shares of R&B
Falcon Corporation."
(d) Addition of Definition of R&B Option. Section 1.1 of the
Credit Agreement is hereby amended by adding the following definition:
"R&B Option" means the option to purchase common stock of the
Borrower granted to Reading & Bates Corporation pursuant to that
certain FDC Corporation Stock Option Agreement dated July 10, 1997
between Borrower and Reading & Bates Corporation."
(f) Addition of Definition of Unsecured Revolving Credit
Agreement. Section 1.1 of the Credit Agreement is hereby amended by
adding the following definition:
"Unsecured Revolving Credit Agreement" means that certain
Unsecured Revolving Credit Agreement dated as of October 3, 1997
among Borrower and each of the Banks providing for an $80,000,000
unsecured credit facility for Borrower, maturing 364 days after its
execution."
(g) Addition of Definition of Unsecured Revolving Credit Loans
Documents. Section 1.1 of the Credit Agreement is hereby amended by
adding the following definition:
"Unsecured Revolving Credit Loans Documents" means the "Loan
Documents" as such term is defined in the Unsecured Revolving
Credit Agreement.
3. Amendment to Section 2.6 of the Credit Agreement. Section 2.6 of
the Credit Agreement is amended by adding the phrase "or any amounts are due
and owing from Falcon Drilling, Inc. pursuant to the Unsecured Revolving
Credit Agreement" to the end of clause (d).
4. Amendment to Section 2.8 of the Credit Agreement. Section 2.8 of
the Credit Agreement is amended by changing the term "$250,000" contained
therein to "$1,000,000".
5. Amendment to Section 8.1 of the Credit Agreement. Paragraphs (c)
and (f) of Section 8.1 of the Credit Agreement are amended in their entirety
to read as follows:
"[DELETED]"
6. Amendment to Section 9.1(a) of the Credit Agreement. Section
9.1(a) of the Credit Agreement is amended in its entirety to read as follows:
"(a) Debt of the Borrowers and their Subsidiaries to the Banks
pursuant to the Loan Documents, Debt of Falcon Drilling to the
Acquisitions Loans Banks pursuant to the Acquisitions Loans Documents
and Debt of Falcon Drilling to the Banks pursuant to the Unsecured
Revolving Credit Loans Documents;"
7. Amendment to Section 9.3 of the Credit Agreement. Section 9.3 of
the Credit Agreement is amended by inserting the words "Except pursuant to
the R&B Merger," at the beginning of the first sentence thereof.
8. Amendment to Section 9.5 of the Credit Agreement. Section 9.5(m)
of the Credit Agreement is amended in its entirety to read as follows:
"(m) Other Investments in an aggregate amount (as to Borrower and
all of its Subsidiaries) not to exceed the following at any time
outstanding: (i) $75,000,000 minus (ii) the aggregate amount paid
by Borrower and all of its Subsidiaries after November 12, 1996 in
redemption of preferred stock or Redeemable Stock."
9. Amendment to Section 10.2 of the Credit Agreement. Section 10.2 of
the Credit Agreement is amended by substituting "$250,000,000" for
"$95,000,000" and by substituting "50%" for "75%".
10. Amendment to Section 11.1 of the Credit Agreement. Section 11.1 of
the Credit Agreement is amended by a new clause (r) as follows:
"(r) If at any time there shall have occurred and be continuing an
"Event of Default" as that term is used in the Revolving Loans
Credit Agreement or the Unsecured Revolving Credit Agreement."
11. Amendment to Section 13.23 of the Credit Agreement. Section 13.23
of the Credit Agreement is amended by deleting the phrase "Ms. Riordan" in
the fourth line there of and replacing it with the phrase "Mr. Markham."
12. Change in amount of Commitments. The Credit Agreement is amended
by changing the amount of the Commitment of each Bank as set forth on the
signature pages of the Credit Agreement so that the Commitment of each Bank
is the amount set forth beside its name below:
BANQUE PARIBAS $9,848,484.84
ARAB BANKING CORPORATION (B.S.C.) $7,575,757.58
ING (U.S.) CAPITAL CORPORATION $7,575,757.58
13. Conditions to Effectiveness of this Amendment. The effective of
this Amendment is subject to the conditions precedent that (a) this
Amendment, the Unsecured Revolving Credit Agreement and the First Amendment
to Credit Agreement (Acquisition Loans Credit Facility) of even date herewith
between Borrower, Agent and the Banks shall have been executed and delivered
by all parties thereto, and (b) the First Amendment to "First Preferred Fleet
Ship Mortgage" (as such term is defined in the Acquisition Loans Credit
Agreement) of even date herewith between Borrower and Bank One, Texas, N.A.,
as mortgagee, shall have been executed and delivered by all parties thereto
in form and substance satisfactory to the Agent.
14. Costs. The Borrower shall pay all reasonable out-of-pocket costs
and expenses incurred by the Agent, the Co-Agent or any Bank in connection
with the negotiation, preparation, execution and consummation of this
Amendment and the transactions contemplated by this Amendment, including,
without limitation, the reasonable fees and expenses of counsel to the Agent,
the Co-Agent and the Banks.
15. Miscellaneous.
15.1 Headings. Section headings are for reference only and shall not
affect the interpretation or meanings of any provision of this Amendment.
15.2 Effect of this Amendment. The Credit Agreement, as amended by this
Amendment, shall remain in full force and effect except that any reference
therein, or in any other Loan Document referring to the Credit Agreement,
shall be deemed to refer to the Credit Agreement as amended by this
Amendment.
15.3 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL
LAW.
15.4 Counterparts. This Amendment may be executed by the different
parties hereto on separate counterparts, each of which, when so executed,
shall be deemed an original but all such counterparts shall constitute but
one and the same Amendment.
15.5 NO ORAL AGREEMENTS. THE CREDIT AGREEMENT, AS AMENDED BY THIS
AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE ENTIRE
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective duly authorized officers as of the date first
above written.
BORROWER:
FALCON DRILLING COMPANY, INC.
By:
Leighton E. Moss
Vice President
BANQUE PARIBAS,
Individually and as Agent
By:
Name:
Title:
By:
Name:
Title:
ARAB BANKING CORPORATION (B.S.C.)
Individually and as Co-Agent
By:
Stephen A. Plauche
Vice President
ING (U.S.) CAPITAL CORPORATION
By:
Trond Rokholt
Managing Director
EXHIBIT 10.178
FIRST AMENDMENT TO CREDIT AGREEMENT
(Acquisition Loans Credit Facility)
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "Amendment") dated
October 3, 1997, is by and among FALCON DRILLING COMPANY, INC. a Delaware
corporation ("Falcon Drilling or Borrower"), BANQUE PARIBAS, a bank
organized under the laws of the Republic of France, ARAB BANKING
CORPORATION (B.S.C.), banking corporation organized under the laws of
Bahrain, and ING (U.S.) CAPITAL CORPORATION, a banking corporation
organized under the laws of the Netherlands.
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Banks are parties to the
Credit Agreement dated as of November 12, 1996 (as amended, the "Credit
Agreement") relating to a $40,000,000 Acquisition Loans Credit Facility,
pursuant to which, inter alia, the Banks agreed to make certain loans
available to the Borrower upon the terms and conditions contained in the
Credit Agreement;
WHEREAS, Borrower desires that the Banks increase the available credit
under said facility to an aggregate of $60,000,000.
WHEREAS, the parties hereto desire to amend the Credit Agreement in
accordance with the terms and provisions of this Amendment;
NOW, THEREFORE, for and in consideration of these premises and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Agent and the Banks hereby agree as
follows:
1. Terms. All capitalized terms defined in the Credit Agreement and
not otherwise defined herein shall have the same definitions when used
herein as set forth in the Credit Agreement as amended by this Amendment.
2. Amendment to Section 1.1 of the Credit Agreement.
(a) Amendment to Definition of Applicable Margin. The
definition of "Applicable Margin" contained in Section 1.1 of the
Credit Agreement is hereby amended and restated to read in its
entirety as follows:
"Applicable Margin" means (a) 0.50% per annum with respect
to ABR Loans and (b) 1.50% per annum with respect to Eurodollar
Loans.
(b) Amendment to Definition of Change of Control. The
definition of "Change of Control" contained in Section 1.1 of the
Credit Agreement is hereby amended by adding at the end thereof the
following proviso: "provided, however (i) the R&B Merger shall not
constitute a Change of Control and (ii) following the R&B Merger a
change in the Board of Directors of Falcon Drilling shall in no event
constitute a Change of Control."
(c) Amendment to Definition of Drilling Rigs. The definition
of "Drilling Rigs" contained in Section 1.1 of the Credit Agreement is
hereby amended by deleting the last sentence thereof and replacing it
with the following:
As of October 3, 1997, the Drilling Rigs shall consist of the
PHOENIX I (U.S. Official No. 641320), the PHOENIX II (U.S.
Official No. 643906), the PHOENIX III (U.S. Official No. 644283),
the PHOENIX IV (U.S. Official No. 634728), the FALRIG 85 (U.S.
Official No. 604568), the FALRIG 86 (U.S. Official No. 624764)
and the ACHILLES (U.S. Official No. 643745).
(d) Addition of Definition of R&B Merger. Section 1.1 of the
Credit Agreement is hereby amended by adding the following definition:
"R&B Merger" means the proposed combination of the Borrower
with Reading & Bates Corporation, which combination will be
effected by merging one subsidiary of R&B Falcon Corporation into
Borrower and another subsidiary of R&B Falcon Corporation into
Reading & Bates Corporation, following which Borrower and Reading
& Bates Corporation will be wholly owned subsidiaries of R&B
Falcon Corporation, and the former shareholders of Borrower and
Reading & Bates Corporation will own all of the outstanding
shares of R&B Falcon Corporation."
(e) Addition of Definition of R&B Option. Section 1.1 of the
Credit Agreement is hereby amended by adding the following definition:
"R&B Option" means the option to purchase common stock of
the Borrower granted to Reading & Bates Corporation pursuant to
that certain FDC Corporation Stock Option Agreement dated July
10, 1997 between Borrower and Reading & Bates Corporation."
(f) Addition of Definition of Unsecured Revolving Credit
Agreement. Section 1.1 of the Credit Agreement is hereby amended by
adding the following definition:
"Unsecured Revolving Credit Agreement" means that certain
Unsecured Revolving Credit Agreement dated as of October 3, 1997
among Borrower and each of the Banks providing for an $80,000,000
unsecured credit facility for Borrower, maturing 364 days after
execution."
(g) Addition of Definition of Unsecured Revolving Credit Loans
Documents. Section 1.1 of the Credit Agreement is hereby amended by
adding the following definition:
"Unsecured Revolving Credit Loans Documents" means the "Loan
Documents" as such term is defined in the Unsecured Revolving
Credit Agreement.
3. Amendment to Section 2.6 of the Credit Agreement. Section 2.6 of
the Credit Agreement is amended by deleting the "and" before clause (c) in
the proviso and adding a new clause (d) as follows: "and (d) no prepayment
may be made against the Loans at any time that any amounts are due and
owing from Borrower pursuant to the Unsecured Credit Agreement."
4. Amendment to Section 2.8 of the Credit Agreement. Section 2.8 of
the Credit Agreement is amended by changing the term "$250,000" contained
therein to "$1,000,000".
5. Amendment to Section 2.11 of the Credit Agreement. Section 2.11
of the Credit Agreement is amended by substituting "0.375%" for "0.50%".
6. Amendment to Section 8.1 of the Credit Agreement. Paragraphs (c)
and (f) of Section 8.1 of the Credit Agreement are amended in their
entirety to read as follows:
"[DELETED]"
7. Amendment to Section 9.1(a) of the Credit Agreement. Section
9.1(a) of the Credit Agreement is amended by adding the phrase "and the
Unsecured Revolving Credit Loans Documents" to the end of clause (a).
8. Amendment to Section 9.3 of the Credit Agreement. Section 9.3 of
the Credit Agreement is amended by inserting the words "Except pursuant to
the R&B Merger," at the beginning of the first sentence thereof.
9. Amendment to Section 9.5 of the Credit Agreement. Section 9.5(m)
of the Credit Agreement is amended in its entirety to read as follows:
"(m) Other Investments in an aggregate amount (as to Borrower and
all of its Subsidiaries) not to exceed the following at any time
outstanding: (i) $75,000,000 minus (ii) the aggregate amount paid
by Borrower and all of its Subsidiaries after November 12, 1996
in redemption of preferred stock or Redeemable Stock."
10. Amendment to Section 10.2 of the Credit Agreement. Section 10.2
of the Credit Agreement is amended by substituting "$250,000,000" for
"$95,000,000" and by substituting "50%" for "75%".
11. Amendment to Section 11.1(r) of the Credit Agreement. Section
11.1(r) of the Credit Agreement is amended by adding the phrase "or the
Unsecured Revolving Credit Agreement" to the end of clause (r);
12. Amendment to Section 13.11 of the Credit Agreement. Section
13.11 of the Credit Agreement is amended by substituting "Drilling Rigs"
for "Eligible Receivables."
13. Amendment to Section 13.23 of the Credit Agreement. Section
13.23 of the Credit Agreement is amended by deleting the phrase "Ms.
Riordan" in the fourth line there of and replacing it with the phrase "Mr.
Markham."
14. Change in amount of Commitments. The Credit Agreement is amended
by changing the amount of the Commitment of each Bank as set forth on the
signature pages of the Credit Agreement so that the Commitment of each Bank
is the amount set forth beside its name below:
BANQUE PARIBAS $23,636,363.64
ARAB BANKING CORPORATION (B.S.C.) $18,181,818.18
ING (U.S.) CAPITAL CORPORATION $18,181,818.18
15. Conditions to Closing and Effectiveness of this Amendment. The
obligation of each Bank to make its Loans pursuant to the Credit Agreement
as amended by this Amendment are subject to the conditions precedent that
(a) this Amendment, the Unsecured Revolving Credit Agreement and the First
Amendment to Credit Agreement (Revolving Loans Credit Facility) of even
date herewith between Borrower, Agent and the Banks shall have been
executed and delivered by all parties thereto, (b) Borrower shall have
acquired title to the PHOENIX I (U.S. Official No. 641320) and the ACHILLES
(U.S. Official No. 643745) drilling rigs, free of all liens, mortgages and
encumbrances and that the First Amendment to First Preferred Fleet Ship
Mortgage of even date herewith between Borrower and Bank One, Texas, N.A.,
as mortgagee, shall have been executed and delivered by all parties thereto
in form and substance satisfactory to the Agent, (c) Agent shall have
received a certificate of the Vice President and General Counsel of
Borrower certifying that no changes have been made the Articles of
Incorporation or Bylaws of Borrower and shall have received current copies
(not more than 10 days old) of each of the items listed in Section 6.1 of
the Credit Agreement other than those listed in clauses (c), (d), (i),
(k), (aa) and (bb), and (d) all conditions listed in Section 6.1 of the
Unsecured Revolving Credit Agreement shall have been satisfied.
16. Costs. The Borrower shall pay all reasonable out-of-pocket costs
and expenses incurred by the Agent, the Co-Agent or any Bank in connection
with the negotiation, preparation, execution and consummation of this
Amendment and the transactions contemplated by this Amendment, including,
without limitation, the reasonable fees and expenses of counsel to the
Agent, the Co-Agent and the Banks.
17. Miscellaneous.
17.1 Headings. Section headings are for reference only and shall not
affect the interpretation or meanings of any provision of this Amendment.
17.2 Effect of this Amendment. The Credit Agreement, as amended by
this Amendment, shall remain in full force and effect except that any
reference therein, or in any other Loan Document referring to the Credit
Agreement, shall be deemed to refer to the Credit Agreement as amended by
this Amendment.
17.3 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS AND APPLICABLE
FEDERAL LAW.
17.4 Counterparts. This Amendment may be executed by the different
parties hereto on separate counterparts, each of which, when so executed,
shall be deemed an original but all such counterparts shall constitute but
one and the same Amendment.
17.5 NO ORAL AGREEMENTS. THE CREDIT AGREEMENT, AS AMENDED BY THIS
AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE ENTIRE
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective duly authorized officers as of the date
first above written.
BORROWER:
FALCON DRILLING COMPANY, INC.
By:
Leighton E. Moss
Vice President
BANQUE PARIBAS,
Individually and as Agent
By:
Name:
Title:
By:
Name:
Title:
ARAB BANKING CORPORATION (B.S.C.)
Individually and as Co-Agent
By:
Stephen A. Plauche
Vice President
ING (U.S.) CAPITAL CORPORATION
By:
Trond Rokholt
Managing Director
EXHIBIT 10.179
=============================================================================
CREDIT AGREEMENT
dated as of October 3, 1997
$80,000,000 UNSECURED REVOLVING CREDIT FACILITY
FALCON DRILLING COMPANY, INC.
as Borrower
BANQUE PARIBAS
as Agent and a Lender
ARAB BANKING CORPORATION (B.S.C.)
as Co-Agent and a Lender
ING (U.S.) CAPITAL CORPORATION
as a Lender
============================================================================
TABLE OF CONTENTS
ARTICLE 1- Definitions . . . . . . . . . . . . . . . . . . . . . . . .
Section 1.1 Definitions . . . . . . . . . . . . . . . . . .
Section 1.2 Other Definitional Provisions . . . . . . . .
Section 1.3 Accounting Terms and Determinations . . . . .
Section 1.4 Financial Covenants and Reporting . . . . . .
ARTICLE 2 - Loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 2.1 Commitments. . . . . . . . . . . . . . . . .
Section 2.2 Notes . . . . . . . . . . . . . . . . . . . .
Section 2.3 Repayment of Loans . . . . . . . . . . . . .
Section 2.4 Interest . . . . . . . . . . . . . . . . . .
Section 2.5 Borrowing Procedure . . . . . . . . . . . . .
Section 2.6 Optional Prepayments, Conversions and
Continuations of Loans . . . . . . . . . . .
Section 2.7 Mandatory Prepayments . . . . . . . . . . . .
Section 2.8 Minimum Amounts. . . . . . . . . . . . . . .
Section 2.9 Certain Notices. . . . . . . . . . . . . . .
Section 2.10 Use of Proceeds . . . . . . . . . . . . . . .
Section 2.11 Commitment Fee and Other Fees . . . . . . . .
Section 2.12 Computations. . . . . . . . . . . . . . . . .
Section 2.13 Termination or Reduction of Commitments . . .
Section 2.14 Letters of Credit . . . . . . . . . . . . . .
ARTICLE 3 - Payments . . . . . . . . . . . . . . . . . . . . . . . .
Section 3.1 Method of Payment . . . . . . . . . . . . . .
Section 3.2 Pro Rata Treatment . . . . . . . . . . . . .
Section 3.3 Sharing of Payments, Etc . . . . . . . . . .
Section 3.4 Non-Receipt of Funds by the Agent . . . . . .
Section 3.5 Withholding Taxes . . . . . . . . . . . . . .
Section 3.6 Withholding Tax Exemption . . . . . . . . . .
ARTICLE 4 - Yield Protection and Illegality . . . . . . . . . . . . .
Section 4.1 Additional Costs . . . . . . . . . . . . . .
Section 4.2 Limitation on Types of Loans . . . . . . . .
Section 4.3 Illegality . . . . . . . . . . . . . . . . .
Section 4.4 Treatment of Affected Loans . . . . . . . . .
Section 4.5 Compensation . . . . . . . . . . . . . . . .
Section 4.6 Capital Adequacy . . . . . . . . . . . . . .
Section 4.7 Additional Interest on Eurodollar Loans . . .
ARTICLE 5 - Setoff . . . . . . . . . . . . . . . . . . . . . . . . .
Section 5.1 Collateral . . . . . . . . . . . . . . . . .
ARTICLE 6 - Conditions Precedent . . . . . . . . . . . . . . . . . .
Section 6.1 Initial Extension of Credit . . . . . . . . .
Section 6.2 All Extensions of Credit . . . . . . . . . .
ARTICLE 7 - Representations and Warranties . . . . . . . . . . . . .
Section 7.1 Corporate Existence . . . . . . . . . . . . .
Section 7.2 Financial Statements . . . . . . . . . . . .
Section 7.3 Entity Action; No Breach . . . . . . . . . .
Section 7.4 Operation of Business . . . . . . . . . . . .
Section 7.5 Intellectual Property . . . . . . . . . . . .
Section 7.6 Litigation and Judgments . . . . . . . . . .
Section 7.7 Rights in Properties; Liens . . . . . . . . .
Section 7.8 Enforceability . . . . . . . . . . . . . . .
Section 7.9 Approvals . . . . . . . . . . . . . . . . . .
Section 7.10 Debt . . . . . . . . . . . . . . . . . . . .
Section 7.11 Taxes . . . . . . . . . . . . . . . . . . . .
Section 7.12 Margin Securities . . . . . . . . . . . . . .
Section 7.13 ERISA . . . . . . . . . . . . . . . . . . . .
Section 7.14 Disclosure . . . . . . . . . . . . . . . . .
Section 7.15 Capitalization . . . . . . . . . . . . . . .
Section 7.16 Agreements . . . . . . . . . . . . . . . . .
Section 7.17 Compliance with Laws . . . . . . . . . . . .
Section 7.18 Investment Company Act . . . . . . . . . . .
Section 7.19 Public Utility Holding Company Act . . . . .
Section 7.20 Environmental Matters . . . . . . . . . . . .
Section 7.21 Labor Disputes and Acts of God . . . . . . .
Section 7.22 Material Contracts . . . . . . . . . . . . .
Section 7.23 Outstanding Securities . . . . . . . . . . .
Section 7.24 Priority of Payment. . . . . . . . . . . . .
Section 7.25 Solvency . . . . . . . . . . . . . . . . . .
Section 7.26 Employee Matters . . . . . . . . . . . . . .
Section 7.27 Insurance . . . . . . . . . . . . . . . . . .
ARTICLE 8 - Affirmative Covenants . . . . . . . . . . . . . . . . . .
Section 8.1 Reporting Requirements . . . . . . . . . . .
Section 8.2 Maintenance of Existence; Conduct of Business
Section 8.3 Maintenance of Properties . . . . . . . . . .
Section 8.4 Taxes and Claims . . . . . . . . . . . . . .
Section 8.5 Insurance . . . . . . . . . . . . . . . . . .
Section 8.6 Inspection Rights . . . . . . . . . . . . . .
Section 8.7 Keeping Books and Records . . . . . . . . . .
Section 8.8 Compliance with Laws . . . . . . . . . . . .
Section 8.9 Compliance with Agreements . . . . . . . . .
Section 8.10 Further Assurances . . . . . . . . . . . . .
Section 8.11 ERISA . . . . . . . . . . . . . . . . . . . .
Section 8.12 Concentration Account . . . . . . . . . . . .
Section 8.13 No Consolidation in Bankruptcy . . . . . . .
ARTICLE 9 - Negative Covenants . . . . . . . . . . . . . . . . . . .
Section 9.1 Debt . . . . . . . . . . . . . . . . . . . .
Section 9.2 Limitation on Liens . . . . . . . . . . . . .
Section 9.3 Mergers, Etc . . . . . . . . . . . . . . . .
Section 9.4 Restricted Payments . . . . . . . . . . . . .
Section 9.5 Investments. . . . . . . . . . . . . . . . .
Section 9.6 Limitation on Issuance of Capital Stock . . .
Section 9.7 Transactions With Affiliates . . . . . . . .
Section 9.8 Disposition of Property . . . . . . . . . . .
Section 9.9 Sale and Leaseback . . . . . . . . . . . . .
Section 9.10 Lines of Business . . . . . . . . . . . . . .
Section 9.11 Environmental Protection . . . . . . . . . .
Section 9.12 Intercompany Transactions . . . . . . . . . .
Section 9.13 Consulting and Management Fees . . . . . . .
Section 9.14 Modification of Other Agreements . . . . . .
Section 9.15 ERISA. . . . . . . . . . . . . . . . . . . .
ARTICLE 10 - Financial Covenants . . . . . . . . . . . . . . . . . .
Section 10.1 Consolidated Current Ratio . . . . . . . . .
Section 10.2 Consolidated Tangible Net Worth . . . . . . .
Section 10.3 Consolidated Interest Coverage Ratio . . . .
ARTICLE 11 - Default . . . . . . . . . . . . . . . . . . . . . . . .
Section 11.1 Events of Default . . . . . . . . . . . . . .
Section 11.2 Remedies . . . . . . . . . . . . . . . . . .
Section 11.3 Cash Collateral . . . . . . . . . . . . . . .
Section 11.4 Performance by the Agent . . . . . . . . . .
ARTICLE 12 - The Agent . . . . . . . . . . . . . . . . . . . . . . .
Section 12.1 Appointment, Powers and Immunities . . . . .
Section 12.2 Rights of Agent as a Bank . . . . . . . . . .
Section 12.3 Defaults . . . . . . . . . . . . . . . . . .
Section 12.4 Indemnification . . . . . . . . . . . . . . .
Section 12.5 Independent Credit Decisions . . . . . . . .
Section 12.6 Several Commitments . . . . . . . . . . . . .
Section 12.7 Successor Agent . . . . . . . . . . . . . . .
ARTICLE 13 - Miscellaneous . . . . . . . . . . . . . . . . . . . . .
Section 13.1 Expenses . . . . . . . . . . . . . . . . . .
Section 13.2 Indemnification . . . . . . . . . . . . . . .
Section 13.3 Limitation of Liability . . . . . . . . . . .
Section 13.4 No Duty . . . . . . . . . . . . . . . . . . .
Section 13.5 No Fiduciary Relationship . . . . . . . . . .
Section 13.6 Equitable Relief . . . . . . . . . . . . . .
Section 13.7 No Waiver; Cumulative Remedies . . . . . . .
Section 13.8 Successors and Assigns . . . . . . . . . . .
Section 13.9 Survival . . . . . . . . . . . . . . . . . .
Section 13.10 Entire Agreement . . . . . . . . . . . . . .
Section 13.11 Amendments. . . . . . . . . . . . . . . . . .
Section 13.12 Maximum Interest Rate . . . . . . . . . . . .
Section 13.13 Notices . . . . . . . . . . . . . . . . . . .
Section 13.14 Governing Law; Submission to Jurisdiction; Service
of Process . . . . . . . . . . . . . . . . .
Section 13.15 Counterparts . . . . . . . . . . . . . . . .
Section 13.16 Severability . . . . . . . . . . . . . . . .
Section 13.17 Headings . . . . . . . . . . . . . . . . . .
Section 13.18 Construction . . . . . . . . . . . . . . . .
Section 13.19 Independence of Covenants . . . . . . . . . .
Section 13.20 Confidentiality . . . . . . . . . . . . . . .
Section 13.21 Waiver of Jury Trial . . . . . . . . . . . .
Section 13.22 Approvals and Consent. . . . . . . . . . . .
Section 13.23 Agent for Services of Process . . . . . . . .
Section 13.24 Joint and Several Obligations . . . . . . . .
Section 13.25 Co-Agent . . . . . . . . . . . . . . . . . .
INDEX TO EXHIBITS
Exhibit Description of Exhibit Section
"A" Form of Assignment and Acceptance 1.1
"B" Form of Note 1.1
"C" Form of Notice of Borrowings, Conversions,
Continuations or Prepayments 2.9
INDEX TO SCHEDULES
Schedule Description of Schedule
1.1(a) Permitted Liens
7.6 Litigation
7.10 Existing Debt
7.11 Taxes
7.13 Plans
7.15(b) Capitalization of Subsidiaries
7.22 Material Contracts and Defaults
7.26 Employee Matters
9.5 Investments
9.7 Certain Transactions with Affiliates
9.12 Intercompany Transactions
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of October 3, 1997, is among FALCON
DRILLING COMPANY, INC., a Delaware corporation ("Falcon Drilling" or
"Borrower"), BANQUE PARIBAS, a bank organized under the laws of France
acting through its Houston Agency, ARAB BANKING CORPORATION (B.S.C.), a
banking corporation organized under the laws of Bahrain, ING (U.S.)
CAPITAL CORPORATION, a corporation organized under the laws of Delaware,
each of the other banks or lending institutions which is or which may
from time to time become a party hereto or any permitted successor or
assignee thereof (each of Banque Paribas, Arab Banking Corporation
(B.S.C.), ING (U.S.) Capital Corporation and such other banks or lending
institutions is sometimes hereinafter individually referred to as a
"Bank" and all of such Persons are sometimes hereinafter collectively
referred to as the "Banks"), BANQUE PARIBAS, as agent for itself and the
other Banks (in such capacity, together with its successors in such
capacity, the "Agent") and ARAB BANKING CORPORATION (B.S.C.), as Co-Agent
for itself and the other Banks (in such capacity, together with its
successors and assigns in such capacity, the "Co-Agent").
RECITALS:
Borrower desires that the Lenders extend a revolving credit
facility to Borrower to provide working capital financing for, and other
funds for the general corporate purposes of, Borrower.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. As used in this Agreement, the following
terms have the following meanings:
"ABR" means the sum of (a) the greater of the Prime Rate or the
Federal Funds Rate, plus (b) one-half of one percent per annum.
"ABR Loans" means Loans that bear interest at rates based upon the
ABR.
"Additional Costs" means as specified in Section 4.1(a).
"Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) determined by the Agent to be equal
to (a) the Eurodollar Rate for such Eurodollar Loan for such Interest
Period, divided by (b) the remainder of one minus the Reserve Requirement
for such Eurodollar Loan for such Interest Period.
"Affiliate" means, as to any Person, any other Person (a) that
directly or indirectly, through one or more intermediaries, controls or
is controlled by, or is under common control with, such Person; (b) that
directly or indirectly beneficially owns or holds ten percent or more of
any class of voting stock of such Person; or (c) ten percent or more of
the voting stock of which is directly or indirectly beneficially owned or
held by the Person in question. The term "control" means the possession,
directly or indirectly, of the power to direct or cause direction of the
management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise. Notwithstanding the
foregoing, (i) in no event shall the Agent or any Bank be deemed an
Affiliate of Borrower or any of its Subsidiaries and (ii) for purposes of
(A) the definition of the term "Net Proceeds" and (B) Sections 7.6 and
8.1(f), the Chatterjee Group shall not be deemed to be an Affiliate of
Falcon Drilling or any of its Subsidiaries if (but only if) the
Chatterjee Group (1) directly and indirectly beneficially owns and holds
no more than 50% of the voting stock of Falcon Drilling and (2) does not
directly or indirectly control the election of a majority of the
directors of Falcon Drilling or any of its Subsidiaries.
"Agent" means as specified in the initial paragraph of this
Agreement.
"Agreement" means this Credit Agreement and any and all amendments,
modifications, supplements, renewals, extension or restatements hereof.
"Applicable Lending Office" means for each Bank and each Type of
Loan, the Lending Office of such Bank (or of an Affiliate of such Bank)
designated for such Type of Loan below its name on the signature pages
hereof (or, with respect to a Bank that becomes a party to this Agreement
pursuant to an assignment made in accordance with Section 13.8, in the
Assignment and Acceptance executed by it) or such other office of such
Bank (or of an Affiliate of such Bank) as such Bank may from time to time
specify to Borrower and the Agent as the office by which its Loans of
such Type are to be made and maintained.
"Applicable Margin" means (a) 0.75% per annum with respect to ABR
Loans and (b) 1.75% per annum with respect to Eurodollar Loans;
"Acquisition Loans" means the "Loans" as defined in the Acquisition
Loans Credit Agreement.
"Acquisition Loans Credit Agreement" means that certain Credit
Agreement dated November 12, 1996, among Borrower, the banks named
therein, Banque Paribas, as agent for such banks, and Arab Banking
Corporation (B.S.C.), as co-agent for such banks originally relating to a
$40,000,000 Acquisition Loans Credit Facility.
"Asset Disposition" means the disposition (other than sales of
Inventory in the ordinary course of business consistent with past
practices or the grant of a Permitted Lien as security or the transfer of
a Non-Recourse Rig) of any or all of the Property of Borrower or any of
its Subsidiaries, whether by sale, conveyance, lease, transfer,
assignment, condemnation or otherwise, but excluding (a) the issuance of
Capital Stock and (b) any involuntary disposition resulting from casualty
damage to Property.
"Assignee" means as specified in Section 13.8(b).
"Assigning Bank" means as specified in Section 13.8(b).
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Bank and its Assignee and accepted by the Agent
pursuant to Section 13.8(e), in substantially the form of Exhibit A
hereto.
"Bank" and "Banks" means as specified in the initial paragraph of
this Agreement.
"Bank Parties" means the Agent, the Co-Agent (at any time a Co-
Agent has been designated by Banque Paribas), the Banks, the Required
Banks and/or any Bank.
"Bankruptcy Code" means as specified in Section 11.1(e).
"Basle Accord" means the proposals for risk-based capital framework
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as amended,
supplemented and otherwise modified and in effect from time to time, or
any replacement thereof.
"Borrower" means as specified in the initial paragraph of this
Agreement.
Borrower Member means Borrower and each other Person which is a
member of a Control Group including, or under common control with,
Borrower, within the meaning of Section 414(b) or (c) of the Code, or
4001(a)(14) of ERISA.
"Borrowing Base Account" has the meaning given to it in the
Acquisitions Loans Credit Agreement.
"Business Day" means (a) any day on which commercial banks are not
authorized or required to close in Houston, Texas, or New York, New York,
and (b) with respect to all borrowings, payments, Conversions,
Continuations, Interest Periods and notices in connection with Eurodollar
Loans, any day which is a Business Day described in clause (a) above and
which is also a day on which dealings in Dollar deposits are carried out
in the London interbank market.
"Capital Expenditures" means, for any period, expenditures
(including the aggregate amount of Capital Lease Obligations incurred
during such period) made by Falcon Drilling or any of its Subsidiaries to
acquire or construct fixed assets, plant or equipment (including
renewals, improvements or replacements) during such period and which, in
accordance with GAAP, are classified as capital expenditures.
"Capital Lease Obligations" means, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of
(or other agreement conveying the right to use) real and/or personal
Property, which obligations are classified as a capital lease on a
balance sheet of such Person under GAAP. For purposes of this Agreement,
the amount of such Capital Lease Obligations shall be the capitalized
amount thereof, determined in accordance with GAAP.
"Capital Stock" means corporate stock, partnership interests and
any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock or partnership
interests issued by any entity (whether a corporation, a partnership or
another entity) and any rights, warrants or options to acquire an equity
interest in such entity.
"Cash Proceeds" means, with respect to any Asset Disposition by any
Person, the aggregate consideration received for such Asset Disposition
by such Person in the form of cash or cash equivalents (including any
amounts of insurance or other proceeds received in connection with an
Asset Disposition), including payments in respect of deferred payment
obligations when received in the form of cash or cash equivalents (except
to the extent that such obligations are financed or sold with recourse to
such Person or any subsidiary thereof). For the purposes of this
definition, "cash or cash equivalents" shall be deemed to include, for a
period not to exceed 12 months from the related Asset Disposition,
noncash consideration received with respect to an Asset Disposition to
the extent that such noncash consideration consists of (i) publicly
traded debt securities of a Person, which securities are rated as "BBB-"
or higher by Standard and Poor's Corporation ("S&P") and "Baa3" or higher
by Moody's Investors Service, Inc. ("Moody's"), or (ii) other
indebtedness of a Person if (A) the lowest rated long-term, unsecured
debt obligation issued by such Person is rated "BBB-" or higher by S&P
and "Baa3" or higher by Moody's or (B) in the case of other indebtedness,
the payment of such other indebtedness is secured by an irrevocable
letter of credit issued by a commercial bank having capital and surplus
in excess of $100,000,000 and long term unsecured debt obligations rated
at least "A-" by S&P and "A3" by Moody's.
"Change of Control" means the existence or occurrence of any of the
following: (a) a determination by Falcon Drilling or the Agent that any
Person or group (as defined in Section 13(d)(3) or 14(d)(2) of the
Exchange Act) other than the Chatterjee Group has become the direct or
indirect beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of more than 40% of the Voting Stock of Falcon Drilling;
(b) Borrower is merged with or into or consolidated with another
corporation, and immediately after giving effect to the merger or
consolidation, less than 50% of the outstanding voting securities
entitled to vote generally in the election of directors or persons who
serve similar functions of the surviving or resulting entity are then
beneficially owned (within the meaning of Rule 13d-3 under the Exchange
Act) in the aggregate by (i) the stockholders of Falcon Drilling
immediately prior to such merger or consolidation, or (ii) if a record
date has been set to determine the stockholders of Borrower entitled to
vote on such merger or consolidation, the stockholders of Falcon Drilling
as of such record date; (c) Borrower, either individually or in
connection with one or more Subsidiaries, sells, conveys, transfers or
leases, or the Subsidiaries sell, convey, transfer or lease, all or
substantially all of the assets of Falcon Drilling and its Subsidiaries,
taken as a whole (either in one transaction or a series of related
transactions), including Capital Stock of the Subsidiaries of Falcon
Drilling, to any Person (other than a Wholly Owned Subsidiary of Falcon
Drilling); (d) the liquidation or dissolution of Borrower; or (e) the
first day on which a majority of the individuals who constitute the Board
of Directors of Falcon Drilling on the date hereof are not Continuing
Directors; provided, however, (i) the R&B Merger shall not be considered
a Change of Control and (ii) following the R&B Merger, a change in the
Board of Directors of Falcon Drilling shall in no event constitute a
Change of Control.
"Chatterjee Group" means Purnendu Chatterjee and George Soros and
any Person, other than Borrower or any Subsidiary of a Borrower, a
majority of the Capital Stock of which is beneficially owned, directly or
indirectly, by such individual(s), either individually or collectively.
"Closing Date" means the date of this Agreement as set forth on the
first page hereof.
"Co-Agent" means as specified in the initial paragraph of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"Commitment" means, as to any Bank, the obligation of such Bank to
make Loans and incur or participate in Letter of Credit Liabilities
hereunder in an aggregate principal amount at any one time outstanding up
to but not exceeding the amount set forth opposite the name of such Bank
on the signature pages hereto under the heading "Commitment" or, if such
Bank is a party to an Assignment and Acceptance, the amount set forth in
the most recent Assignment and Acceptance of such Bank, as the same may
be reduced or terminated pursuant to Section 2.13 or 11.2.
"Commitment Percentage" means, as to any Bank, the percentage
equivalent of a fraction the numerator of which is the amount of the
outstanding Commitment of such Bank (or, if such Commitment has
terminated or expired, the outstanding principal amount of its Loans and
Letter of Credit Liabilities) and the denominator of which is the
aggregate amount of the outstanding Commitments of all of the Banks (or,
if such Commitments have terminated or expired, the aggregate outstanding
principal amount of all Loans and Letter of Credit Liabilities).
"Consolidated Current Assets" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as current
assets on a consolidated balance sheet of Borrower.
"Consolidated Current Liabilities" means, at any particular time,
all amounts which, in conformity with GAAP, would be included as current
liabilities on a consolidated balance sheet of Borrower and the current
portion of Consolidated Funded Debt, exclusive of, in connection with
any calculation of Consolidated Current Liabilities during the 12-month
period immediately preceding the Maturity Date or the Revolving Loans
Maturity Date, the outstanding principal amount of the Loans or the
outstanding principal amount of the Revolving Loans, respectively.
"Consolidated Current Ratio" means, at any particular time, the
ratio of Consolidated Current Assets to Consolidated Current Liabilities.
"Consolidated Funded Debt" means, at any particular time, (a) all
Debt of Borrower and its consolidated subsidiaries which matures by its
terms, or is renewable at the option of the obligor to a date, more than
one year after the original creation of such Debt, (b) all other Debt
which would be classified as "funded indebtedness" or "long-term
indebtedness" on a consolidated balance sheet of Borrower as of such date
in accordance with GAAP, and (c) all obligations of Borrower for borrowed
money.
"Consolidated Interest Coverage Ratio" means, for any period, the
ratio of (a) EBITDA of Borrower for such period to (b) Consolidated
Interest Expense for such period.
"Consolidated Interest Expense" means, for any period, (a) all
interest on Debt of Borrower and its consolidated subsidiaries accrued
during such period, including the interest portion of payments under
Capital Lease Obligations, and (b) all other amounts which would be
classified as interest expense on a consolidated statement of income of
Borrower for such period in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income (or
loss) of Borrower for such period, determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Worth" means, at any particular time, the sum of
all amounts which, in conformity with GAAP, would be included as
stockholders' equity on a consolidated balance sheet of Borrower.
"Consolidated Tangible Net Worth" means, at any particular time,
the remainder of (a) Consolidated Net Worth minus (b) the aggregate book
value of Intangible Assets shown on a consolidated balance sheet of
Borrower.
"Continue", "Continuation" and "Continued" shall refer to the
continuation pursuant to Section 2.6 of a Eurodollar Loan as a Eurodollar
Loan from one Interest Period to the next Interest Period.
"Continuing Director" means an individual who (a) is a member of
the Board of Directors of Falcon Drilling and (b) either (i) was a member
of the Board of Directors of Falcon Drilling as of the Closing Date or
(ii) whose nomination for election or election to the Board of Directors
of Falcon Drilling was approved by a vote of at least 66 2/3% of the
directors then still in office who were either directors as of the
Closing Date or whose election or nomination for election was previously
so approved.
"Contract Rate" means as specified in Section 13.12(a).
"Convert", "Conversion" and "Converted" shall refer to a conversion
pursuant to Section 2.6 or Article 4 of one Type of Loan into the other
Type of Loan.
"Currency Hedge Agreement" means any foreign currency exchange
agreement, option or future contract or other similar agreement designed
to protect against or manage a Person's exposure to fluctuations in
foreign currency exchange rates.
"Current Date" means a date occurring no more than 30 days prior to
the Closing Date or such earlier date which is reasonably acceptable to
the Agent.
"Debt" means as to any Person at any time (without duplication):
(a) any indebtedness, liability or obligation of such Person, contingent
or otherwise, for borrowed money; (b) any indebtedness, liability or
obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments; (c) any indebtedness, liability or obligation of
such Person for all or any part of the purchase price of Property or
services or for the cost of Property constructed or of improvements
thereto (including any indebtedness, liability or obligation under or in
connection with any letter of credit related thereto), other than
accounts payable included in current liabilities incurred in respect of
Property and services purchased in the ordinary course of business; (d)
any indebtedness, liability or obligation of such Person upon which
interest charges are customarily paid (other than accounts payable
incurred in the ordinary course of business); (e) any indebtedness,
liability or obligation of such Person under conditional sale or other
title retention agreements relating to purchased Property; (f) any
indebtedness, liability or obligation of such Person issued or assumed as
the deferred purchase price of Property (other than accounts payable
incurred in the ordinary course of business); (g) any Capital Lease
Obligation or any obligation pursuant to any sale and lease-back
transaction of such Person; (h) any indebtedness, liability or obligation
of any other Person secured by (or for which the obligee thereof has an
existing right, contingent or otherwise, to be secured by) any Lien on
Property owned or acquired, whether or not any indebtedness, liability or
obligation secured thereby has been assumed, by such Person; (i) any
indebtedness, liability or obligation of such Person in respect of any
letter of credit supporting any indebtedness, liability or obligation of
any other Person; (j) the maximum fixed repurchase price of any
Redeemable Stock of such Person or, if such Person is a Subsidiary, any
preferred stock of such Person, exclusive of any Redeemable Stock or
Subsidiary preferred stock issued by a Subsidiary of Borrower and owned
by Borrower; (k) any obligation of such Person under or with respect to
any Interest Rate Protection Agreement or Currency Hedge Agreement; and
(l) any indebtedness, liability or obligation which is in economic effect
a guarantee, regardless of its characterization, with respect to any Debt
of another Person, to the extent guaranteed. For purposes of the
preceding sentence, the maximum fixed repurchase price of any Redeemable
Stock or Subsidiary preferred stock that does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Redeemable
Stock or Subsidiary preferred stock as if such Redeemable Stock or
Subsidiary preferred stock were repurchased on any date on which Debt
shall be required to be determined pursuant to the this Agreement;
provided, however, that if such Redeemable Stock or Subsidiary preferred
stock is not then permitted to be repurchased, the repurchase price shall
be the book value of such Redeemable Stock or Subsidiary preferred stock.
The amount of Debt of any Person at any date shall be (i) the outstanding
book value at such date of all indebtedness, liabilities and obligations
as described above and (ii) the maximum liability of all contingent
indebtedness, liabilities and obligations at such date.
"Debtor Relief Law" means any applicable liquidation,
conservatorship, receivership, bankruptcy, moratorium, rearrangement,
insolvency, reorganization or similar law for the relief of debtors from
time to time in effect and generally affecting the rights of creditors.
"Default" means an Event of Default or the occurrence of an event
or condition which with notice or lapse of time or both would become an
Event of Default.
"Default Rate" means, in respect of any principal of any Loan, any
Reimbursement Obligation or any other amount payable by Borrower under
this Agreement or any other Loan Document which is not paid when due
(whether at stated maturity, by acceleration or otherwise), a rate per
annum during the period commencing on the due date until such amount is
paid in full equal to the sum of 2.00% plus the Prime Rate as in effect
from time to time plus the Applicable Margin for ABR Loans; provided,
however, that if such amount in default is principal of a Eurodollar Loan
and the due date is a day other than the last day of an Interest Period
therefor, the "Default Rate" for such principal shall be, for the period
from and including the due date and to but excluding the last day of the
Interest Period therefor, 2.00% plus the interest rate for such
Eurodollar Loan for such Interest Period as provided in Section 2.4(a)
hereof, and, thereafter, the rate provided for above in this definition.
"Dollars" and "$" mean lawful money of the United States.
"Drilling Rigs" has the meaning given to it in the Acquisition
Loans Credit Agreement.
"EBITDA" means, for any period, without duplication, the sum of the
following for Borrower for such period determined on a consolidated basis
in accordance with GAAP: (a) Consolidated Net Income, plus
(b) Consolidated Interest Expense, plus (c) income and franchise taxes to
the extent deducted in determining Consolidated Net Income, plus
(d) depreciation and amortization expense and other non-cash items to the
extent deducted in determining Consolidated Net Income, minus (e) non-
cash income to the extent included in determining Consolidated Net
Income.
"Eligible Assignee" means any (i) a commercial bank or finance
company organized under the laws of the United States, or any State
thereof or the District of Columbia, and having total assets in excess of
$1,000,000,000; (ii) a savings and loan association or savings bank
organized under the laws of the United States, or any State thereof or
the District of Columbia, and having a net worth of at least
$100,000,000, calculated in accordance with generally accepted accounting
principles; (iii) any Affiliate of any Bank; (iv) a commercial bank
organized under the laws of any other country which is a member of the
OECD, or a political subdivision of any such country, and having total
assets in excess of $1,000,000,000, provided that such bank is acting
through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (v) the
central bank of any country which is a member of the OECD; or (vi) if,
but only if, any Event of Default has occurred and is continuing, any
other bank, insurance company, commercial finance company or other
financial institution approved by the Agent, such approval not to be
unreasonably withheld.
"Environmental Law" means any federal, state, local or foreign law,
statute, code or ordinance, principle of common law, rule or regulation,
as well as any Permit, order, decree, judgment or injunction issued,
promulgated, approved or entered thereunder, relating to pollution or the
protection, cleanup or restoration of the environment or natural
resources, or to the public health or safety, or otherwise governing the
generation, use, handling, collection, treatment, storage,
transportation, recovery, recycling, renewal, discharge or disposal of
Hazardous Materials, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
9601 et seq., the Superfund Amendment and Reauthorization Act of 1986,
99-499, 100 Stat. 1613, the Resource Conservation and Recovery Act of
1976, 42 U. S. C. 6901 et seq., the Occupational Safety and Health Act,
29 U S.C. 651 et seq., the Clean Air Act, 42 U.S.C. 7401 et seq., the
Clean Water Act, 33 U.S.C. 1251 et seq., the Emergency Planning and
Community Right to Know Act, 15 U.S.C., 651 et seq., the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. 300F et seq., and
the Toxic Substances Control Act, 15 U.S.C. 2601 et seq., and any state
or local counterparts.
"Environmental Liabilities" means, as to any Person, all
indebtedness, liabilities, obligations, responsibilities, Remedial
Actions, losses, damages, punitive damages, consequential damages, treble
damages, costs and expenses (including, without limitation, all
reasonable fees, disbursements and expenses of counsel, expert and
consulting fees and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any
claim or demand, by any Person, whether based in contract, tort, implied
or express warranty, strict liability or criminal or civil statute,
including any Environmental Law, Permit, order or agreement with any
Governmental Authority or other Person, arising from environmental,
health or safety conditions or the Release or threatened Release of a
Hazardous Material into the environment.
"Equity Issuance" means any issuance by Falcon Drilling or any of
its Subsidiaries of any Capital Stock of Falcon Drilling or any of its
Subsidiaries, respectively.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations and published
interpretations thereunder.
"ERISA Affiliate" means any corporation or trade or business which
is a member of a group of entities, organizations or employers of which a
Loan Party is also a member and which is treated as a single employer
within the meaning of Sections 414(b), (c), (m) or (o) of the Code.
"Eurodollar Loan" means any Loan that bears interest at a rate
based upon the Eurodollar Rate or the Adjusted Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/16 of 1%) quoted by the Reference Bank at approximately
11:00 a.m. London time (or as soon thereafter as practicable) two
Business Days prior to the first day of such Interest Period for the
offering by the Reference Bank to leading banks in the London interbank
market of Dollar deposits in immediately available funds having a term
comparable to such Interest Period and in an amount comparable to the
principal amount of the Eurodollar Loan made by the Reference Bank to
which such Interest Period relates. If the Reference Bank is not
participating in any Eurodollar Loans during any Interest Period therefor
(pursuant to Section 4.4 or for any other reason), the Eurodollar Rate
and the Adjusted Eurodollar Rate for such Loans for such Interest Period
shall be determined by reference to the amount of the Loans which the
Reference Bank would have made had it been participating in such Loans.
"Event of Default" has the meaning specified in Section 11.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Falcon Atlantic" means Falcon Atlantic Ltd., a Cayman Islands
company.
"Falcon Brazil" means Falcon Drilling do Brasil, Ltda., a Brazilian
limited liability company.
"Falcon Drilling" means as specified in the initial paragraph of
this Agreement.
"Falcon Holdings" means Falcon Drilling Holdings, L.P., a Delaware
limited partnership.
"Falcon Inland" means Falcon Inland, Inc., a Delaware corporation.
"Falcon Management" means Falcon Drilling Management, Inc., a
Delaware corporation.
"Falcon Offshore" means Falcon Offshore, Inc., a Delaware
corporation.
"Falcon Services" means Falcon Services Company, Inc., a Delaware
corporation.
"Falcon Venezuela" means Falcon Drilling de Venezuela, Inc., a
Delaware corporation.
"Falcon Workover" means Falcon Workover Company, Inc., a Delaware
corporation.
"FALRIG Offshore" means FALRIG Offshore, Inc., a Delaware
corporation.
"FALRIG Offshore GP" means FALRIG Offshore Partners, a Texas
general partnership.
"FALRIG Offshore LP" means FALRIG Offshore (USA), L.P., a Delaware
limited partnership.
"FALRIG Venezuela" means Perforaciones Falrig de Venezuela C.A., a
Venezuelan company.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided that (a) if the
day for which such rate is to be determined is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Business Day as so published on the next succeeding
Business Day, and (b) if such rate is not so published on such next
succeeding Business Day, the Federal Funds Rate for any day shall be the
average rate which would be charged to the Reference Bank on such day on
such transactions as determined by the Agent.
"Foreign Subsidiary" means Falcon Atlantic, Falcon Brasil, FALRIG
Venezuela or any other Subsidiary of Borrower which is incorporated,
organized or otherwise existing under the laws of a country other than
the United States.
"Funding Date" means the earlier to occur of the date of the making
of the initial Loan or the date of the issuance of the initial Letter of
Credit.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
statements of the Financial Accounting Standards Board and/or their
respective successors and which are applicable in the circumstances as of
the date in question. Accounting principles are applied on a "consistent
basis" when the accounting principles applied in a current period are
comparable in all material respects to those accounting principles
applied in a preceding period.
"Governmental Authority" means any nation or government, any state
or political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Governmental Requirement" means any law, statute, code, ordinance,
order, rule, regulation, judgment, decree, injunction, franchise, Permit,
certificate, license, authorization or other directive or requirement of
any federal, state, county, municipal, parish, provincial or other
Governmental Authority or any department, commission, board, court,
agency or any other instrumentality of any of them.
"Guarantee" by any Person means any indebtedness, liability or
obligation, contingent or otherwise, of such Person directly or
indirectly guaranteeing any Debt or other indebtedness, liability or
obligation of any other Person and, without limiting the generality of
the foregoing, any indebtedness, liability or obligation, direct or
indirect, contingent or otherwise, of such Person (a) to purchase or pay
(or advance or supply funds for the purchase or payment of) such Debt or
other indebtedness, liability or obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, to maintain financial
statement conditions or otherwise) or (b) entered into for the purpose of
assuring in any other manner the obligee of such Debt or other
indebtedness, liability or obligation of the payment thereof or to
protect the obligee against loss in respect thereof (in whole or in
part), provided that the term Guarantee shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning. The amount of
any Guarantee shall be deemed to be an amount equal to the stated or
determinable amount of the primary indebtedness, liability or obligation
in respect of which such Guarantee is made or, if not stated or
determinable, the maximum anticipated indebtedness, liability or
obligation in respect thereof (assuming such Person is required to
perform thereunder).
"Hazardous Material" means any substance, product, waste,
pollutant, chemical, contaminant, insecticide, pesticide, constituent or
material which is or becomes listed, regulated or addressed under any
Environmental Law, including, without limitation, asbestos, petroleum,
underground storage tanks (whether empty or containing any substance) and
polychlorinated biphenyls.
"Holder" means a Person in whose name a note evidencing Senior Debt
is registered.
"Indenture" means that certain Indenture by and among Borrower,
certain of its Subsidiaries and Texas Commerce Bank National Association,
as Trustee, dated as of January 15, 1994, relating to the Senior Fixed
Rate Notes, and any and all amendments, modifications, supplements,
renewals, extensions or restatements thereof.
"Intangible Assets" of any Person means those assets of such Person
which are (a) deferred assets, other than prepaid insurance and prepaid
taxes, (b) patents, copyrights, trademarks, tradenames, franchises,
goodwill, experimental expenses and other similar assets which would be
classified as intangible assets on a balance sheet of such Person
prepared in accordance with GAAP, and (c) unamortized debt discount and
expense.
"Intellectual Property" means any United States or foreign patents,
patent applications, trademarks, trade names, service marks, brand names,
logos and other trade designations (including unregistered names and
marks), trademark and service mark registrations and applications,
copyrights and copyright registrations and applications, inventions,
invention disclosures, protected formulae, formulations, processes,
methods, trade secrets, computer software, computer programs, source
codes, manufacturing research and similar technical information,
engineering know-how, customer and supplier information, assembly and
test data drawings or royalty rights.
"Intercreditor Agreement" means the Intercreditor Agreement in form
and substance satisfactory to the Banks and the Revolving Loans Banks
with respect to the relative priorities of Liens securing the Obligations
and the Revolving Loans Obligations.
"Interest Period" means, with respect to any Eurodollar Loan, each
period commencing on the date such Loan is made or Converted from an ABR
Loan or (if continued) the last day of the next preceding Interest Period
with respect to such Loan, and ending on the numerically corresponding
day in the first, second, third or sixth calendar month thereafter, as
Borrowers may select as provided in Section 2.9 hereof, except that each
such Interest Period which commences on the last Business Day of a
calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end
on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (a) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, if such succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day);
(b) any Interest Period which would otherwise extend beyond the Maturity
Date shall end on the Maturity Date; (c) no more than five Interest
Periods for Eurodollar Loans shall be in effect at the same time; and
(d) no Interest Period shall have a duration of less than one month and,
if the Interest Period for any Eurodollar Loans would otherwise be a
shorter period, such Loans shall not be available hereunder.
"Interest Rate Protection Agreements" means, with respect to any
Person, an interest rate swap, cap or collar agreement or similar
arrangement between such Person providing for the transfer or mitigation
of interest rate risks either generally or under specified contingencies.
"Investments" means as specified in Section 9.5.
"Issue Date" shall have the meaning specified in the Indenture.
"Issuing Bank" means Banque Paribas or (if Banque Paribas does not
wish to be the issuer of a particular Letter of Credit and another Bank
agrees to be such issuer) such other Bank as Borrower may designate from
time to time which agrees to be the issuer of such Letter of Credit.
"Kestrel" means Kestrel Offshore, Inc., a Delaware corporation.
"Letter of Credit" means any standby letter of credit issued by the
Issuing Bank for the account of Borrower pursuant to this Agreement.
"Letter of Credit Liabilities" means, at any time, the aggregate
face amount of all outstanding Letters of Credit and all unreimbursed
drawings under Letters of Credit.
"Lien" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation or other encumbrance
of any kind or nature whatsoever (including, without limitation, any
conditional sale or title retention agreement), whether arising by
contract, operation of law or otherwise.
"Loan Documents" means this Agreement, the Notes, the Term Sheet,
the Letters of Credit, any Currency Hedge Agreement or Interest Rate
Protection Agreement between Borrower and any Bank that is expressly
approved by the Agent and expressly determined by the Agent (at any time)
to be a Loan Document, and all other agreements, documents and
instruments executed and/or delivered pursuant to or in connection with
any of the foregoing, and any and all amendments, modifications,
supplements, renewals, extensions or restatements thereof.
"Loan Party" means Borrower and any other Person (if any) who is or
becomes a party to any agreement, document or instrument that Guarantees
or secures payment or performance of the Obligations or any part thereof.
"Loans" means as specified in Section 2.1(a).
"Material Adverse Effect" means any material adverse effect, or the
occurrence of any event or the existence of any condition that could
reasonably be expected to have a material adverse effect, on (a) the
business or financial condition of (i) Borrower and its Subsidiaries,
taken as a whole, or (ii) Borrower on an individual basis, (b) the
ability of Borrower to pay and perform the Obligations when due, or
(c) the validity or enforceability of any of the Loan Documents, any Lien
created or purported to be created by any of the Loan Documents or the
rights and remedies of the Agent or the Banks under any of the Loan
Documents.
"Material Contracts" means, as to Borrower or any of its
Subsidiaries, any material contract as such term is used or defined in
item 601(b)(10) of Regulation S-K promulgated by the Securities and
Exchange Commission (or in any successor regulation).
"Material Subsidiary" means any Subsidiary of Borrower that engages
in any material operations or that contributes or has contributed, during
any fiscal quarter, 1% or more of the aggregate gross revenue of Borrower
and its consolidated Subsidiaries on a consolidated basis.
"Maturity Date" means the date that is 364 days after the date
hereof.
"Maximum Rate" means, with respect to any Bank, the maximum non-
usurious interest rate (or, if the context so requires, the amount
calculated at such rate), if any, that at any time or from time to time
may be contracted for, taken, reserved, charged or received with respect
to the Loans or on other amounts, if any, payable to such Bank pursuant
to this Agreement or any other Loan Document, under laws applicable to
such Bank which are presently in effect, or, to the extent allowed by
law, under such applicable laws which may hereafter be in effect and
which allow a higher maximum non-usurious interest rate than applicable
laws now allow. The Maximum Rate shall be calculated in a manner that
takes into account any and all fees, payments and other charges in
respect of the Loan Documents that constitute interest under applicable
law. Each change in any interest rate provided for herein based upon the
Maximum Rate resulting from a change in the Maximum Rate shall take
effect without notice to Borrowers at the time of such change in the
Maximum Rate. For purposes of determining the Maximum Rate under Texas
law, the applicable rate ceiling shall be the indicated rate ceiling
described in, and computed in accordance with, Article 5069-1.04,
Vernon's Texas Civil Statutes or any successor or replacement statute;
provided, however, that, to the extent permitted by applicable law, the
Agent shall have the right to change the applicable rate ceiling from
time to time in accordance with applicable law.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by or are
required from any Loan Party or any ERISA Affiliate since 1974 and which
is covered by Title IV of ERISA.
"Net Proceeds" means, with respect to any Asset Disposition,
(a) the gross amount of cash received by Borrower or any of its
Subsidiaries from any Asset Disposition, minus (b) the amount, if any, of
all taxes paid or payable by Borrower or any of its Subsidiaries directly
resulting from such Asset Disposition (including the amount, if any,
estimated by Borrower in good faith at the time of such Asset Disposition
for taxes payable by Borrower or any of its Subsidiaries on or measured
by net income or gain resulting from such Asset Disposition), minus
(c) the out-of-pocket costs and expenses incurred by Borrower or such
Subsidiary in connection with such Asset Disposition (including brokerage
fees paid to a Person other than an Affiliate of Borrower) excluding any
fees or expenses paid to an Affiliate of Borrower, minus (d) amounts
applied to the repayment of indebtedness (other than the Obligations)
secured by a Permitted Lien on the Property subject to the Asset
Disposition. "Net Proceeds" with respect to any Asset Disposition shall
also include proceeds (after deducting any amounts specified in clauses
(b), (c) and (d) of the preceding sentence) of insurance with respect to
any actual or constructive loss of Property, an agreed or compromised
loss of Property or the taking of any Property under the power of eminent
domain and condemnation awards and awards in lieu of condemnation for the
taking of Property under the power of eminent domain. "Net Proceeds"
means, with respect to any Equity Issuance, (i) the gross amount of cash
or other consideration received from such Equity Issuance minus (ii) the
out-of-pocket costs and expenses incurred by the issuer in connection
with such Equity Issuance (including underwriting fees paid to a Person
other than an Affiliate of Borrower) excluding any fees or expenses paid
to an Affiliate of Borrower.
"Non-Material Subsidiary" means any of Falcon Holdings, Falcon
Management, Kestrel or Raptor prior to the time that such entity is or
becomes a Material Subsidiary.
"Non-Recourse Debt" means Debt or that portion of Debt (a) as to
which neither Borrower nor any of its Subsidiaries (other than an Non-
Recourse Subsidiary) (i) provides credit support pursuant to any
guaranty, undertaking, agreement, document or instrument that would
constitute Debt, (ii) is directly or indirectly liable, or
(iii) constitutes the lender, and (b) no default with respect to which
(including any rights that the holders thereof may have to take
enforcement action against an Non-Recourse Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Debt of Borrower
or any of its Subsidiaries (other than an Non-Recourse Subsidiary) to
declare a default on such other Debt or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"Non-Recourse Rig" means as defined in the Indenture.
"Non-Recourse Subsidiary" means a Subsidiary of Borrower
(i) established for the purpose of acquiring or investing in one or more
of the Non-Recourse Rigs, (ii) substantially all of the assets of which
consist of one or more of the Non-Recourse Rigs, (iii) at least 67% of
the equity interest in all the Capital Stock of which is owned directly,
or indirectly through one or more Wholly-Owned Subsidiaries, by Borrower
and, in the case of a Non-Recourse Subsidiary that has a board of
directors or similar governing body, a majority of the members of which
board of directors or similar governing body are nominees of Borrower or
such Wholly-Owned Subsidiaries, and (iv) which shall have been designated
as a Non-Recourse Subsidiary by a resolution of the Board of Directors of
Borrower. Borrower may redesignate any Non-Recourse Subsidiary to be a
Subsidiary other than a Non-Recourse Subsidiary by a resolution of the
Board of Directors of Borrower if, after giving effect to such
redesignation, Borrower could incur $1.00 of additional Debt pursuant to
Section 4.16 of the Indenture (such redesignation being deemed an
incurrence of Debt (other than Non-Recourse Debt)). Any Non-Recourse
Subsidiary shall become a Subsidiary other than a Non-Recourse Subsidiary
upon the repayment, renewal, extension, refinancing, refunding or
repurchase of the Non-Recourse Debt of such Non-Recourse Subsidiary
(other than Permitted Non-Recourse Subsidiary Refinancing Indebtedness,
as such term is defined in the Indenture). Any indebtedness incurred to
effect such renewal, extension, refinancing, refunding or repurchase
shall be deemed to be incurred on the date of such renewal, extension,
refinancing, refunding or repurchase.
"Notes" means the promissory notes of Borrower evidencing the Loans
in the form of Exhibit C hereto, and any and all amendments,
modifications, supplements, renewals, extensions or restatements thereof
and all substitutions therefor (including promissory notes issued by
Borrower pursuant to Section 13.8).
"Note Purchase Agreement" means that certain agreement by and among
Borrower, certain of its Subsidiaries and Crescent/Mach I Partners, L.P.,
dated as of February 23, 1994, relating to the Senior Floating Rate
Notes, and any and all amendments, modifications, supplements, renewals,
extensions or restatements thereof.
"OECD" means the Organization for Economic Cooperation and
Development.
"Obligations" means (a) any and all indebtedness, liabilities and
obligations of Borrower and the other Loan Parties, and/or any of them,
to the Agent, the Issuing Bank and/or the Banks, and/or any of them,
evidenced by and/or arising pursuant to any of the Loan Documents, now
existing or hereafter arising, whether direct, indirect, related,
unrelated, fixed, contingent, liquidated, unliquidated, joint, several or
joint and several, including, without limitation, (i) the obligations of
Borrower to repay the Loans and the Reimbursement Obligations, to pay
interest on the Loans and the Reimbursement Obligations (including,
without limitation, interest accruing after any, if any, implementation
of or filing under any Debtor Relief Law) and to pay all fees,
indemnities, costs and expenses (including attorneys' fees) provided for
in the Loan Documents, and (ii) the indebtedness constituting the Loans,
the Reimbursement Obligations and such fees, indemnities, costs and
expenses, and (b) the indebtedness, liabilities and obligations of
Borrower under any and all Interest Rate Protection Agreements and
Currency Hedge Agreements that it may enter into with any Bank that are
expressly approved by the Agent and expressly determined by the Agent (at
any time) to be Loan Documents.
"Operating Lease" means, with respect to any Person, any lease,
rental or other agreement for the use by that Person of any Property
which is not a Capital Lease Obligation.
"Outstanding Credit" means, at any particular time, the sum of
(a) the outstanding principal amount of the Loans, plus (b) the Letter of
Credit Liabilities.
"Payor" means as specified in Section 3.4.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Pension Plan" means an employee pension benefit plan as defined in
Section 3(2) of ERISA (including a Multiemployer Plan) which is subject
to the funding requirements under Section 302 or 4212 of ERISA or Section
412 of the Code, in whole or in part, and which is established or
maintained or contributed to currently or at any time within the six
years immediately preceding the Closing Date or, in the case of a
Multiemployer Plan, at any time since September 2, 1974, by Borrower or
any ERISA Affiliate for employees of Borrower or any ERISA Affiliate.
"Peril" means as specified in Section 8.5.
"Permits" means all permits, certificates, approvals, orders,
licenses and other authorizations.
"Permitted Capital Expenditures" means as specified in Section
10.6.
"Permitted Liens" means:
(a) Liens disclosed on Schedule 1.1(a) hereto;
(b) Liens securing payment and performance of the
"Obligations" as that term is defined in each of the Revolving
Loans Credit Agreement and the Acquisition Loans Credit Agreement.
(c) Encumbrances consisting of easements, zoning
restrictions or other restrictions on the use of real Property or
imperfections to title that (i) do not (individually or in the
aggregate) materially affect the value of the Property encumbered
thereby or materially impair the ability of Borrower or its
Subsidiaries to use such Property in their respective businesses,
and none of which is violated in any material respect by existing
or proposed structures or land use and (ii) were entered into in
the ordinary course of business and could not have a Material
Adverse Effect;
(d) Liens for taxes, assessments or other governmental
charges that are not delinquent or which are being contested in
good faith by appropriate proceedings, which proceedings have the
effect of preventing the forfeiture or sale of the Property subject
to such Liens, and for which adequate reserves have been
established;
(e) Liens of mechanics, materialmen, warehousemen,
carriers, landlords, suppliers or vendors imposed by law or arising
by operation of law, or Liens for master's or crew's wages imposed
by law or arising by operation of law, or other similar statutory
or maritime Liens, securing obligations that are not yet due and
are incurred in the ordinary course of business or which are being
contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of
the Property subject to such Liens, and for which adequate reserves
have been established;
(f) Liens resulting from good faith deposits to secure
payment of workmen's compensation or other social security programs
or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, contracts (other than for payment of
Debt), or leases, all in the ordinary course of business;
(g) Liens to secure Debt incurred for the purpose of
financing all or a part of the purchase price or construction cost
of Property (including the cost of upgrading refurbishing rigs or
drillships) acquired or constructed after the Closing Date;
provided that (i) the principal amount of Debt secured by such
Liens shall not exceed 66 % of the lesser of cost or fair market
value of the assets or Property so acquired or constructed and (ii)
such Liens shall not encumber any other assets or Property of
Borrower and shall attach to such Property within 120 days of the
construction or acquisition of such assets or Property;
(h) Easements, rights-of-way, restrictions and other Liens
and imperfections to title that are approved by the Agent;
(i) Liens on Property of a Person existing at the time such
Person is merged or consolidated with or into Borrower or any of
its Subsidiaries pursuant to a transaction permitted by this
Agreement (and not incurred as a result of, or in anticipation of,
such transaction), provided that such Lien relates solely to such
Property;
(j) Liens on Property acquired after the Closing Date and
existing at the time of the acquisition thereof (and not incurred
as a result of, or in anticipation of, such transaction), provided
that such Lien relates solely to such Property;
(k) Liens securing Capital Lease Obligations not to exceed
$30,000,000 in aggregate principal amount (as to Borrower and its
Subsidiaries) at any time outstanding;
(l) any charter or lease of equipment entered into in the
ordinary course of business for full and fair consideration;
(m) leases or subleases of real property to other Persons
in the ordinary course of business for full and fair consideration;
(n) Liens on the Capital Stock of a Non-Recourse Subsidiary
securing loans made to such Non-Recourse Subsidiary;
(o) Liens on Property other than Collateral referred to in
item (a) above of this definition securing Debt in an aggregate
principal amount not to exceed $20,000,000 at any time outstanding;
(p) Liens securing that Debt permitted by Section 9.1
hereof; and
(q) Any extension, renewal or replacement of any of the
foregoing, provided that Liens permitted hereunder shall not be
extended or spread to cover any additional indebtedness or
Property;
provided, however, that (i) none of the Permitted Liens (except those in
favor of the Agent) may attach or relate to the Capital Stock of or any
other ownership interest in Borrower or any Subsidiary (other than a Non-
Recourse Subsidiary) of Borrower, (ii) none of the Permitted Liens,
except the Permitted Liens referred to in clauses (b), (d) and (e)
preceding, may attach or relate to any of the "Collateral" as defined in
the Acquisition Loans Credit Agreement, and (iii) none of the Permitted
Liens referred to in subclause (ii) of clause (b) preceding may have
priority equal or prior to the Liens in favor of the Agent as security
for the Obligations except such Permitted Liens referred to in such
subclause (ii) which attach or relate to the Receivables of Borrower.
"Permitted Refinancing Debt" means Debt of Borrower or any of its
Subsidiaries incurred in exchange for, or the net proceeds of which are
used to renew, extend, refinance, refund or repurchase, outstanding Debt
of such Person which outstanding Debt was incurred in accordance with, or
is otherwise permitted by, the terms of this Agreement; provided that
(a) if the Debt being renewed, extended, refinanced, refunded or
repurchased is pari passu with or subordinated in right of payment to the
Obligations or any part thereof, then such new Debt shall be pari passu
with or subordinated in right of payment to, as the case may be, the
Obligations (or the applicable part thereof) at least to the same extent
as the Debt being renewed, extended, refinanced, refunded or repurchased,
(b) such new Debt is scheduled to mature later than the Debt being
renewed, extended, refinanced, refunded or repurchased, (c) such new Debt
has an Average Life (as such term is defined in the Indenture) at the
time such Debt is incurred that is greater than the Average Life of the
Debt being renewed, extended, refinanced, refunded or repurchased, and
(d) such new Debt is in an aggregate principal amount (or, if such Debt
is issued at a price less than the principal amount thereof, the
aggregate amount of gross proceeds therefrom is) not in excess of the
aggregate principal amount then outstanding of the Debt being renewed,
extended, refinanced, refunded or repurchased (or if the Debt being
renewed, extended, refinanced, refunded or repurchased was issued at a
price less than the principal amount thereof, then not in excess of the
amount of liability in respect thereof determined in accordance with
GAAP).
"Person" means any individual, corporation, trust, association,
company, partnership, joint venture, Governmental Authority or other
entity.
"Plan" means any employee benefit plan as defined in Section 3(3)
of ERISA established or maintained or contributed to by any Loan Party or
any ERISA Affiliate, including any Pension Plan.
Preferred Ship Mortgages means (a) that certain First Preferred
Fleet Mortgage dated as of November 12, 1996, executed by Borrower, as
owner and mortgagor, to and in favor of BANK ONE, TEXAS, N.A., as
mortgagee, which creates a Lien on certain of the Drilling Rigs as
security for the Obligations, and any and all amendments, modifications,
and supplements, renewals, extensions, or restatements thereof, and (b)
and any other mortgage or other security agreement which creates a Lien
on any Drilling Rig as security for the Obligations.
"Prime Rate" means, at any time, the rate of interest per annum
then most recently established by Citibank, N.A. as its highest
commercial prime rate, which rate may not be the lowest rate of interest
charged by Citibank, N.A. to its commercial borrowers. Each change in
any interest rate provided for herein based upon the Prime Rate resulting
from a change in the Prime Rate shall take effect without notice to
Borrower at the time of such change in the Prime Rate.
"Principal Office" means the principal office of the Agent,
presently located at 1200 Smith Street, Suite 3100, Houston, Texas 77002.
"Proforma Interest Coverage Ratio" means, as of the date of the
transaction giving rise to the need to calculate such ratio (the
"Transaction Date"), the ratio of (a) the aggregate EBITDA for the four
fiscal quarters preceding the Transaction Date to (b) the aggregate
Consolidated Interest Expense that is anticipated to accrue during the
fiscal quarter in which the Transaction Date occurs and the three fiscal
quarters immediately subsequent thereto (based upon the proforma amount
and maturity of, and interest payments in respect of, Debt expected by
Borrower to be outstanding on the Transaction Date and reasonably
anticipated by Borrower to be outstanding from time to time during such
period). In determining such ratio, (i) interest rates in effect on the
Transaction Date shall remain in effect throughout the relevant period,
except that if Borrower is a party to any Interest Rate Protection
Agreements that would have the effect of changing the interest rate on
the Debt of such Person proposed to be incurred during a period (or
portion thereof), such resulting rate shall be used for the period or
portion thereof, (ii) any Consolidated Interest Expense of Borrower with
respect to Debt incurred or retired by Borrower (excluding Non-Recourse
Debt) during the fiscal quarter in which the Transaction Date occurs
shall be calculated as if such Debt was so incurred or retired on the
first day of the fiscal quarter in which the Transaction Date occurs,
(iii) if the transaction giving rise to the need to calculate the
Proforma Interest Coverage Ratio would have the effect of increasing or
decreasing EBITDA in the future and if such increase or decrease is
readily quantifiable and is directly attributable to such transaction,
EBITDA shall be calculated on a proforma basis as if such transaction had
occurred on the first day of the four fiscal quarters preceding the
fiscal quarter in which the Transaction Date occurs, and (iv) if Borrower
shall have sold any material portion of its assets during such period,
EBITDA for such period shall be reduced by an amount equal to the EBITDA
(if positive), or increased by an amount equal to the EBITDA (if
negative), directly attributable to the assets which were sold for such
period calculated on a proforma basis as if such asset sale and any
related retirement of Debt had occurred on the first day of such quarter.
As used in this definition, "Borrower" shall mean Borrower and its
consolidated Subsidiaries, excluding any Non-Recourse Subsidiaries.
"Prohibited Transaction" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Code.
"Property" means property of all kinds, real, personal or mixed,
tangible or intangible (including, without limitation, all rights
relating thereto), whether owned or acquired on or after the Closing
Date.
"Quarterly Date" means the last day of each March, June, September
and December of each year, the first of which shall be the first such day
after the Closing Date.
"R&B Merger" means the proposed combination of the Borrower with
Reading & Bates Corporation, which combination will be effected by
merging one subsidiary of R&B Falcon Corporation into Borrower and
another Subsidiary of R&B Falcon Corporation into Reading & Bates
Corporation, following which Borrower and Reading & Bates Corporation
will be wholly owned subsidiaries of R&B Falcon Corporation, and the
former shareholders of Borrower and Reading & Bates Corporation will own
all of the outstanding shares of R&B Falcon Corporation.
"R&B Option" means the option to purchase shares of common stock of
the Borrower granted to Reading & Bates Corporation pursuant to that
certain FDC Corporation Stock Option Agreement dated July 10, 1997
between Borrower and Reading & Bates Corporation.
"Raptor" means Raptor Exploration Co., Inc., a Delaware
corporation.
"Receivables" means, as at any date of determination thereof, all
accounts (as such term is defined in the UCC) of Borrower and includes,
without limitation, the unpaid portion of the obligation, as stated on
the respective invoice, or, if there is no invoice, other writing, of a
customer of Borrower in respect of services rendered or inventory sold
and shipped by such Person.
"Redeemable Stock" means, with respect to any Person, any equity
security that, by its terms or otherwise, is required to be redeemed,
purchased or paid by the issuer thereof, or is redeemable, transferable
or payable at the option of the holder thereof, at any time prior to
January 15, 2002, or is exchangeable into Debt of such Person or any of
its Subsidiaries.
"Reference Bank" means Banque Paribas.
"Register" means as specified in Section 13.8(d).
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from
time to time.
"Regulatory Change" means, with respect to any Bank, any change
after the Closing Date in United States federal, state or foreign laws or
regulations (including Regulation D) or the adoption or making after such
date of any interpretations, directives or requests applying to a class
of banks including such Bank of or under any United States federal or
state, or any foreign, laws or regulations (whether or not having the
force of law) by any Governmental Authority charged with the
interpretation or administration thereof.
"Reimbursement Obligation" means the obligation of Borrower to
reimburse the Issuing Bank for any drawing under a Letter of Credit.
"Release" means, as to any Person, any release, spill, emission,
leaking, pumping, injection, deposit, disposal, disbursement, leaching or
migration of Hazardous Materials into the indoor or outdoor environment
or into or out of Property owned by such Person, including, without
limitation, the movement of Hazardous Materials through or in the air,
soil, surface water or ground water.
"Remedial Action" means all actions required to (a) cleanup,
remove, respond to, treat or otherwise address Hazardous Materials in the
indoor or outdoor environment, (b) prevent the Release or threat of
Release or minimize the further Release of Hazardous Materials so that
they do not migrate or endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment, (c) perform studies and
investigations on the extent and nature of any actual or suspected
contamination, the remedy or remedies to be used or health effects or
risks of such contamination, or (d) perform post-remedial monitoring,
care or remedy of a contaminated site.
"Required Banks" means, at any date of determination, Banks having
in the aggregate at least 75% (in Dollar amount) of the aggregate amount
of the outstanding Commitments (or, if such Commitments have terminated
or expired, the aggregate outstanding principal amount of the Loans and
the aggregate Letter of Credit Liabilities).
"Required Payment" means as specified in Section 3.4.
"Replacement Asset" means a Property or asset that, as determined
by the Board of Directors of Borrower as evidenced by a resolution of its
Board of Directors, is used or is useful in a business related, ancillary
or complementary to the business of Borrower and its Subsidiaries on the
Closing Date.
"Reportable Event" means any of the events set forth in Section
4043 of ERISA.
"Reserve Requirement" means, for any Eurodollar Loan of any Bank
for any Interest Period therefor, the maximum rate at which reserves
(including any marginal, supplemental or emergency reserves) are required
to be maintained during such Interest Period under any regulations of the
Board of Governors of the Federal Reserve System (or any successor) by
such Bank for deposits exceeding $1,000,000,000 against "Eurocurrency
Liabilities" as such term is used in Regulation D. Without limiting the
effect of the foregoing, the Reserve Requirement shall reflect any other
reserves required to be maintained by such member banks by reason of any
Regulatory Change against (a) any category of liabilities which includes
deposits by reference to which the Eurodollar Rate or the Adjusted
Eurodollar Rate is to be determined, or (b) any category of extensions of
credit or other assets which include Eurodollar Loans.
"Responsible Officer" means, as to any Loan Party, the chief
financial officer, vice president of finance, chief operating officer or
chief executive officer of such Person.
"Restricted Payment" means (a) any dividend or other distribution
(whether in cash, Property or obligations), direct or indirect, on
account of (or the setting apart of money for a sinking or other
analogous fund for) any shares of any class of Capital Stock of Borrower
or any of its Subsidiaries now or hereafter outstanding, except a
dividend payable solely in shares of that class of stock to the holders
of that class; (b) any redemption, conversion, exchange, retirement,
sinking fund or similar payment, purchase or other acquisition for value,
direct or indirect, of any shares of any class of Capital Stock of
Borrower or any of its Subsidiaries now or hereafter outstanding; (c) any
payment or prepayment of principal of, premium, if any, or interest on,
or any redemption, conversion, exchange, purchase, retirement or
defeasance of, or payment with respect to, any Subordinated Debt or any
Senior Debt; (d) any loan, advance or payment (pursuant to a tax sharing
agreement or otherwise) to any shareholder of Borrower or any of its
Subsidiaries; and (e) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of Capital Stock of Borrower or any of its
Subsidiaries now or hereafter outstanding.
"Revolving Loans" means the "Loans" as such term is defined in the
Revolving Loans Credit Agreement.
"Revolving Loans Agent" means the "Agent" as such term is defined
in the Revolving Loans Credit Agreement.
"Revolving Loans Banks" means the "Banks" as such term is defined
in the Revolving Loans Credit Agreement.
"Revolving Loans Credit Agreement" means that certain Credit
Agreement dated as of November 12, 1996, among Borrower, certain
Subsidiaries of Borrower, the banks named therein, Banque Paribas, as
agent for such banks, and Arab Banking Corporation (B.S.), as co-agent
for such banks.
"Revolving Loans Documents" means the "Loan Documents" as such term
is defined in the Revolving Loans Credit Agreement.
"Revolving Loans Maturity Date" means the "Maturity Date" as such
term is defined in the Revolving Loans Credit Agreement.
"Revolving Loans Obligations" means the "Obligations" as such term
is defined in the Revolving Loans Credit Agreement.
"Senior Debt" means the Debt of Borrower under the Senior Debt
Documents.
"Senior Debt Documents" means the Senior Notes, the Indenture, the
Series 1996 Indenture, the Note Purchase Agreement, the Subsidiary Senior
Note Guaranties, all agreements, documents and instruments now or
hereafter executed by Borrower or any of its Subsidiaries and/or
delivered to the trustee pursuant to the Indenture or to any Holder
pursuant to the Indenture, the Series 1996 Indenture, the Note Purchase
Agreement or otherwise, and any and all amendments, modifications,
supplements, renewals, extensions or restatements thereof.
"Senior Fixed Rate Notes" means the 9 % Series B Notes due 2001, if
any, issued by Borrower, and any and all amendments, modifications,
supplements, renewals, extensions or restatements of such Senior Fixed
Rate Notes.
"Senior Floating Rate Notes" means the Senior Floating Rate Notes
due January 15, 2001, issued by Borrower pursuant to the Note Purchase
Agreement or otherwise, and any and all amendments, modifications,
supplements, renewals, extensions or restatements of such Senior Floating
Rate Notes.
"Senior Note Guarantors" means Falcon Offshore, Falcon Drilling
Management, Inc., Falcon Rig Management Company, Inc., Falcon Rig
(Liberia), Ltd., Falcon Drilling Holdings, L.P., FALRIG Offshore, Kestrel
Offshore, Inc., Falcon Workover Company, Inc., Raptor Exploration
Company, Inc., FALRIG Offshore (USA), L.P. and FALRIG Offshore Partners
and any other Subsidiary of Borrower which Guarantees Borrower's
obligations with respect to any Senior Note pursuant to the terms of the
Indenture, the Note Purchase Agreement or otherwise.
"Senior Notes" means, collectively, the Senior Fixed Rate Notes,
the Senior Floating Rate Notes and the Series 1996 Notes.
"Senior Subordinated Debt" means the Debt of Borrower under the
Senior Subordinated Debt Documents.
"Senior Subordinated Debt Documents" means the Senior Subordinated
Notes, the Senior Subordinated Notes Indenture, all agreements, documents
and instruments now or hereafter executed by Borrower or any of its
Subsidiaries and/or delivered to the Trustee pursuant to the Senior
Subordinated Notes Indenture or to any Senior Subordinated Notes Holder
pursuant to the Senior Subordinated Notes Indenture or otherwise, and any
and all amendments, modifications, supplements, renewals, extensions or
restatements thereof.
"Senior Subordinated Notes" means those certain 12 1/2% Series B
Senior Subordinated Notes due 2005 in the aggregate principal amount of
$50,000,000 issued pursuant to the terms of the Senior Subordinated Notes
Indenture.
"Senior Subordinated Notes Holder" means a Person in whose name a
Senior Subordinated Note is registered.
"Senior Subordinated Notes Indenture" means that certain Indenture
by and between Borrower, as Issuer and Texas Commerce Bank National
Association, as Trustee, dated as of March 15, 1995, relating to the
Senior Subordinated Notes.
"Series B Notes" means the 9 % Series B Notes due 2001, if any,
issued by Borrower pursuant to the Indenture or otherwise.
"Series 1996 Indenture" means the Indenture dated as of March 1,
1996, between Borrower and Bank One, Texas, N.A., pursuant to which the
Series 1996 Notes have been issued.
"Series 1996 Notes" means the 8 % Series B Notes due 2003 issued by
Borrower pursuant to the Series 1996 Indenture, and any and all
amendments, modifications, supplements, renewals, extensions or
restatements thereof.
"Solvent" means, with respect to any Person as of the date of any
determination, that on such date (a) the fair value of the Property of
such Person (both at fair valuation and at present fair saleable value)
is greater than the total liabilities, including, without limitation,
contingent liabilities, of such Person, (b) the present fair saleable
value of the assets of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its debts as
they become absolute and matured, (c) such Person is able to realize upon
its assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that
it will, incur debts or liabilities beyond such Person's ability to pay
as such debts and liabilities mature, and (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's Property would constitute
unreasonably small capital after giving due consideration to current and
anticipated future capital requirements and current and anticipated
future business conduct and the prevailing practice in the industry in
which such Person is engaged. In computing the amount of contingent
liabilities at any time, such liabilities shall be computed at the amount
which in light of the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual
or matured liability.
"Subordinated Debt" means any Debt of Borrower or any of its
Subsidiaries which is, by its terms, subordinated in any manner (as to
payment or collection) to any other Debt of any such Person and includes,
without limitation, the Senior Subordinated Debt.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the
outstanding shares of stock, partnership interests or other ownership
interests having by the terms thereof ordinary voting power to elect a
majority of the board of directors (or Persons performing similar
functions) of such corporation, partnership or entity (irrespective of
whether or not at the time, in the case of a corporation, stock of any
other 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 directly or indirectly owned or controlled by such Person or one or
more of its Subsidiaries or by such Person and one or more of its
Subsidiaries.
"Subsidiary Senior Note Guaranties" means the obligations of the
Senior Note Guarantors under the Indenture and the Note Purchase
Agreement pursuant to which the Senior Note Guarantors guarantee payment
of the Senior Fixed Rate Notes and the Senior Floating Rates.
"Term Sheet" means that certain letter agreement dated August 27,
1997 containing a "Summary of Terms" as executed by Banque Paribas and
agreed to and accepted by Borrower as of August 27, 1997.
"Type" means any type of Loan (i.e., an ABR Loan or an Eurodollar
Loan).
"UCC" means the Uniform Commercial Code as in effect in the State
of New York, Texas, Louisiana or any other jurisdiction, as may be
applicable to or in connection with any Lien on any Property created
pursuant to any Security Document.
"UCP" means as specified in Section 2.14(b).
"United States" means the United States of America.
"Voting Stock" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling the holders
thereof (whether at all times or at the times that such class of Capital
Stock has voting power by reason of the happening of any contingency) to
vote in the election of members of the board of directors or comparable
body of such Person.
"Wholly-Owned Subsidiary" means, with respect to any Person, a
Subsidiary of such Person all of whose outstanding Capital Stock (other
than directors' qualifying shares, if any) shall at the time be owned by
such Person and/or one or more of its Wholly-Owned Subsidiaries.
Section 1.2 Other Definitional Provisions. All definitions
contained in this Agreement are equally applicable to the singular and
plural forms of the terms defined. The words "hereof", "herein", and
"hereunder" and words of similar import referring to this Agreement refer
to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified, all Article and Section
references pertain to this Agreement. Terms used herein that are defined
in the UCC, unless otherwise defined herein, shall have the meanings
specified in the UCC.
Section 1.3 Accounting Terms and Determinations.
(a) All accounting terms not specifically defined herein
shall be construed in accordance with GAAP consistent with such
accounting principles applied in the preparation of the audited
financial statements referred to in Section 7.2(a). All financial
information delivered to the Agent pursuant to Section 8.1 shall be
prepared in accordance with GAAP applied on a basis consistent with
such accounting principles applied in the preparation of the
audited financial statements referred to in Section 7.2(a) or in
accordance with Section 8.7.
(b) Borrower shall deliver to the Agent and the Banks at
the same time as the delivery of any annual, quarterly or monthly
financial statement under Section 8.1 (i) a description in
reasonable detail of any material variation between the application
of GAAP employed in the preparation of the next preceding annual,
quarterly or monthly financial statements as to which no objection
has been made in accordance with the last sentence of subsection
(a) above, and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of
compliance with the covenants set forth in this Agreement
(including Article 10 hereof), Borrower will not change the last
day of its fiscal year from December 31, or the last days of the
first three fiscal quarters in each of its fiscal years from that
existing on the Closing Date.
Section 1.4 Financial Covenants and Reporting. The financial
covenants contained in Article 10 (including the defined terms used
therein) shall be calculated on a consolidated basis for Borrower
exclusive of any Non-Recourse Subsidiary, notwithstanding anything to the
contrary contained in this Agreement.
ARTICLE 2
Loans
Section 2.1 Commitments.
(a) Loans. Subject to the terms and conditions of this
Agreement, each Bank severally agrees to make one or more loans
(the "Loans") to Borrower from time to time from and including the
Closing Date to but excluding the Maturity Date up to but not
exceeding the amount of such Bank's Commitment as then in effect;
provided, however, that the Outstanding Credit shall not at any
time exceed the Commitments. Subject to the foregoing limitations
and the other terms and conditions of this Agreement, Borrower may
borrow, repay and reborrow the Loans hereunder.
(b) Continuation and Conversion of Loans. Subject to the
terms and conditions of this Agreement, Borrowers may borrow the
Loans as ABR Loans or Eurodollar Loans and, until the applicable
Maturity Date, Borrower may Continue Eurodollar Loans or Convert
Loans of one Type into Loans of the other Type.
(c) Lending Offices. Loans of each Type made by each Bank
shall be made and maintained at such Bank's Applicable Lending
Office for Loans of such Type.
(d) Limitations. Notwithstanding any other provision of
this Agreement, Borrower shall not be entitled to make any
borrowing hereunder or in any way utilize the Commitments hereunder
unless the Outstanding Credit as defined in the Revolving Loans
Credit Agreement equals $25,000,000 and the "Outstanding Credit" as
defined in the Acquisition Loans Credit Agreement equals
$60,000.00.
Section 2.2 Notes. The Loans made by each Bank shall be evidenced
by a single promissory note made by Borrower in substantially the form of
Exhibit B hereto, dated the Closing Date, payable to the order of such
Bank in a principal amount equal to its Commitment as originally in
effect and otherwise duly completed. Each Bank is hereby authorized by
Borrower to endorse on the schedule (or a continuation thereof) attached
to the Note of such Bank, to the extent applicable, the date, amount and
Type of and the Interest Period for each Loan made by such Bank to
Borrower hereunder and the amount of each payment or prepayment of
principal of such Loan received by such Bank, provided that any failure
by such Bank to make any such endorsement shall not affect the
obligations of Borrower under such Note or this Agreement in respect of
such Loan.
Section 2.3 Repayment of Loans. Borrower shall pay to the Agent
for the account of each Bank the outstanding principal of the Loans (and
the outstanding principal of the Loans shall be due and payable) on the
Maturity Date.
Section 2.4 Interest.
(a) Interest Rate. Borrower shall pay to the Agent for the
account of each Bank interest on the unpaid principal amount of
each Loan made by such Bank for the period commencing on the date
of such Loan to but excluding the date such Loan shall be paid in
full, at the following rates per annum:
(i) during the periods such Loan is an ABR Loan, the
ABR Rate plus the Applicable Margin; and
(ii) during the periods such Loan is a Eurodollar
Loan, the Eurodollar Rate plus the Applicable Margin.
(b) Payment Dates. Accrued interest on the Loans shall be
due and payable as follows:
(i) in the case of ABR Loans, on each Quarterly Date;
(ii) in the case of each Eurodollar Loan, on the last
day of the Interest Period with respect thereto and, in the
case of an Interest Period greater than three months, at
three-month intervals after the first day of such Interest
Period;
(iii) upon the payment or prepayment of any Loan or the
Conversion of any Loan to a Loan of the other Type (but only
on the principal amount so paid, prepaid, or Converted); and
(iv) on the Maturity Date.
(c) Default Interest. Notwithstanding the foregoing,
Borrower will pay to the Agent for the account of each Bank
interest at the applicable Default Rate on any principal of any
Loan made by such Bank, any Reimbursement Obligation and (to the
fullest extent permitted by law) on any other amount payable by
Borrower (including, without limitation, an amount required to be
prepaid pursuant to Section 2.7, but excluding unmatured interest)
under this Agreement or any other Loan Document to or for the
account of such Bank, which is not paid in full when due (whether
at stated maturity, by acceleration or otherwise), for the period
from and including the due date thereof to but excluding the date
the same is paid in full. Interest payable at the Default Rate
shall be payable from time to time on demand.
Section 2.5 Borrowing Procedure. Borrower shall give the Agent
notice of each borrowing hereunder in accordance with Section 2.9. Not
later than 11:00 a.m. (Houston, Texas time) on the date specified for
each borrowing hereunder, each Bank will make available the amount of the
Loan to be made by it on such date to the Agent, at the Principal Office,
in immediately available funds, for the account of Borrower. The amount
so received by the Agent shall, subject to the terms and conditions of
this Agreement, be made available to Borrower by wire transfer of
immediately available funds to Borrower s bank account # 1884879600 at
Bank One, Texas N.A., Houston, Texas (or to another account of Borrower
specified by it which is acceptable to the Agent) no later than 1:00 p.m.
Section 2.6 Optional Prepayments, Conversions and Continuations of
Loans. Subject to Section 2.7, Borrower shall have the right from time
to time to prepay the Loans, or to Convert all or part of a Loan of one
Type into a Loan of another Type or to Continue Eurodollar Loans;
provided that: (a) Borrower shall give the Agent notice of each such
prepayment, Conversion or Continuation as provided in Section 2.9,
(b) Eurodollar Loans may only be Converted on the last day of the
Interest Period, and (c) except for Conversions of Eurodollar Loans into
ABR Loans, no Conversions or Continuations shall be made while a Default
has occurred and is continuing. Borrower shall not make any payment of
principal on the Revolving Loans or the Acquisition Loans at any time
there is an outstanding principal balance on any Loan.
Section 2.7 Mandatory Prepayments. If at anytime the Outstanding
Credit exceeds the Commitments at such time, within seven days after the
occurrence thereof Borrower shall pay to the Agent the amount of such
excess as a prepayment of the Loans.
Section 2.8 Minimum Amounts. Except for Conversions and
prepayments pursuant to Section 2.7 and Article 4, each borrowing, each
Conversion and each prepayment of principal of the Loans shall be in an
amount at least equal to $1,000,000 or an integral multiple thereof
(borrowings, prepayments or Conversions of or into Loans of different
Types or, in the case of Eurodollar Loans, having different Interest
Periods at the same time hereunder shall be deemed separate borrowings,
prepayments and Conversions for purposes of the foregoing, one for each
Type, or Interest Period), provided, that no minimum prepayment amount
shall exist with respect to the Loans.
Section 2.9 Certain Notices. Notices by Borrower to the Agent of
terminations or reductions of Commitments, of borrowings, Conversions,
Continuations and prepayments of Loans and of the duration of Interest
Periods shall be irrevocable and shall be effective only if received by
the Agent not later than 11:00 a.m. (Houston, Texas, time) on the
Business Day prior to the date of the relevant termination, reduction,
borrowing, Conversion, Continuation or prepayment or the first day of
such Interest Period specified below:
Number of
Notice Business
Days Prior
Termination or reductions of Commitments 3
Borrowing of Loans which are ABR Loans 1
Borrowing of Loans which are Eurodollar Loans 3
Conversions or Continuations of Loans 3
Prepayments of Revolving Credit Loans 1
Each such notice of termination or reduction shall specify the amount of
the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or prepayment shall specify the Loans
to be borrowed, Converted, Continued or prepaid and the amount (subject
to Section 2.8 hereof) and Type of the Loans to be borrowed, Converted,
Continued or prepaid (and, in the case of a Conversion, the Type of Loans
to result from such Conversion) and the date of borrowing, Conversion,
Continuation or prepayment (which shall be a Business Day). Notices of
borrowings, Conversions, Continuations or prepayments shall be in the
form of Exhibit D hereto, appropriately completed as applicable. Each
such notice of the duration of an Interest Period shall specify the Loans
to which such Interest Period is to relate. The Agent shall promptly
notify the Banks of the contents of each such notice. In the event
Borrower fails to select the Type of Loan, or the duration of any
Interest Period for any Eurodollar Loan, within the time period and
otherwise as provided in this Section 2.9, such Loan (if outstanding as
an Eurodollar Loan) will be automatically Converted into an ABR Loan on
the last day of the preceding Interest Period for such Loan or (if
outstanding as an ABR Loan) will remain as, or (if not then outstanding)
will be made as, an ABR Loan. Borrower may not borrow any Eurodollar
Loans, Convert any Loans into Eurodollar Loans or Continue any Loans as
Eurodollar Loans if the interest rate for such Eurodollar Loans would
exceed the Maximum Rate.
Section 2.10 Use of Proceeds. The proceeds of the Loans shall
be used by Borrower for general corporate purposes, including asset
acquisition and capital expenditure financing. None of the proceeds of
any Loan will be used to acquire any security in any transaction that is
subject to Section 13 or 14 of the Securities Exchange Act of 1934, as
amended.
Section 2.11 Commitment Fee and Other Fees. Borrower agrees
to pay to the Agent for the account of each Bank a commitment fee on the
daily average unused amount of such Bank's Commitment for the period from
and including the Closing Date to and including the Maturity Date, at the
rate of 0.20% per annum based on a 365 day year and the actual number of
days elapsed. Accrued commitment fees shall be payable in arrears on
each Quarterly Date beginning on September 30, 1997, and on the Maturity
Date. Furthermore, Borrower agrees to pay to the Agent the additional
fees specified in the Term Sheet.
Section 2.12 Computations. Interest payable by Borrower
hereunder and under the other Loan Documents on all Eurodollar Loans
shall be computed on the basis of a year of 360 days and the actual
number of days elapsed (including the first day but excluding the last
day) occurring in the period for which payable unless in the case of
interest such calculation would result in a usurious rate, in which case
interest shall be calculated on the basis of a year of 365 or 366 days,
as the case may be. Interest payable by Borrower hereunder and under the
other Loan Documents on ABR Loans and all fees payable hereunder and
under the Loan Documents shall be computed on the basis of a year of 365
or 366 days, as the case may be.
Section 2.13 Termination or Reduction of Commitments.
Borrower shall have the right to terminate or reduce in part the unused
portion of the Commitments at any time and from time to time, provided
that: (a) Borrower shall give notice of each such termination or
reduction as provided in Section 2.9; and (b) each partial reduction
shall be in an aggregate amount at least equal to $500,000. The
Commitments may not be reinstated after they have been terminated or
reduced.
Section 2.14 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement,
Borrower may utilize the Commitments by requesting that the Issuing
Bank issue Letters of Credit; provided, that the aggregate amount
of outstanding Letter of Credit Liabilities shall not at any time
exceed $1,000. Upon the date of issue of each Letter of Credit,
the Issuing Bank shall be deemed, without further action by any
party hereto, to have sold to each Bank, and each Bank shall be
deemed, without further action by any party hereto, to have
purchased from the Issuing Bank, a participation to the extent of
such Bank's Commitment Percentage in such Letter of Credit.
(b) Borrower shall give the Issuing Bank (with a copy to
the Agent) at least five Business Days irrevocable prior notice
(effective upon receipt) specifying the date of each Letter of
Credit and the nature of the transactions to be supported thereby.
Upon receipt of such notice the Issuing Bank shall promptly notify
each Bank of the contents thereof and of such Bank's Commitment
Percentage of the amount of the proposed Letter of Credit. Each
Letter of Credit shall have an expiration date that does not exceed
one year from the date of issuance and that does not extend beyond
the Maturity Date, shall be payable in Dollars, shall support a
transaction entered into in connection with and reasonably related
to Borrower's existing business, shall be satisfactory in form and
substance to the Issuing Bank and shall be issued pursuant to such
agreements, documents and instruments (including a letter of credit
application and reimbursement agreement) as the Issuing Bank may
reasonably require, none of which shall be inconsistent with this
Section 2.14; provided, however, that Letters of Credit having an
aggregate face amount not to exceed $1,000 at any time outstanding
may have expiration dates that extend beyond one year from the date
of issuance (but not to extend beyond the Maturity Date) with the
prior written consent of the Agent, which consent shall not be
unreasonably withheld. Each Letter of Credit shall (i) provide for
the payment of drafts presented for, on or thereunder by the
beneficiary, in accordance with the terms thereof, when such drafts
are accompanied by the documents described in the Letter of Credit,
if any, and (ii) to the extent not inconsistent with the terms
hereof or any applicable letter of credit application, be subject
to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500
(together with any subsequent revision thereof approved by a
Congress of the International Chamber of Commerce and adhered to by
the Issuing Bank, the "UCP"), and shall, as to matters not governed
by the UCP, be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.
(c) Borrower agrees to pay to the Agent for the account of
each Bank, in arrears on each Quarterly Date following the Closing
Date (beginning on December 31, 1996) and on the Maturity Date, if
such Letter of Credit was outstanding at any time during any
portion of the quarterly period (or, with respect to the December
31, 1996 Quarterly Date, the period from Closing Date through such
Quarterly Date) immediately preceding such Quarterly Date or the
Maturity Date, a nonrefundable letter of credit fee with respect to
each Letter of Credit issued in an amount equal to (i) the rate per
annum equal to the Applicable Margin for Eurodollar Loans in effect
on the date of issuance of such Letter of Credit (with respect to
the fee due on the first Quarterly Date after issuance) or on the
first day of the applicable quarterly or other period beginning
after the quarter during which the issuance of such Letter of
Credit occurred (with respect to the fee due on each subsequent
Quarterly Date or on the Maturity Date) minus 0.25%, multiplied by
(ii) the daily average face amount of the Letter of Credit in
effect during the applicable period. The Agent agrees to pay to
each Bank, promptly after receiving any payment of letter of credit
fees referred to above in this Section 2.14(c), such Bank's
Commitment Percentage of such fees. Borrower agrees to pay to the
Issuing Bank for its own account, in arrears on each Quarterly Date
following the Closing Date (beginning on December 31, 1996) and on
the Maturity Date, if such Letter of Credit was outstanding at any
time during any portion of the quarterly period (or, with respect
to the December 31, 1996 Quarterly Date, the period from the
Closing Date through such Quarterly Date) immediately preceding
such Quarterly Date or the Maturity Date, a nonrefundable letter of
credit fee with respect to each Letter of Credit issued by the
Issuing Bank hereunder in an amount equal to the greater of (A) (1)
0.25% per annum multiplied by (2) the daily average face amount of
the Letter of Credit in effect during such period, or (B) $300.00.
In addition to the foregoing fees, Borrower shall pay or reimburse
the Issuing Bank for such normal and customary costs and expenses,
including, without limitation, administrative, issuance, amendment,
payment and negotiation charges, as are incurred or charged by the
Issuing Bank in issuing, effecting payment under, amending, or
otherwise administering any Letter of Credit.
(d) Upon receipt from the beneficiary of any Letter of
Credit of any demand for payment or other drawing under such Letter
of Credit, the Issuing Bank shall promptly notify Borrower and each
Bank as to the amount to be paid as a result of such demand or
drawing and the payment date. If at any time the Issuing Bank
shall make a payment to a beneficiary of a Letter of Credit
pursuant to a drawing under such Letter of Credit, each Bank will
pay to the Issuing Bank, immediately upon the Issuing Bank's demand
at any time commencing after such payment until reimbursement
therefor in full by Borrower, an amount equal to such Bank's
Commitment Percentage of such payment, together with interest on
such amount for each day from the date of such payment to the date
of payment by such Bank of such amount at a rate of interest per
annum equal to the Federal Funds Rate.
(e) Borrower shall be irrevocably and unconditionally
obligated, without presentment, demand, protest or other
formalities of any kind, to reimburse the Issuing Bank for any
amounts paid by the Issuing Bank upon any drawing under any Letter
of Credit on or before the second Business Day after such drawing.
The Issuing Bank will pay to each such Bank such Bank's Commitment
Percentage of all amounts received from or on behalf of Borrower
for application in payment, in whole or in part, of the
Reimbursement Obligation in respect of any Letter of Credit, but
only to the extent such Bank has made payment to the Issuing Bank
in respect of such Letter of Credit pursuant to Section 2.14(d).
Outstanding Reimbursement Obligations shall bear interest (i) at
the rate then applicable to ABR Loans to and including the fifth
day after such Reimbursement Obligations become outstanding and
(ii) at the Default Rate thereafter, and such interest shall be
payable on demand.
(f) The Reimbursement Obligations of Borrower under this
Agreement and the other Loan Documents shall be absolute,
unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement and the other Loan
Documents under all circumstances whatsoever, including, without
limitation, the following circumstances:
(i) Any lack of validity or enforceability of any
Letter of Credit or any other Loan Document;
(ii) Any amendment or waiver of or any consent to
departure from any Loan Document;
(iii) The existence of any claim, setoff, counterclaim,
defense or other right which any Loan Party or other Person
may have at any time against any beneficiary of any Letter of
Credit, the Agent, the Issuing Bank, the Banks or any other
Person, whether in connection with this Agreement or any
other Loan Document or any unrelated transaction;
(iv) Any statement, draft or other document presented
under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect whatsoever;
(v) Payment by the Issuing Bank under any Letter of
Credit against presentation of a draft or other document that
does not comply with the terms of such Letter of Credit,
provided, that such payment shall not have constituted gross
negligence or willful misconduct of the Issuing Bank; and
(vi) Any other circumstance whatsoever, whether or not
similar to any of the foregoing, provided that such other
circumstance or event shall not have been the result of the
gross negligence or willful misconduct of the Issuing Bank.
(g) Borrower assumes all risks of the acts or omissions of any
beneficiary of any Letter of Credit with respect to its use of such
Letter of Credit. Neither the Agent, the Issuing Bank, the Banks nor any
of their respective officers or directors shall have any responsibility
or liability to Borrower or any other Person for: (i) the failure of any
draft to bear any reference or adequate reference to any Letter of
Credit, or the failure of any documents to accompany any draft at
negotiation, or the failure of any Person to surrender or to take up any
Letter of Credit or to send documents apart from drafts as required by
the terms of any Letter of Credit, or the failure of any Person to note
the amount of any instrument on any Letter of Credit; (ii) errors,
omissions, interruptions or delays in transmission or delivery of any
messages; (iii) the validity, sufficiency or genuineness of any draft or
other document, or any endorsement(s) thereon, even if any such draft,
document or endorsement should in fact prove to be in any and all
respects invalid, insufficient, fraudulent or forged or any statement
therein is untrue or inaccurate in any respect; (iv) the payment by the
Issuing Bank to the beneficiary of any Letter of Credit against
presentation of any draft or other document that does not comply with the
terms of the Letter of Credit; or (v) any other circumstance whatsoever
in making or failing to make any payment under a Letter of Credit;
provided, however, that, notwithstanding the foregoing, Borrower shall
have a claim against the Issuing Bank, and the Issuing Bank shall be
liable to Borrower, to the extent of any direct, but not indirect or
consequential, damages suffered by Borrower which Borrower proves in a
final nonappealable judgment were caused by (A) the Issuing Bank's
willful misconduct or gross negligence in determining whether documents
presented under any Letter of Credit complied with the terms thereof or
(B) the Issuing Bank's willful failure to pay under any Letter of Credit
after presentation to it of documents strictly complying with the terms
and conditions of such Letter of Credit. The Issuing Bank may accept
documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
ARTICLE 3
Payments
Section 3.1 Method of Payment. All payments of principal, interest
and other amounts to be made by Borrower under this Agreement and the
other Loan Documents shall be made to the Agent at the Principal Office
for the account of each Bank's Applicable Lending Office in Dollars and
in immediately available funds, without setoff, deduction or
counterclaim, not later than 11:00 a.m. (Houston, Texas time) on the date
on which such payment shall become due (each such payment made after such
time on such due date to be deemed to have been made on the next
succeeding Business Day). Borrower shall, at the time of making each
such payment, specify to the Agent the sums payable by Borrower under
this Agreement and the other Loan Documents to which such payment is to
be applied (and in the event that Borrower fails to so specify, or if an
Event of Default has occurred and is continuing, the Agent may apply such
payment to the Obligations in such order and manner as the Agent may
elect, subject to Section 3.2). Each payment received by the Agent under
this Agreement or any other Loan Document for the account of a Bank shall
be paid promptly to such Bank, in immediately available funds, for the
account of such Bank's Applicable Lending Office. Whenever any payment
under this Agreement or any other Loan Document shall be stated to be due
on a day that is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of the payment of interest and commitment
fee, as the case may be.
Section 3.2 Pro Rata Treatment. Except to the extent otherwise
provided herein: (a) each Loan shall be made by the Banks under Section
2.1, each payment of commitment fees under Section 2.11 shall be made for
the account of the Banks and each termination or reduction of the
Commitments under Section 2.13 shall be applied to the Commitments of the
Banks on a pro rata basis; (b) the making, Conversion and Continuation of
Loans of a particular Type (other than Conversions provided for by
Section 4.4) shall be made pro rata among the Banks holding Loans of such
Type in accordance with their respective Commitment Percentages; (c) each
payment and prepayment by Borrower of principal of or interest on Loans
of a particular Type shall be made to the Agent for the account of the
Banks holding Loans of such Type pro rata in accordance with the
respective unpaid principal amounts of such Loans held by such Banks;
(d) Interest Periods for Eurodollar Loans shall be allocated among the
Banks holding Eurodollar Loans pro rata according to the respective
principal amounts held by such Banks; and (e) the Banks (other than the
Issuing Bank) shall purchase participations in the Letters of Credit pro
rata in accordance with their respective Commitment Percentages.
Section 3.3 Sharing of Payments, Etc. If a Bank shall obtain
payment of any principal of or interest on any of the Obligations due to
such Bank hereunder through the exercise of any right of setoff, banker's
lien, counterclaim or similar right, or otherwise, it shall promptly
purchase from the other Banks participations in the Obligations held by
the other Banks in such amounts and make such adjustments from time to
time as shall be equitable to the end that all the Banks shall share pro
rata in accordance with the unpaid principal and interest on the
Obligations then due to each of them. To such end, all of the Banks
shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if all or any portion of such excess
payment is thereafter rescinded or must otherwise be restored. Borrower
agrees, to the fullest extent it may effectively do so under applicable
law, that any Bank so purchasing a participation in the Obligations by
the other Banks may exercise all rights of setoff, banker's lien,
counterclaim or similar rights with respect to such participation as
fully as if such Bank were a direct holder of Obligations in the amount
of such participation. Nothing contained herein shall require any Bank
to exercise any such right or shall affect the right of any Bank to
exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of Borrower.
Section 3.4 Non-Receipt of Funds by the Agent. Unless the Agent
shall have been notified by a Bank or Borrower (the "Payor") prior to the
date on which such Bank is to make payment to the Agent of the proceeds
of a Loan to be made by it hereunder or Borrower is to make a payment to
the Agent for the account of one or more of the Banks, as the case may be
(such payment being herein called the "Required Payment"), which notice
shall be effective upon receipt, that the Payor does not intend to make
the Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but
shall not be required to), make the amount thereof available to the
intended recipient on such date and, if the Payor has not in fact made
the Required Payment to the Agent, the recipient of such payment shall,
on demand, pay to the Agent the amount made available to it together with
interest thereon in respect of the period commencing on the date such
amount was so made available by the Agent until the date the Agent
recovers such amount at a rate per annum equal to the Federal Funds Rate
for such period.
Section 3.5 Withholding Taxes. (a) All payments by Borrowers of
principal of and interest on the Loans and the Letter of Credit
Liabilities and of all fees and other amounts payable under the Loan
Documents shall be made free and clear of, and without deduction by
reason of, any present or future taxes, duties, imposts, assessments or
other charges levied or imposed by any Governmental Authority (other than
taxes on the overall net income or gross receipts of the Agent or any
Bank). If any such taxes, duties, imposts, assessments or other charges
are so levied or imposed, Borrower will (i) make additional payments in
such amounts so that every net payment of principal of and interest on
the Loans and the Letter of Credit Liabilities and of all other amounts
payable by it under the Loan Documents, after withholding or deduction
for or on account of any such present or future taxes, duties, imposts,
assessments or other charges (including, without limitation, any tax
imposed on or measured by net income or gross receipts of the Agent or a
Bank attributable to payments made to or on behalf of the Agent or a Bank
pursuant to this Section 3.5 and any penalties or interest attributable
to such payments), will not be less than the amount provided for herein
or therein absent such withholding or deduction (provided that Borrower
shall have no obligation to pay such additional amounts to the Agent or
any Bank to the extent that such taxes, duties, imposts, assessments or
other charges are levied or imposed by reason of the failure of the Agent
or such Bank to comply with the provisions of Section 3.6), (ii) make
such withholding or deduction, and (ii) remit the full amount deducted or
withheld to the relevant Governmental Authority in accordance with
applicable law. Without limiting the generality of the foregoing,
Borrower will, upon written request of any Bank, reimburse each such Bank
for the amount of (A) such taxes, levies, duties, imports, assessments or
other charges so levied or imposed by any Governmental Authority and paid
by such Bank as a result of payments made by Borrower under or with
respect to the Loans and Letter of Credit Liabilities other than such
taxes, levies, duties, imports, assessments and other charges previously
withheld or deducted by Borrower which have previously resulted in the
payment of the required additional amount to such Bank, and (B) such
taxes, levies, duties, assessments and other charges so levied or imposed
with respect to any Bank reimbursement under the foregoing clause (A), so
that the net amount received by such Bank (net of payments made under or
with respect to the Loans and the Letter of Credit Liabilities) after
such reimbursement will not be less than the net amount such Bank would
have received if such taxes, levies, duties, assessments and other
charges on such reimbursement had not been levied or imposed. Borrower
shall furnish promptly to the Agent for distribution to each affected
Bank, as the case may be, upon request of such Bank, official receipts
evidencing any such withholding or reduction.
(b) Borrower will indemnify the Agent and each Bank (without
duplication) against, and reimburse the Agent and each Bank for, all
present and future taxes, duties, imposts, assessments or other charges
(including interest and penalties) levied or collected (whether or not
legally or correctly imposed, assessed, levied or collected), excluding,
however, any taxes imposed on the overall net income or gross receipts of
the Agent or such Bank, on or in respect of this Agreement, any of the
Loan Documents or the Obligations or any portion thereof (the
"reimbursable taxes"). Any such indemnification shall be on an after-tax
basis, taking into account any such reimbursable taxes imposed on the
amounts paid as indemnity.
(c) Without prejudice to the survival of any other term or
provision of this Agreement, the obligations of Borrower under this
Section 3.5 shall survive the payment of the Loans, the Letter of Credit
Liabilities and the other Obligations and termination of the Commitments
Section 3.6 Withholding Tax Exemption. Each Bank that is
originally a party to this Agreement as of the Closing Date and that is
not incorporated under the laws of the United States or a state thereof
agrees that it will deliver to Borrower and the Agent two duly completed
copies of United States Internal Revenue Service Form 1001, 4224 or W-8,
as appropriate, certifying in any case that such Bank is entitled to
receive payments from Borrower under any Loan Document without deduction
or withholding of any United States federal income taxes. Each other
Bank that is not incorporated under the laws of the United States or a
state thereof and which is eligible to deliver a Form 1001, 4224 or W-8,
as applicable, undertakes to deliver to Borrower and the Agent two duly
completed copies of such form promptly upon its becoming a Bank under
this Agreement. Each Bank which initially so delivers a Form 1001, 4224
or W-8 pursuant to this Section 3.6 further undertakes to deliver to
Borrower and the Agent two additional copies of such form (or a successor
form) on or before the date such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent
form so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by Borrower or the Agent,
in each case certifying that such Bank is entitled to receive payments
from Borrower under any Loan Document without deduction or withholding of
any United States federal income taxes, unless an event (including
without limitation any change in treaty, law or regulation) has occurred
prior to the date on which any such delivery would otherwise be required
which renders all such forms inapplicable or which would prevent such
Bank from duly completing and delivering any such form with respect to it
and such Bank advises Borrower and the Agent that it is not capable of
receiving such payments without any deduction or withholding of United
States federal income tax.
ARTICLE 4
Yield Protection and Illegality
Section 4.1 Additional Costs.
(a) Borrower shall pay directly to each Bank from time to
time, promptly upon the request of such Bank, the reasonable costs
incurred by such Bank which such Bank determines are attributable
to its making or maintaining of any Eurodollar Loans hereunder or
its obligation to make any of such Loans hereunder, or any
reduction in any amount receivable by such Bank hereunder in
respect of any such Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts
payable to such Bank under this Agreement or its Notes in
respect of any of such Loans (other than taxes imposed on the
overall net income or gross receipts of such Bank or its
Applicable Lending Office for any of such Loans by the
jurisdiction in which such Bank has its principal office or
such Applicable Lending Office);
(ii) imposes or modifies any reserve, special deposit,
minimum capital, capital ratio or similar requirement
relating to any extensions of credit or other assets of, or
any deposits with or other liabilities or commitments of,
such Bank (including any of such Loans or any deposits
referred to in the definition of "Eurodollar Rate" in Section
1.1 hereof, but excluding the Reserve Requirement to the
extent it is included in the calculation of the Adjusted
Eurodollar Rate); or
(iii) imposes any other condition affecting this
Agreement or the Notes or any of such extensions of credit or
liabilities or commitments.
Each Bank will notify Borrower (with a copy to the Agent) of any
event occurring after the Closing Date which will entitle such Bank
to compensation pursuant to this Section 4.1(a) as promptly as
practicable after it obtains knowledge thereof and determines to
request such compensation, and (if so requested by Borrower) will
designate a different Applicable Lending Office for the Eurodollar
Loans of such Bank if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the sole
opinion of such Bank, violate any law, rule or regulation or be in
any way disadvantageous to such Bank, provided that such Bank shall
have no obligation to so designate an Applicable Lending Office
located in the United States. Each Bank will furnish Borrower with
a certificate setting forth the basis and the amount of each
request of such Bank for compensation under this Section 4.1(a). If
any Bank requests compensation from Borrower under this Section
4.1(a), Borrower may, by notice to such Bank (with a copy to the
Agent), suspend the obligation of such Bank to make or Continue
making, or Convert ABR Loans into, Eurodollar Loans until the
Regulatory Change giving rise to such request ceases to be in
effect (in which case the provisions of Section 4.4 hereof shall be
applicable).
(b) Without limiting the effect of the foregoing provisions
of this Section 4.1, in the event that, by reason of any Regulatory
Change, any Bank either (i) incurs Additional Costs based on or
measured by the excess above a specified level of the amount of a
category of deposits or other liabilities of such Bank which
includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or a
category of extensions of credit or other assets of such Bank which
includes Eurodollar Loans or (ii) becomes subject to restrictions
on the amount of such a category of liabilities or assets which it
may hold, then, if such Bank so elects by notice to Borrower (with
a copy to the Agent), the obligation of such Bank to make or
Continue making, or Convert ABR Loans into, Eurodollar Loans
hereunder shall be suspended until such Regulatory Change ceases to
be in effect (in which case the provisions of Section 4.4 hereof
shall be applicable).
(c) Determinations and allocations by any Bank for purposes
of this Section 4.1 of the effect of any Regulatory Change on its
costs of maintaining its obligation to make Loans or of making or
maintaining Loans or on amounts receivable by it in respect of
Loans, and of the additional amounts required to compensate such
Bank in respect of any Additional Costs, shall be conclusive in the
absence of manifest error, provided that such determinations and
allocations are made on a reasonable basis.
Section 4.2 Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if with respect to any Eurodollar Loans for any
Interest Period therefor:
(a) The Agent determines (which determination shall be
conclusive absent manifest error) that quotations of interest rates
for the relevant deposits referred to in the definition of
"Eurodollar Rate" in Section 1.1 hereof are not being provided in
the relative amounts or for the relative maturities for purposes of
determining the rate of interest for such Loans as provided in this
Agreement; or
(b) Required Banks determine (which determination shall be
conclusive absent manifest error) and notify the Agent that the
relevant rates of interest referred to in the definition of
"Eurodollar Rate" or "Adjusted Eurodollar Rate" in Section 1.1
hereof on the basis of which the rate of interest for such Loans
for such Interest Period is to be determined do not accurately
reflect the cost to the Banks of making or maintaining such Loans
for such Interest Period;
then the Agent shall give Borrower prompt notice thereof and, so long as
such condition remains in effect, the Banks shall be under no obligation
to make Eurodollar Loans or to Convert ABR Loans into Eurodollar Loans
and Borrower shall, on the last day(s) of the then current Interest
Period(s) for the outstanding Eurodollar Loans, either prepay such Loans
or Convert such Loans into ABR Loans in accordance with the terms of this
Agreement.
Section 4.3 Illegality. Notwithstanding any other provision of
this Agreement, in the event that it becomes unlawful for any Bank or its
Applicable Lending Office to (a) honor its obligation to make Eurodollar
Loans hereunder or (b) maintain Eurodollar Loans hereunder, then such
Bank shall promptly notify Borrower (with a copy to the Agent) thereof
and such Bank's obligation to make or maintain Eurodollar Loans and to
Convert ABR Loans into Eurodollar Loans hereunder shall be suspended
until such time as such Bank may again make and maintain Eurodollar Loans
(in which case the provisions of Section 4.4 hereof shall be applicable).
Section 4.4 Treatment of Affected Loans. If the obligation of any
Bank to make or Continue, or to Convert ABR Loans into, Eurodollar Loans
is suspended pursuant to Section 4.1 or 4.3 hereof, such Bank's
Eurodollar Loans shall be automatically Converted into ABR Loans on the
last day(s) of the then current Interest Period(s) for the Eurodollar
Loans (or, in the case of a Conversion required by Section 4.1(b) or 4.3
hereof, on such earlier date as such Bank may specify to Borrower with a
copy to the Agent) and, unless and until such Bank gives notice as
provided below that the circumstances specified in Section 4.1 or 4.3
hereof which gave rise to such Conversion no longer exist:
(a) To the extent that such Bank's Eurodollar Loans have
been so Converted, all payments and prepayments of principal which
would otherwise be applied to such Bank's Eurodollar Loans shall be
applied instead to its ABR Loans; and
(b) All Loans which would otherwise be made or Continued by
such Bank as Eurodollar Loans shall be made as or Converted into
ABR Loans and all Loans of such Bank which would otherwise be
Converted into Eurodollar Loans shall be Converted instead into (or
shall remain as) ABR Loans.
If such Bank gives notice to Borrower (with a copy to the Agent) that the
circumstances specified in Section 4.1 or 4.3 hereof which gave rise to
the Conversion of such Bank's Eurodollar Loans pursuant to this Section
4.4 no longer exist (which such Bank agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans are
outstanding, such Bank's ABR Loans shall be automatically Converted, on
the first day(s) of the next succeeding Interest Period(s) for such
outstanding Eurodollar Loans, to the extent necessary so that, after
giving effect thereto, all Loans held by the Banks holding Eurodollar
Loans and by such Bank are held pro rata (as to principal amounts, Types
and Interest Periods) in accordance with their respective Commitments.
Section 4.5 Compensation. Borrower shall pay to the Agent for the
account of each Bank, promptly upon the request of such Bank through the
Agent, such amount or amounts as shall be sufficient (in the reasonable
opinion of such Bank) to compensate it for any loss, cost or expense
incurred by it as a result of:
(a) Any payment, prepayment or Conversion of a Eurodollar
Loan for any reason (including, without limitation, the
acceleration of the outstanding Loans pursuant to Section 11.2) on
a date other than the last day of an Interest Period for such Loan;
or
(b) Any failure by Borrower for any reason (including,
without limitation, the failure of any conditions precedent
specified in Article 6 to be satisfied) to borrow, Convert or
prepay a Eurodollar Loan on the date for such borrowing,
Conversion, or prepayment specified in the relevant notice of
borrowing, prepayment, or Conversion under this Agreement.
Section 4.6 Capital Adequacy. If, after the Closing Date, any Bank
shall have determined that the adoption or implementation of any
applicable law, rule or regulation regarding capital adequacy (including,
without limitation, any law, rule or regulation implementing the Basle
Accord), or any change therein, or any change in the interpretation or
administration thereof by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or
compliance by such Bank (or its parent) with any guideline, request or
directive regarding capital adequacy (whether or not having the force of
law) of any central bank or other Governmental Authority (including,
without limitation, any guideline or other requirement implementing the
Basle Accord), has or would have the effect of reducing the rate of
return on such Bank's (or its parent's) capital as a consequence of its
obligations hereunder or the transactions contemplated hereby to a level
below that which such Bank (or its parent) could have achieved but for
such adoption, implementation, change or compliance (taking into
consideration such Bank's policies with respect to capital adequacy) by
an amount deemed by such Bank to be material, then from time to time,
within ten Business Days after demand by such Bank (with a copy to the
Agent), Borrower shall pay to such Bank such additional amount or amounts
as will compensate such Bank (or its parent) for such reduction. A
certificate of such Bank claiming compensation under this Section 4.6 and
setting forth the additional amount or amounts to be paid to it hereunder
shall be conclusive absent manifest error, provided that the
determination thereof is made on a reasonable basis. In determining such
amount or amounts, such Bank may use any reasonable averaging and
attribution methods.
Section 4.7 Additional Interest on Eurodollar Loans. Borrower
shall pay, directly to each Bank from time to time, additional interest
on the unpaid principal amount of each Eurodollar Loan held by such Bank,
from the date of the making of such Eurodollar Loan until such principal
amount is paid in full, at an interest rate per annum determined by such
Bank in good faith equal to the positive remainder (if any) of (a) the
Adjusted Eurodollar Rate applicable to such Eurodollar Loan minus (b) the
Eurodollar Rate applicable to such Eurodollar Loan. Each payment of
additional interest pursuant to this Section 4.7 shall be payable by
Borrower on each date upon which interest is payable on such Eurodollar
Loan pursuant to Section 2.4(b); provided, however, that Borrower shall
not be obligated to make any such payment of additional interest until
the first Business Day after the date when Borrower have been informed
(i) that such Bank is subject to a Reserve Requirement and (ii) of the
amount of such Reserve Requirement (after which time Borrower shall be
obligated to make all such payments of additional interest, including,
without limitation, such payments of additional interest that otherwise
would have been payable by Borrower on or prior to such time had Borrower
been earlier informed).
ARTICLE 5
Setoff
Section 5.1 Setoff. If an Event of Default shall have occurred and
be continuing, each Bank is hereby authorized at any time and from time
to time, without notice to Borrower (any such notice being hereby
expressly waived by Borrower), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Bank to or for the
credit or the account of Borrower against any and all of the Obligations
of such Borrower now or hereafter existing under this Agreement, any of
such Bank's Notes or any other Loan Document, irrespective of whether or
not the Agent or such Bank shall have made any demand under this
Agreement or any of such Bank's Note or such other Loan Document and
although such Obligations may be unmatured. Each Bank agrees promptly to
notify Borrower (with a copy to the Agent) after any such setoff and
application, provided that the failure to give such notice shall not
affect the validity of such setoff and application. The rights and
remedies of each Bank hereunder are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which
such Bank may have.
ARTICLE 6
Conditions Precedent
Section 6.1 Initial Extension of Credit. The obligation of each
Bank to make its initial Loan and the obligation of the Issuing Bank to
issue the initial Letter of Credit are subject to the condition precedent
that the Agent shall have received, on or before the Funding Date, all of
the following, each dated (unless otherwise indicated or otherwise agreed
by the Agent) as of the Closing Date, in form and substance satisfactory
to the Agent and, in the case of actions to be taken, evidence that the
following required actions have been taken to the satisfaction of the
Agent:
(a) Resolutions. Resolutions of the Board of Directors of
each Loan Party certified by its Secretary or an Assistant
Secretary which authorize the execution, delivery and performance
by such Loan Party of the Loan Documents to which it is or is to be
a party;
(b) Incumbency Certificate. A certificate of incumbency
certified by the Secretary or an Assistant Secretary of each Loan
Party certifying the name of each officer of such Loan Party
(i) who is authorized to sign the Loan Documents to which such Loan
Party is or is to be a party (including any certificates
contemplated therein), together with specimen signatures of each
such officer, and (ii) who will, until replaced by other officers
duly authorized for that purpose, act as its representative for the
purposes of signing documents and giving notices and other
communications in connection with the Loan Documents and the
transactions contemplated thereby;
(c) Articles or Certificates of Incorporation. The
articles or certificates of incorporation and Bylaws of each Loan
Party certified by the Secretary of State of the state of
incorporation of such Loan Party and dated as of a Current Date or
a certificate from an officer of the Borrower that there has been
no change in the Certificate of Incorporation or Bylaws since the
most recent copy thereof was furnished to Agent;;
(d) Governmental Certificates. Certificates of appropriate
officials as to the existence and good standing of each Loan Party
in its respective jurisdiction of incorporation and any and all
jurisdictions where such Loan Party is qualified to do business as
a foreign corporation, each such certificate to be dated as of a
Current Date;
(e) Notes. The Notes duly completed and executed by
Borrower;
(f) Solvency Certificate. A certificate executed by a
Responsible Officer of Borrower and its Subsidiaries (with respect
to such Subsidiaries) to the effect that, before and after giving
effect to the Loans, Borrower and its Subsidiaries will be Solvent,
both on a consolidated and consolidating basis;
(g) Other Consents. Copies of all material consents
necessary for the execution, delivery and performance by each of
the Loan Parties of the Loan Documents to which it is a party,
which consents shall be certified by a Responsible Officer of
Borrower as true and correct copies of such consents as of the
Closing Date;
(h) Permits. Copies of all material Permits of Borrower or
any of its Subsidiaries and all material permits relating to any of
the Properties owned or leased by any of them (except for
certificates of class of the American Shipping Bureau and
certificates of documentation or inspection of the United States
Coast Guard and except to the extent that the Agent may inform
Borrower that copies of certain of such Permits shall not be
required to be delivered); and evidence satisfactory to the Agent
that Borrower and its Subsidiaries have taken appropriate action to
ensure that Borrower and its Subsidiaries are able to conduct their
businesses with the use of such Permits in full force and effect;
(i) Payment of Fees and Expenses. Borrower shall have paid
all fees due on the Closing Date as specified in the Term Sheet and
all fees and expenses of or incurred by the Agent and its counsel
to the extent billed as of the Closing Date and payable pursuant to
this Agreement;
(j) Regulatory Approvals. Evidence satisfactory to the
Agent that all filings, consents, or approvals with or of
Governmental Authorities necessary to consummate the transactions
contemplated by the Loan Documents, if any, have been obtained;
(k) Compliance with Laws. On the Closing Date, each Person
that is a party to this Agreement or any of the other Loan
Documents shall have complied with all Governmental Requirements
necessary to consummate the transactions contemplated by this
Agreement and the other Loan Documents;
(l) No Prohibitions. No Governmental Requirement shall
prohibit the consummation of the transactions contemplated by this
Agreement or any other Loan Document, and no order, judgment or
decree of any Governmental Authority or arbitrator shall, and no
litigation or other proceeding shall be pending or threatened which
would, enjoin, prohibit, restrain or otherwise adversely affect the
consummation of the transactions contemplated by this Agreement or
the other Loan Documents or otherwise have a Material Adverse
Effect;
(m) Material Adverse Change. No material adverse change
shall have occurred with respect to the financial condition,
business, operations, capitalization or liabilities of Borrower, or
of Borrower and its Subsidiaries taken as a whole, since June 30,
1997;
(n) Wiring Instructions. A letter of direction from
Borrower to the Agent with respect to the disbursement of the
proceeds of the Loans on the Funding Date;
(o) Financial Statements. Copies of each of the financial
statements referred to in Section 7.2, including, without
limitation, the most recent audited financial statements of
Borrower and its Subsidiaries;
(p) Opinion of Counsel. A favorable opinion of counsel for
Borrower reasonably acceptable to the Agent, each in form and
substance (and covering such matters as are) satisfactory to the
Agent; and
(q) Notice of Borrowing or Issuance of Letter of Credit. A
notice of borrowing in accordance with Section 2.9 (with respect to
a Loan) or a notice of request for the issuance of a Letter of
Credit in accordance with Section 2.14 (with respect to a Letter of
Credit).
Borrower shall deliver, or cause to be delivered, to the Agent
sufficient counterparts of each document to be received by the Agent
under this Section 6.1 to permit the Agent to distribute a copy of such
document to the Banks.
Section 6.2 All Extensions of Credit. The obligation of each Bank
to make any Loan (including the initial Loan) and the obligation of the
Issuing Bank to issue any Letter of Credit (including the initial Letter
of Credit) are subject to the following additional conditions precedent:
(a) No Default. No Default shall have occurred and be
continuing, or would result from such Loan or Letter of Credit;
(b) Representations and Warranties. All of the
representations and warranties of Borrower and the other Loan
Parties contained in Article 7 hereof and in the other Loan
Documents (a) shall be true and correct when made and (b) shall be
deemed to be repeated on and as of the date of such Loan or Letter
of Credit and shall be true and correct in all respects on and as
of such date, except in the case of representations and warranties
which expressly and specifically relate only to an earlier date;
(c) Additional Documentation. The Agent shall have
received all notices and other agreements, documents and
instruments as may be required under this Agreement as a condition
to such Loan or Letter of Credit in compliance with this Agreement
(including, without limitation, the notice required under Section
2.9 with respect to a Loan and the notice required under Section
2.14 with respect to a Letter of Credit) and such additional
approvals, opinions, agreements, documents and instruments as the
Agent may reasonably request;
(d) No Overadvance. After giving effect to the Loans
and/or Letters of Credit requested to be made and/or issued,
respectively, the Outstanding Credit shall not exceed an amount
equal to the Commitments at such time; and
(e) No Material Adverse Effect. Both before and after
giving effect to the Loans and/or Letters of Credit requested to be
made and/or issued, respectively, no Material Adverse Effect shall
have occurred and shall be continuing.
Each notice of borrowing or request for the issuance of a Letter of
Credit by Borrower hereunder shall constitute a representation and
warranty by Borrower that the conditions precedent set forth in this
Section 6.2 (other than the Agent's receipt of any additional
documentation that it may, at its option, request pursuant to Section
6.2(c) preceding) have been satisfied (both as of the date of such notice
and, unless Borrower otherwise notifies the Agent prior to the date of
such borrowing or Letter of Credit, as of the date of such borrowing or
Letter of Credit).
ARTICLE 7
Representations and Warranties
Borrower represents and warrants to the Agent and the Banks that
the following statements are true, correct and complete:
Section 7.1 Corporate Existence. Each Loan Party (a) is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, (b) has all requisite entity power and authority to own its
Properties and carry on its business as now being or as proposed to be
conducted, and (c) is qualified to do business in all jurisdictions in
which the nature of its business makes such qualification necessary and
where failure to so qualify would have a Material Adverse Effect. Each
Loan Party has the corporate power and authority and legal right to
execute, deliver and perform its obligations under the Loan Documents to
which it is or may become a party. The chief executive office and
principal place of business of Borrower is located in the State of Texas.
Section 7.2 Financial Statements. Borrower has delivered to the
Agent and the Banks the Form 10-K of Borrower for the fiscal year ended
December 31, 1996, and the Forms 10-Q of Borrower for the fiscal quarters
ended March 31, 1997, and June 30, 1997, which contain audited (with
respect to the Form 10-K ) and unaudited (with respect to the Forms 10-Q)
consolidated (and certain audited and unaudited consolidating) balance
sheets and statements of operations and statements of cash flow of
Borrower and its consolidated Subsidiaries as of or for (as applicable)
the fiscal year or fiscal quarter (as applicable) ended December 31,
1996, March 31, 1997, and June 30, 1997. To Borrower's knowledge, such
financial statements are true and correct, have been prepared in
accordance with GAAP and fairly and accurately present, on a consolidated
and consolidating (where applicable) basis, the financial condition of
Borrower and its consolidated Subsidiaries as of the respective dates
indicated therein and the results of operations for the respective
periods indicated therein. There has been no material adverse change in
the business, condition (financial or otherwise), operations or
Properties of Borrower, or of Borrower and its consolidated Subsidiaries
taken as a whole, since the effective date of the financial statements
referred to in this Section 7.2(a).
Section 7.3 Entity Action; No Breach. The execution, delivery and
performance by each Loan Party of the Loan Documents to which it is or
may become a party and compliance with the terms and provisions hereof
and thereof have been duly authorized by all requisite corporate action
on the part of the Loan Parties and do not and will not (a) violate or
conflict with, or result in a breach of, or require any consent under
(i) the articles or certificates of incorporation or bylaws of any Loan
Party or the partnership agreement or certificate of limited partnership
or other constitutional document of any Loan Party, (ii) any Governmental
Requirement or any order, writ, injunction or decree of any Governmental
Authority or arbitrator, or (iii) any material agreement, document or
instrument to which any Loan Party is a party or by which any Loan Party
or any of its Property is bound or subject, or (b) constitute a default
under any such material agreement, document or instrument, or result in
the creation or imposition of any Lien (except under the Security
Documents as provided in Article 5) upon any of the revenues or Property
of any Loan Party.
Section 7.4 Operation of Business. The Loan Parties possess all
Permits, franchises, licenses and authorizations necessary to conduct
their respective businesses substantially as now conducted and as
presently proposed to be conducted except where the failure to so possess
would not cause a Material Adverse Effect. None of such Persons is in
material violation of any such Permits, franchises, licenses or
authorizations required to be possessed pursuant to this Section 7.4.
Section 7.5 Intellectual Property. The Loan Parties own or possess
(or will be licensed or have the full right to use) all Intellectual
Property which is necessary for the operation of their respective
businesses as presently conducted and as proposed to be conducted,
without any known conflict with the rights of others. The consummation
of the transactions contemplated by this Agreement and the other Loan
Documents will not materially alter or impair, individually or in the
aggregate, any of such rights of such Persons. No product of the Loan
Parties infringes upon any Intellectual Property owned by any other
Person, and no claim or litigation is pending or, to the knowledge of
Borrower, threatened against any Loan Party or any such Person contesting
its right to use any product or material which could have a Material
Adverse Effect. There is no violation by any Loan Party of any right of
such Loan Party with respect to any material Intellectual Property owned
or used by such Loan Party.
Section 7.6 Litigation and Judgments. Each material action, suit,
investigation or proceeding before or by any Governmental Authority or
arbitrator pending or, to the knowledge of Borrower, threatened against
or affecting any Loan Party as of the date of this Agreement is disclosed
on Schedule 7.6 hereto or in the Form 10-K of Borrower for the fiscal
year ended December 31, 1996, or in the Form 10-Q of Borrower for the
fiscal quarter ended March 31, 1997, or June 30, 1997 except for suits
for personal injury, death or property damage which are adequately
covered by insurance (subject to any deductibles, all of which
deductibles are customary for the industry in which Borrower are
engaged). None of such actions, suits, investigations or proceedings (a)
could be reasonably expected to be adversely determined or (b) if and to
the extent the same could be reasonably expected to be adversely
determined, could be reasonably expected to have a Material Adverse
Effect. On the date of this Agreement, there are no outstanding
judgments against any Loan Party or any of their Subsidiaries or
Affiliates. No Loan Party has received any opinion or memorandum or
legal advice from legal counsel to the effect that it is exposed to any
liability or disadvantage that could have a Material Adverse Effect.
Section 7.7 Rights in Properties; Liens. Except as expressly
stated to the contrary on Schedule 1.1(a), each of the Loan Parties has
good and indefeasible title to, or valid leasehold interests in, its
Properties and assets, real and personal, including the Properties,
assets and leasehold interests reflected in the financial statements
described in Section 7.2(a), and none of the Properties or leasehold
interests of any Loan Party or any of its Subsidiaries is subject to any
Lien, except Permitted Liens. As of the Closing Date, each of the
Drilling Rigs purported to be owned by Borrower is owned, of record and
beneficially, by Borrower free of all liens, mortgages and encumbrances
except Permitted Liens, except for the PHOENIX I and the ACHILLES
Drilling Rigs which are to be transferred to Borrower on or prior to the
Closing Date, free of all liens, mortgages and encumbrances except
Permitted Liens.
Section 7.8 Enforceability. The Loan Documents have been duly and
validly executed and delivered by each of the Loan Parties that is a
party thereto and constitute the legal, valid and binding obligations of
the Loan Parties, enforceable against the Loan Parties in accordance with
their respective terms, except as limited by bankruptcy, insolvency or
other laws of general application relating to the enforcement of
creditors' rights and general principles of equity.
Section 7.9 Approvals. No authorization, approval or consent of,
and no filing or registration with or notice to, any Governmental
Authority or third party is or will be necessary for the execution,
delivery or performance by any Loan Party of any of the Loan Documents to
which it is a party or for the validity or enforceability thereof, except
for such consents, approvals and filings as have been validly obtained or
made and are in full force and effect. None of the Loan Parties has
failed to obtain any material governmental consent, approval, license,
Permit, franchise or other governmental authorization necessary for the
ownership of any of its Properties or the conduct of its business.
Section 7.10 Debt. As of the Closing Date, Borrower and its
consolidated Subsidiaries have no Debt except for (a) any Revolving
Loans or Acquisition Loans, (b) the Debt disclosed in the financial
statements including in the Form 10-Q of Borrower for the fiscal quarter
ended June 30, 1997, and (c) the Debt disclosed with respect to such
Person on Schedule 7.10 hereto.
Section 7.11 Taxes. The Loan Parties have filed all tax
returns (federal, state and local) required to be filed, including all
income, franchise, employment, Property and sales tax returns, and have
paid all of their respective liabilities for taxes, assessments,
governmental charges and other levies that are due and payable. Borrower
is not aware of any pending investigation by any taxing authority of any
Loan Party or any of its Subsidiaries or of any pending but unassessed
tax liability of any Loan Party or any of its Subsidiaries. No tax Liens
have been filed and, except as disclosed on Schedule 7.11, no claims are
being asserted against any Loan Party or any of its Subsidiaries with
respect to any taxes. Except as disclosed on Schedule 7.11 hereto, as of
the Closing Date, none of the United States income tax returns of the
Loan Parties and any of their respective Subsidiaries are under audit.
The charges, accruals and reserves on the books of the Loan Parties in
respect of taxes or other governmental charges are in accordance with
GAAP.
Section 7.12 Margin Securities. None of the Loan Parties or
any of their respective Subsidiaries is engaged principally, or as one of
its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulations 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 or to extend credit to others for the
purpose of purchasing or carrying margin stock.
Section 7.13 ERISA.
(a) Each Plan of each Loan Party and of each Borrower
Member is in compliance in all material respects with all
applicable provisions of ERISA and the Code. Neither a Reportable
Event nor a Prohibited Transaction has occurred within the last 60
months with respect to any Plan of any Loan Party or any Borrower
Member. No notice of intent to terminate a Pension Plan of any
Loan Party or any Borrower Member has been filed, nor has any
Pension Plan been terminated. No circumstances exist which
constitute grounds entitling the PBGC to institute proceedings to
terminate, or appoint a trustee to administer, a Pension Plan of
any Loan Party or any Borrower Member, nor has the PBGC instituted
any such proceedings. Neither any of the Loan Parties nor any
Borrower Member has completely or partially withdrawn from a
Multiemployer Plan. Each Loan Party and each Borrower Member has
met its minimum funding requirements under ERISA and the Code with
respect to all of its Plans subject to such requirements, and, as
of the Closing Date except as specified on Schedule 7.13, the
present value of all vested benefits under each funded Plan
(exclusive of any Multiemployer Plan) does not exceed the fair
market value of all such Plan assets allocable to such benefits, as
determined on the most recent valuation date of such Plan and in
accordance with ERISA. Neither any of the Loan Parties nor any
Borrower Member has incurred any liability to the PBGC under ERISA.
No litigation is pending or threatened concerning or involving any
Plan of any Loan Party or any Borrower Member. There are no
unfunded or unreserved liabilities relating to any Plan of any Loan
Party or any Borrower Member that could, individually or in the
aggregate, have a Material Adverse Effect if such Loan Party or
Borrower Member were required to fund or reserve such liability in
full. As of the Closing Date, no funding waivers have been
requested or granted under Section 412 of the Code with respect to
any Plan of any Loan Party or Borrower Member. As of the Closing
Date, no unfunded or unreserved liability for benefits under any
Plan or Plans of any Loan Party or any Borrower Member (exclusive
of any Multiemployer Plans) exceeds $1,000,000 with respect to any
such Plan or $3,000,000 with respect to all such Plans in the
aggregate.
(b) No ERISA Affiliate has incurred any liability to the
PBGC or has withdrawn from a Multiemployer Plan. Neither Borrower
nor any ERISA Affiliate has received a demand letter from the PBGC
(i) for the payment of minimum funding contributions under Section
302 of ERISA which exceed $1,000,000 with respect to any Pension
Plan or $3,000,000 with respect to all Pension Plans in the
aggregate or (ii) for the payment of employer liabilities under
Section 4062, 4063 or 4064 of ERISA which exceeds $1,000,000 with
respect to any Pension Plan or $3,000,000 with respect to all
Pension Plans in the aggregate. The PBGC has not filed or
perfected any Lien under Section 302(f)(1) or 4068(a) of ERISA
against Borrower or any ERISA Affiliate. Neither Borrower nor any
ERISA Affiliate has received a notice of complete or partial
withdrawal from a Multiemployer Plan in which the amount of the
liability asserted exceeds $1,000,000 with respect to any
Multiemployer Plan or $3,000,000 with respect to all Multiemployer
Plans in the aggregate.
Section 7.14 Disclosure. No written statement, information,
report, representation or warranty made by any Loan Party in any Loan
Document, or furnished to the Agent or any Bank by any Loan Party in
connection with the Loan Documents, or made in connection with any
transaction contemplated hereby or thereby, contains (as of the date when
made) any untrue statement of a material fact or omits to state any
material fact necessary to make the statements herein or therein not
misleading. There is no fact known to Borrower which has had a Material
Adverse Effect, and there is no fact known to Borrower which might in the
future have a Material Adverse Effect, except as may have been disclosed
in writing to the Agent and the Banks.
Section 7.15 Capitalization.
(a) As of June 30, 1997, the capitalization of Borrower and
its consolidated Subsidiaries was as set forth in the Form 10-Q of
Borrower for the fiscal quarter ended June 30, 1997.
(b) On and as of the Closing Date, Borrower directly or
indirectly owns (legally and beneficially) all of the issued and
outstanding Capital Stock of each of its consolidated Subsidiaries.
On and as of the Closing Date, none of the Subsidiaries of Borrower
has authorized or issued any Redeemable Stock.
(c) All of the outstanding common stock of Borrower and its
Subsidiaries has been validly issued, is fully paid and is
nonassessable. Since June 30, 1997, no Subsidiary has issued any
subscriptions, options, warrants, calls or rights (including
preemptive rights) to acquire, or securities or instruments
convertible into, Capital Stock of such Subsidiary.
Section 7.16 Agreements. None of the Loan Parties is a party
to any indenture, loan, credit agreement, stock purchase agreement, lease
or other agreement, document or instrument, or subject to any charter,
corporate, partnership or similar restriction, that could reasonably be
expected to have a Material Adverse Effect. Except as disclosed on
Schedule 7.22, none of the Loan Parties is in default in any respect in
the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement, document or
instrument binding on it or its Properties, except for instances of
noncompliance that, individually or in the aggregate, could not have a
Material Adverse Effect.
Section 7.17 Compliance with Laws. None of the Loan Parties
is in violation of any Governmental Requirement, except for instances of
non-compliance that, individually or in the aggregate, could not have a
Material Adverse Effect.
Section 7.18 Investment Company Act. None of the Loan Parties
is an "investment company" within the meaning of the Investment Company
Act of 1940, as amended.
Section 7.19 Public Utility Holding Company Act. None of the
Loan Parties is a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or a "public
utility" within the meaning of the Public Utility Holding Company Act of
1935, as amended.
Section 7.20 Environmental Matters.
(a) Except for instances of noncompliance with or
exceptions to any of the following representations and warranties
that could not have, individually or in the aggregate, a Material
Adverse Effect:
(i) The Loan Parties and all of their respective
Properties and operations are in full compliance with all
Environmental Laws. Borrower is not aware of, and Borrower
has received no written notice of, any past, present or
future conditions, events, activities, practices or incidents
which may interfere with or prevent the compliance or
continued compliance by any Loan Party with all Environmental
Laws;
(ii) The Loan Parties have obtained all Permits that
are required under applicable Environmental Laws, and all
such Permits are in good standing and all such Persons are in
compliance with all of the terms and conditions thereof;
(iii) No Hazardous Materials exist on, about or within
or have been (to Borrower's knowledge) or are being used,
generated, stored, transported, disposed of on or Released
from any of the Properties of the Loan Parties except in
compliance with applicable Environmental Laws. The use which
the Loan Parties make and intend to make of their respective
Properties will not result in the use, generation, storage,
transportation, accumulation, disposal or Release of any
Hazardous Material on, in or from any of their Properties
except in compliance with applicable Environmental Laws;
(iv) Neither the Loan Parties nor any of their
respective Subsidiaries currently or previously owned or
leased Properties or operations is subject to any outstanding
or, to the best of Borrower's knowledge, threatened order
from or agreement with any Governmental Authority or other
Person or subject to any judicial or administrative
proceeding with respect to (A) any failure to comply with
Environmental Laws, (B) any Remedial Action, or (C) any
Environmental Liabilities;
(v) There are no conditions or circumstances
associated with the currently or previously owned or leased
Properties or operations of the Loan Parties that could
reasonably be expected to give rise to any Environmental
Liabilities or claims resulting in any Environmental
Liabilities. None of the Loan Parties is subject to, or has
received written notice of any claim from any Person alleging
that any of the Loan Parties is or will be subject to, any
Environmental Liabilities;
(vi) None of the Properties of the Loan Parties is a
treatment facility (except for the recycling of Hazardous
Materials generated onsite and the treatment of liquid wastes
subject to the Clean Water Act), storage facility (except for
temporary storage of Hazardous Materials generated onsite
prior to their disposal offsite) or disposal facility
requiring a permit under the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq., regulations
thereunder or any comparable provision of state law. The
Loan Parties and their Subsidiaries are compliance with all
applicable financial responsibility requirements of all
Environmental Laws; and
(vii) None of the Loan Parties has failed to file any
notice required under applicable Environmental Law reporting
a Release.
(b) No Lien arising under any Environmental Law that could
have, individually or in the aggregate, a Material Adverse Effect
has attached to any Property or revenues of any Loan Party.
Section 7.21 Labor Disputes and Acts of God. Neither the
business nor the Properties of any Loan Party are affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy, or
other casualty (whether or not covered by insurance), that is having or
could have a Material Adverse Effect.
Section 7.22 Material Contracts. Except as may be disclosed
on Schedule 7.22, (a) all of the Material Contracts of each Loan Party
are in full force and effect, (b) there are no defaults under any
Material Contracts (which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect), and (c) to the
best of Borrower's knowledge after due inquiry, no other Person that is a
party thereto is in default under any of the Material Contracts. None of
the Material Contracts, and no other agreement, document or instrument to
which any Loan Party is a party or by which any Loan Party or any of its
Property is based or subject, prohibits the transactions contemplated
under the Loan Documents.
Section 7.23 Outstanding Securities. As of the Closing Date,
all outstanding securities (as defined in the Securities Act of 1933, as
amended, or any successor thereto, and the rules and regulations of the
Securities and Exchange Commission thereunder) of the Loan Parties have
been offered, issued, sold and delivered in compliance with all
applicable Governmental Requirements.
Section 7.24 Priority of Payment. The Debt evidenced by the
Notes and all other Obligations of Borrower to the Agent and the Banks
under the Loan Documents (a) constitutes "Permitted Indebtedness" (as
such term is defined in the Indenture and the Note Purchase Agreement) of
Borrower, (b) is pari passu in right of payment with the Senior Debt,
except that the Debt evidenced by the Notes and the other Obligations
(subject to the contractual right of the holders of the Senior Fixed Rate
Notes to obtain security in the future under certain circumstances as
provided in Section 4.10 of the Indenture), and (c) shall in no event be
subordinate in any respect (including, without limitation, right of
payment) to any other Debt of Borrower or any of its Subsidiaries,
exclusive of the effect of any Permitted Liens.
Section 7.25 Solvency. Borrower and each of its consolidated
Subsidiaries, as a separate entity and on a consolidated basis, is
Solvent, both before and after giving effect to the Loans and the other
transactions contemplated by the Loan Documents.
Section 7.26 Employee Matters. Except as set forth on
Schedule 7.26, as of the Closing Date (a) none of the Loan Parties nor
any of their respective Subsidiaries, nor any of their respective
employees, is subject to any collective bargaining agreement, and (b) no
petition for certification or union election is pending with respect to
the employees of any Loan Party or any of their respective Subsidiaries,
and no union or collective bargaining unit has sought such certification
or recognition with respect to the employees of any of the Loan Parties
or any of their respective Subsidiaries. There are no strikes,
slowdowns, work stoppages or controversies pending or, to the best
knowledge of Borrower after due inquiry, threatened against, any of the
Loan Parties or any of their respective Subsidiaries or their respective
employees which could have, either individually or in the aggregate, a
Material Adverse Effect.
Section 7.27 Insurance. Borrower has delivered to the Agent a
true and complete summary of the insurance that will be in effect as of
the Closing Date for Borrower. No notice of cancellation has been
received for such insurance and Borrower and its Subsidiaries are in
substantial compliance with all of the terms and conditions of the
policies providing such insurance.
ARTICLE 8
Affirmative Covenants
Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Bank has any Commitment hereunder
or any Letter of Credit remains outstanding, Borrower will perform and
observe, or cause to be performed and observed, the following covenants:
Section 8.1 Reporting Requirements. Borrower will furnish to the
Agent and each Bank:
(a) Annual Financial Statements. As soon as available, and
in any event within 90 days after the end of each fiscal year of
Borrower, beginning with the fiscal year ending December 31, 1997,
(i) a copy of the annual audit report of Borrower and its
consolidated Subsidiaries as of the end of and for such fiscal year
then ended containing, on a consolidated basis and with unaudited
consolidating schedules attached, balance sheets and statements of
income, retained earnings and cash flow, in each case setting forth
in comparative form the figures for the preceding fiscal year, all
in reasonable detail and audited by Arthur Andersen & Co. or other
independent certified public accountants of recognized national
standing, to the effect that such report has been prepared in
accordance with GAAP and (ii) a letter from such independent
certified public accountants to the Agent (A) stating that nothing
has come to its attention during its auditing procedures which
indicates that a Default has occurred and is continuing or, if in
its opinion a Default has occurred and is continuing, stating the
nature thereof, and (B) confirming the calculations set forth in
the officer's certificate delivered simultaneously therewith;
(b) Quarterly Financial Statements. As soon as available,
and in any event within 45 days after the end of each of the first
three quarters of each fiscal year of Borrower, beginning with the
fiscal quarter ending September 30, 1997, a copy of an unaudited
financial report of Borrower and its consolidated Subsidiaries as
of the end of such fiscal quarter and for the portion of the fiscal
year then ended containing, on a consolidated basis, balance sheets
and statements of income, retained earnings and cash flow, in each
case setting forth in comparative form the figures for the
corresponding period of the preceding fiscal year all in reasonable
detail certified by a Responsible Officer of Borrower to have been
prepared in accordance with GAAP and to fairly and accurately
present (subject to year-end audit adjustments) the financial
condition and results of operation of Borrower and its consolidated
Subsidiaries, on a consolidated and consolidating basis, at the
date and for the periods indicated therein;
(c) Certificate of No Default. Concurrently with the
delivery of each of the financial statements referred to in
Sections 8.1(a) or 8.1(b), a certificate of a Responsible Officer
of Borrower (i) stating that, to the best of such officer's
knowledge, no Default has occurred and is continuing or, if a
Default has occurred and is continuing, stating the nature thereof
and the action that is proposed to be taken with respect thereto,
and (ii) showing in reasonable detail the calculations
demonstrating compliance with Article 10;
(d) Budget; Projections. As soon as available, a copy of
any budget or projections of Borrower or any of its Subsidiaries as
may be prepared by or for the directors of any such Person and, in
any event with 30 days after the end of each fiscal year, a copy of
a budget and projections of Borrower and its consolidated
Subsidiaries for the then current fiscal year, which budget and
projections shall including consolidating schedules containing
information exclusively as to Borrower;
(e) Management Letters. Promptly upon receipt thereof, a
copy of any management letter or written report submitted to any
Loan Party by independent certified public accountants with respect
to the business, condition (financial or otherwise), operations,
prospects or Properties of such Loan Party;
(f) Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits and proceedings before any
Governmental Authority or arbitrator affecting any Loan Party
which, if determined adversely to such Loan Party, could have a
Material Adverse Effect;
(g) Notice of Default. As soon as possible and in any
event immediately upon any Borrower's knowledge of the occurrence
of any Default, a written notice setting forth the details of such
Default and the action that Borrower has taken and proposes to take
with respect thereto;
(h) ERISA Reports. Promptly after the filing or receipt
thereof, copies of all reports, including annual reports, and
notices which any Loan Party or any Borrower Member files with or
receives from the PBGC or the U.S. Department of Labor under ERISA;
as soon as possible and in any event within five days after any
such Person knows or has reason to know that any Pension Plan is
insolvent, or that any Reportable Event or Prohibited Transaction
has occurred with respect to any Plan or Multiemployer Plan, or
that the PBGC, any Loan Party or any Borrower Member has instituted
or will institute proceedings under ERISA to terminate or withdraw
from or reorganize any Pension Plan, a certificate of a Responsible
Officer of Borrower setting forth the details as to such
insolvency, withdrawal, Reportable Event, Prohibited Transaction or
termination and the action that Borrower proposes to take with
respect thereto; and promptly after the receipt thereof, a copy of
each demand letter or notice which would have been described in
Section 7.13(b) if it had been received on or prior to the Closing
Date.
(i) Reports to Other Creditors. Promptly after the
furnishing thereof, a copy of any statement or report furnished by
any Loan Party to any other party pursuant to the terms of any
indenture, loan, stock purchase or credit or similar agreement
relating to any Consolidated Funded Debt and not otherwise required
to be furnished to the Agent and the Banks pursuant to any other
clause of this Section 8.1;
(j) Notice of Material Adverse Effect. Within five
Business Days after Borrower becomes aware thereof, written notice
of any matter that could reasonably be expected to have a Material
Adverse Effect;
(k) Proxy Statements, Etc. As soon as available, one copy
of each financial statement, report, notice or proxy statement sent
by any Loan Party to its stockholders generally and one copy of
each regular, periodic or special report, registration statement or
prospectus filed by any Loan Party with any securities exchange or
the Securities and Exchange Commission or any successor agency, and
of all press releases and other statements made by any of the Loan
Parties to the public containing material developments in its
business;
(l) Notices regarding Subsidiaries and Transfers of
Drilling Rigs. (i) Concurrently with the delivery of each of the
financial statements referred to in Sections 8.1(a) and 8.1(b),
notice of the creation or acquisition of any Subsidiary by Borrower
after the Closing Date and subsequent to the last delivery of such
information, (ii) promptly upon the occurrence thereof, notice of
any sale, transfer or other disposition of any Drilling Rig by
Borrower and information concerning the identity of the Drilling
Rig affected thereby, the identity of the transferee thereof and
the date of such sale, transfer or other disposition, (iii)
promptly upon the occurrence thereof, notice of the creation or
acquisition of any Material Subsidiary of Borrower, or of the
existence of any Material Subsidiary of Borrower, after the Closing
Date and subsequent to the last delivery of such information; and
(iv) promptly upon the occurrence thereof, notice of any Non-
Material Subsidiary being or becoming a Material Subsidiary
(m) Insurance. Within 60 days prior to the end of each
fiscal year of Borrower, a report in form and substance reasonably
satisfactory to the Agent summarizing all material insurance
coverage maintained by Borrower and their Subsidiaries as of the
date of such report and all material insurance coverage planned to
be maintained by such Persons in the subsequent fiscal year;
(n) Environmental Assessments and Notices. Promptly after
the receipt thereof, a copy of each environmental assessment
(including any analysis relating thereto) involving an amount in
excess of $50,000 prepared with respect to any real Property of any
Loan Party and each notice sent by any Governmental Authority
relating to any failure or alleged failure of a material nature to
comply with any Environmental Law or any liability with respect
thereto;
(o) Notices relating to the Senior Debt. Promptly after
the delivery or receipt thereof by Borrower, a copy of each notice,
demand or other written information given or received by Borrower
under or in connection with any of the Senior Debt (including,
without limitation, any notice of a default or of any redemption,
purchase or repayment);
(p) Notice Relating to Drilling Rig Revenues. Within 30
days after the end of each calendar quarter, a report setting forth
the following information for each Drilling Rig: the revenues
earned by each Drilling Rig during the preceding calendar quarter
and the current contract status of such Drilling Rig; and
(q) General Information. Promptly, such other information
concerning the Loan Parties and their respective Subsidiaries, the
creditworthiness of the Loan Parties and their respective
Subsidiaries as the Agent or any Bank may from time to time
reasonably request.
Section 8.2 Maintenance of Existence; Conduct of Business.
Borrower will, and will cause each of its Subsidiaries to, preserve and
maintain its corporate existence and all of its material leases,
privileges, licenses, Permits, franchises, qualifications and rights that
are necessary in the ordinary conduct of its business. Borrower will,
and will cause each of its Subsidiaries to, conduct its business in an
orderly and efficient manner in accordance with good business practices.
Section 8.3 Maintenance of Properties. Borrower will, and will
cause each of its Subsidiaries to, maintain, keep and preserve all of its
Properties necessary in the proper conduct of its business in good
repair, working order and condition (ordinary wear and tear excepted) and
make all necessary repairs, renewals, replacements, betterments and
improvements thereof; provided, however, that nothing in this Section 8.3
shall prevent Borrower or any of its Subsidiaries from discontinuing the
operation or maintenance of any of its Properties if such discontinuance
is, in the judgment of Borrower, desirable in the conduct of its business
or the business of any Subsidiary.
Section 8.4 Taxes and Claims. Borrower will, and will cause each
of its Subsidiaries to, pay or discharge at or before maturity or before
becoming delinquent (a) all taxes, levies, assessments and governmental
charges imposed on it or its income or profits or any of its Property,
and (b) all lawful claims for labor, material and supplies which, if
unpaid, might become a Lien upon any of its Property; provided, however,
that neither Borrower nor any of its Subsidiaries shall be required to
pay or discharge any tax, levy, assessment or governmental charge or
claim for labor, material or supplies whose amount, applicability or
validity is being contested in good faith by appropriate proceedings
being diligently pursued and for which adequate reserves have been
established under GAAP.
Section 8.5 Insurance. Borrower will, and will cause each of its
Subsidiaries to, keep insured by financially sound and reputable insurers
all Property of a character usually insured by responsible corporations
engaged in the same or a similar business similarly situated against loss
or damage of the kinds and in the amounts customarily insured against by
such entities and carry such other insurance as is usually carried by
such entities. Such insurance shall be written by financially
responsible companies selected by Borrower which are reasonably
acceptable to the Required Banks. Each policy of insurance shall provide
that it will not be canceled, amended or reduced except after not less
than ten days' prior written notice to the Agent. Borrower will advise
the Agent promptly of any policy cancellation, reduction or amendment.
Section 8.6 Inspection Rights. Borrower will, and will cause each
of its Subsidiaries to, permit representatives and agents of the Agent
and each Bank, during normal business hours and upon reasonable notice to
Borrower, to examine, copy and make extracts from its books and records,
to visit and inspect its rigs and other Properties and to discuss its
business, operations and financial condition with its officers and
independent certified public accountants (provided that Agent and Bank
shall provide Borrower reasonable opportunity to participate in any such
discussions between or among (a) Agent and Banks and (b) the independent
certified public accountants of Borrower and their Subsidiaries).
Borrower shall authorize each of its Subsidiaries to authorize their
accountants in writing (with a copy to the Agent) to comply with this
Section 8.6.
Section 8.7 Keeping Books and Records. Borrower will, and will
cause each of its Subsidiaries to, maintain appropriate books of record
and account in accordance with GAAP consistently applied in which true,
full and correct entries will be made of all their respective dealings
and business affairs. If any changes in accounting principles from those
used in the preparation of the financial statements referenced in Section
8.1 are hereafter required or permitted by GAAP and are adopted by
Borrower or any of its Subsidiaries with the concurrence of its
independent certified public accountants and such changes in GAAP result
in a change in the method of calculation or the interpretation of any of
the financial covenants, standards or terms found in Section 8.1 or
Article 10 or any other provision of this Agreement, Borrower and the
Required Banks agree to amend any such affected terms and provisions so
as to reflect such changes in GAAP with the result that the criteria for
evaluating Borrower's or such Subsidiaries' financial condition shall be
the same after such changes in GAAP as if such changes in GAAP had not
been made; provided, that until any necessary amendments have been made,
the certificate required to be delivered under Section 8.1(d) hereof
demonstrating compliance with Article 10 shall include calculations
setting forth the adjustments from the relevant items as shown in the
current financial statements based on the changes to GAAP to the
corresponding items based on GAAP as used in the financial statements
referenced in Section 7.2(a), in order to demonstrate how such financial
covenant compliance was derived from the current financial statements.
Section 8.8 Compliance with Laws. Borrower will, and will cause
each of its Subsidiaries to, comply with all applicable Governmental
Requirements, except for instances of noncompliance that could not have,
individually or in the aggregate, a Material Adverse Effect.
Section 8.9 Compliance with Agreements. Borrower will, and will
cause each of its Subsidiaries to, comply in all material respects with
all agreements, contracts and instruments binding on it or affecting its
Properties or business. Borrower will comply with all terms and
provisions of the Senior Debt Documents and Senior Subordinated Debt
Documents which are intended to benefit the holders of any "Permitted
Indebtedness" and the Agent and the Banks as beneficiaries of "Permitted
Liens" (as such terms are defined in the Indenture and the Note Purchase
Agreement, respectively), including, without limitation, the terms and
provisions of Sections 4.16 and 4.10 of the Indenture and Sections 8.13
and 8.07 of the Note Purchase Agreement.
Section 8.10 Further Assurances. Borrower will, and will
cause each of its Subsidiaries to, execute and deliver such further
agreements, documents and instruments and take such further action as may
be requested by the Agent to carry out the provisions and purposes of
this Agreement and the other Loan Documents and to evidence the
Obligations.
Section 8.11 ERISA. Borrower will, and will cause each of
Borrower Members to, comply with all minimum funding requirements and all
other material requirements of ERISA, if applicable, so as not to give
rise to any liability thereunder.
Section 8.12 No Consolidation in Bankruptcy. Borrower will,
and will cause each of its Subsidiaries to, (a) maintain corporate or
partnership (as applicable) records and books of account separate from
those of any other entity, except that Borrower may commingle proceeds of
the Receivables in the Concentration Account, (b) not commingle its funds
or assets with those of any other entity, and (c) except for consents or
meetings to approve the transactions contemplated by this Agreement, the
Acquisition Loans Credit Agreement and the Revolving Loans Credit
Agreement, provide that its board of directors or, with respect to any
partnership, analogous managing body will hold all appropriate meetings
which will not be jointly held with any Subsidiary or Affiliate.
ARTICLE 9
Negative Covenants
Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Bank has any Commitment hereunder
or any Letter of Credit remains outstanding, Borrower will perform and
observe, or cause to be performed and observed, the following covenants:
Section 9.1 Debt. Borrower will not, and will not permit any of
its Subsidiaries (other than Non-Recourse Subsidiaries) to, incur,
create, assume or permit to exist any Debt, except:
(a) Debt pursuant hereto and Debt of Borrower and its
Subsidiaries to the Revolving Loans Credit Agreement and the
Acquisition Loans Credit Agreement.
(b) Existing Debt identified in the Form 10-Q of Borrower
for the quarter ended June 30, 1997, and renewals, extensions or
refinancings of any of such Debt referred to in this Section 9.1(b)
which do not increase the outstanding principal amount of such Debt
and the terms and provisions of which are not materially more
onerous than the terms and conditions of such Debt on the Closing
Date;
(c) Purchase money Debt secured by purchase money Liens,
which Debt and Liens are permitted under and meet all of the
requirements of clause (g) of the definition of Permitted Liens;
(d) Intercompany Debt between Borrower and any of its
Subsidiaries incurred in the ordinary course of business or
consistent with prudent business practices; provided, however, that
any and all of the Debt permitted pursuant to this Section 9.1(d)
shall be unsecured, and, if evidenced by instruments, shall be
evidenced by instruments satisfactory to the Agent which will be
pledged to the Agent for the benefit of the Banks pursuant to a
security agreement in form and substance satisfactory to the Agent
(except if and to the extent that such a pledge would give the
holders of the Senior Notes the contract right to also obtain the
benefit of such a pledge);
(e) Debt under Currency Hedge Agreements and Interest Rate
Protection Agreements, provided that (i) each counterparty shall be
rated in one of the two highest rating categories of Standard and
Poor's Corporation or Moody's Investors Service, Inc. and (ii) the
aggregate notional amount (as to Borrower and its Subsidiaries,
other than Non-Recourse Subsidiaries) of all Currency Hedge
Agreements and Interest Rate Protection Agreements to which
Borrower or any of its Subsidiaries is a party shall not exceed
$10,000,000 at any time outstanding;
(f) Debt of Borrower or any of its Subsidiaries incurred in
the ordinary course of business in respect of performance bonds,
surety bonds and appeal bonds in an aggregate principal amount (as
to Borrower and its Subsidiaries) not to exceed $5,000,000 at any
time outstanding;
(g) Debt of a Person who becomes a Subsidiary of Borrower
pursuant to a transaction permitted by this Agreement occurring
after the Closing Date, which Debt was outstanding prior to the
date on which such Subsidiary was acquired (other than Debt
incurred as a result of, or in anticipation of, such transaction);
(h) Permitted Refinancing Debt; and
(i) Debt the incurrence of which, after giving proforma
effect to such incurrence, would not result in the Proforma
Interest Coverage Ratio exceeding 2.50 to 1.00;
provided, however, that, other than loans by a Subsidiary of Borrower to
Borrower or any other Subsidiary of Borrower, no Debt described in clause
(c), (d), (g), (h) or (i) preceding may be incurred if a Default exists
at the time of such incurrence or would result therefrom. For purposes
of clause (d) of this Section 9.1, the term Borrower shall include the
Guarantors to the extent necessary so that the requirements of Section
4.12 of the Indenture and Section 8.09 of the Note Purchase Agreement are
not violated by the Borrower and the Guarantors.
Section 9.2 Limitation on Liens. Borrower will not, and will not
permit any of its Subsidiaries (other than Non-Recourse Subsidiaries) to,
incur, create, assume or permit to exist any Lien upon any of its
Property or revenues, whether now owned or hereafter acquired, except
Permitted Liens. Borrower will not, and will not permit any of its
Subsidiaries to, incur, create, assume or permit to exist any Lien upon
any Capital Stock, whether now outstanding or hereafter issued, of any
Subsidiary of Borrower (other than a Non-Recourse Subsidiary).
Section 9.3 Mergers, Etc. Except pursuant to the R&B Merger,
Borrower will not become a party to a merger or consolidation, or
wind-up, dissolve or liquidate itself. Borrower will not, and will not
permit any of its Subsidiaries to, purchase or acquire all or a
substantial part of the business, assets or Properties of any Person if
such purchase or acquisition (i) could reasonably be expected to cause or
result in the occurrence of a Default or (ii) could reasonably be
expected to have a material adverse effect upon the financial position or
performance of Borrower.
Section 9.4 Restricted Payments. Borrower will not, and will not
permit any of its Subsidiaries (other than Non-Recourse Subsidiaries) to,
make any Restricted Payments, except:
(a) Payroll advances in the ordinary course of business not
to exceed an aggregate amount of $1,000,000 at any one time;
(b) Other advances and loans to officers, employees or
shareholders of Borrower or any of its Subsidiaries, so long as the
aggregate principal amount (as to Borrower and all of its
Subsidiaries) of any such advances and loans does not exceed
$500,000 at any time outstanding;
(c) Payments of accrued interest and expenses with respect
to the Senior Debt and the Senior Subordinated Debt when due in
accordance with the Senior Debt Documents and the Senior
Subordinated Debt Documents, respectively, and regularly scheduled
payments of principal and accrued interest with respect to the
Senior Floating Rate Notes and Senior Subordinated Debt when due in
accordance with the terms of the Senior Floating Rate Notes and
Senior Subordinated Debt Documents, respectively;
(d) Repayment of Debt permitted pursuant to Section 9.1,
which repayment occurs pursuant to a refinancing transaction in
which the resulting Debt constitutes Permitted Refinancing Debt;
(e) Restricted Payments not exceeding $2,000,000 in
aggregate amount (as to Borrower and all of its Subsidiaries)
during any fiscal year;
(f) Restricted Payments made to redeem any preferred stock
or Redeemable Stock issued after the Closing Date at a price not
exceeding the issue price thereof;
(g) Payment of dividends on any preferred stock issued
after the Closing Date;
(h) Investments permitted pursuant to Section 9.5; and
(i) Loans by a Subsidiary of Borrower to Borrower or any
other Subsidiary of Borrower;
provided, however, that, except for loans described in clause (i) above,
no such Restricted Payments otherwise permitted pursuant to this
Section 9.4 may be made to any Person if a Default exists at the time of
such Restricted Payment or would result therefrom or may be made if an
Event of Default exists at the time of such Restricted Payment or would
result therefrom. For purposes of clause (a) of this Section 9.4, the
term Borrower shall include the Guarantors to the extent necessary so
that the requirements of Section 4.12 of the Indenture and Section 8.09
of the Note Purchase Agreement are not violated by the Borrower and the
Guarantors.
Section 9.5 Investments. Borrower will not, and will not permit
any of its Subsidiaries to make or permit to remain outstanding any
advance, loan, extension of credit or capital contribution to or
investment in any Person, or purchase or own any stock, bonds, notes,
debentures or other securities of any Person, or be or become a joint
venturer with or partner of any Person (all such transactions being
herein called "Investments"), except:
(a) Investments in obligations or securities received in
settlement of debts (created in the ordinary course of business)
owing to Borrower;
(b) Investments existing as of the Closing Date identified
on Schedule 9.5 hereto;
(c) Investments in securities issued or guaranteed by the
United States or any agency thereof with maturities of four years
or less from the date of acquisition;
(d) Investments in certificates of deposit and Eurodollar
time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding
six months and overnight bank deposits, in each case with any Bank
or with any domestic commercial bank having capital and surplus in
excess of $100,000,000;
(e) Investments in repurchase obligations with a term of
not more than seven days for securities of the types described in
clause (c) above with any Bank or with any domestic commercial bank
having capital and surplus in excess of $100,000,000;
(f) Investments in commercial paper of a domestic issuer
rated A-1 or better or P-1 or better by Standard & Poor's
Corporation or Moody's Investors Services, Inc., respectively,
maturing not more than six months from the date of acquisition;
(g) Investments in shares of money market mutual or similar
funds having assets in excess of $100,000,000;
(h) Investments in a Subsidiary of Borrower that is an
obligor on the Revolving Loans;
(i) Advances and loans to officers and employees of
Borrower or any of its Subsidiaries, so long as the aggregate
principal amount (as to Borrower and all of its Subsidiaries) of
such advances and loans does not exceed $500,000 at any time
outstanding;
(j) Investments represented by that portion of the proceeds
from Asset Dispositions permitted pursuant to Section 9.8, which
proceeds are either not Cash Proceeds or are deemed to be Cash
Proceeds pursuant to the second sentence of the definition of "Cash
Proceeds";
(k) The contribution of the Non-Recourse Rigs to the Non-
Recourse Subsidiaries;
(l) Debt permitted pursuant to Section 9.3 and Restricted
Payments permitted pursuant to Section 9.4; and
(m) Other Investments in an aggregate amount (as to
Borrower and all of its Subsidiaries) not to exceed the sum of the
following at any time outstanding: (i) $75,000,000, minus (ii) the
aggregate amount paid by Borrower and all of its Subsidiaries after
the Closing Date in redemption of preferred stock or Redeemable
Stock.
provided, however, that no Investments may be made by Borrower pursuant
to clauses (h), (i), (j), (k), (l) or (m) preceding if a Default exists
at the time of such Investment or would result therefrom. For purposes
of clause (h) of this Section 9.5, the term Borrower shall include the
Guarantors to the extent necessary so that the requirements of Section
4.12 of the Indenture and Section 8.09 of the Note Purchase Agreement are
not violated by the Borrower and the Guarantors.
Section 9.6 Limitation on Issuance of Capital Stock. Borrower will
not at any time on or after the Closing Date issue, sell, assign or
otherwise dispose of (a) any of its Capital Stock, (b) any securities
exchangeable for or convertible into or carrying any rights to acquire
any of its Capital Stock or (c) any option, warrant or other right to
acquire any of its Capital Stock; provided, however, that, if and to the
extent not otherwise prohibited by this Agreement or the other Loan
Documents (i) Borrower may issue additional shares of its Capital Stock
or such securities, options, warrants or other rights, other than
Redeemable Stock, for full and fair consideration, (ii) Borrower may
issue stock in accordance with the terms of options and warrants that
were outstanding on the date hereof, and (iii) Borrower may grant
compensatory stock options in the ordinary course of business consistent
with past practices and issue shares upon the exercise of such options.
For purposes of clause (c)(ii) of this Section 9.6, the term Borrower
shall include the Guarantors to the extent necessary so that the
requirements of Section 4.12 of the Indenture and Section 8.09 of the
Note Purchase Agreement are not violated by the Borrower and the
Guarantors.
Section 9.7 Transactions With Affiliates. Except for (a) the
payment of salaries in the ordinary course of business consistent with
prudent business practices, (b) the furnishing of employment benefits in
the ordinary course of business consistent with prudent business
practices, (c) the transactions permitted by Section 9.13, and (d) the
transactions specified in Schedule 9.7, Borrower will not, and will not
permit any of its Subsidiaries to, enter into any transaction, including,
without limitation, the purchase, sale or exchange of Property or the
rendering of any service, with any Affiliate of Borrower or such
Subsidiary, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to Borrower or such
Subsidiary than would be obtained in a comparable arms-length transaction
with a Person not an Affiliate of Borrower or such Subsidiary.
Section 9.8 Disposition of Property. Borrower will not, and will
not permit any of its Subsidiaries (other than Non-Recourse Subsidiaries)
to, enter into an Asset Disposition, directly or indirectly, except:
(a) Asset Dispositions pursuant to which (i) Borrower or
its Subsidiary, as the case may be, receives consideration at the
time of such disposition at least equal to the fair market value of
such Property, except in the case of (A) a Bargain Purchase
Contract (as such term is defined in the Indenture) entered into in
the ordinary course of business, (B) a transfer of a drilling rig
or rigs and related equipment between Borrower and one of its
Subsidiaries if no Default exists at the time of such transfer or
would result therefrom, or (C) an Asset Disposition resulting from
the requisition of title to, seizure or forfeiture of any Property
or assets or any actual or constructive total loss or an agreed or
compromised total loss; (ii) at least 75% of such consideration
consists of Cash Proceeds (or the assumption of Debt of Borrower or
such Subsidiary relating to the Capital Stock or Property that was
the subject of such disposition and the release of Borrower or such
Subsidiary from such indebtedness); and (iii) after giving effect
to such disposition, the total noncash consideration from all
dispositions held by Borrower and its Subsidiaries, including
noncash consideration described in the second sentence of the
definition of "Cash Proceeds" which is not converted into cash
within 12 months after the related dispositions, then outstanding
is not greater than $25,000,000;
(b) the sale of drill-string components, inventory (other
than drilling rigs) and obsolete and worn-out equipment in the
ordinary course of business;
(c) any drilling contract, charter (bareboat or otherwise)
or other lease of property entered into by Borrower or any
Subsidiary (including, without limitation, bareboat charters by
Borrower to any Subsidiary other than any Non-Recourse Subsidiary)
in the ordinary course of business; provided, however, that (i) any
such contract, charter or other lease affecting any Drilling Rig
shall be for full and fair consideration payable to Borrower, and
with respect to such contracts, charters or other leases other than
drilling contracts entered into in the ordinary course of business,
shall be in form and substance satisfactory to the Agent and shall
expressly include terms and provisions in form and substance
satisfactory to the Agent to the effect that the parties thereto
acknowledge the existing Lien on such Drilling Rig securing the
Acquisition Loans Obligations and agree that such Lien securing
such obligations is prior to, and will not in any way be affected
by, such contract, charter or other lease and (ii) neither Borrower
nor any of its Subsidiaries shall enter into any such contract,
charter or lease with a Non-Recourse Subsidiary.
(d) a Restricted Payment permitted under Section 9.4 or any
Investment permitted under Section 9.5;
(e) the transfer of the Non-Recourse Rigs to one or more
Non-Recourse Subsidiaries;
(f) the conveyance, transfer or other disposition of rigs
pursuant to which such rigs are exchanged for rigs of a like kind,
i.e. barge rigs may be exchanged for barge rigs and jackup rigs may
be exchanged for jackup rigs, having an equivalent value; and
(g) issuances or dispositions of Capital Stock permitted
under Section 9.6.
Provided, in no event shall Borrower sell, transfer, encumber or
otherwise dispose of any Drilling Rig, except for:
(a) Permitted Liens;
(b) Drilling Contracts entered into in the ordinary course
of business; and
(c) Disposition of Drilling Rig components that have been
replaced by components of equal or better quality.
Section 9.9 Sale and Leaseback. Except for transactions in the
ordinary course of business involving real or personal Property having an
aggregate fair market value of $30,000,000 or less and providing for
annual lease payments in an annual aggregate amount not to exceed
$3,000,000, Borrower will not, and will not permit any of its
Subsidiaries (other than Non-Recourse Subsidiaries) to, enter into any
arrangement with any Person pursuant to which it leases from such Person
real or personal Property that has been or is to be sold or transferred,
directly or indirectly, by it to such Person.
Section 9.10 Lines of Business. Borrower will not, and will
not permit any of its Subsidiaries to, engage in any line or lines of
business activity other than the businesses in which they are engaged on
the Closing Date and lines of business reasonably related thereto.
Section 9.11 Environmental Protection. Borrower will not, and
will not permit any of its Subsidiaries to, (a) use (or permit any tenant
to use) any of its Properties for the handling, processing, storage,
transportation or disposal of any Hazardous Material except in compliance
with applicable Environmental Laws, (b) generate any Hazardous Material
except in compliance with applicable Environmental Laws, (c) conduct any
activity that is likely to cause a Release or threatened Release of any
Hazardous Material in violation of any Environmental Law, or
(d) otherwise conduct any activity or use any of its Properties in any
manner that violates or is likely to violate any Environmental Law or
create any Environmental Liabilities for which Borrower or any of its
Subsidiaries would be responsible, except for circumstances or events
described in clauses (a) through (d) preceding that could not have,
individually or in the aggregate, a Material Adverse Effect.
Section 9.12 Intercompany Transactions. Except as may be
expressly permitted or required by the Loan Documents or except as may be
expressly permitted or required by the Senior Debt Documents or the
Senior Subordinated Debt Documents as summarized on Schedule 9.12,
Borrower will not, and will not permit any of its Subsidiaries to, create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Subsidiary
(other than a Non-Recourse Subsidiary) to (a) pay dividends or make any
other distribution to Borrower or any of its Subsidiaries (other than
Non-Recourse Subsidiaries) in respect of such Subsidiary's Capital Stock
or with respect to any other interest or participation in, or measured
by, its profits, (b) pay any Debt owed to Borrower or any of its
Subsidiaries (other than Non-Recourse Subsidiaries), (c) make any loan or
advance to Borrower or any of its Subsidiaries (other than Non-Recourse
Subsidiaries), or (d) sell, lease or transfer any of its Property to
Borrower or any of its Subsidiaries (other Non-Recourse Subsidiaries).
Nothing contained in this Section 9.12 shall be deemed to constitute an
encumbrance or restriction prohibited by Section 4.12 of the Indenture or
Section 8.09 of the Note Purchase Agreement.
Section 9.13 Consulting and Management Fees. Other than
reasonable consulting fees paid to Affiliates of Borrower on an arm's-
length basis for specific services rendered not to exceed $750,000 in the
aggregate during any calendar year, Borrower will not, and will not
permit any of its Subsidiaries to, pay any management, consulting or
similar fees (excluding directors' fees and legal fees) to any Affiliate
of Borrower or to any director, officer or employee of Borrower or any
Affiliate of Borrower.
Section 9.14 Modification of Other Agreements. Borrower will
not, and will not permit any of its Subsidiaries to, consent to or
implement any termination, amendment, modification, supplement or waiver
of (a) the Senior Debt Documents, (b) the Senior Subordinated Debt
Documents, (c) the certificate of incorporation or bylaws or partnership
agreement or certificate of limited partnership or analogous
constitutional documents of Borrower or any of its Subsidiaries if the
same could have a Material Adverse Effect, or (d) any other Material
Contract to which it is a party or any Permit which it possesses if the
same could have a Material Adverse Effect. Without limiting the
generality of and in addition to the foregoing, Borrower will not consent
to or implement any termination, amendment, modification, supplement or
waiver of the Senior Debt Documents or Senor Subordinated Debt Documents
(i) to increase the principal amount of any Senior Debt or Senor
Subordinated Debt, (ii) to shorten the maturity of, or any date for the
payment of any principal of or interest on, any Senior Debt or Senior
Subordinated Debt, (iii) to increase the rate of interest on or with
respect to any Senior Debt or Senior Subordinated Debt, (iv) to otherwise
amend or modify the payment or subordination terms of any Senior Debt or
Senior Subordinated Debt, (v) to increase any cost, fee or expense
payable by Borrower or any its Subsidiaries, (vi) to provide any
collateral or security for payment or collection of any Senior Debt or
Senior Subordinated Debt without the written consent of Required Banks,
or (vii) in any other respect that could be materially adverse to
Borrower and its Subsidiaries taken as a whole.
Section 9.15 ERISA. Borrower will not:
(a) allow, or take (or permit any Borrower Member to take)
any action which would cause, any unfunded or unreserved liability
for benefits under any Plan (exclusive of any Multiemployer Plan)
to exist or to be created that exceeds $4,000,000 with respect to
any such Plan or $8,000,000 with respect to all such Plans in the
aggregate; or
(b) with respect to any Multiemployer Plan, allow, or take
(or permit any ERISA Affiliate to take) any action which would
cause, any unfunded or unreserved liability for benefits under any
Multiemployer Plan to exist or to be created, either individually
as to any such Plan or in the aggregate as to all such Plans, that
could, upon any partial or complete withdrawal from or termination
of any such Multiemployer Plan or Plans, have a Material Adverse
Effect.
ARTICLE 10
Financial Covenants
Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Bank has any Commitment hereunder
or any Letter of Credit remains outstanding, Borrower will perform and
observe the following covenants:
Section 10.1 Consolidated Current Ratio. Borrower will at all
times maintain a Consolidated Current Ratio of not less than 1.00 to
1.00.
Section 10.2 Consolidated Tangible Net Worth. Borrower will
at all times maintain Consolidated Tangible Net Worth in an amount not
less than the sum of (a) $250,000,000, plus (b) 50% of cumulative
Consolidated Net Income during any fiscal quarter ending after the
Closing Date if, but only if, such Consolidated Net Income during such
fiscal quarter is positive, plus (c) 50% of all Net Proceeds of each
Equity Issuance after the Closing Date.
Section 10.3 Consolidated Interest Coverage Ratio. Borrower
will not permit the Consolidated Interest Coverage Ratio, calculated as
of the end of each fiscal quarter of Borrower commencing with the fiscal
quarter ending September 30, 1996, for the four fiscal quarters of
Borrower then most recently ended, to be less than 2.50 to 1.00.
ARTICLE 11
Default
Section 11.1 Events of Default. Each of the following shall
be deemed an "Event of Default":
(a) Borrower (i) shall fail to pay, repay or prepay when
due any amount of principal owing to the Agent or any Bank pursuant
to this Agreement or any other Loan Document, (ii) shall fail to
pay within one day of the date when due any amount of accrued
interest owing to the Agent or any Bank pursuant to this Agreement
or any other Loan Document, or (iii) or shall fail to pay within
five days of the date when due any fee or other amount or other
Obligation (other than principal or interest) owing to the Agent or
any Bank pursuant to this Agreement or any other Loan Document.
(b) Any representation or warranty made or deemed made by
Borrower or any Loan Party in any Loan Document or in any
certificate, report, notice or financial statement furnished at any
time in connection with this Agreement or any other Loan Document
shall be false, misleading or erroneous in any material respect
when made or deemed to have been made.
(c) Borrower or any Loan Party shall fail to perform,
observe or comply with any other covenant, agreement or term
contained in this Agreement or any other Loan Document (other than
covenants to pay the Obligations) and such failure is not remedied
or waived within 15 days after the Agent or any Bank shall have
notified Borrower of such failure or, if a different grace period
is expressly made applicable in such other Loan Documents, within
such applicable grace period.
(d) Any of the Loan Parties shall admit in writing its
inability to, or be generally unable to, pay its debts as such
debts become due.
(e) Any Loan Party shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner, liquidator or the like of itself or
of all or any substantial part of its Property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a
voluntary case under the United States Bankruptcy Code (as now or
hereafter in effect, the "Bankruptcy Code"), (iv) institute any
proceeding or file a petition seeking to take advantage of any
other Debtor Relief Law, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code, or
(vi) take any corporate or other action for the purpose of
effecting any of the foregoing.
(f) A proceeding or case shall be commenced, without the
application, approval or consent of any of the Loan Parties in any
court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
receiver, custodian, trustee, examiner, liquidator or the like of
any of the Loan Parties or of all or any substantial part of its
Property, or (iii) similar relief in respect of any of the Loan
Parties under any Debtor Relief Law, and such proceeding or case
shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 or more days;
or an order for relief against any of the Loan Parties shall be
entered in an involuntary case under the Bankruptcy Code.
(g) Any of the Loan Parties shall fail to discharge (or
fail to have continually stayed until subsequently discharged)
within a period of 30 days after the commencement thereof any
attachment, sequestration, forfeiture or similar proceeding or
proceedings involving an aggregate amount in excess of $3,000,000
against any of its Properties.
(h) A final judgment or judgments for the payment of money
in excess of $5,000,000 in the aggregate shall be rendered by a
court or courts against the Loan Parties or any of them on claims
not covered by insurance or as to which the insurance carrier has
denied responsibility and the same shall not be discharged, or a
stay of execution thereof shall not be procured, within 30 days
from the date of entry thereof and the Loan Parties shall not,
within said period of 30 days, or such longer period during which
execution of the same shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal.
(i) Any of the Loan Parties shall fail to pay when due
(including any applicable grace period) any principal of or
interest on any Debt or Debts (other than the Obligations or any
Non-Recourse Debt) having a principal amount of at least $3,000,000
individually, or $5,000,000 in the aggregate, or the maturity of
any such Debt or Debts shall have been accelerated, or any such
Debt or Debts shall have been required to be prepaid prior to the
stated maturity thereof.
(j) Any event shall have occurred (and shall not have been
waived or otherwise cured) that permits any holder or holders of
such Debt or any Person acting on behalf of such holder or holders
to accelerate the maturity of such Debt or require prepayment of
such Debt.
(k) Any event shall have occurred (and shall not have been
waived or otherwise cured) that, with the giving of notice or lapse
of time or both, would permit any holder or holders of such Debt or
any Person acting on behalf of such holder or holders to accelerate
the maturity of such Debt or require the prepayment of such Debt,
and such default shall have continued for a period of 30 days after
a Responsible Officer of Borrower obtains actual knowledge of such
default.
(l) This Agreement or any other Loan Document shall cease
to be in full force and effect or shall be declared null and void
or the validity or enforceability thereof shall be contested or
challenged by any Loan Party or any of its shareholders, or any
Loan Party shall deny that it has any further liability or
obligation under any of the Loan Documents.
(m) Any of the following events shall occur or exist with
respect to any Loan Party or any ERISA Affiliate: (i) any
Prohibited Transaction involving any Plan; (ii) any Reportable
Event with respect to any Pension Plan; (iii) the filing under
Section 4041 of ERISA of a notice of intent to terminate any
Pension Plan or the termination of any Pension Plan; (iv) any event
or circumstance that might constitute grounds entitling the PBGC to
institute proceedings under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to administer,
any Pension Plan, or the institution by the PBGC of any such
proceedings; (v) any "accumulated funding deficiency" (as defined
in Section 406 of ERISA or Section 412 of the Code), whether or not
waived, shall exist with respect to any Plan; or (vi) complete or
partial withdrawal under Section 4201 or 4204 of ERISA from a Plan
or the reorganization, insolvency, or termination of any Pension
Plan; and in each case above, such event or condition, together
with all other events or conditions, if any, have subjected or
could in the reasonable opinion of the Agent subject any Loan Party
or any ERISA Affiliate to any tax, penalty or other liability to a
Plan, a Multiemployer Plan, the PBGC or otherwise (or any
combination thereof) which in the aggregate exceed or could
reasonably be expected to exceed $3,000,000.
(n) The occurrence of a Change of Control;
(o) If, at any time, the Senior Debt shall (i) cease to be
either pari passu with, or subordinate in right of payment to, the
Notes or the Obligations, (ii) become superior in right of payment
to the Notes or the Obligations, or (iii) otherwise have a right to
any payment or any security superior to that of the Notes or the
Obligations; or if, at any time, the Senior Subordinated Debt shall
(A) cease to be subordinate in right of payment to the Notes or the
Obligations, (B) become equal or superior in right of payment to
the Notes or the Obligations, or (C) otherwise have a right to
payment or any security equal or superior to that of the Notes or
the Obligations;
(p) The occurrence of (i) a "Default" (as such term is used
or defined in any of the Senior Debt Documents or the Senior
Subordinated Debt Documents) under any of the Senior Debt Documents
or the Senior Subordinated Debt Documents, unless (A) within 30
days after a Responsible Officer of Borrower obtains or should have
obtained actual knowledge of such Default, such Default has been
waived, cured or consented to in accordance with such documents,
(B) the maturity of the Loans has not been accelerated, and
(C) such waiver or consent is not made in connection with any
amendment or modification of any such documents in violation of
Section 9.14 hereof or in violation of any of the Senior Debt
Documents or the Senior Subordinated Debt Documents or in
connection with any payment to the holders of any Senior Debt or
any Senior Subordinated Debt, (ii) an "Event of Default" (as such
term is used or defined in any of the Senior Debt Documents or
Senior Subordinated Debt Documents) under any of the Senior Debt
Documents or Senior Subordinated Debt Documents, or (iii) any
acceleration of the maturity of any Senior Debt or Senior
Subordinated Debt.
(q) If, at any time, (i) Borrower or any of its
Subsidiaries shall make, or shall be required to make, any
redemption, purchase or prepayment (whether optional or mandatory)
with respect to any of the Senior Debt or Senior Subordinated Debt,
(ii) any event or circumstance shall occur which gives any party to
the Senior Debt Documents or Senior Subordinated Debt Documents or
any holder of any Senior Debt or Senior Subordinated Debt the right
to request or require Borrower or any of its Subsidiaries, as the
case may be, to redeem, purchase or prepay the Senior Debt or Senor
Subordinated Debt, as the case may be (including, without
limitation (A) the making of, or the obligation of Borrower or any
of its Subsidiaries to make, an Asset Sale Offer (as such term is
defined in the Indenture) or a Senior Notes Assets Sale Offer (as
such term is defined in the Note Purchase Agreement) or (B) the
occurrence of a Change of Control (as such term is defined in the
Indenture or the Note Purchase Agreement), or (iii) Borrower or any
of its Subsidiaries shall initiate or give (A) any election or
notice relating to any redemption, purchase or prepayment (whether
optional or mandatory) of any of the Senior Debt or Senior
Subordinated Debt or (B) any election or notice relating to any
defeasance of the Senior Debt or Senior Subordinated Debt.
(r) If at any time, there shall have occurred and be
continuing an "Event of Default" as that term is used in the
Revolving Loans Credit Agreement or the Acquisition Loans Credit
Agreement.
Section 11.2 Remedies. If any Event of Default shall occur
and be continuing, the Agent may and, if directed by the Required Banks,
the Agent shall do any one or more of the following:
(a) Acceleration. Declare all outstanding principal of and
accrued and unpaid interest on the Loans and the other Obligations
and all other amounts payable by Borrower under the Loan Documents
immediately due and payable, and the same shall thereupon become
immediately due and payable, without notice, demand, presentment,
notice of dishonor, notice of acceleration, notice of intent to
accelerate, protest or other formalities of any kind, all of which
are hereby expressly waived by Borrower;
(b) Termination of Commitments. Terminate the Commitments
(including, without limitation, the obligation of the Issuing Bank
to issue Letters of Credit) without notice to Borrower;
(c) Judgment. Reduce any claim to judgment;
(d) Foreclosure. Foreclose or otherwise enforce any Lien
granted to the Agent for the benefit of itself and the Banks to
secure payment and performance of the Obligations in accordance
with the terms of the Loan Documents; or
(e) Rights. Exercise any and all rights and remedies
afforded by the laws of the State of Texas or any other
jurisdiction, by any of the Loan Documents, by equity or otherwise
against any or all of the Loan Parties or any other Person;
provided, however, that upon the occurrence of an Event of Default under
Section 11.1(e) or Section 11.1(f), the Commitments of all of the Banks
(including, without limitation, the obligation of the Issuing Bank to
issue Letters of Credit) shall immediately and automatically terminate,
and the outstanding principal of and accrued and unpaid interest on the
Loans and the other Obligations and all other amounts payable by Borrower
under the Loan Documents shall thereupon become immediately and
automatically due and payable without notice, demand, presentment, notice
of dishonor, notice of acceleration, notice of intent to accelerate,
protest or other formalities of any kind, all of which are hereby
expressly waived by Borrower.
Section 11.3 Cash Collateral. If (a) an Event of Default
shall have occurred and be continuing or (b) any Letter of Credit shall,
for whatever reason, remain outstanding after all Loans and Reimbursement
Obligations have been paid in full and all Commitments have expired or
terminated, then Borrower shall, if requested by the Agent or the
Required Banks, pledge to the Agent as security for the Obligations,
pursuant to a security agreement or assignment in form and substance
satisfactory to the Agent, an amount in immediately available funds (in
excess of any funds already pledged or assigned by Borrower to the Agent
as of the date of the occurrence of such Event of Default) equal to the
then outstanding Letter of Credit Liabilities, such funds to be held in a
cash collateral account satisfactory to the Agent without any right of
withdrawal by Borrower.
Section 11.4 Performance by the Agent. If Borrower shall fail
to perform any covenant or agreement in accordance with the terms of the
Loan Documents, the Agent may, at the direction of the Required Banks,
perform or attempt to perform such covenant or agreement on behalf of
Borrower. In such event, Borrower shall, at the request of the Agent,
promptly pay any amount expended by the Agent or the Banks in connection
with such performance or attempted performance to the Agent at the
Principal Office, together with interest thereon at the applicable
Default Rate from and including the date of such expenditure to but
excluding the date such expenditure is paid in full. Notwithstanding the
foregoing, it is expressly agreed that neither the Agent nor any Bank
shall have any liability or responsibility for the performance of any
obligation of Borrower under this Agreement or any of the other Loan
Documents.
ARTICLE 12
The Agent
Section 12.1 Appointment, Powers and Immunities. Each Bank
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and under the other Loan Documents with such powers as are
specifically delegated to the Agent by the terms of this Agreement and
the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Neither the Agent, the Co-Agent, nor any
of their respective Affiliates, officers, directors, employees, attorneys
or agents shall be liable for any action taken or omitted to be taken by
any of them hereunder or otherwise in connection with this Agreement or
any of the other Loan Documents except for its or their own gross
negligence or willful misconduct or the wrongful failure of the Agent or
Co-Agent, in their capacities as a Bank, to fund their own respective
Commitment pursuant to the terms of this Agreement. Without limiting the
generality of the preceding sentence, the Agent (a) may treat the payee
of any Note as the holder thereof until the Agent receives written notice
of the assignment or transfer thereof signed by such payee and in form
satisfactory to the Agent; (b) shall have no duties or responsibilities
except those expressly set forth in this Agreement and the other Loan
Documents, and shall not by reason of this Agreement or any other Loan
Document be a trustee or fiduciary for any Bank; (c) shall not be
required to initiate any litigation or collection proceedings hereunder
or under any other Loan Document except to the extent requested by the
Required Banks; (d) shall not be responsible to the Banks for any
recitals, statements, representations or warranties contained in this
Agreement or any other Loan Document, or any certificate or other
document referred to or provided for in, or received by any of them
under, this Agreement or any other Loan Document, or for the value,
validity, effectiveness, enforceability or sufficiency of this Agreement
or any other Loan Document or any other document referred to or provided
for herein or therein or for any failure by any Person to perform any of
its obligations hereunder or thereunder; (e) may consult with legal
counsel (including counsel for Borrower), independent public accountants
and other experts selected by it and shall not be liable for any action
taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; and (f) shall incur no
liability under or in respect of any Loan Document by acting upon any
notice, consent, certificate or other instrument or writing reasonably
believed by it to be genuine and signed or sent by the proper party or
parties. As to any matters not expressly provided for by this Agreement,
the Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder in accordance with instructions signed
by the Required Banks, and such instructions of the Required Banks and
any action taken or failure to act pursuant thereto shall be binding on
all of the Banks; provided, however, that the Agent shall not be required
to take any action which exposes the Agent to liability or which is
contrary to this Agreement or any other Loan Document or applicable law.
Section 12.2 Rights of Agent as a Bank. With respect to its
Commitment, the Loan made by it and the Note issued to it, Banque Paribas
(and any successor acting as Agent) in its capacity as a Bank hereunder
shall have the same rights and powers hereunder as any other Bank and may
exercise the same as though it were not acting as the Agent, and the term
"Bank" or "Banks" shall, unless the context otherwise indicates, include
the Agent in its individual capacity. The Agent and its Affiliates may
(without having to account therefor to any Bank) accept deposits from,
lend money to, act as trustee under indentures of, provide merchant
banking services to and generally engage in any kind of banking, trust or
other business with the Loan Parties or any of their Affiliates, and any
other Person who may do business with or own securities of the Loan
Parties or any of their Affiliates, all as if it were not acting as the
Agent and without any duty to account therefor to the Banks.
Section 12.3 Defaults. The Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default (other than the non-
payment of principal of or interest on the Loans or of commitment fees)
unless the Agent has received notice from a Bank or Borrower specifying
such Default and stating that such notice is a "Notice of Default". In
the event that the Agent receives such a notice of the occurrence of a
Default, the Agent shall give prompt notice thereof to the Banks (and
shall give each Bank prompt notice of each such non-payment). The Agent
shall (subject to Section 12.1) take such action with respect to such
Default as shall be directed by the Required Banks, provided that unless
and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default as it shall seem advisable and
in the best interest of the Banks.
Section 12.4 INDEMNIFICATION. THE BANKS HEREBY AGREE TO
INDEMNIFY THE AGENT AND THE CO-AGENT FROM AND HOLD THE AGENT AND THE CO-
AGENT HARMLESS AGAINST (TO THE EXTENT NOT PROMPTLY REIMBURSED UNDER
SECTIONS 13.1 AND 13.2, BUT WITHOUT LIMITING THE OBLIGATIONS OF BORROWER
UNDER SECTIONS 13.1 AND 13.2), RATABLY IN ACCORDANCE WITH THEIR
RESPECTIVE COMMITMENT PERCENTAGES, ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS,
COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES) AND DISBURSEMENTS OF ANY KIND
OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED
AGAINST THE AGENT OR THE CO-AGENT IN ANY WAY RELATING TO OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED TO BE TAKEN
BY THE AGENT OR THE CO-AGENT UNDER OR IN RESPECT OF ANY OF THE LOAN
DOCUMENTS; PROVIDED, FURTHER, THAT NO BANK SHALL BE LIABLE FOR ANY
PORTION OF THE FOREGOING TO THE EXTENT CAUSED BY THE AGENT'S OR THE CO-
AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF
THE FOREGOING, IT IS THE EXPRESS INTENTION OF THE BANKS THAT THE AGENT
AND THE CO-AGENT SHALL BE INDEMNIFIED HEREUNDER FROM AND HELD HARMLESS
AGAINST ALL OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING
ATTORNEYS' FEES) AND DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF THE AGENT OR THE CO-AGENT (EXCEPT TO THE EXTENT THE SAME
ARE CAUSED BY THE AGENT'S OR THE CO-AGENT'S [AS APPLICABLE] OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT). WITHOUT LIMITING ANY OTHER PROVISION
OF THIS SECTION 12.4, EACH BANK AGREES TO REIMBURSE THE AGENT AND THE CO-
AGENT PROMPTLY UPON DEMAND FOR ITS PRO RATA SHARE (CALCULATED ON THE
BASIS OF THE COMMITMENTS) OF ANY AND ALL OUT-OF-POCKET EXPENSES
(INCLUDING ATTORNEYS' FEES) INCURRED BY THE AGENT OR THE CO-AGENT IN
CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION,
MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS,
LEGAL PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS
OR RESPONSIBILITIES UNDER, THE LOAN DOCUMENTS, TO THE EXTENT THAT THE
AGENT OR THE CO-AGENT, AS APPLICABLE, IS NOT PROMPTLY REIMBURSED FOR SUCH
EXPENSES BY BORROWER.
Section 12.5 Independent Credit Decisions. Each Bank agrees
that it has independently and without reliance on the Agent or any other
Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Borrower and decision to
enter into this Agreement and that it will, independently and without
reliance upon the Agent or any other Bank, and based upon such documents
and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under
this Agreement or any of the other Loan Documents. The Agent shall not
be required to keep itself informed as to the performance or observance
by any Loan Party of this Agreement or any other Loan Document or to
inspect the Properties or books of any Loan Party. Except for notices,
reports and other documents and information expressly required to be
furnished to the Banks by the Agent hereunder or under the other Loan
Documents, the Agent shall not have any duty or responsibility to provide
any Bank with any credit or other financial information concerning the
affairs, financial condition or business of any Loan Party (or any of
their Affiliates) which may come into the possession of the Agent or any
of its Affiliates.
Section 12.6 Several Commitments. The Commitments and other
obligations of the Banks under this Agreement are several. The default
by any Bank in making a Loan in accordance with its Commitment shall not
relieve the other Banks of their obligations under this Agreement. In
the event of any default by any Bank in making any Loan, each
nondefaulting Bank shall be obligated to make its Loan but shall not be
obligated to advance the amount which the defaulting Bank was required to
advance hereunder. In no event shall any Bank be required to advance an
amount or amounts with respect to any of the Loans which would in the
aggregate exceed such Bank's Commitment with respect to such Loans. No
Bank shall be responsible for any act or omission of any other Bank.
Notwithstanding anything to the contrary contained in this Agreement or
any of the other Loan Documents, any Bank that fails to make available to
the Agent its pro rata share of any Loan or to purchase its pro rata
share of any Letter of Credit as, when and to the full extent required by
the provisions of this Agreement, shall be deemed delinquent (a "Non-
Funding Bank") and shall be deemed a Non-Funding Bank until such time as
such delinquency is satisfied. A Non-Funding Bank shall be deemed to
have assigned any and all payments due to it from the Loan Parties,
whether on account of outstanding Loans, the Letter of Credit, interest,
fees or otherwise, to the remaining non-delinquent Banks for application
to, and reduction of, their respective pro rata shares of all outstanding
Loans, Letters of Credit, fees and/or otherwise. As among the Banks, a
Non-Funding Bank shall be deemed to have satisfied in full a delinquency
when and if, as a result of application of the assigned payments to all
outstanding Loans, etc. of the non-delinquent Banks, the Banks'
respective pro rata shares of all outstanding Loans and Letters of Credit
have returned to those in effect immediately prior to such delinquency
and without giving effect to the nonpayment causing such delinquency.
Section 12.7 Successor Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign
at any time by giving notice thereof to the Banks and Borrower. Upon any
such resignation, the Required Banks will have the right, after notice to
and consultation with Borrower if (but only if) no Default has then
occurred and is continuing, to appoint another Bank as a successor Agent.
If no successor Agent shall have been so appointed by the Required Banks
and shall have accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Banks, appoint a successor Agent, which shall be a
commercial bank organized under the laws of the United States or any
state thereof and having combined capital and surplus of at least
$100,000,000. Upon the acceptance of its appointment as successor Agent,
such successor Agent shall thereupon succeed to and become vested with
all rights, powers, privileges, immunities and duties of the resigning
Agent, and the resigning Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After any
Agent's resignation as Agent, the provisions of this Article 12 shall
continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was the Agent.
ARTICLE 13
Miscellaneous
Section 13.1 Expenses. Whether or not the transactions
contemplated hereby are consummated, Borrower hereby agrees, on demand,
to pay or reimburse the Agent and each of the Banks for paying (as the
Agent may request): (a) all reasonable out-of-pocket costs and expenses
of the Agent in connection with the preparation, negotiation, execution
and delivery of this Agreement and the other Loan Documents and any and
all (actual or proposed) amendments, modifications, renewals, extensions
and supplements thereof and thereto, and the syndication of the Loans,
including, without limitation, the reasonable fees and expenses of legal
counsel for the Agent, (b) all reasonable out-of-pocket costs and
expenses of the Agent and the Banks in connection with any Default and
the enforcement of this Agreement or any other Loan Document, including,
without limitation, the reasonable fees and expenses of legal counsel for
the Agent and the Banks, (c) all transfer, stamp, documentary or other
similar taxes, assessments or charges levied by any Governmental
Authority in respect of this Agreement or any of the other Loan
Documents, (d) all costs, expenses, assessments and other charges
incurred in connection with any filing, registration, recording or
perfection of any Lien contemplated by this Agreement or any other Loan
Document, and (e) all reasonable out-of-pocket costs and expenses
incurred by the Agent in connection with due diligence, computer
services, copying, appraisals, environmental audits, collateral audits,
field exams, insurance, consultants and search reports.
Section 13.2 INDEMNIFICATION. BORROWER SHALL INDEMNIFY THE
AGENT, THE CO-AGENT AND EACH BANK AND EACH AFFILIATE THEREOF AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS AND AGENTS FROM, AND
HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES,
CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS AND EXPENSES
(INCLUDING REASONABLE ATTORNEYS' AND CONSULTANTS' FEES) TO WHICH ANY OF
THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE
TO (A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION
OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY ANY LOAN PARTY OF
ANY REPRESENTATION, WARRANTY, COVENANT OR OTHER AGREEMENT CONTAINED IN
ANY OF THE LOAN DOCUMENTS, (D) THE USE OR PROPOSED USE OF ANY LOAN OR
LETTER OF CREDIT, (E) ANY AND ALL TAXES, LEVIES, DEDUCTIONS AND CHARGES
IMPOSED ON THE AGENT, THE ISSUING BANK OR ANY BANK (OTHER THAN TAXES
IMPOSED ON THE OVERALL NET INCOME OR GROSS RECEIPTS OF THE AGENT, THE CO-
AGENT, THE ISSUING BANK OR ANY OTHER BANK) IN RESPECT OF ANY LETTER OF
CREDIT, (F) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL
OR CLEANUP OF ANY HAZARDOUS MATERIAL OR THE EXISTENCE OF ANY UNDERGROUND
STORAGE TANK LOCATED ON, ABOUT, WITHIN OR AFFECTING ANY OF THE PROPERTIES
OF ANY LOAN PARTY, OR OTHERWISE ATTRIBUTABLE TO ANY LOAN PARTY IN
CONNECTION WITH ANY OTHER SITE, OR (G) ANY INVESTIGATION, LITIGATION OR
OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED
INVESTIGATION, LITIGATION OR OTHER PROCEEDING RELATING TO ANY OF THE
FOREGOING; BUT EXCLUDING ANY OF THE FOREGOING TO THE EXTENT DIRECTLY
CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON TO BE
INDEMNIFIED. WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR OF ANY
OTHER LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO
THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION 13.2 SHALL BE
INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS
AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) ARISING OUT OF OR
RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON.
WITHOUT PREJUDICE TO THE SURVIVAL OF ANY OTHER TERM OR PROVISION OF THIS
AGREEMENT, THE OBLIGATIONS OF BORROWER UNDER THIS SECTION 13.2 SHALL
SURVIVE THE REPAYMENT OF THE LOANS AND LETTER OF CREDIT LIABILITIES AND
OTHER OBLIGATIONS AND TERMINATION OF THE COMMITMENTS.
Section 13.3 Limitation of Liability. None of the Agent, the
Co-Agent, any Bank or any Affiliate, officer, director, employee,
attorney or agent thereof shall be liable to Borrower or any Loan Party
for any error of judgment or act done in good faith, or be otherwise
liable or responsible under any circumstances whatsoever (including such
Person's negligence), except for such Person's gross negligence or
willful misconduct. None of the Agent, the Co-Agent, any Bank, or any
Affiliate, officer, director, employee, attorney or agent thereof shall
have any liability with respect to, and Borrower hereby waives, releases
and agrees not to sue any of them upon, any claim for any special,
indirect, incidental or consequential damages suffered or incurred by
Borrower or any other Loan Party in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents,
or any of the transactions contemplated by this Agreement or any of the
other Loan Documents. Borrower hereby waive, release and agree not to
sue the Agent, the Co-Agent or any Bank or any of their respective
Affiliates, officers, directors, employees, attorneys or agents for
exemplary or punitive damages in respect of any claim in connection with,
arising out of, or in any way related to, this Agreement or any of the
other Loan Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan Documents.
Section 13.4 No Duty. All attorneys, accountants, appraisers
and other professional Persons and consultants retained by the Agent, the
Co-Agent and the Banks shall have the right to act exclusively in the
interest of the Agent, the Co-Agent and the Banks and shall have no duty
of disclosure, duty of loyalty, duty of care or other duty or obligation
of any type or nature whatsoever to Borrower or any of Borrower'
shareholders or any other Person.
Section 13.5 No Fiduciary Relationship. The relationship
between Borrower and each Bank is solely that of debtor and creditor, and
neither the Agent, the Co-Agent nor any Bank has any fiduciary or other
special relationship with Borrower or any other Loan Party, and no term
or condition of any of the Loan Documents shall be construed so as to
deem the relationship between Borrower and any Bank, or any other Loan
Party and any Bank, to be other than that of debtor and creditor. No
joint venture or partnership is created by this Agreement among the Banks
or between Borrower or any other Loan Party and any Bank.
Section 13.6 Equitable Relief. Borrower recognize that in the
event Borrower fail to pay, perform, observe or discharge any or all of
the Obligations, any remedy at law may prove to be inadequate relief to
the Agent and the Banks. Borrower therefore agrees that the Agent and
the Banks, if the Agent or the Banks so request, shall be entitled to
temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages.
Section 13.7 No Waiver; Cumulative Remedies. No failure on
the part of the Agent or any Bank to exercise and no delay in exercising,
and no course of dealing with respect to, any right, power or privilege
under this Agreement or any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement or any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies provided for in this
Agreement and the other Loan Documents are cumulative and not exclusive
of any rights and remedies provided by law.
Section 13.8 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns. Borrower may not assign or transfer any of their rights
or obligations hereunder without the prior written consent of the
Agent and the Banks. Any Bank may sell participations to one or
more banks or other institutions in or to all or a portion of its
rights and obligations under this Agreement and the other Loan
Documents (including, without limitation, all or a portion of its
Commitment and the Loan owing to it); provided, however, that
(i) such Bank's obligations under this Agreement and the other Loan
Documents (including, without limitation, its Commitment) shall
remain unchanged, (ii) such Bank shall remain solely responsible to
Borrower for the performance of such obligations, (iii) such Bank
shall remain the holder of its Note for all purposes of this
Agreement, (iv) Borrower shall continue to deal solely and directly
with such Bank in connection with such Bank's rights and
obligations under this Agreement and the other Loan Documents, and
(v) such Bank shall not sell a participation that conveys to the
participant the right to vote or give or withhold consents under
this Agreement or any other Loan Document, other than the right to
vote upon or consent to (A) any increase of such Bank's Commitment,
(B) any reduction of the principal amount of, or interest to be
paid on, the Loan of such Bank, (C) any reduction of any commitment
fee or other amount payable to such Bank under any Loan Document,
(D) any postponement of any date for the payment of any amount
payable in respect of the Loan of such Bank, and (E) any release
of any Loan Party from liability under the Loan Documents. Each
holder of a participation interest in this Agreement shall be
entitled to the benefits of the provisions of Section 3.5, 4.6, 4.7
and 13.2 of this Agreement as if and to the same extent as if it
were a Bank hereunder.
(b) Borrower and the Banks agree that any Bank (the
"Assigning Bank") may at any time assign to one or more Eligible
Assignees all, or a proportionate part of all, of its rights and
obligations under this Agreement and the other Loan Documents
(including, without limitation, its Commitment, Loans and Letter of
Credit Liabilities) (each an "Assignee"); provided, however, that
(i) each such assignment shall be of a consistent, and not a
varying, percentage of all of the Assigning Bank's rights and
obligations under this Agreement and the other Loan Documents,
(ii) except in the case of an assignment of all of a Bank's rights
and obligations under this Agreement and the other Loan Documents,
the amount of the Commitment, Loans and Letter of Credit
Liabilities of the Assigning Bank being assigned pursuant to each
assignment (determined as of the date of the Assignment Acceptance
with respect to such assignment) shall in no event be less than an
amount equal to $5,000,000, and (iii) the parties to each such
assignment shall execute and deliver to the Agent for its
acceptance and recording in the Register (as defined below), an
Assignment and Acceptance, together with the Notes subject to such
assignment, and a processing and recordation fee of $2,500. Upon
such execution, delivery, acceptance and recording, from and after
the effective date specified in each Assignment and Acceptance,
which effective date shall be at least five Business Days after the
execution thereof, or, if so specified in such Assignment and
Acceptance, the date of acceptance thereof by the Agent, (A) the
Assignee thereunder shall be a party hereto as a "Bank" and, to the
extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder and under the Loan Documents and
(B) the Assigning Bank thereunder shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released
from its obligations under this Agreement and the other Loan
Documents (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of a Bank's rights and
obligations under the Loan Documents, such Bank shall cease to be a
party thereto). Notwithstanding anything to the contrary contained
herein, each Assigning Bank shall, concurrently with each
assignment to an Assignee referred to in this Section 13.8(b), also
assign to such Assignee an identical interest in such Assigning
Bank's Acquisition Loans and commitments thereunder. (For example,
if an Assigning Bank assigns 50% of its Commitment or its
Obligations to an Assignee, such Assigning Bank shall also,
concurrently therewith, assign 50% of its commitment relating to
the Acquisition Loans or its Acquisition Loans Obligations,
respectively, to such Assignee.)
(c) By executing and delivering an Assignment and
Acceptance, the Assigning Bank thereunder and the Assignee
thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such Assigning Bank makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or
in connection with the Loan Documents or the execution, legality,
validity and enforceability, genuineness, sufficiency or value of
the Loan Documents or any other instrument or document furnished
pursuant thereto; (ii) such Assigning Bank makes no representation
or warranty and assumes no responsibility with respect to the
financial condition of any Loan Party or the performance or
observance by any Loan Party of its obligations under the Loan
Documents; (iii) such Assignee confirms that it has received a copy
of the other Loan Documents, together with copies of the financial
statements referred to in Section 7.2 and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance;
(iv) such Assignee will, independently and without reliance upon
the Agent or such Assigning Bank and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents; (v) such Assignee
confirms that it is an Eligible Assignee; (vi) such Assignee
appoints and authorizes the Agent to take such action as agent on
its behalf and exercise such powers under the Loan Documents as are
delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; and (vii) such
Assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Bank.
(d) The Agent shall maintain at its Principal Office a copy
of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of
the Banks and the Commitments of, and principal amount of the Loans
owing to, each Bank from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and Borrower, the Agent and the
Banks may treat each Person whose name is recorded in the Register
as a Bank hereunder for all purposes under the Loan Documents. The
Register shall be available for inspection by Borrower or any Bank
at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance
executed by an Assigning Bank and Assignee representing that it is
an Eligible Assignee, together with the Note subject to such
assignment, the Agent shall, if such Assignment and Acceptance has
been completed and is in substantially the form of Exhibit A
hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register, and (iii) give
prompt written notice thereof to Borrower. Within five Business
Days after its receipt of such notice Borrower, at their expense,
shall execute and deliver to the Agent in exchange for each
surrendered Note a new Note in an amount equal to the Commitment
assumed by it (or, if the Commitments have terminated or expired,
the Loans assigned to it) pursuant to such Assignment and
Acceptance and, if the Assigning Bank has retained any Loan or
Letter of Credit Liability, the Commitment retained by it (or, if
the Commitments have terminated or expired, the Loans retained by
it) (each such promissory note shall constitute a "Note" for
purposes of the Loan Documents). Such new Notes shall be dated the
effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of Exhibit C hereto.
(f) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to
this Section 13.8, disclose to the Assignee or participant, or
proposed Assignee or participant, any information relating to
Borrower or any Subsidiary or Affiliate of Borrower furnished to
such Bank by or on behalf of Borrower or any Subsidiary or
Affiliate of Borrower; provided that each such actual or proposed
Assignee or participant shall agree to be bound by the provisions
of Section 13.20.
(g) Any Bank may assign and pledge all or part of the Note
held by it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any operating
circular issued by such Federal Reserve System and/or Federal
Reserve Bank; provided, that any payment made by Borrower for the
benefit of such assigning and/or pledging Bank in accordance with
the terms of the Loan Documents shall satisfy Borrower's
obligations under the Loan Documents in respect thereof to the
extent of such payment. No such assignment and/or pledge shall
release the assigning and/or pledging Bank from its obligations
hereunder.
Section 13.9 Survival. All representations and warranties
made or deemed made in this Agreement or any other Loan Document or in
any document, statement or certificate furnished in connection with this
Agreement shall survive the execution and delivery of this Agreement and
the other Loan Documents and the making of the Loans and the issuance of
the Letters of Credit, and no investigation by the Agent or any Bank or
any closing shall affect the representations and warranties or the right
of the Agent or any Bank to rely upon them. Without prejudice to the
survival of any other obligation of Borrower hereunder, the obligations
of Borrower under Article 4 and Sections 13.1 and 13.2 shall survive
repayment of the Notes and termination of the Commitments.
Section 13.10 ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES, AND
THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND (EXCEPT AS PROVIDED IN THIS
SECTION 13.10 WITH RESPECT TO THE TERM SHEET) SUPERSEDE ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.
Notwithstanding the foregoing, the Term Sheet shall continue in full
force and effect as it relates to fees as provided in Section 2.11.
Section 13.11 Amendments. No amendment or waiver of any
provision of this Agreement, the Notes or any other Loan Document to
which Borrower is a party, nor any consent to any departure by Borrower
therefrom, shall in any event be effective unless the same shall be
agreed or consented to by the Required Banks and Borrower in writing, and
each such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, that no
amendment, waiver or consent shall, unless in writing and signed by all
of the Banks and Borrower, do any of the following: (a) increase the
Commitments of the Banks or subject the Banks to any additional
obligations; (b) reduce the principal of, or interest on, the Notes or
any fees or other amounts payable hereunder; (c) postpone any date fixed
for any payment of principal of, or interest on, the Notes or any fees or
other amounts payable hereunder; (d) waive any of the conditions
precedent specified in Article 6; (e) change the Commitment Percentages
or the aggregate unpaid principal amount of the Notes or the percentage
of the Banks which shall be required for the Banks or any of them to take
any action under this Agreement; (f) change any provision contained in
Section 9.14 or this Section 13.11 or modify the definition of "Required
Banks" contained in Section 1.1; and provided further, however, that no
amendment, waiver or consent relating to Sections 12.1, 12.2, 12.3, 12.4
or 12.5 shall require the agreement of any Loan Party. Notwithstanding
anything to the contrary contained in this Section 13.11, no amendment,
waiver or consent shall be made with respect to Article 12 hereof without
the prior written consent of the Agent.
Section 13.12 Maximum Interest Rate.
(a) No interest rate specified in this Agreement or any
other Loan Document shall at any time exceed the Maximum Rate. If
at any time the interest rate (the "Contract Rate") for any
Obligation shall exceed the Maximum Rate, thereby causing the
interest accruing on such Obligation to be limited to the Maximum
Rate, then any subsequent reduction in the Contract Rate for such
Obligation shall not reduce the rate of interest on such Obligation
below the Maximum Rate until the aggregate amount of interest
accrued on such Obligation equals the aggregate amount of interest
which would have accrued on such Obligation if the Contract Rate
for such Obligation had at all times been in effect.
(b) Notwithstanding anything to the contrary contained in
this Agreement or the other Loan Documents, none of the terms and
provisions of this Agreement or the other Loan Documents shall ever
be construed to create a contract or obligation to pay interest at
a rate in excess of the Maximum Rate; and neither the Agent nor any
Bank shall ever charge, receive, take, collect, reserve or apply,
as interest on the Obligations, any amount in excess of the Maximum
Rate. The parties hereto agree that any interest, charge, fee,
expense or other obligation provided for in this Agreement or in
the other Loan Documents which constitutes interest under
applicable law shall be, ipso facto and under any and all
circumstances, limited or reduced to an amount equal to the lesser
of (i) the amount of such interest, charge, fee, expense or other
obligation that would be payable in the absence of this Section
13.12(b), or (ii) an amount, which when added to all other interest
payable under this Agreement and the other Loan Documents, equals
the Maximum Rate. If, notwithstanding the foregoing, the Agent or
any Bank ever contracts for, charges, receives, takes, collects,
reserves or applies as interest any amount in excess of the Maximum
Rate, such amount which would be deemed excessive interest shall be
deemed a partial payment or prepayment of principal of the
Obligations and treated hereunder as such; and if the Obligations,
or applicable portions thereof, are paid in full, any remaining
excess shall promptly be paid to Borrower (or other appropriate
Person). In determining whether the interest paid or payable,
under any specific contingency, exceeds the Maximum Rate, Borrower,
the Agent and the Banks shall, to the maximum extent permitted by
applicable law, (A) characterize any nonprincipal payment as an
expense, fee or premium rather than as interest, (B) exclude
voluntary prepayments and the effects thereof, and (C) amortize,
prorate, allocate and spread in equal or unequal parts the total
amount of interest throughout the entire contemplated term of the
Obligations, or applicable portions thereof, so that the interest
rate does not exceed the Maximum Rate at any time during the term
of the Obligations; provided that, if the unpaid principal balance
is paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the
actual period of existence thereof exceeds the Maximum Rate, the
Agent and/or the Banks, as appropriate, shall refund to Borrower
(or other appropriate Person) the amount of such excess and, in
such event, the Agent and the Banks shall not be subject to any
penalties provided by any laws for contracting for, charging,
receiving, taking, collecting, reserving or applying interest in
excess of the Maximum Rate.
(c) Pursuant to Article 15.10(b) of Chapter 15, Subtitle
79, Revised Civil Statutes of Texas 1925, as amended, Borrower
agrees that such Chapter 15 (which regulates certain revolving
credit loan accounts and revolving tri-party accounts) shall not
govern or in any manner apply to the Obligations.
Section 13.13 Notices. All notices and other communications
provided for in this Agreement and the other Loan Documents to which
Borrower is a party shall be given or made by telecopy or in writing and
telecopied, mailed by certified mail return receipt requested, or
delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof (or, with respect
to a Bank that becomes a party to this Agreement pursuant to an
assignment made in accordance with Section 13.8, in the Assignment and
Acceptance executed by it); or, as to any party, at such other address as
shall be designated by such party in a notice to each other party given
in accordance with this Section 13.13. Except as otherwise provided in
this Agreement, all such communications shall be deemed to have been duly
given when transmitted by telecopy or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid; provided, however, that notices to the Agent shall be deemed
given when received by the Agent.
Section 13.14 GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE
OF PROCESS. EXCEPT AS MAY BE EXPRESSLY STATED TO THE CONTRARY IN CERTAIN
LOAN DOCUMENTS, THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF TEXAS AND APPLICABLE LAWS OF THE UNITED STATES. EACH OF
BORROWER HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF EACH OF (A)
ANY UNITED STATES DISTRICT COURT OF NEW YORK, (B) THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS, (C) ANY NEW YORK STATE
COURT SITTING IN NEW YORK, NEW YORK, AND (D) ANY TEXAS STATE COURT
SITTING IN HOUSTON, TEXAS, FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BORROWER IRREVOCABLY
CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO SUCH BORROWER AT
ITS ADDRESS SET FORTH UNDERNEATH ITS SIGNATURE HERETO. BORROWER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORM.
Section 13.15 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
Section 13.16 Severability. Any provision of this Agreement
held by a court of competent jurisdiction to be invalid or unenforceable
shall not impair or invalidate the remainder of this Agreement and the
effect thereof shall be confined to the provision held to be invalid or
illegal.
Section 13.17 Headings. The headings, captions and
arrangements used in this Agreement are for convenience only and shall
not affect the interpretation of this Agreement.
Section 13.18 Construction. Borrower, the Agent, and the Banks
acknowledges that it has had the benefit of legal counsel of its own
choice and has been afforded an opportunity to review this Agreement and
the other Loan Documents with its legal counsel and that this Agreement
and the other Loan Documents shall be construed as if jointly drafted by
the parties hereto.
Section 13.19 Independence of Covenants. All covenants
hereunder shall be given independent effect so that if a particular
action or condition is not permitted by any of such covenants, the fact
that it would be permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the occurrence of a
Default if such action is taken or such condition exists.
Section 13.20 Confidentiality. Each Bank agrees to exercise
its best efforts to keep any information delivered or made available by
any Loan Party to it which is clearly indicated to be confidential
information, confidential from anyone other than Persons employed or
retained by such Bank who are or are expected to become engaged in
evaluating, approving, structuring or administering the Loans; provided
that nothing herein shall prevent any Bank from disclosing such
information (a) to the Agent, the Co-Agent or any other Bank, (b) to any
Person if reasonably incidental to the administration of the Loans or
Letter of Credit Liabilities, (c) upon the order of any court or
administrative agency, (d) upon the request or demand of any regulatory
agency or authority having jurisdiction over such Bank, (e) which has
been publicly disclosed, (f) in connection with any litigation to which
the Agent, any Bank or their respective Affiliates may be a party, (g) to
the extent reasonably required in connection with the exercise of any
remedy under the Loan Documents, (h) to such Bank's legal counsel and
independent auditors, and (i) to any actual or proposed participant or
Assignee of all or part of its rights hereunder, so long as such actual
or proposed participant or Assignee agrees to be bound by the provisions
of this Section 13.20.
Section 13.21 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF THE AGENT OR ANY BANK
IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT THEREOF.
Section 13.22 Approvals and Consent. Except as may be
expressly provided to the contrary in this Agreement or in the other Loan
Documents (as applicable), in any instance under this Agreement or the
other Loan Documents where the approval, consent or exercise of judgment
of any Bank Party is requested or required, (a) the granting or denial of
such approval or consent and the exercise of such judgment shall be
within the sole discretion of such Bank Party, and such Bank Party shall
not, for any reason or to any extent, be required to grant such approval
or consent or to exercise such judgment in any particular manner,
regardless of the reasonableness of the request or the action or judgment
of such Bank Party, and (b) no approval or consent of any Bank Party
shall in any event be effective unless the same shall be in writing and
the same shall be effective only in the specific instance and for the
specific purpose for which given.
Section 13.23 Agent for Services of Process. Borrower hereby
irrevocably designates Edwin T. Markham with offices at 666 Third Avenue,
9th Floor, New York, New York, 10017 to receive for and on behalf of
such Borrower service of process in New York. In the event that Mr.
Markham resigns or ceases to serve as Borrower's agent for service of
process hereunder, Borrower agrees forthwith (a) to designate another
agent for service of process in New York, New York and (b) to give prompt
written notice to the Agent of the name and address of such agent.
Borrower agrees that the failure of its agent for service of process to
give any notice of any such service of process to Borrower shall not
impair or affect the validity of such service or of any judgment based
thereon. If, despite the foregoing, there is for any reason no agent for
service of process of Borrower available to be served, then Borrower
further irrevocably consents to the service of process by the mailing
thereof by the Agent or the Required Banks by registered or certified
mail, postage prepaid, to Borrower at its address listed on the signature
pages hereof. Nothing in this Section 13.23 shall affect the right of
the Agent or the Banks to serve legal process in any other manner
permitted by law or affect the right of the Agent or any Bank to bring
any action or proceeding against Borrower or its Property in the court of
any jurisdiction.
Section 13.24 Joint and Several Obligations. Each and every
representation, warranty, covenant, agreement, indebtedness, liability or
obligation of Borrower under this Agreement or any other Loan Document
shall be, and shall be deemed to be, the joint and several
representation, warranty, covenant, agreement, indebtedness, liability or
obligation, respectively, of Borrower.
Section 13.25 Co-Agent. All of the privileges and immunities
created by Articles 12 and 13 of this Agreement in favor of the Agent in
its capacity as such shall be equally applicable to the Co-Agent in its
capacity as such.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BORROWER:
FALCON DRILLING COMPANY, INC.
By: __________________________
Leighton E. Moss
Vice President and General Counsel
Address for Notices:
1900 West Loop South, Suite 1800
Houston, Texas 77027
Telecopy No.: 713-623-8103
Telephone No.: 713-623-8984
Attention: Don P. Rodney
AGENT:
BANQUE PARIBAS
By:
Name:
Title:
By:
Name:
Title:
Address for Notices:
Banque Paribas
1200 Smith Street, Suite 3100
Houston, Texas 77002
Telecopy No.: 713-659-3832
Telephone No.: 713-659-4811
Attention: Mr. Brian M. Malone
Vice President
BANKS:
BANQUE PARIBAS
By:
Commitment: Name:
Title:
$31,515,151.52
By:
Name:
Title:
Address for Notices:
Banque Paribas
1200 Smith Street, Suite 3100
Houston, Texas 77002
Telecopy No.: 713-659-3832
Telephone No.: 713-659-4811
Attention: Mr. Brian M. Malone
Vice President
Lending Office for ABR Loans:
Banque Paribas
1200 Smith Street, Suite 3100
Houston, Texas 77002
Attention: Leah Evans
Operations Officer
Lending Office for Eurodollar Loans:
Banque Paribas
1200 Smith Street, Suite 3100
Houston, Texas 77002
Attention: Leah Evans
Operations Officer
ARAB BANKING CORPORATION (B.S.C.)
By:
Commitment: Name:
Title:
$24,242,424.24
Address for Notices:
Arab Banking Corporation (B.S.C.)
277 Park Avenue, 32nd Floor
New York, New York 10172
Telecopy No.: 212-583-0921
Telephone No.: 212-583-4720
Attention: Loan Administration Manager
With copies to:
Arab Banking Corporation (B.S.C.)
600 Travis Street, Suite 1900
Houston, Texas 77002
Telecopy No.: 713-227-6507
Telephone No.: 713-227-8444
Attention: Mr. Stephen A. Plauche
Vice President
Lending Office for ABR Loans:
Arab Banking Corporation (B.S.C.)
277 Park Avenue, 32nd Floor
New York, New York 10172
Telecopy No.: 212-583-0921
Telephone No.: 212-583-4720
Attention: Loan Administration Manager
Lending Office for Eurodollar Loans:
Arab Banking Corporation (B.S.C.)
277 Park Avenue, 32nd Floor
New York, New York 10172
Telecopy No.: 212- 583-0921
Telephone No.: 212-583-4720
Attention: Loan Administration Manager
ING (U.S.) CAPITAL CORPORATION
By:
Commitment: Name:
Title:
$24,242,424.24
By:
Name:
Title:
Address for Notices:
ING (U.S.) Capital Corporation
Telecopy No.:
Telephone No.:
Attention:
Lending Office for ABR Loans:
Attention:
Lending Office for Eurodollar Loans:
Attention:
EXHIBIT "A"
ASSIGNMENT AND ACCEPTANCE
Date: _______________, 19__
Reference is made to the Credit Agreement dated as of
_____________, 1997 (as the same may be amended and in effect from time
to time, the "Credit Agreement"), among Falcon Drilling Company, Inc., a
Delaware corporation, each of the Banks or other lending institutions
which is or which may from time to time became a party thereto
(individually a "Bank" and collectively the "Banks"), Banque Paribas as
agent for itself and the other Banks (in such capacity as agent, the
"Agent"), and the Co-Agent (if any) for the Banks named therein (the "Co-
Agent"). Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Credit Agreement.
This Assignment and Acceptance is being executed pursuant to Section 13.8
of the Credit Agreement.
___________________________ (the "Assignor") and
___________________________ (the "Assignee") agree as follows:
(a) The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor,
a ________% interest in and to all the Assignor's rights and
obligations under the Credit Agreement and the other Loan
Documents as of the Effective Date (as defined below)
(including, without limitation, such percentage interest in
the Commitment of the Assignor on the Effective Date and such
percentage interest in the Loans and Letter of Credit
Liabilities owing to the Assignor outstanding on the
Effective Date together with such percentage interest in all
unpaid interest and fees accrued from the Effective Date).
After giving effect to this Assignment and Acceptance, the
Commitment of Assignor will be $_______________ and the
Commitment of Assignee will be $_______________.
(b) The Assignor (i) represents that, as of the date hereof, its
Commitment is $_______________, the outstanding principal
balance of its Loans is $_______________, and the outstanding
principal balance of its Letter of Credit Liabilities is
$_____________________ (all as unreduced by any assignments
which have not yet become effective); (ii) makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made
in or in connection with the Credit Agreement or any other
Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the
Credit Agreement or any other Loan Document, other than that
it is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and
clear of any adverse claim; (iii) makes no representation or
warranty and assumes no responsibility with respect to the
financial condition of any Loan Party or the performance or
observance by any Loan Party of any of its obligations under
the Credit Agreement or any other Loan Document; and
(iv) attaches the Note held by Assignor and requests that the
Agent exchange such Note for a new Note payable to the order
of (A) the Assignee in an amount equal to the amount of
Assignor's Commitment assumed by Assignee hereunder, and
(B) the Assignor in an amount equal to the amount of the
Commitment retained by Assignor.
(c) The Assignee (i) represents and warrants that it is legally
authorized to enter in this Assignment and Acceptance;
(ii) confirms that it has received a copy of the Credit
Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 8.1 thereof, and
such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to
enter into this Assignment and Acceptance; (iii) agrees that
it will, independently and without reliance upon the Agent or
Co-Agent, the Assignor or any other Bank and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement and the other
Loan Documents; (iv) confirms that it is an Eligible
Assignee; (v) appoints and authorizes the Agent to take such
action on the Assignee's behalf and to exercise such powers
under the Loan Documents as are delegated to the Agent by the
terms thereof, together with such powers as are reasonably
incidental thereto; (vi) agrees that it will perform in
accordance with their terms all obligations which by the
terms of the Credit Agreement and the other Loan Documents
are required to be performed by it as a Bank; (vii) agrees
that it will keep confidential all information with respect
to the Loan Parties furnished to it by any Loan Party or the
Assignor marked as being confidential (other than information
generally available to the public) in accordance with
Section 13.20 of the Credit Agreement; and (viii) attaches
the forms prescribed by the Internal Revenue Service of the
United States certifying as to the Assignee's exemption from
United States withholding taxes with respect to all payments
to be made to the Assignee under the Credit Agreement or such
other documents as are necessary to indicate that all such
payments are subject to such tax at a rate reduced by an
applicable tax treaty.(1)
(d) The effective date for this Assignment and Acceptance shall
be ______________, 19__ (the "Effective Date").(2) Following
the execution of this Assignment and Acceptance, it will be
delivered to the Agent for acceptance and recording by the
Agent.
(1) If the Assignee is organized under the laws of a
jurisdiction outside the United States.
(2) Such date shall be at least five (5) Business
Days after the execution of this Assignment and
Acceptance and delivery thereof to the Agent
(unless otherwise agreed by the Agent).
(e) Upon such acceptance and recording, from and after the
Effective Date, (i) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this
Assignment and Acceptance, shall have the rights and
obligations of a Bank thereunder and under the other Loan
Documents and (ii) the Assignor shall, to the extent provided
in this Assignment and Acceptance, relinquish its rights and
be released from its obligations under the Credit Agreement
and the other Loan Documents.
(f) Upon such acceptance and recording, from and after the
Effective Date, the Agent shall make all payments in respect
of the interest assigned hereby (including payments of
principal, interest, fees and other amounts) to the Assignee.
The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement and the
Note for periods prior to the Effective Date directly between
themselves.
(g) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS
AND APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
(h) The Assignee's address for notices and Applicable Lending
Office for purposes of the Credit Agreement (until such
address or office are subsequently changed in accordance with
the Credit Agreement) are specified below its name on the
signature pages of this Assignment and Acceptance.
[NAME OF ASSIGNOR]
By:
Name:
Title:
[NAME OF ASSIGNEE]
By:
Name:
Title:
Address for Notices:
Telecopy No.:
Telephone No.:
Attention:
Lending Office for ABR Loans:
Lending Office for Eurodollar Loans:
ACCEPTED BY:
BANQUE PARIBAS, as Agent for the Banks
By:
Name:
Title:
By:
Name:
Title:
Date:
EXHIBIT "B"
UNSECURED REVOLVING LOAN NOTE
$______________ Houston, Texas ______________, 1997
FOR VALUE RECEIVED, Falcon Drilling Company, Inc., a Delaware
corporation (the Borrower ), promises to pay to the order of Banque
Paribas, a French banking corporation, (the "Bank"), at the Principal
Office of the Agent, in lawful money of the United States of America and
in immediately available funds, the principal amount of
______________________________________________________ (_______________)
or such lesser amount as shall equal the aggregate unpaid principal
amount of the Loans made by the Bank (or its predecessor in interest) to
the Borrower under the Credit Agreement referred to below, on the dates
and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of each such Loan, at such
office, in like money and funds, for the period commencing on the date of
each such Loan until each such Loan shall be paid in full, at the rates
per annum and on the dates provided in the Credit Agreement.
This Note is one of the Notes referred to in the Credit Agreement
dated as of __________, 1997, among the Borrower, the Banks named
therein, Banque Paribas, as Agent for the Banks, and the Co-Agent (if
any) for the Banks named therein (such Credit Agreement, as the same may
be amended, modified, supplemented, renewed, extended, or restated from
time to time, being referred to herein as the "Credit Agreement"), and
evidences Loans made by the Bank (or its predecessor in interest)
thereunder. The holder of this Note shall be entitled to, without
limitation, the benefits provided in the Credit Agreement as set forth
therein. The Credit Agreement, among other things, contains provisions
for acceleration of the maturity of this Note upon the happening of
certain stated events and for prepayment of the Loans prior to the
maturity of this Note upon the terms and conditions specified in the
Credit Agreement. Capitalized terms used in this Note have the respective
meanings assigned to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA. THIS NOTE IS PERFORMABLE IN HARRIS COUNTY, TEXAS.
Each Borrower, surety, guarantor, endorser, and other party ever
liable for payment of any sums of money payable on this Note jointly and
severally waive notice, presentment, demand for payment, protest, notice
of protest and non-payment or dishonor, notice of acceleration, notice of
intent to accelerate, notice of intent to demand, diligence in
collecting, grace, and all other formalities of any kind, and consent to
all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any
collateral securing this Note, all without prejudice to the holder. The
holder shall similarly have the right to deal in any way, at any time,
with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of
any of said indebtedness, or to release or substitute part or all of the
collateral securing this Note, or to grant any other indulgences or
forbearances whatsoever, without notice to any other party and without in
any way affecting the personal liability of any party hereunder.
THIS NOTE, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE
FINAL AGREEMENT OF THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
FALCON DRILLING COMPANY, INC.
By:
Leighton E. Moss
Vice President and General Counsel
EXHIBIT "C"
NOTICE
_____________, 19__
Banque Paribas, as Agent
1200 Smith Street, Suite 3100
Houston, Texas 77002
Gentlemen:
Reference is made to the Credit Agreement dated as of
_____________, 1997 (as the same may be amended and in effect from time
to time, the "Credit Agreement"), among Falcon Drilling Company, Inc., a
Delaware corporation, (the "Borrower"), each of the Banks or other
lending institutions which is or which may from time to time become a
party thereto (individually a Bank and collectively the "Banks"),
Banque Paribas, as agent for itself and the other Banks (in such capacity
as agent, the Agent ), and the Co-Agent (if any) for the Banks named
therein (the Co-Agent ). Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms
in the Credit Agreement.
This irrevocable Notice is given by the Borrower pursuant to
Section 2.9 of the Credit Agreement. The Borrower hereby notifies you of
the following (check and/or complete the applicable item):
____ (a) Borrowing.
(i) The Borrower requests a Loan in the amount of $________
on _____________, 19___.
(ii) The Loan will be of the following Type:
[ABR Loan] [Eurodollar Loan].
(iii) If the Loan will be a Eurodollar Loan, the Interest
Period will be ___________ month[s].
____ (b) [Conversion] [Continuation] of Loan.
(i) The Borrower requests a [Conversion] [Continuation] of a
Loan in the amount of $________ on __________, 19___.
(ii) The Type of Loan to be [Converted] [Continued] will be a
[ABR Loan] [Eurodollar Loan].
(iii) The Loan resulting from the [Conversion] [Continuation]
will be a [ABR Loan] [Eurodollar Loan].
(iv) If the Loan resulting from the [Conversion]
[Continuation] will be a Eurodollar Loan, the Interest
Period for such Loan will be _____ month[s].
____ (c) Prepayment.
(i) The Borrower will make a prepayment of the principal of
the Loans in the amount of $___________ on
______________, 19___.
(ii) The Loan to be prepaid will be of the following Type:
[ABR Loan] [Eurodollar Loan].
(iii) If the Loan to be prepaid is a Eurodollar Loan, it has an
Interest Period of _____ month[s] that will end on
_____________, 19___ [and the breakage costs associated
with the prepayment of such Eurodollar Loan is
$____________].
Very truly yours,
FALCON DRILLING COMPANY, INC.
By:
Name:
Title:
SCHEDULE 1.1(a)
Permitted Liens
3. Pledge by Falcon Drilling Holdings, L.P. ("FDH") of its shares of
stock and joint venture interests in Foraven S.A. and Forwest de
Venezuela C.A., securing the guarantees by FDH and Falcon Drilling
Company, Inc. of 3/14 of a $14,500,000 loan by Compagnie Financiere
De CIC Et De L'Union Europeenne ("CFCICUE") to Foraven S.A.
pursuant to that certain Pledge Over Shares between FDH as the
Chargor and CFCICUE as the Bank dated November 15, 1991 with
respect to the stock in Foraven S.A. and that certain Pledge
Agreement Over the Shares of Forwest de Venezuela C.A. executed by
FDH in favor of CFCICUE.
SCHEDULE 7.6
Litigation
In October 1996, suit was initiated against the Company by Springwell
Corporation in the United States District Court for the Southern District
of New York. Springwell alleges that it introduced the Company to an
investment banking firm which subsequently participated in placements of
debt and equity of the Company. Springwell claims it is entitled to
compensation based on quantum meruit and express or implied agreements by
the Company or its agents to pay Springwell a commission. The Company
believes Springwell s claims are without merit and intends to vigorously
contest such claims.
SCHEDULE 7.10
Existing Debt
None
SCHEDULE 7.11
Taxes
None
SCHEDULE 7.13
Plans
None
SCHEDULE 7.15(b)
Capitalization of Subsidiaries
1. Falcon Drilling Company, Inc. Owns all of the capital stock of:
Falcon Services Company, Inc.
Raptor Exploration Company, Inc.
Falcon Inland, Inc.
Falcon Drilling Management, Inc.
Falcon Workover Company, Inc.
Falcon Drilling de Venezuela, Inc.
FALRIG Offshore, Inc.
Falcon Offshore, Inc.
Falcon Atlantic Inc.
Perforaciones FALRIG de Venezuela, S.A.
Double Eagle Marine, Inc.
Sun Towing Company, Inc.
MNS Towing, Inc.
2. Falcon Drilling Company, Inc. and Falcon Drilling Management are
the sole partners of Falcon Drilling Holdings, L.P.
3. Falcon Offshore, Inc. owns all of the capital stock of Kestrel
Offshore, Inc.
4. Falcon Offshore, Inc. and Kestrel Offshore, Inc. are the sole
partners of FALRIG Offshore Partners.
5. FALRIG Offshore, Inc. and FALRIG Offshore Partners are the sole
partners of FALRIG Offshore (USA), L.P.
6. All of the capital interest of Falcon Drilling do Brasil, Ltda. is
owned by Falcon Offshore, Inc. and FALRIG Offshore, Inc.
SCHEDULE 7.22
Material Contracts
Under its contracts with Petroleo Brasiliero S.A. to provide contract
drilling with the drillship Peregrine I, the Company is liable for a
penalty of approximately $15,000 per day for each day beyond June 30,
1996 that the drillship was not available to be placed in service. The
drillship was not available to be placed in service until November 2,
1996.
BHP Petroleum Pty. Ltd. is in default in the payment to the Company of
amounts owned to the Company under a drilling contact.
Articmorneftigas is in default under a Memorandum of Agreement to charter
a drillship to the Company.
SCHEDULE 7.26
Employee Matters
None
SCHEDULE 9.5
Investments
None
SCHEDULE 9.7
Certain Transactions with Affiliates
None
SCHEDULE 9.12
Intercompany Transactions
None
EXHIBIT 10.180
FIRST AMENDMENT TO CREDIT AGREEMENT
(Unsecured Revolving Credit Facility)
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "First Amendment") dated
December 22, 1997, is by and among FALCON DRILLING COMPANY, INC. a Delaware
corporation ("Falcon Drilling or Borrower"), BANQUE PARIBAS, a bank
organized under the laws of the Republic of France, ARAB BANKING
CORPORATION (B.S.C.), banking corporation organized under the laws of
Bahrain, and ING (U.S.) CAPITAL CORPORATION, a banking corporation
organized under the laws of the Netherlands.
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Banks are parties to the
Credit Agreement dated as of October 3, 1997 (as amended, the "Credit
Agreement") relating to a $80,000,000 Unsecured Revolving Credit Facility,
pursuant to which, inter alia, the Banks agreed to make certain loans
available to the Borrower upon the terms and conditions contained in the
Credit Agreement;
WHEREAS, Borrower desires that the Banks modify and amend certain
terms and provisions of the Credit Agreement; and
WHEREAS, the parties hereto desire to amend the Credit Agreement in
accordance with the terms and provisions of this Amendment;
NOW, THEREFORE, for and in consideration of these premises and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Agent and the Banks hereby agree as
follows:
1. Terms. All capitalized terms defined in the Credit Agreement and
not otherwise defined herein shall have the same definitions when used
herein as set forth in the Credit Agreement as amended by this First
Amendment.
2. Amendment to Section 1.1 of the Credit Agreement.
(a) Amendment to Definition of Applicable Margin. The
definition of "Applicable Margin" contained in Section 1.1 of the
Credit Agreement is hereby amended and restated to read in its
entirety as follows:
"Applicable Margin" means as follows:
(a) for the period from the date hereof through March 30, 1998,
and subject to clause (b) below, and for so long thereafter as
the outstanding principal amount of the Loans does not exceed
$80,000,000, (i) 0.75% per annum with respect to ABR Loans and
(ii) 1.75% per annum with respect to Eurodollar Loans, and
(b) if at any time after the Closing Date the outstanding
principal amount of the Loans should exceed $80,000,000, the
Applicable Margin per annum with respect to each of ABR Loans and
Eurodollar Loans shall thereafter increase by 0.50% over each
immediately preceding three-month period, automatically and
without any action by Agent or the Lenders. The initial increase
shall take effect as of the Quarterly Date immediately preceding
the date on which the outstanding principal amount first exceeded
$80,000,000, and such required increases shall continue on each
Quarterly Date thereafter until all of the Obligations are paid
in full; provided, however, if such outstanding principal amount
should exceed $80,000,000 before March 31, 1998, the Applicable
Margin shall still be governed by clause (a) above. In no event
shall interest rates charged hereunder based upon the Applicable
Margin, as it may be computed from time to time, ever exceed the
Maximum Rate.
(b) Addition of Definition of Increased Commitment Amount.
Section 1.1 of the Credit Agreement is hereby amended by adding the
following definition:
"Increased Commitment Amount" means with respect to each
Bank, the amount of increase of its outstanding Commitment upon
the execution and delivery of the Amendment over its outstanding
Commitment immediately preceding the execution and delivery of
the First Amendment."
(c) Addition of Definition of First Amendment. Section 1.1 of
the Credit Agreement is hereby amended by adding the following
definition:
"First Amendment" means the First Amendment to the
Agreement, which First Amendment is dated December 22, 1997.
3. Amendment to Section 2.11 of the Credit Agreement. Section 2.11
of the Credit Agreement is amended in its entirety to read as follows:
Commitment Fee and Other Fees.
(a) Borrower agrees to pay to the Agent for the account of
each Bank a commitment fee on the daily average unused amount of
such Bank's Commitment for the period from and including the
Closing Date to and including the Maturity Date, at the rate of
0.20% per annum based on a 365 day year and the actual number of
days elapsed. Accrued commitment fees shall be payable in
arrears on each Quarterly Date beginning on December 31, 1997,
and on the Maturity Date.
(b) Borrower agrees to pay to the Agent for the account of
each Bank a front-end fee at the rate of 0.25% on such Bank?s
Increased Commitment Amount. Such front-end fees shall be payable
on execution and delivery of this Amendment.
(c) If the outstanding principal amount of the Loans
hereunder shall ever exceed $80,000,000, Borrower agrees to pay
to the Agent for the account of each Bank a usage fee, in
addition to the fee provided for in clause (b) above, at the rate
of 0.25% on such Bank?s Increased Commitment Amount. Such usage
fees shall be payable immediately upon the outstanding principal
amount of the Loan?s exceeding $80,000,000.
4. Change in amount of Commitments. The Credit Agreement is amended
by changing the amount of the Commitment of each Bank as set forth on the
signature pages of the Credit Agreement so that the Commitment of each Bank
is the amount set forth beside its name below:
BANQUE PARIBAS $48,181,818.20
ARAB BANKING CORPORATION (B.S.C.) $40,909,090.90
ING (U.S.) CAPITAL CORPORATION $40,909,090.90
5. Conditions to Effectiveness of this Amendment. The effectiveness
of this First Amendment is subject to the conditions precedent that (a)
this First Amendment shall have been executed and delivered by all parties
thereto, and(b) that all conditions set forth in Section 6.1 (a), (b), (c),
(e), (f), (g), (h), (i), (j), (k), (l), (m) and (p), and all conditions set
forth in Section 6.2 have been complied with to the satisfaction of the
Agent.
6. Costs. The Borrower shall pay all reasonable out-of-pocket costs
and expenses incurred by the Agent, the Co-Agent or any Bank in connection
with the negotiation, preparation, execution and consummation of this First
Amendment and the transactions contemplated by this First Amendment,
including, without limitation, the reasonable fees and expenses of counsel
to the Agent, the Co-Agent and the Banks.
7. Miscellaneous.
7.1 Headings. Section headings are for reference only and shall not
affect the interpretation or meanings of any provision of this First
Amendment.
7.2 Effect of this First Amendment. The Credit Agreement, as amended
by this First Amendment, shall remain in full force and effect except that
any reference therein, or in any other Loan Document referring to the
Credit Agreement, shall be deemed to refer to the Credit Agreement as
amended by this First Amendment.
7.3 GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS AND APPLICABLE
FEDERAL LAW.
7.4 Counterparts. This First Amendment may be executed by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed an original but all such counterparts shall
constitute but one and the same First Amendment.
7.5 NO ORAL AGREEMENTS. THE CREDIT AGREEMENT, AS AMENDED BY THIS
FIRST AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE
ENTIRE AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed by their respective duly authorized officers as of
the date first above written.
BORROWER:
FALCON DRILLING COMPANY, INC.
By:/s/ Leighton E. Moss
--------------------------
Leighton E. Moss
Vice President
BANQUE PARIBAS,
Individually and as Agent
By:/s/ Brian Malone
--------------------------
Name: Brian Malone
Title: Vice President
By:/s/ Barton D. Schouest
--------------------------
Name: Barton D. Schouest
Title: Managing Director
ARAB BANKING CORPORATION (B.S.C.)
Individually and as Co-Agent
By:/s/ Stephen A. Plauche
--------------------------
Stephen A. Plauche
Vice President
ING (U.S.) CAPITAL CORPORATION
By:/s/ Trond Rokholt
--------------------------
Trond Rokholt
Managing Director
EXHIBIT 10.182
PARTICIPATION AGREEMENT
GREEN CANYON AREA, OUTER CONTINENTAL SHELF
THIS PARTICIPATION AGREEMENT (the "Agreement ) is executed and
effective this 28th day of August, 1997 by and between Reading & Bates
Development Co., a Delaware corporation ("R&B") and British-Borneo
Petroleum Inc., a Texas corporation ("BBPI") and to the extent of its
obligations hereunder, British-Borneo Exploration, Inc. a Texas
corporation. as operator ("Operator" or "BBEI").
RECITALS
WHEREAS, BBPI is simultaneously with the execution of this Agreement,
acquiring an undivided sixty, percent (60%) interest in and to those Oil
and Gas Leases of Submerged Lands under the Outer Continental Shelf Lands
Act set forth and more fully described in Exhibit "A", attached hereto and
made a part hereof for all purposes (the "Leases"); and
WHEREAS, R&B is simultaneously with the execution of this Agreement,
acquiring an undivided twenty percent (20%) interest in and to the Leases,
resulting in R&B owning the remaining undivided forty percent (40% interest
in the Leases") and
WHEREAS, the Leases are burdened by and operated in accordance with
that certain Operating Agreement dated effective May 1, 1995, executed by
and between Enserch Exploration, Inc., Mobil Oil Corporation, Mobil Oil
Exploration & Producing Southeast Inc. and Reading & Bates Development Co.,
et al., as amended by letters dated October 16, 1995, October 31, 1995 and
May 17, 1996 (the "Allegheny JOA") and that certain Unit Agreement for
Outer Continental Shelf Exploration, Development, and Production Operations
on the Green Canyon Block 254 Unit executed by and between Enserch
Exploration, Inc. and Enserch Offshore, Inc., dated effective June 1, 1995
and bearing MMS Contract No. 754395015, as amended (the "UA") and that
certain Unit Operating Agreement, executed by and between Enserch
Exploration, Inc. and Enserch Offshore, Inc., dated effective June 1, 1995
(the "UOA") and
WHEREAS, BBPI and R&B have entered into a letter of intent dated
August 19, 1997, covering and pertaining to the Leases, the Allegheny JOA
and the further development of the Leases (the "LOI"); and
WHEREAS, BBPI and R&B desire to set forth in detail, the preliminary
agreements reached between then in the LOI and to provide a mechanism for
the effectuation of such agreements.
NOW, THEREFORE, BBPI and R&B, for and in consideration of the mutual
covenants herein contained and of the mutual benefits to be derived
herefrom, the sufficiency of such consideration is hereby acknowledged and
confessed and for which due acquittance is hereby granted, hereby covenant,
stipulate and agree as follows (capitalized terms not otherwise defined
herein shall have the meaning ascribed to them in the Alleghenv JOA):
1. PARTICIPATION.
1.1 Participation. Notwithstanding anything to the contrary contained
within or derivable from the Allegheny JOA, the UA and/or the UOA, BBPI,
BBEI and R&B do hereby covenant, stipulate and agree with respect to the
Leases that:
(a) BBEI is hereby established, named and designated as operator of
the Leases and any unit encompassing all or any portion of the
Leases in accordance with the terms and provisions of the
Allegheny JOA, the UA and the UOA, as to certain depths, all as
identified in those certain Designation of Operator and
Designation of Successor Unit Operator Forms filed with the
Minerals Management Service on August 20, 1997. BBPI and R&B do
hereby stipulate and agree that for purposes of the default and
security provisions of the Allegheny JOA, the UA and the UOA, a
default by BBEI, as operator, shall be deemed a default by BBPI.
BBPI and R&B shall execute and deliver, each unto the other, an
amendment to the Allegheny JOA, the UA and the UOA, as may be
required to implement this stipulation and agreement.
(b) The development plan attached hereto and made a part hereof for
all purposes as Exhibit "B" (the "Development Plan"), is hereby
approved by both R&B and BBPI with respect to the development of
the Leases and both BBPI and R&B shall be deemed to have obtained
any necessary execution, approval and consent necessary to
implement the Development Plan, to construct any and all
facilities contemplated by the Development Plan and to conduct
any and all operations contemplated by the Development Plan.
Although not necessary to evidence the execution of, the approval
of or their consent to the Development Plan hereunder, it is
anticipated that information AFEs shall be forwarded to R&B and
BBPI by the Operator. By way of illustration and not limitation,
BBPI and R&B do hereby acknowledge the consent, approval and/or
execution of any and all Design AFEs, Fabrication AFEs, waivers
of the formation of an integrated project team, joint evaluation
of development options, any approval processes for the
Development Plan, the right to make counter proposals for
development plans, any minor modifications to the Development
Plan and/or any other applicable provisions of the Allegheny JOA,
the UA and/or the UOA which may be necessary to implement the
intent of the BBPI and R&B hereunder or which may impede, delay
or affect the timely implementation of the Development Plan in
accordance with the terms and provisions of the LOI and the terms
and provisions of this Agreement.
(c) BBPI and R&B agree to cooperate in good faith in the acquisition
of appropriate Minerals Management Service ("MMS") acceptance and
approval of the Development Plan and any associated matter with
the Development Plan.
(d) BBPI and R&B do hereby approve the immediate commencement and
implementation of the Development Plan by the Operator, and the
Operator hereby undertakes to do so.
(e) Subject to the further terms hereof, including, but not limited
to, providing for the bearing by BBPI of R&B's share of costs
relating to the implementation of the Development Plan, R&B does
hereby agree to bear and absorb its forty percent (40%) share of
all costs, risks and expenses associated with the Development
Plan and its implementation and execution, as if such Development
Plan had been approved by R&B under the terms and provision of
the Allegheny JOA.
(f) With respect to the acquisition of interests in the Leases by R&B
and BBPI described above, both R&B and BBPI do hereby waive and
relinquish any and all pre-emtive, preferential rights of
purchase, rights to object due to the failure to maintain a
uniform interest or any other such similar or dissimilar right
which either R&B or BBPI may have or maintain with respect to the
other on account of or arising from the above describer
acquisition of interests, whether such right is derived from the
Allegheny JOA, the UA or the UOA or any other contract or
agreement. Additionally, R&B does hereby grant unto BBPI a
similar waiver of rights with respect to any future acquisition
by BBPI of the interest of Mobil Oil Corporation and/or Mobil Oil
Exploration & Producing Southeast Inc or any other affiliated
entity of either which may hold title (hereinafter collectively
"Mobil") or its successors or assigns, in Green Canyon Block 252
and/or Green Canyon Block 296. In the event BBPI does acquire an
interest from Mobil, BBPI and R&B agree to examine and discuss,
in good faith, the equalization of interests between them in
Greet Canyon Block 252 and/or Green Canyon Block 296.
g) With respect to the acquisition of interests in the Leases by R&B
and BBPI described above, for the purposes of properly reflecting
the interests to be acquired in the records of the Minerals
Management Service ("MMS"), R&B and BBPI do hereby agree that the
conveyance documents evidencing the conveyance of interest from
Mobil to BBPI shall be filed with the MMS prior to the conveyance
documents evidencing the conveyance of interest from Enserch to
R&B and that R&B agrees that in its letter to the MMS requesting
approval of the conveyance documents evidencing the conveyance of
interest from Enserch to R&B, R&B shall specifically provide that
the documents evidencing the conveyance of interest from Mobil to
BBPI shall be approved first.
2. DEVELOPMENT CARRY.
2.1 Obligation to Carry. Notwithstanding anything to the contrary
which may be contained in or derived from the Allegheny JOA, the UA or the
UOA, and as a portion of the consideration due R&B hereunder, BBPI shall
bear (by paying for the following costs on R&B's behalf), R&B's undivided
forty percent (40%) share of the cost and expense of the design,
engineering, fabrication, construction and installation of the facilities
contemplated under the Development Plan ("Development Costs"), through
August 28, 1998, or the date of the election set out in Article 2.2 is made
by R&B, whichever is the first to occur. BBPl's obligation hereunder is
only as to costs actually incurred during said time period and R&B shall
continue to bear and pay directly, its proportionate share of all
liability, risks, exposures, lawsuits, demands, claims and other similar
and dissimilar liabilities. Nothing herein shall be deemed to provide R&B a
turnkey or other fixing of costs or liabilities with respect to the
implementation of the Development Plan.
2.2 Election of R&B. On or before August 28, 1998 (the period from
August 28, 1997 to the earlier of August 28, 1998 or the date upon which
payment is made pursuant to R&B's election under 2.2 shall be referred to
at the "Option Period"), R&B shall elect by written notice to BBPI, either
to:
(a) convey to BBPI, effective as of August 28, 1997 (the "Effective
Closing Date"), free and clear of all burdens, liens, overriding
royalties, production payments and any other burden or
encumbrance created by, through or under R&B, all of R&B's
interest in the Leases, and all of R&B's interest in any and all
associated facilities and equipment for the sum of Twenty-five
Million and No/100 Dollars ($25,000,000.00) plus interest from
August 28, 1997 at LIBOR (London Interbank Rate) + 2%: or
(b) retain its interest in the Leases and pay to BBPI, forty percent
(40%) of all of the above described costs incurred by BBPI in
connection with the implementation of the Development Plan during
the Option Period, plus interest to be calculated at LIBOR + 2%
from the date such funds were paid by BBPI. R&B would then be
assigned an undivided forty percent (40%) interest in and to the
Seastar facility and all associated equipment and facilities,
free and clear of all liens and encumbrances, save and except
those liens and encumbrances contemplated under the terms and
provisions of the Allegheny JOA, the UA or the UOA and R&B would
also then assume an undivided forty percent (40%) of the future
costs of the development pursuant to the terms and provisions of
the Allegheny JOA and the LOI.
Failure of R&B to make an election within the Option Period shall be deemed
to be an election under Article 2.2 (a above
In the event R&B makes an election under option 2.2 (a) above or if R&B
fails to make an election during the Option Period, upon the closing of the
transaction contemplated in 2.2(a) above, BBPI shall agree to protect,
indemnify, defend and hold R&B harmless from and against any and all
claims, demands, liabilities, suits, damages and injuries arising from the
implementation of the Development Plan from and after August 28, 1997.
2.3 Option Agreement. The rights and obligations of the parties with
respect to the option of R&B hereunder, shall be confirmed in a separate
agreement to be executed by R&B and BBPI (the "Option Agreement") which is
attached hereto and made a part hereof for all purposes as Exhibit "D." The
Option Agreement shall be executed in recordable form and which may be
filed in the records of the Minerals Management Service and the appropriate
parish records.
2.4 Voting/Elections during the Option Period. During the Option
Period, BBPI shall, under the terms of the Allegheny JOA, be entitled to
vote and make Elections with respect to R&B's interest with respect to the
implementation of and all matters associated with the Development Plan,
provided that such vote and/or Election is the same as BBPI's vote with
respect to its own interest. During the Option Period, BBPI shall not be
entitled to vote or make Elections with respect to R&B's interest with
respect to drilling operations, but may vote and make Elections with
respect to R&B's interest with respect to completion operations of existing
wells. BBPI agrees to keep R&B fully informed with respect to such votes
and Elections.
2.5 Transfers of Interest by R&B during the Option Period. Prior to
its payment or assignment under Article 2.2 above, R&B shall not sell,
convey, mortgage, pledge, assign, encumber, alienate or otherwise transfer,
nor enter into any agreement to sell, convey, mortgage, pledge, assign,
encumber, alienate or otherwise transfer all or any portion of its interest
in the Leases to any party other than BBPI.
2.6 Information to R&B during the Option Period. During the Option
Period, R&B shall be entitled to review all information, data and contracts
affecting the Development Plan and R&B shall be permitted to attend, at an
observer, periodic review meetings with contractors in which the
Development Plan is discussed. In addition to the other information to be
provided to R&B under the Allegheny JOA as a Participating Party, within 30
days after the end of each calendar month during the Option Period, BBEI
and BBPI shall provide a statement to R&B describing the costs and expenses
accruing to R&B's forty percent (40%) share during the preceeding month.
3. SECURITIZATION OF OBLIGATIONS.
3.1 Mortgage, Pledge and Assignment. To secure its obligation to pay
BBPI for the amounts paid by BBPI and attributable to R&B's forty percent
(40%) share of the costs for the development contemplated by the
Development Plan hereunder and/or its obligation to convey its interest in
the Leases under Article 2.2(a) hereof if R&B so elects, if R&B fails to
make an election or if R&B experiences a change in control of the Company,
R&B shall grant to BBPI a mortgage and UCC financing statement
(collectively the "Mortgage") burdening its interest in the Leases and
equipment associated with the Leases (now or hereinafter in existence), in
an amount sufficient to secure its undivided forty percent (40%) share of
all anticipated expenditures to be made by BBPI in connection with the
development contemplated by the Development Plan. The Mortgage shall be in
the form and contain the terms and provisions as set forth in Exhibit "D",
attached hereto and made a part hereof for all purposes.
3.2 Release and Subordination of Mortgage, Pledge and Assignment. The
Mortgage shall be released when both first commercial production of
hydrocarbons, contemplated under the Development Plan has occurred and R&B
has repaid in full its share of development costs, plus accrued interest,
accruing prior to such first commercial production and payment. If prior to
final payment by R&B and release of the Mortgage by BBPI, R&B desires to
acquire alternate project financing of its proportionate share of such
development, BBPI shall subordinate such Mortgage to the extent of any
funds advanced pursuant to such financing and to the extent that any
interest may be due on such advanced funds, provided that such funds
advanced are paid directly to BBPI, to the extent of R&B;'s unpaid
obligations to BBPI only, pursuant to Article 2.2(b) above in repayment of
its loan to R&B.
4. CHANGE IN CONTROL OF R&B.
4.1 Effect of Change in Control. In the event that, at any time
during the term of the Option Period R&B experiences a "change in control
of the Company", as hereinafter defined in Article 4.2, R&B shall give
written notice to BBPI of such occurrence and BBPI shall have the right and
option, but not the obligation, for a period of ten (10) business days
after receipt of such notice, to acquire the Property from R&B as provided
herein. Such option shall expire if BBPI fails to exercise such option
within the time frame established hereunder.
Any such acquisition by BBPI pursuant to the terms and provisions hereof
shall be made free and clear of any and all liens, mortgages, claims,
overriding royalty interests, production payments or any other burdens
which may have been created by, through or under R&B.
4.2 Change in Control Defined. For the purposes of this provision,
"Company" shall be deemed to mean R&B and the parent of R&B and/or any
other entity controlling a majority of the voting stock of R&B. For the
purposes of this provision, a "change in control of the Company" shall mean
a change in control of a nature that would be required to be reported in
response to Item l(a) of the Current Report on Form 8-K, as in effect on
the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended ("Exchange Act") or would have been required to be
so reported but for the fact that such event had been "previously reported"
as that term is defined in Rule 12b-2 of Regulation 12B of the Exchange
Act; provided that, without limitation, such a change it control shall be
deemed to have occurred if (a) any Person is or becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than fifty
percent (50%) of the combined voting power of the Company's then
outstanding securities ordinarily (apart from rights accruing under special
circumstances) having the right to vote at elections of directors ("Voting
Securities"), or (b) individuals who constitute the Board on the Effective
Date hereof (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least three
quarters of the directors comprising the Incumbent Board (either by
specific vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without objection to such
nomination) shall be, for purposes of this clause (b), considered as though
such person were a member of the Incumbent Board, or (c) a recapitalization
of the Company occurs which results in either a decrease by 33% or more in
the aggregate percentage ownership of Voting Securities held by Independent
Shareholders (on a primary basis or on a fully diluted basis after giving
effect to the exercise of stock option and warrants) or an increase in the
aggregate percentage ownership of Voting Securities held by non-Independent
Shareholders (on a primary basis or on a fully diluted basis after giving
effect to the exercise of stock options and warrants) to greater than 50%.
For purposes of this provision the term "Person" shall mean and include any
individual, corporation, partnership, group, association or other "person,"
as such term is used in Section 14(d) of the Exchange Act, other than the
Company, a subsidiary of the Company or any employee benefit plan(s)
sponsored or maintained by the Company or an subsidiary thereof, and the
term "Independent Shareholder" shall mean any shareholder of the Company
except any employee(s) or director(s) of the Company or any employee
benefit plan(s) sponsored or maintained by the Company or any subsidiary
thereof. For purposes of this Article 4., a "change in control of the
Company" shall not be deemed to occur solely as the result of a spin-off,
split-off or other distribution of the outstanding stock of R&B to the
stockholders of the ultimate parent corporation controlling a majority of
the voting stock of R&B, or the merger of R&B's parent with Falcon Drilling
Company, Inc., or the merger of R&B where R&B's parent ultimately retains
controlling interest of the surviving entity, or any merger where the
parent of R&B is the surviving entity.
5. TITLE WARRANTY.
5.1 Title Warranty. R&B warrants that:
(a) Neither R&B nor any parent, subsidiary or affiliate of R&B
during their respective periods of ownership has (A)
executed any deed, conveyance, assignment or other
instrument as an assignor, grantor, sublessor or in another
capacity or (B) has breached any obligation under any Lease
that would (i) result, now or in the future, in R&B's
interest for any Lease being less than that set forth in
Exhibit "F", attached hereto and made a part hereof for all
purposes or (ii) obligate R&B, now or in the future, to bear
the costs and expense relating to the maintenance,
development and operation of such Lease, in an amount
greater than the working interest for such Lease, well or
unit set forth in Exhibit "F", unless the net revenue
interest attributable to said working interest is increased
by proportionate or greater amount; and
(b) Except as specifically provided in the Allegheny JOA, the UA
or the UOA, the interests of R&B, as set forth in Exhibit
"F" hereto are free of all liens, mortgages, charges
privileges, security interests and encumbrances created by
or through R&B as of the Effective Closing Date;
(the limited warranty set forth in subparagraphs (a) and (h) above shall
hereinafter be referred to as the "Special Limited Warranty"). The Mortgage
and the assignment of leasehold interest, in the event the option set forth
in 2.2(a) is selected or deemed to be selected, executed by R&B in favor of
BBPI shall be with no warranty whatsoever other than the Special Limited
Warranty, but with full substitution and subrogation to BBPI in and to all
covenants, agreements, representations and warranties made by others
heretofore given or made in connection with the Leases or any part thereof.
6. REPRESENTAT10NS OF R&B.
As a principal cause and material inducement to BBPI's execution of
this Agreement and to BBPI's consummation of the transactions contemplated
hereby, and with the acknowledgment by R&B of BBPI's reliance hereon, R&B,
to the extent set forth below and with respect to its undivided forty
percent (40%) interest in the Leases covered hereby, represents to BBPI
that as of the date hereof:
6.1 Existence of R&B. R&B is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
6.2 Power of R&B. R&B has the requisite corporate power to enter
into and perform this Agreement and the transactions contemplated hereby.
Subject to rights to consent by, required notices to, and filings with of
other actions by governmental entities where the same are customarily
obtained subsequent to the assignment of oil and gas interests and leases,
the execution, delivery and performance of this Agreement by R&B, and the
transactions contemplated hereby, will not violate (i) any provision of the
articles of incorporation or bylaws of R&B, (ii) an, material agreement or
instrument to which R&B is a party or by which R&B is or the Assets owned
by R&B art bound, (iii) any judgment, order, ruling, or decree applicable
to the Assets or to R&B as a party in interest, or (iv) any law, rule or
regulation applicable to R&B or to the ownership or operation of the
Assets.
6.3 Authorization of R&B. The execution, delivery and performance of
this Agreement and the transactions contemplated hereby have been duly and
validly authorized by all requisite corporate action on the part of R&B.
This Agreement has been duly executed and delivered on behalf of R&B, and
at the Closing all documents and instruments required hereunder to be
executed and delivered by R&B shall have been duly executed and delivered.
This Agreement does, and such documents and instruments shall, constitute
legal, valid and binding obligations of R&B enforceable in accordance with
their terms, subject, however, to the effect of bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in effect
relating to the rights and remedies of creditors, as well as to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
6.4 Brokers. R&B has incurred no obligation or liability, contingent
or otherwise, for brokers' or finders' fees in respect of the matters
provided for in this Agreement and any such obligation or liability that
might exist and which was incurred by R&B, shall be the sole obligation or
liability of R&B.
6.5 Foreign Person. R&B is not a "foreign person" within the meaning
of the Sections 1445 and 7701 of Internal Revenue Code of 1986, as amended
(the "Code")(i.e. R&B is not a non-resident alien, foreign corporation,
foreign partnership, foreign trust or foreign estate as those terms are
defined in the Code and any regulations promulgated thereunder).
6.6 Litigation. There are no actions, suits or proceedings pending,
or to the knowledge of R&B threatened, against or affecting the Leases or
any portion or portions thereof, or the operations of R&B relating to the
Leases or any portion or portions thereof, and to the best of R&B's
knowledge after reasonable inquiry, no violation of any laws, statutes,
regulations or orders applicable to any Lease or the operation thereof
exists.
6.7 Consents and Preferential Purchase Rights. Other than the
consents and waivers contained in this Agreement and the existing
agreements with Manta Ray Gathering Company, L.L.C., there are no consents
(except governmental consents which are customarily obtained after the
assignment of an oil and gas lease), agreements or waivers of preferential
rights necessary to the valid mortgage of the Leases to BBPI at Closing
that have not been affirmatively waived or deemed to have been waived by
expiration of the appropriate notice period, and there are no preferential
purchase rights or calls on production with respect to the production from
the Leasehold Interests, which limit the purchase price for oil or pas, or
which are not subject to termination upon 60 days' notice.
6.8 MMS Approval. R&B is not aware of the existence of any fact or
condition with respect to R&B or the Leases that may cause the MMS to
withhold unconditional approval, to the extent MMS approval is required
under applicable law, of the Mortgage of the Leases from R&B to BBPI or any
acquisition of R&B's interest in the Leases under Articles 2., 3. or 4.
hereof.
7. REPRESENTATIONS OF BBPI AND BBEI.
As a principal cause and material inducement to R&B's execution of
this Agreement and to R&B's consummation of the transactions contemplated
hereby, and with the acknowledgment by BBPI of R&B's reliance hereon, BBPI,
to the extent set forth below and with respect to its undivided sixty
percent (60%) interest in the Leases covered hereby, represents to R&B that
as of the date hereof:
7.1 Existence of BBPI. BBPI and BBEI are corporations duly organized,
validly existing and in good standing under the laws of the State of Texas.
7.2 Power of BBPI & BBEI. BBPI and BBEI have the requisite corporate
power to enter into and perform this Agreement and the transactions
contemplated hereby. Subject to rights to consent by, required notices to,
and filings with or other actions by governmental entities where the same
are customarily obtained subsequent to the assignment of oil and gas
interests and leases, the execution, delivery and performance of this
Agreement by BBPI and BBEI, and the transactions contemplated hereby, will
not violate (i) any provision of the articles of incorporation or bylaws of
BBPI or BBEI, (ii) any material agreement or instrument to which BBPI or
BBEI is a party or by which BBPI or BBEI is or the Leases owned by BBPI are
bound, (iii) any judgment, order, ruling, or decree applicable to the
Leases or to BBPI or BBEI as a party in interest, or (iv) any law, rule or
regulation applicable to BBPI or BBEI or to the ownership or operation of
the Leases.
7.3 Authorization of BBPI & BBEI. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby have
been duly and validly authorized by all requisite corporate action on the
part of BBPI and BBEI. This Agreement has been duly executed and delivered
on behalf of BBPI and BBEI, and at the Closing all documents and
instruments required hereunder to be executed and delivered by BBPI and
BBEI shall have been duly executed and delivered. This Agreement does, and
such documents and instruments shall, constitute legal, valid and binding
obligations of BBPI and BBEI, enforceable in accordance with their terms,
subject, however, to the effect of bankruptcy, insolvency, reorganization,
moratorium and similar laws from time to time in effect relating to the
rights and remedies of creditors, as well as to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
7.4 Brokers. Neither BBEI or BBPI have incurred any obligation or
liability, contingent or otherwise, for brokers' or finders' fees in
respect of the matters provided for in this Agreement and any such
obligation or liability that might exist and which was incurred by BBPI or
BBEI, shall be the sole obligation or liability of BBPI and BBEI.
7.5 Foreign Person. Neither BBPI or BBEI are a "foreign person"
within the meaning of the Sections 1445 and 7701 of Internal Revenue Code
of 1986, as amended (the Code) (i.e., BBPI and BBEI are not a non-resident
alien, foreign corporation, foreign partnership, foreign trust or foreign
estate as those terms are defined in the Code and any regulations
promulgated thereunder).
7.6 Litigation. There are no actions, suits or proceedings pending,
or to the knowledge of BBPI or BBEI threatened, against or affecting the
Leases or any portion or portions thereof, or the operations of BBPI or
BBEI relating to the Leases or any portion or portions thereof, and to the
best of BBPI's and BBEI's knowledge after reasonable inquiry, no violation
of any laws statutes. regulations or orders applicable to any Lease or the
operation thereof exists.
7.7 Consents and Preferential Purchase Rights. Other than the
consents and waivers contained in this Agreement and the existing
agreements with Manta Ray Gathering Company, L.L.C., there are no consents
(except governmental consents which are customarily obtained after the
assignment of an oil and gas lease), agreements of waivers of preferential
rights necessary to the valid mortgage of the Leases to BBPI at Closing
that have not been affirmatively waived or deemed to have been waived by
expiration of the appropriate notice period, and there are no preferential
purchase rights or calls on production with respect to the production from
the Leasehold Interests, which limit the purchase vice for oil or gas, or
which are not subject to termination upon 60 days' notice.
7.8 MMS Approval. Neither BBEI nor BBPI is aware of the existence of
any fact or condition with respect to BBPI or BBEI or the Leases that may
cause the MMS to withhold unconditional approval, to the extent MMS
approval is required under applicable law, of the Mortgage of the Leases
from R&B to BBPI or any acquisition of R&B's interest in the Leases under
Articles 2., 3., or 4. hereof.
8. CLOSING.
8.1 Time and Place of Closing. The consummation of the transactions
contemplated hereby (the "Closing") is to be held at the offices of BBPI on
the later to occur of August 28, 1997, or such other date as may be
mutually agreed in writing between BBPI and R&B.
8.2 Closing Obligations. At the Closing:
(a) R&B shall execute, acknowledge and deliver to BBPI and BBPI
shall execute, acknowledge and deliver to R&B, this
Agreement, the Option Agreement attached hereto as Exhibit
"C", the mortgage and UCC statements attached hereto as
Exhibit "D" together with any and all requisite forms
required to accompany such documents for filing with the MMS
and the appropriate parishes, including, but not limited to,
Designation of Operator forms in favor of BBEI.
(h) BBPI and R&B shall execute such other instruments and take
such other action as may be necessary to carry out their
respective obligations under this Agreement.
(c) BBEI, BBPI and R&B shall execute and deliver, each unto the
other, appropriate ratifications of the Allegheny JOA and
which agreement shall govern the operation of the Leases on
and after the Effective Date, together with any and all
Declarations of Operating Agreement, UCC Financing
Statements and any other documents which may be required
under the terms and provisions of the Allegheny JOA.
9. POST-CLOSING OBLIGATIONS.
9.1 Further Assurances. After Closing, BBPI and R&B agree to take
such further actions and to execute, acknowledge and deliver all such
further documents that are necessary or useful in carrying out the purpose
of this Agreement or of any document delivered pursuant hereto.
9.2 Governmental Approvals. After Closing, BBPI and R&B agree to
take all actions and to execute all documents reasonably requested by the
other party to obtain all necessary permissions, approvals or consent
required by federal, state or local governmental authorities to consummate
the transactions contemplated by this Agreement.
9.3 Cooperation. Each party to this Agreement shall provide the
other party with reasonable access to all relevant documents, data and
other information which may be required by the other parties for the
purpose of preparing tax returns and responding to any audit by any taxing
jurisdiction. Each party to this Agreement shall cooperate with all
reasonable requests of the other parties made in connection with contesting
the imposition of taxes. Notwithstanding anything to the contrary in this
Agreement, no party to this Agreement shall be required at any time to
disclose to the other parties any tax return or other confidential tax
information.
9.4 Sharing of Information regarding the Leases. If requested by
Mobil and/or Enserch Exploration Inc. ("Enserch"), BBPI may provide Mobil
and/or Enserch reasonable access to data concerning the development
contemplated by the Development Plan, by means of project reports and
invitations to attend periodic review meetings
10. MISCELLANEOUS.
10.1 Governing law. THIS AGREEMENT AND ALL INSTRUMENTS EXECUTED IN
ACCORDANCE WITH IT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE
WITH THE SUBSTANTIVE LAWS OF THE STATE OF LOUISIANA, WITHOUT REGARD TO
CONFLICT OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
10.2 Entire Agreement. This Agreement, including all exhibits
attached hereto and made a part hereof, together with the LOI, including
all exhibits attached thereto and made a part thereof, constitute the
entire agreement between the parties and together supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. In the event of any conflict between this
Agreement and the LOI, the provisions of this Agreement shall take
precedence. In the event of any conflict between this Agreement and the
terms and provisions of the Allegheny JOA, this Agreement shall take
precedence. No supplement, amendment, alteration, modification, waiver or
termination of this Agreement or the LOI shall be binding unless executed
in writing by the parties hereto. The Allegheny JOA shall govern the
operation of the Leases on and after the Effective Date.
10.3 Waiver. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing
waive' unless otherwise expressly provided.
10.4 Captions. The captions in this Agreement are for convenience
only and shall not be considered part of or affect the construction or
interpretation of any provision of this Agreement.
10.5 Notices. Any notice provided or permitted to be given under
this Agreement shall be in writing, and may be served by personal
delivery, by depositing same in the mail, addressed to the party to be
notified, postage prepaid, and registered or certified with a return
receipt requested or by facsimile transmission. Notice deposited in the
mail in the manner herein above described shall be deemed to have been
given and received on the date of the delivery as shown on the return
receipt. Notice served in any other manner shall be deemed to have been
given and received only in and when actually received by the addressee. For
purposes of notice, the addresses of the parties shall be as follows:
BBPI's Mailing Address: British-Borneo Petroleum, Inc.
1201 Louisiana, Suite 3500
Houston, Texas 77002
Attention: James K. Teringo, Jr
General Counsel
Telephone: (713) 752-5619
Fax: (713) 650-1053
BBEI's Mailing Address: British-Borneo Exploration. Inc.
1201 Louisiana, Suite 3500
Houston, Texas 77002
Attention James K. Teringo, Jr.
General Counsel
Telephone: (713) 752-5619
Fax: (713) 650-1053
R&B's Mailing Address: Reading & Bates Development Co
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Gary J. Junco
Chief Operating Office
Telephone: (281) 496-5000
Fax: (281) 496-0285
Each party shall have the right, upon giving ten (10) days prior notice to
the other in the manner hereinabove provided, to change its address for
purposes of notice.
10.6 Expenses. Except as otherwise provided herein, each party shall
be solely responsible for all expenses incurred by it in connection with
this transaction (including, without limitation, fees and expenses of its
own counsel and accountants).
10.7 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced under any rule of law,
all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is no affected in a
materially adverse manner with respect to either party
10.8 Survival. The warranties, representations, covenants,
agreements and obligations of the parties under this Agreement shall
survive the Closing of the transaction contemplated hereby.
10.9 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives.
10.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.11 Attorneys' Fees. If a suit or action is filed by any party to
enforce this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees incurred in investigation or related matters and
it preparation for and prosecution or defense of such suit or action as
fixed by the trial court, and, if any appeal is takes from the decision
of the trial court, reasonable attorneys' fees as fixed by the appellate
court or, if appropriate, by the trial court.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
BRITISH-BORNEO PETROLEUM, INC.
WITNESSES: By: _____________________
Name: _____________________
Title:_____________________
READING & BATES DEVELOPMENT CO.
WITNESSES:
_______________________________ By: ______________________
Name: _________________________ Name: ______________________
Title:______________________
_______________________________
Name: _________________________
TO THE EXTENT AND ONLY TO THE EXTENT
OF ITS OBLIGATIONS HEREUNDER:
BRITISH-BORNEO EXPLORATION, INC.
WITNESSES:
_______________________________ By: ______________________
Name: ______________________
_______________________________ Title:______________________
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
______________, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that he
executed the above and foregoing instrument in his capacity as
_______________ of British-Borneo Petroleum, Inc., a Texas corporation, on
behalf of said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of ___________________ and ___________________, competent
witnesses, on the 28th day of August, 1997.
WITNESSES:
_________________________ _________________________
_________________________
_________________________
Notary Public in and for the
State of Texas
My Commission expires:
________________________
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
______________ , to me personally known to be the person whose name
is subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the present of the undersigned competent witnesses, that he
executed the above and foregoing instrument in his capacity as
______________ of Reading & Bates Development Co., a Delaware corporation,
on behalf of the said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of ______________________ and ___________________, competent
witnesses, on the 28th day of August, 1997.
WITNESSES:
_________________________ _________________________
_________________________
_________________________
Notary Public in and for the
State of Texas
My Commission expires:
________________________
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
_____________________, to me personally known to be the person whose
name is subscribed to the foregoing instrument, who declared and
acknowledged to me, notary, in the presence of the undersigned competent
witnesses, the he executed the above and foregoing instrument in his
capacity as _______________ of British-Borneo Exploration, Inc., a Texas
corporation, on behalf of said corporation with full authority, and that
the said instrument is the free act ant deed of the said corporation, and
was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _______________ and _________________, competent witnesses, on
the 28th day of August, 1997.
WITNESSES:
_________________________ _________________________
_________________________
_________________________
Notary Public in and for the
State of Texas
My Commission expires:
________________________
EXHIBIT "A"
THE LEASES
1. LEASE OCS-G 8005. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
to Amerada Hess et al., as Lessees, bearing Serial No. OCS-G 8005
covering all of Block 253, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
2. LEASE OCS-G 7049. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1984, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
7049 covering all of Block 254, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
3. LEASE OCS-G 8876. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1987, by and between the United States of America, as Lessor,
to Hunt Petroleum Corporation et al., as Lessees, bearing Serial No.
OCS-G 8876 covering all of Block 297, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
4. LEASE OCS-G 8010. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8010 covering all of Block 298, Green Canyon. OCS Official Protraction
Diagram, NG 15-3.
EXHIBIT, "B"
THE DEVELOPMENT PLAN
ALLEGHENY FIELD
DEVELOPMENT PLAN (SUMMARY)
I DEVELOPMENT OVERVIEW
1.1 The purpose of this note is to demonstrate how British-Borneo intends
to develop the Allegheny field, achieving first oil in Q3 1999 at a
development cost in the region of US $213 million.
1.2 This proposal for the Allegheny field development is founded on the
following assumptions:
- four existing (suspended) wells completed at two sea floor
locations (at wells GC 254 #3, 4STI, 5 and at GC 297 #1);
- one new well located near GC 297 # 1;
- recompletions as needed dependent on reservoir performance;
- additional wells as needed, also dependent upon reservoir
performance;
- dual gravel pack completions using HES/PES for all equipment and
installation;
- production via flowlines to a SeaStar TLP situated between the two
sea floor well
locations (see Attachments la and lb);
- duplication of the Morpeth SeaStar system;
- project management undertaken by the existing British-Borneo
project team;
1.3 Export-quality crude will be shipped via a 30 mile, 8" pipeline to the
Poseidon trunk line system a EW 953, gas via a 25 mile, 6" pipeline to
the Texaco Discovery system at EW 873 (see Attachment 1c). An
alternative route for both pipelines could be to the Morpeth SeaStar
at EW 921.
1.4 The SeaStar TLP will provide full processing facilities for:
- 25M bpd oil average: 27 M peak;
- 35MMscfd gas average: 45mm peak;
- 8M bpd water average: 9M peak
(See Attachment 2)
2 CONTRACTING PHILOSOPHY
2.1 It is proposed to use British-Borneo's current Morpeth field
development as a model for Allegheny substantially duplicating the
Morpeth SeaStar components (e.g. hull, mooring system) utilizing the
services of the same contractors and subcontractors This is considered
an essential prerequisite for the optimum development of the Allegheny
field. Discussions have been held with the major contractors and
subcontractors. Negotiations are sufficiently far advanced to enable
British-Borneo to express its confidence in the viability of this
proposal.
2.2 Current contractual areas of responsibility on Morpeth are:
2.2.1 Atlantia Corporation - the design and procurement and fabrication of
the SeaStar System including hull, deck
topsides and mooring system:
subcontracting to: Gulf Island Fabrication - hull fabrication
- deck
- piles
Aker Gulf Marine - tendons
ABB Vetco Gray - tendon connectors
2.2.2 J. Ray McDermott - transportation and installation of the SeaStar
TLP including mooring system, hull and
topsides;
- design, engineering, fabrication, supply and
installation of the subsea system including
xmas trees, flowline risers, control system
and umbilicals;
- design, engineering, fabrication, supply and
installation of the subsea gas and oil export
pipelines.
3 PROJECT MANAGEMENT PHILOSOPHY
3.1 This proposal is predicated on capitalizing on the existing
relationships that British-Borneo has developed with Atlantia and J.
Ray McDermott on the Morpeth project. With a small augmentation in the
current Morpeth project team (in the subsea area), existing synergies
can be exploited to the fullest, thus ensuring the most effective and
efficient management of the Allegheny project.
4 SCHEDULE
4.1 Taking into account the existing skills and resources being offered by
British-Borneo, the aggressive schedule contained in Attachment 3 is
achievable. The following key dates should be noted:
August 29, 1997 - Obtain SOP extension from MMS
August 29, 1997 - Deal closure
October 1. 1997 - Order tendon connectors
- Order steel for hull
- Commit to DB50 slot
November 1, 1998 - Order subsea trees
Q1 1999 - Complete 3 wells
Ql/Q2 1999 - Install SeaStar and subsea systems (using DB50 prior
to its commitment to Shell on 7/1/99)
Q3 1999 - FIRST OIL
- Drill and complete one additional well, complete
fourth existing well
5 ESTIMATED COSTS
5.1 Total field facility costs, pre-production costs (including 3
completions) are estimated at US$ 213MM. A breakdown of this figure
can be found in Attachment 4.
EXHIBIT "C"
THE OPTION AND ELECTION AGREEMENT
STATE OF TEXAS
COUNTY OF HARRIS
OPTION AND ELECTION AGREEMENT
THIS OPTION AGREEMENT is entered into and shall be effective as
of 12:01 a.m., August 28, 1997 (hereinafter referred to as the "Effective
Date"), by and between READING & BATES DEVELOPMENT CO., a Delaware
corporation, federal taxpayer identification no._____, whose mailing
address is 901 Threadneedle, Suite 200, Houston, Texas 77079 ("R&B") and
BRITISH-BORNEO PETROLEUM, INC., a Texas corporation, federal taxpayer
identification no._____, whose mailing address is 1201 Louisiana, Suite
3500, Houston, Texas 77002 ("BBPI").
In consideration of the payment of the sum of One Thousand
($1,000.00) Dollars and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged and confessed and for which
due acquitance is hereby granted, (x) R&B does hereby grant in favor of
BBPI the right and option, but not the obligation, to purchase, upon the
occurrence of a change in control of the Company, as hereinbelow defined,
during the Option Period (as defined in Article 2.2 of the Participation
Agreement dated August 28, 1997, executed by and between R&B and BBPI (the
"Participation Agreement")), on the terms and conditions described
hereinbelow; and (y) BBPI shall purchase, upon the election of R&B to sell
on or before August 28, 1998, pursuant to the terms and provisions of
Article 2.2(a) of the Participation Agreement, or upon the failure of R&B
to make an election, pursuant to the terms and provisions of Article 2.2 of
the Participation Agreement; on the terms described below, all of R&B's
right, title and interest, together with any and all right, title and
interest which may be hereinafter acquired by R&B pursuant to the terms of
the Operating Agreement, dated effective May 1, 1995, ratified by R&B and
BBPI, as amended (the "Operating Agreement" or the "Allegheny JOA"), in and
to the following described properties (the "Property"):
(a) The oil, gas and mineral leases described on Exhibit 1,
Part (a) (the "Leases"), together with a like interest with
respect to the Leases in and to any and all (i) mineral
interests, (ii) overriding or landowners' royalty interests,
(iii) surface and subsurface interests and rights, (iv)
beneficial, convertible or reversionary interests, (v) interest
owned, claimed or acquired, or to be owned, claimed or acquired,
by agreement, (vi) production payments, (vii) contractual
interests owned pursuant to participation agreements, operating
agreements or similar agreements, and (viii) any and all like or
unlike interests, including without limitation those specific
items identified on Exhibit 1, Part (a). This shall include any
contractual rights providing for the acquisition or earning of
any of the foregoing, and R&B's rights in respect of any pooled,
communitized or unitized acreage of which any of the foregoing
is a part. (All of the foregoing shall be called collectively
the "Leasehold Interests.")
(b) Any and all wells, wellbores, pipe, gathering lines,
compressors, facilities, equipment, platforms, pipelines,
templates and any and all other personal, real, movable and
immovable property, fixtures or equipment which are located on
or used directly in connection with the production, treatment or
transportation of oil and gas from the Leasehold Interests,
including, without limitation, those items specifically
identified on Exhibit 1, Part (b) (the "Equipment").
(c) Any and all easements, rights-of-way, and subsurface and
surface rights associated or used in connection with any such
easements or rights-of-way, which easements, rights-of-way and
subsurface and surface rights have been obtained for use in
connection with the Leasehold Interests (the "Gathering
Facilities").
(d) To the extent the same are assignable or transferable by
R&B and to the extent and only to the extent that the same
relate to the ownership or operation of the Leasehold Interests,
the Gathering Facilities or the Equipment on or after the
Effective Date, a like interest in and to all orders, contracts,
agreements (including without limitation all operating
agreements, transportation agreements, unit agreements,
participation agreements and processing agreements),
instruments, licenses, authorizations, permits, audits, claims,
liens, suits, settlements and demands, and other rights,
privileges, benefits and powers conferred upon R&B.
(e) Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interest on or after the Effective
Closing Date (as hereinafter defined).
R&B and BBPI have heretofore entered into the Participation Agreement
and have ratified the Operating Agreement covering the Leases. In
connection with the obligations set forth in the Participation Agreement
and Operating Agreement, R&B and BBPI do hereby agree that this Option
Agreement shall be irrevocable until the occurrence of (i) the election by
R&B to retain its interest and the payment by R&B to BBPI of costs and
expenses paid on behalf of R&B, with accrued interest, as provided in
Article 2 of the Participation Agreement or (ii) the conveyance by R&B to
BBPI of all of its right, title and interest in and to the Property,
whichever occurs first.
Additionally, the Participation Agreement provides and for purposes of this
Option Agreement, Change in Control of the Company shall be defined in
accordance with the Participation Agreement:
The Participation Agreement provides, inter alia:
2. DEVELOPMENT CARRY.
2.1 Obligation to Carry. Notwithstanding anything to the contrary
which may be contained in or derived from the Allegheny JOA, the UA or the
UOA, and as a portion of the consideration due R&B hereunder, BBPI shall
bear (by paying for the following costs on R&B's behalf), R&B's undivided
forty percent (40%) share of the cost and expense of the design,
engineering, fabrication, construction and installation of the facilities
contemplated under the Development Plan ("Development Costs"), through
August 28, 1998, or the date of the election set out in Article 2.2 is made
by R&B, whichever is the first to occur. BBPI's obligation hereunder is
only as to costs actually incurred during said time period and R&B shall
continue to bear and pay directly, its proportionate share of all
liability, risks, exposures, lawsuits, demands, claims and other similar
and dissimilar liabilities. Nothing herein shall be deemed to provide R&B a
turnkey or other fixing of costs or liabilities with respect to the
implementation of the Development Plan.
2.2 Election of R&B. On or before August 28, 1998 (the period from
August 28,1997 to the earlier of August 28, 1998 or the date upon which
payment is made pursuant to R&B's election under 2.2 shall be referred to
as the "Option Period"), R&B shall elect by written notice to BBPI either
to:
(a) convey to BBPI, effective as of August 28, 1997 (the
"Effective Closing Date"), free and clear of all burdens,
liens, overriding royalties, production payments and any
other burden or encumbrance created by, through or under
R&B, all of R&B's interest in the Leases, and all of R&B's
interest in any and all associated facilities and equipment
for the sum of Twenty-five Million and No/100 Dollars
($25,000,000.00) plus interest front August 28. 1997 at
LIBOR (London Interbank Rate) + 2%: or
(b) retain its interest in the Leases and pay to BBPI, forty
percent (40%) of all of the above described costs incurred
by BBPI in connection with the implementation of the
Development Plan during the Option Period, plus interest to
be calculated at LIBOR + 2% from the date such funds were
paid by BBPI. R&B would then be assigned al undivided forty
percent (40%) interest in and to the Seastar facility and
all associate equipment and facilities, free and clear of
all liens and encumbrances, save and except those liens and
encumbrances contemplated under the terms and provisions of
the Allegheny JOA, the UA or the UOA and R&B would also then
assume an undivided forty percent (40%) of the future costs
of the development pursuant to the terms and provisions of
the Allegheny JOA and the LOI.
Failure of R&B to make an election within the Option Period shall be deemed
to be an election under Article 2.2 (a) above.
In the event R&B makes an election under option 2.2 (a) above or if R&B
fails to make an election during the Option Period, upon the closing of the
transaction contemplated in 2.2(a) above, BBPI shall agree to protect,
indemnify, defend and hold R&B harmless from and against any and all
claims, demands, liabilities, suits, damages and injuries arising from the
implementation of the Development Plan from and after August 28, 1997.
2.3 Option Agreement. The rights and obligations of the parties with
respect to the option of R&B hereunder, shall be confirmed in a separate
agreement to be executed by R&B and BBPI (the "Option Agreement") which is
attached hereto and made a part hereof for all purposes as Exhibit "D." The
Option Agreement shall be executed in recordable form and which may be
filed in the records of the Minerals Management Service and the appropriate
parish records.
2.4 Voting/Elections during the Option Period. During the Option
Period, BBPI shall, under the terms of the Allegheny JOA, be entitled to
vote and make Elections with respect to R&B's interest with respect to the
implementation of and all matters associated with the Development Plan,
provided that such vote and/or Election is the same as BBPl's vote with
respect to its own interest. During the Option Period, BBPI shall not be
entitled to vote or make Elections with respect to R&B's interest with
respect to drilling operations, but may vote and make Elections with
respect to R&B's interest with respect to completion operations of existing
wells. BBPI agrees to keep R&B fully informed with respect to such votes
and Elections.
2.5 Transfers of Interest by R&B during the Option Period. Prior to
its payment or assignment under Article 2.2 above, R&B shall not sell,
convey, mortgage, pledge, assign, encumber, alienate or otherwise transfer,
nor enter into any agreement to sell, convey, mortgage, pledge, assign,
encumber, alienate or otherwise transfer all or any portion of its interest
in the Leases to any party other than BBPI.
2.6 Information to R&B during the Option Period. During the Option
Period, R&B shall be entitled to review all information, data and contracts
affecting the Development Plan and R&B shall be permitted to attend, as an
observer, periodic review meetings with contractors in which the
Development Plan is discussed. In addition to the other information to be
provided to R&B under the Allegheny JOA as a Participating Party, within 30
days after the end of each calendar month during the Option Period, BBEI
and BBPI shall provide a statement to R&B describing the costs ant expenses
accruing to R&B's forty Percent (40%) share during the preceeding month.
Additionally, the Participation Agreement provides and for the purposes of
this Option Agreement, change in control of the Company shall be defined as
follows:
4 CHANGE IN CONTROL OF R&B.
4.1 Effect of Change in Control. In the event that, at any time
during the term of the Option Period, R&B experiences a
"change in control of the Company", as hereinafter defined
in Article 4.2, R&B shall give written notice to BBPI of
such occurrence and BBPI shall have the right and option,
but not the obligation, for a period of ten (10) business
days after receipt of such notice, to acquire the Property
from R&B as provided herein. Such option shall expire if
BBPI fails to exercise such option within the time frame
established hereunder.
4.2 Change in Control Defined. For the purposes of this
provision, "Company" shall be deemed to mean R&B and the
parent of R&B and/or any other entity controlling a majority
of the voting stock of R&B. For the purposes of this
provision, a "change in control of the Company" shall mean a
change in control of a nature that would be required to be
reported in response to Item l(a) of the Current Report on
Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended ("Exchange Act") or would have been required to
be so reported but for the fact that such event had been
"previously reported" as that term is defined in Rule 12b-2
of Regulation 12B of the Exchange Act; provided that,
without limitation, such a change in control shall be deemed
to have occurred if (a) any Person is or becomes the
beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the
combined voting power of the Company's then outstanding
securities ordinarily (apart from rights accruing under
special circumstances) having the right to vote at election
of directors ("Voting Securities"), or (b) individuals who
constitute the Board on the Effective Date hereof (the
"Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming
a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board (either by specific
vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes
of this clause (b), considered as though such person were a
member of the Incumbent Board, or (c) a recapitalization of
the Company occurs which results in either a decrease by 33%
or more in the aggregate percentage ownership of Voting
Securities held by Independent Shareholders (on a primary
basis or on a fully diluted basis after giving effect to the
exercise of stock option and warrants) or an increase in the
aggregate percentage ownership of Voting Securities held by
non-Independent Shareholders (on a primary basis or on a
fully diluted basis after giving effect to the exercise of
stock options and warrants) to greater than 50%. For
purposes of this provision, the term "Person" shall mean and
include any individual, corporation, partnership, group,
association or other "person," as such term is used in
Section 14(d) of the Exchange Act, other than the Company, a
subsidiary of the Company or any employee benefit plan(s)
sponsored or maintained by the Company or an subsidiary
thereof, and the term "Independent Shareholder" shall mean
any shareholder of the Company except any employee(s) or
director(s) of the Company or any employee benefit plans
sponsored or maintained by the Company or any subsidiary
thereof. For purposes of this Article 4., a "change in
control of the Company" shall not be deemed to occur solely
as the result of a spin-off, split-off or other distribution
of the outstanding stock of R&B to the stockholders of the
ultimate parent corporation controlling a majority of the
voting stock of R&B, or the merger of R&B's parent with
Falcon Drilling Company, Inc., or the merger of R&B where
R&B's parent ultimately retains controlling interest of the
surviving entity, or any merger where the parent of R&B is
the surviving entity.
Upon the occurrence of a change in control of the Company, R&B
shall give written notice to BBPI of such occurrence and BBPI shall have
the right and option, but not the obligation, for a period of ten (10)
business day after receipt of such notice, to acquire the Property from R&B
as provided in the Participation Agreement. BBPI shall provide R&B written
notice of its election hereunder and the failure of BBPI to make an
election within the time frame established hereunder shall be deemed an
election not to acquire the interest.
The consideration for this conveyance shall be as set forth in
the Participation Agreement ("Purchase Price"). The Purchase Price shall be
paid in cash at the time of the passing of the act of sale, which shall
occur at the offices of the BBPI within ten (101 business days of R&B's
receipt of notification of BBPI's election to purchase.
R&B shall convey the Property to BBPI, free and clear of any and
all liens, mortgages, claims, security interests and encumbrances,
overriding royalty interests, production payments or other burdens which
may have been created by, through or under R&B and R&B shall further
warrant that neither R&B nor any parent, subsidiary or affiliate of R&B
during their respective periods of ownership has (A) executed any deed,
conveyance, assignment or other instrument as an assignor, grantor,
sublessor or in another capacity or (B) has breached any obligation under
any Lease that would (i) result, now or in the future, in R&B's interest
for any Lease being less than that set forth in Exhibit "A", attached
hereto and made a part hereof for all purposes or (ii) obligate R&B, now or
in the future, to bear the costs and expenses relating to the maintenance,
development and operation of such Lease, in an amount greater than the
working interest for such Lease, well or unit set forth in Exhibit "A",
unless the net revenue interest attributable to said working interest is
increased by a proportionate or greater amount.
The assignment shall also be made with full substitution and
subrogation to BBPI in and to all covenants, agreements, representations
and warranties made by others heretofore given or made in connection with
the Leases or any part or portion thereof.
Any notice provided or permitted to be given under this Option
Agreement shall be in writing, and may be served by personal delivery, by
depositing same in the mail, addressed to the party to be notified, postage
prepaid, and registered or certified with a return receipt requested or by
facsimile transmission. Notice deposited in the mail in the manner
hereinabove described shall be deemed to have been given and received on
the date of the delivery as shown of the return receipt. Notice served in
any other manner shall be deemed to have been given and received only in
and when actually received by the addressee. For purposes of notice, the
addresses of the parties shall be as follows:
R&B's Mailing Address:
Reading & Bates Development Co.
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Gary J. Junco
Chief Operating Office
Telephone: (281) 496-5000
Fax: (281) 496-0285
BBPI's Mailing Address:
British-Borneo Petroleum, Inc.
1201 Louisiana, Suite 3500
Houston, Texas 77002
Attention: James K. Teringo, Jr
General Counsel
Telephone: (713) 752-5619
Fax: (713) 650-1053
Each party shall have the right, upon giving ten (10) days prior
notice to the other in the manner hereinabove provided, to change its
address for purposes of notice.
IN WITNESS WHEREOF, this Assignment is executed in multiple
originals and in the presence of the undersigned witnesses on this 28th day
of August, 1997, but to be effective as of the Effective Date.
WITNESSES: READING & BATES DEVELOPMENT CO.
___________________________________By:___________________________________
Name:______________________________Title:__________________________________
(Please Print)
___________________________________
Name:______________________________
(Please Print)
BRITISH-BORNEO PETROLEUM, INC.
___________________________________By:___________________________________
Name:______________________________Title:__________________________________
(Please Print)
___________________________________
Name:______________________________
(Please Print)
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
_____________________________, to me personally known to be the
person whose name is subscribed to the foregoing instrument, who declared
and acknowledged to me, notary, in the presence of the undersigned
competent witnesses, that he executed the above and foregoing instrument in
his capacity as __________________of British-Borneo Petroleum, Inc., a
Texas corporation, on behalf of said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of ________________________ and _______________________, competent
witnesses, on the 28th day of August, 1997.
WITNESSES:
______________________________ ______________________________
______________________________
______________________________
Notary Public in and for the
State of Texas
My Commission expires:
_______________________
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
____________________, to me personally known to be the person whose
name is subscribed to the foregoing instrument, who declared and
acknowledged to me, notary, in the presence of the undersigned competent
witnesses, that he executed the above and foregoing instrument in his
capacity as _________________ of Reading & Bates Development Co., a
Delaware corporation, on behalf of the said corporation with full
authority, and that the said instrument is the free act and deed of the
said corporation, and was executed for the uses, purposes and benefits
therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of ________________________ and _______________________, competent
witnesses, on the 28th day of August, 1997.
WITNESSES:
______________________________ ______________________________
______________________________
______________________________
Notary Public in and for the
State of Texas
My Commission expires:
_______________________
EXHIBIT I TO OPTION AGREEMENT
PART (a)
LEASEHOLD INTERESTS
1. LEASE OCS-G 8005. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Amerada Hess, et al., as Lessees, bearing Serial No. OCS-G 8005
covering all of Block 253, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 33.00000%
2. LEASE OCS-G 7049. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shell Lands Act made and effective as of
June 1, 1984, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
7049 covering all of Block 254, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 34.70133%
3. LEASE OCS-G 8876. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1987, by and between the United States of America, as Lessor,
and Hunt Petroleum Corporation, et al., as Lessees, bearing Serial No.
OCS-G 8876 covering all of Block 297, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 33.66666%
4. LEASE OCS-G 8010. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8010 covering all of Block 298, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 34.70133%
PART (b)
EOUIPMENT
1. WELLS:
WORKING REVENUE
INTEREST INTEREST
A. OCS-G 7049 #3 40.00000% 34.70133%
B. OCS-G 7049 #4 40.00000% 34.70133%
C. OCS-G 7049 #4STI 40.00000% 34.70133%
D. OCS-G 7049 #5 40.00000% 34.70133%
E OCS-G 8876 #1 40.00000% 33.66666%
2. TEMPLATE:
That certain three well drilling template acquired, inter alia, by
Seller for use in connection with the drilling of the OCS-G 7049 #5
Well.
EXHIBIT "D"
MORTGAGE AND UCC FINANCING STATEMENTS
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT (the "Mortgage") dated as of this
28th day of August, 1997 is by and between READING & BATES DEVELOPMENT CO.,
a Delaware corporation whose mailing address is 901 Threadneedle, Suite
200, Houston, Texas 77079, and whose federal taxpayer identification
number is 73-0797067 (hereinafter referred to as "Mortgagor"), and BRITISH-
BORNEO PETROLEUM, INC., a Texas corporation whose mailing address is 1201
Louisiana, Suite 3500, Houston, Texas 77002, and whose federal taxpayer
identification number is 75-1831772 (the "Mortgagee" or "BBPI"), here
present who accepts this Mortgage.
Recitals
WHEREAS, pursuant to that certain Participation Agreement (the
"Participation Agreement") dated ____________, 1997 by and between
Mortgagor, Mortgagee and to the extent of its obligations thereunder,
British-Borneo Exploration, Inc., Mortgagee has agreed to bear Mortgagor's
undivided forty percent (40%) share of the cost and expense of the design,
engineering, fabrication, construction and installation of the facilities
(the "Development Costs") contemplated under the development plan attached
hereto and made a part hereof for all purposes at Exhibit "B" (the
"Development Plan") through August 28, 1998, or the date the election under
Section 2.2 of the Participation Agreement is made by Mortgagor, whichever
is the first to occur;
WHEREAS, pursuant to Section 2.2 of the Participation Agreement,
Mortgagor must, on or before August 28, 1998, elect to either (the period
from August 28, 1997 to the earlier of August 28, 1998 or the date upon
which payment is made pursuant to Mortgagor's election under Section 2.2 of
the Participation Agreement shall be defined to as the "Option Period")
(a) convey to Mortgagee free and clear of all burdens, liens, overriding
royalties, production payments and any other burdens or encumbrances
created by, through or under Mortgagor, all of Mortgagor's interest in the
leases described on Exhibit "A" hereto and all associated facilities and
equipment for the sum of Twenty-Five Million and No/100 Dollars
($25,000,000.00) plus interest from August 28, 1997 at LIBOR (London
Interbank Rate) plus 2% ("Mortgagor's Conveyance Obligation") or (b) retain
its interest in the leases described in Exhibit "A" hereto and pay to
Mortgagee forty percent (40%) of all of the Development Costs advanced by
Mortgagee on Mortgagor's behalf in connection with the implementation of
the Development Plan during the Option Period plus interest at LIBOR plus
2% from the date such funds were paid by Mortgagee ("Mortgagor's Repayment
Obligation");
WHEREAS, in order to secure the full and punctual payment and
performance of either Mortgagor's Conveyance Obligation or Mortgagor's
Repayment Obligation and the other Indebtedness (as hereafter defined), the
Mortgagor has agreed to execute and deliver this Mortgage and to grant a
mortgage lien and continuing security interest in and to the Collateral (as
hereafter defined);
NOW, THEREFORE, in consideration of the premises, the Mortgagor and
Mortgagee agree as follows:
ARTICLE 1.
General Terms
Section 1.1 Definitions. As used in this Mortgage, the terms
"Mortgagor," "Mortgagor's Conveyance Obligation," "Mortgagor's Repayment
Obligation," "Development Costs," "Development Plan," "Mortgagee,"
"Mortgage" and "Participation Agreement" shall have the meanings indicated
above. As used in this Mortgage, the following additional terms shall have
the meanings indicated:
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter acquired by the Mortgagor (including without limitation accounts
resulting from the sale of Hydrocarbons at the well head) now or hereafter
arising in connection with the sale or other disposition of any
Hydrocarbons, and further means all rights accrued, accruing or to accrue
to receive payments of any and every kind under all Contracts, including
without limitation bonuses, rents and royalties which are payable out of or
measured by production of any Hydrocarbons or
are otherwise attributable to the Mineral Properties and all other revenues
owing to the Mortgagor in connection with the Mineral Properties, including
revenues from the treatment, transportation or storage of Hydrocarbons for
third parties.
"Collateral" has the meaning set forth in Section 2.2 ("The Security
Interest") of this Mortgage".
"Collateral Documents" means collectively all mortgages, pledges,
security agreements and other documents by which the Mortgagor grants Liens
and security interests in immovable or movable property to the Mortgagee.
"Contracts" means all contracts (including, but not limited to, those
contracts described on Exhibit "C" attached hereto), agreements, operating
agreements, farm-out or farm-in agreements, sharing agreements, limited or
general partnership agreements, area of mutual interest agreements, mineral
purchase agreements, contracts for the sale, exchange, transportation or
processing of Hydrocarbons, rights-of-way, easements, surface leases, salt
water disposal agreements, service contracts, permits, franchises,
licenses, pooling or unitization agreements, unit designations and pooling
orders now in effect or hereafter entered into by the Mortgagor affecting
any of the Mineral Properties, Equipment or Hydrocarbons now or hereafter
covered hereby, or which are useful or appropriate in drilling for,
producing, treating, handling, storing, transporting or marketing oil, gas
or other minerals produced from any lands affected by the Mineral
Properties.
"Default" means the occurrence of any of the events specified as an
Event of Default, whether or not any requirement for notice or lapse of
time or other condition precedent has been satisfied.
"Equipment" means all equipment now owned or hereafter acquired by the
Mortgagor and now or hereafter located on or used or held for use in
connection with the Mineral Properties (including, but limited to, the
equipment described on Exhibit "D" attached hereto) or in connection with
the operation thereof or the treating, handling, storing, transporting,
processing, purchasing, exchanging or marketing of Hydrocarbons, including
without limitation all wells, wellbores, rigs, templates platforms,
constructions, extraction plants, facilities, gas systems (for gathering,
treating, injection and compression), water systems (for treating, disposal
and injection), compressors, casing, tubing, rods, flow lines, pipelines,
derricks, tanks, separators, pumps, machinery, tools and all other movable
property and fixtures, now or hereafter located upon and dedicated to be
used (or held for use) in connection with any of the Mineral Properties,
together with all additions, accessories, parts, attachments, special tools
and accessions now and hereafter affixed thereto or used in connection
therewith, and all replacements thereof and substitutions therefor.
"Event of Default" has the meaning set forth in Section 5.1 ("Events
of Default") of this Mortgage.
"General Intangibles" means all "general intangibles" (as defined in
the UCC) now owned or hereafter acquired by the Mortgagor related to the
Mineral Properties, the Equipment or the Hydrocarbons, the operation of the
Mineral Properties or the Equipment (whether the Mortgagor is operator or
non-operator), or the treating, handling, storing, transporting,
processing, purchasing, exchanging or marketing of Hydrocarbons, or under
which the proceeds of Hydrocarbons arise or are evidenced or governed,
including, without limitation, (i) all contractual rights and obligations
or indebtedness owing to the Mortgagor (other than Accounts) from whatever
source arising in connection with the sale or other disposition of any
Hydrocarbons, including all rights to payment owed or received by the
Mortgagor pursuant to a "take-or-pay" provision or gas balancing
arrangement, (ii) all Contracts and other general intangibles now or
hereafter arising in connection with or resulting from Contracts, (iii) all
insurance proceeds and unearned insurance premiums affecting all or any
part of the Collateral, and (iv) all things in action, rights represented
by judgments, claims arising out of tort and other claims relating to the
Collateral, including the right to assert and otherwise to be the plaintiff
and proper party of interest to commence and prosecute such action (whether
as claims, counterclaims or otherwise, and whether involving matters
arising from casualty, condemnation, indemnification, negligence, strict
liability, other tort, contract or in any other manner).
"Hydrocarbons" mean all oil, gas, casinghead gas, condensate,
distillate, other liquid and gaseous hydrocarbons, sulfur, and all other
minerals, whether similar to the foregoing or not, produced, obtained or
secured from or allocable to the Mineral Properties, and any products
refined, processed, recovered or obtained therefrom, including oil in
tanks.
"Indebtedness" means all Development Costs paid by Mortgagee on behalf
of Mortgagor and all other present and future amounts, liabilities and
obligations to perform and/or pay and covenants of the Mortgagor to the
Mortgagee or to any successor or transferee thereof under or pursuant to
the Participation Agreement, that certain Option Agreement effective as of
12:01 a.m., August 28, 1997 by and between Mortgagor and Mortgagee with
respect to the Mineral Properties (the "Option Agreement"), this Mortgage,
the other Collateral Documents or otherwise, whether said amounts,
liabilities or obligations are liquidated or unliquidated, now existing or
hereafter arising, direct or indirect, primary to secondary, fixed or
contingent, and irrespective of the manner in which same may be incurred,
including without limitation all costs and attorneys' fees, as therein
stipulated, and under and pursuant to all amendments, supplements and
restatements to any of said documents, together with any and all renewals
and extensions of such debts, obligations to perform and/or pay, covenants
and liabilities or any part thereof. The Indebtedness includes without
limitation all Payments and other amounts for which the Mortgagor is
obligated under the terms of this Mortgage.
"Lien" means any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on jurisprudence, statute or contract, and including but
not limited to the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust receipt
or a lease, consignment or bailment for security purposes. The term "Lien"
shall include reservations, exceptions, encroachments, easements,
servitudes, usufructs, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions an encumbrances affecting property.
"Mineral Properties" means all right, title and interest of Mortgagor
in the oil, gas and mineral leases described in Exhibit "A" hereto,
together with all interests of the Mortgagor with respect to all
unitization and pooling agreements and orders now or hereafter existing or
which relate to those certain interests described in Exhibit "A", and all
interests of the Mortgagor in agreements and rights pertaining to the use
or occupation of the subsurface depths that relate to those certain
interests described in Exhibit "A".
"Mortgage" means this Mortgage and Security Agreement, as amended or
supplemented from time to time.
"Mortgaged Property" has the meaning set forth in Section 2.1
("Hypothecation") of this Mortgage.
"Payments" has the meaning set forth in Section 4.23 ("Payments by
Mortgagee") of this Mortgage.
"Permitted Liens" means the Security Interest, any other Liens in
favor of the Mortgagee; any validly perfected mechanic's and materialman's
lien filed as of the date of this Mortgage; the Lien created by the
Financing Statement executed by Mortgagor, as debtor, in favor of Mortgagee
and other parties, as Secured Party, securing certain obligations of
Mortgagor under the Operating Agreement dated effective May 1, 1995
executed by and between Enserch Exploration, Inc., Mortgagor, et al., as
amended by letters dated October 16, 1995, October 31, 1995 and May 17,
1996 and assumed by Mortgagee and British-Borneo Exploration, Inc.
effective August 28, 1997 (the "Operating Agreement"); Liens permitted by
the Mortgagee in writing to be created or assumed or to otherwise exist on
the Collateral (including without limitation the Liens permitted by the
provisions of Section 4.3 ("Liens") hereof).
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof, or
any other form of entity.
"Proceeds" means all cash and non-cash proceeds of, and all other
profits, rentals, or receipts, in whatever form, arising from the
collection, sale, lease, exchange, assignment, licensing or other
disposition of, or realization upon, Collateral, including without
limitation all claims of the Mortgagor against third parties for loss of,
damage to or destruction of, or for proceeds payable under, or unearned
premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect to
any Collateral, and including proceeds of all such proceeds, in each case
whether now existing or hereafter arising.
"Proceeds of Runs" has the meaning set forth in Section 2.3
("Assignment") of this Mortgage.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Indebtedness.
"UCC" means the Uniform Commercial Code, Commercial Laws-Secured
Transactions (Louisiana Revised Statutes 10:9-101 through 9-605) in the
State of Louisiana, as amended from time to time; provided that if by
reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the Security Interests in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction
other than Louisiana, "UCC" means the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection.
ARTICLE 2.
Liens and Security Interests
Section 2.1 Hypothecation. (a) In order to secure the full and
punctual payment and performance of all present and future Indebtedness,
the Mortgagor does by these presents specially mortgage, affect,
hypothecate, pledge and assign unto and in favor of the Mortgagee, to inure
to the use and benefit of the Mortgagee, the following described property,
to-wit:
(1) The Mineral Properties, together with all profits, products and
proceeds, whether now or hereafter existing or arising, from the Mineral
Properties.
(2) The Mortgagor's rights in the improvements and other
constructions now or hereafter located on the Mineral Properties, including
without limitation the Equipment, to the extent (i) any such property
should constitute or be deemed to constitute immovable property for the
purposes of Louisiana law, including without limitation any buildings,
platforms, templates, structures, towers, rigs or other immovable property
or component parts thereof, or (ii) any such property that is otherwise
susceptible of mortgage pursuant to Louisiana Civil Code Article 3286 or
Louisiana Mineral Code Article 203.
The descriptions of the Mineral Properties contained in Exhibit "A"
are qualified by the explanations contained in Exhibit 1 attached hereto
and made a part hereof.
All of the foregoing property and rights covered by and subject to
this Mortgage are herein collectively referred to as the "Mortgaged
Property."
SUBJECT, however, to (i) the restrictions, exceptions, reservations,
conditions, limitations and other matters, if any, set forth or specified
in the specific descriptions of such properties and interests in Exhibit
"A" (including all presently existing royalties, overriding royalties,
payments out of production and other burdens which are specified in Exhibit
"A" and which are taken into consideration in computing any percentage,
decimal or fractional interests set forth in Exhibit "A"), and (ii) the
condition that the Mortgagee shall not be liable in any respect hereunder
for the performance of any covenant or obligation of the Mortgagor in
respect of the Mortgaged Property.
The Mortgaged Property is to remain so specially mortgaged, affected
and hypothecated unto and in favor of Mortgagee until the full and final
payment or discharge of the Indebtedness, and Mortgagor is herein and
hereby bound and obligated not to sell or alienate the Mortgaged Property
to the prejudice of this act.
(b) In the event that the Mortgagor acquires additional undivided
interests in some or all of the Mineral Properties, this Mortgage shall
automatically encumber such additions or increases to the Mortgagor's
interest in the Mineral Properties without need of further act or document.
Further, in the event the Mortgagor becomes the owner of an interest in any
part of the land described either in Exhibit "A" or in the documents
described in Exhibit "A" or otherwise subject to or covered by the Mineral
Properties, this Mortgage shall automatically encumber such ownership
interest of the Mortgagor without need of further act or document.
Section 2.2 The Security Interests. In order to secure the full
and punctual payment and performance of all present and future
Indebtedness, the Mortgagor hereby grants to the Mortgagee a continuing
security interest in and to all right, title and interest of the Mortgagor
in, to and under the following property, whether now owned or existing or
hereafter acquired or arising and regardless of where located:
(1) the Mineral Properties;
(2) the Accounts;
(3) the Hydrocarbons;
(4) the Equipment;
(5) the General Intangibles (including the Contracts);
(6) all engineering, seismic, reserve, production,
accounting, title and legal data, reports and books
and records in any form (including, without limitation,
customer lists, credit files, computer programs, tapes,
disks, punch cards, data processing software,
transaction files, master files, printouts and other
computer materials and records) of the Mortgagor
pertaining to any of the Mineral Properties or
Collateral; and
(7) all Proceeds and products of all or any of the
Collateral described in clauses 1 through 6 hereof.
The term "Collateral" means each and all of the items and property
rights described in clauses 1-7 above, together with the Mortgaged
Property.
Section 2.3 Assignment. To further secure the full and punctual
payment and performance of all present and future Indebtedness, up to the
maximum amount outstanding at any time and from time to time set forth in
Section 2.5 ("Maximum Amount") below, the Mortgagor does hereby absolutely,
irrevocably and unconditionally pledge, pawn, transfer and assign to the
Mortgagee all monies which accrue after 8:00 a.m. Central Time, U.S.A., on
the date of this Mortgage, attributable to the Mortgagor's interest in the
Mineral Properties and all present and future rents therefrom (which rents
include without limitation all royalties, delay rentals, shut-in payments
and other payments which are rentals under Title 31 of the Louisiana
Revised Statutes) and all proceeds of the Hydrocarbons (which proceeds
include without limitation all payments for Hydrocarbons not yet delivered,
such as those received pursuant to "take or pay" arrangements) and of the
products obtained, produced or processed from or attributable to the
Mineral Properties now or hereafter (which monies, rents and proceeds are
referred to herein as the "Proceeds of Runs"). The Mortgagor hereby
authorizes and directs all obligors or payors of any Proceeds of Runs to
pay and deliver to Mortgagee, upon request therefor by Mortgagee, all of
the Proceeds of Runs accruing to the Mortgagor's interest without further
inquiry as the rights of the Mortgagee to receive the same and without any
further action or consent on the part of Mortgagor; provided, however, that
Mortgagee hereby agrees that it shall not request that the Proceeds of Runs
be paid directly to Mortgagee unless and until there has occurred an Event
of Default. The Mortgagor agrees that such obligors shall have no
responsibility to see to the application of any funds so paid to Mortgagee.
Section 2.4 Condemnation. The Mortgagor hereby assigns to the
Mortgagee any and all awards that may be given or made in any proceedings
by any legally constituted authority to condemn or expropriate the
Collateral, or any part thereof, under power of eminent domain, and if
there is such a condemnation or expropriation, the Mortgagee may, at its
election, either pay the net proceeds thereof toward the payment of the
Indebtedness or pay the net proceeds thereof to the Mortgagor.
Section 2.5 Maximum Amount. (a) The maximum amount of the
Indebtedness that may be outstanding at any time and from time to time that
this Mortgage secures, including without limitation as a mortgage and as a
collateral assignment, and including any Payments made and included within
the Indebtedness, is Forty Million and No/100 ($40,000,000.00) Dollars.
(b) The Mortgagor acknowledges that this Mortgage secures all
Indebtedness under or pursuant to the Participation Agreement, the Option
Agreement, this Mortgage or the other Collateral Documents, whether such
loans or advances made or incurred by the Mortgagee are optional or
obligatory by the Mortgagee. This Mortgage is and shall remain effective
until all of the amounts, liabilities and obligations, present and future,
comprising the Indebtedness have been incurred and are extinguished. When
no Indebtedness secured by this Mortgage exists, this Mortgage shall
terminate, Mortgagor shall have no further obligation hereunder and
Mortgagee shall promptly cause this Mortgage to be released of record.
Section 2.6 Delivery of Transfer Orders. Independent of the other
provisions and authorities herein granted, the Mortgagor agrees to execute
and deliver any and all transfer orders, letters in lieu thereof, division
orders and other instruments that may be requested by Mortgagee or that may
be required by any purchaser of any Hydrocarbons for the purpose of
effectuating payment of the Proceeds of Runs to Mortgagee. If under any
existing sales agreements, other than division orders or transfer orders,
any Proceeds of Runs are required to be paid by the purchaser or any other
payor to the Mortgagor so that under such existing agreements payment
cannot be made of such Proceeds of Runs to Mortgagee, upon the occurrence
of an Event of Default, the Mortgagor's interest in all Proceeds of Runs
under such sales agreements and in all other Proceeds of Runs which for any
reason may be paid to the Mortgagor shall, when received by the Mortgagor,
constitute trust funds in the Mortgagor's hands and shall be immediately
paid over to Mortgagee.
Section 2.7 Change of Purchaser. Should any Person now or
hereafter purchasing or taking Hydrocarbons fail to make payment promptly
to Mortgagee of the Proceeds of Runs, Mortgagee shall have the right to
make, or to require Mortgagor to make, an change of connection and the
right to designate or approve the purchase with those facilities a new
connection shall be made, and Mortgagee shall have no liability or
responsibility in connection therewith so long as ordinary care is used in
making such designation.
Section 2.8 Application. All proceeds of Runs from time to time in
the hands of Mortgagee shall be applied by it toward the payment and
prepayment of all Indebtedness at such time, and in such manner as
Mortgagee deems advisable, may be held by Mortgagee pending a resolution of
any dispute as to Mortgagee's right to collect such Proceeds of Runs, or
may be delivered by Mortgagee to the Mortgagor without in any way reducing
or paying the Indebtedness.
Section 2.9 Payment of Proceeds. In the event that, for any
reason, the Mortgagee, upon the occurrence of an Event of Default, should
elect with respect to all or particular Mineral Properties or Contracts not
to exercise immediately its right to receive Proceeds of Runs, then the
purchasers or other Persons obligated to make such payment shall continue
to make payment to the Mortgagor until such time as written demand has been
made upon them by the Mortgagee that payment be made direct to the
Mortgagee. Such failure to notify such purchasers or other Persons shall
not in any way waive, remit or release the right of the Mortgagee to
receive any payments not theretofore paid over to the Mortgagor before the
giving of written notice. In this regard, in the event payments are made
direct to the Mortgagee, and then, at the request of the Mortgagee payments
are, for a period or periods of time, paid to the Mortgagor, the Mortgagee
shall nevertheless have the right, effective upon written notice, to
require future payments be again made to it.
Section 2.10 Limitation of Liability. The Mortgagee and its
successors and assigns are hereby absolved from all liability for failure
to enforce collection of the Proceeds of Runs and from all other
responsibility in connection therewith, except the responsibility of each
to account (by application upon the Indebtedness or otherwise) to the
Mortgagor for funds actually received. The Mortgagor agrees to indemnify
and hold harmless Mortgagee against any and all liabilities, actions,
claims, judgments, costs, charges and attorneys' fees by reason of the
assertion that such parties received, either before or after payment and
performance in full of the Indebtedness, funds from the production of
Hydrocarbons or the Proceeds of Runs claimed by third persons (and/or funds
attributable to sales of production which (i) were made at prices in excess
of the maximum price permitted by or (ii) were otherwise made in violation
of laws, rules, regulations and/or orders governing such sales), and the
Mortgagee shall have the right to defend against any such claims or
actions, employing attorneys of Mortgagee's own selection and if not
furnished with indemnify satisfactory to them, the Mortgagee shall have the
right to compromise and adjust any such claims, actions and judgments, and
in addition to the rights to be indemnified as herein provided, all amounts
paid by the Mortgagee in compromise, satisfaction or discharge of any such
claim, actions or judgments, and all court costs, attorneys' fees and other
expenses of every character expended by the Mortgagee pursuant to the
provisions of this Section shall be a demand obligation (which obligation
the Mortgagor hereby expressly promises to pay) owing by the Mortgagor to
such parties and shall bear interest, from the date expended until paid, at
the rate described in Section 4.23 ("Payments by Mortgagee") hereof.
Section 2.11 Duty to Perform. Nothing herein contained shall
detract from or limit the obligation of the Mortgagor to make prompt
payment of the Indebtedness at the time and in the manner provided herein.
The Mortgagor will do and perform every act required of it by this Mortgage
at the time or times in the manner specified.
Section 2.12 No Liability. The foregoing mortgage Liens and
Security Interest are granted as security only and shall not subject the
Mortgagee to, or transfer or in any way affect or modify, any obligation or
liability of the Mortgagor with respect to any of the Collateral or any
transaction in connection therewith.
Section 2.13 Priority. Notwithstanding any other provision in this
Mortgage, Mortgagee hereby agrees that this Mortgage shall in all respects
be subordinate to that Permitted Lien granted by Mortgagor in favor of
Mortgagee and other parties under and pursuant to Article 6.3 of the
Operating Agreement.
ARTICLE 3.
Representations and Warranties
The Mortgagor represents and warrants to the Mortgagee (such
representations and warranties are limited to the best of Mortgagor's
knowledge with respect to Sections 3.1, 3.2, 3.3, 3.7, 3.8 and 3.9) that:
Section 3.1 Title. The Collateral (including without limitation
the Mineral Properties) is accurately, completely, adequately and
sufficiently described herein and in Exhibit "A" as required by all
applicable laws for this Mortgage to create a Lien on all of the
Collateral. The execution, delivery and performance of this Mortgage and
the creation of the liens hereunder do not violate any provision of or
constitute a default under any operating agreement or other instrument
affecting or comprising any of the Collateral or to which the Mortgagor is
a party. The Mortgagor represents and warrants to the Mortgagee that (a)
the Mineral Properties described in Exhibit "A" hereto are valid,
subsisting leases and contracts, in full force and effect, (b) all
producing wells located on the lands described in Exhibit "A" have been
drilled, operated and produced in conformity with all applicable laws,
rules and regulations of all regulatory authorities having jurisdiction,
and are subject to no penalties on account of past production, and that
such wells are in fact bottomed under and are producing from, and the well
bores are wholly within, lands described in Exhibit "A" (or in the case of
wells located on properties unitized therewith, such unitized properties),
(c) upon approval of the assignment by Enserch Exploration, Inc. of a
twenty percent (20%) undivided interest in the Mineral Properties to
Mortgagor by the United States of America Department of Interior, Minerals
Management Service, the Mortgagor, to the extent of the interest specified
in Exhibit "A", shall have legal, valid and defensible title to each
property right or interest constituting the Mineral Properties and the
respective gross working interest and net revenue interests of the
Mortgagor in and to the Hydrocarbons as set forth on Exhibit "A" hereto,
and the Mortgagor's percentage interests in the Mineral Properties, cash
flow, net income and other distributions and in the cost of exploration,
development and production, all as set forth in Exhibit "A" hereto, are
true and correct in all material respects and accurately reflect the
respective interests to which the Mortgagor is legally entitled, (d) the
Mortgagor is not obligated, by virtue of any prepayment under any contract
providing for the sale by the Mortgagor of Hydrocarbons which contains a
"take or pay" clause or under any similar arrangement, to deliver
Hydrocarbons at some future time without then or thereafter receiving full
payment therefor and (e) no agreement, contract or instrument set forth in
Exhibit "A" contains any provision which would prevent the practical
realization of the benefits of this Mortgage as to the Collateral. With
respect to all wells existing on the date hereof, such shares of production
and expenses are not subject to change (pursuant to non-consent provisions
operating agreements described in Exhibit "A" or otherwise) except, and
only to the extent that, such changes are expressly described in Exhibit
"A".
Section 3.2 No Liens Except for Permitted Liens. Other than
financing statements or other similar or equivalent documents or
instruments with respect to the Security Interest and the other Permitted
Liens, no financing statement, mortgage, security agreement or similar or
equivalent document or instrument covering all or any part of the
Collateral has been executed by the Mortgagor. No Collateral is in the
possession of any Person (other than the Mortgagor) asserting any claim
thereto or security interest therein, except that the Mortgagee or its
designee may have possession of Collateral as contemplated hereby.
Section 3.3 Rents; Royalties. All rents, royalties and other
payments (except for those which are being contested in good faith and by
appropriate proceedings and for which the Mortgagor has established
adequate reserves and so long as the payment of same is not a condition to
be met in order to maintain an oil, gas and/or other mineral lease or other
agreement in force) due and payable under the Mineral Properties which are
productive of oil and/or gas (or are included in units productive of oil
and /or gas) and all other oil, gas and/or mineral leases, contracts and
other agreements forming a part of the Mortgaged Property, have been and
are being properly and timely paid, and the Mortgagor is not in default
with respect to any obligations (and the Mortgagor is not aware of any
default by any third party with respect to such third party's obligations)
under such leases, contracts and other agreements, or otherwise attendant
to the ownership or operation of the Collateral, where such fault could
adversely affect the ownership or operation of the Collateral to which such
obligations relate. The Mortgagor is not currently accounting (and does
not anticipate accounting) for any royalties, or overriding royalties or
other payments out of production, on a basis (other than delivery in kind)
where such payments are based other than on proceeds received by Mortgagor
from sale; the Mortgagor has advised the Mortgagee in writing of
situations, if any, where a contingent liability to account in such manner
may exist.
Section 3.4 No Limitations on Payments for Production. Except as
otherwise specifically disclosed to the Mortgagee in writing with respect
to any particular part of the Mineral Properties, (i) neither Mortgagor,
nor its predecessors in title, have received prepayments (including, but no
limited to, payments for gas not taken pursuant to "take or pay"
arrangements) for any Hydrocarbons produced or to be produced from the
Mineral Properties after the date hereof; (ii) none of the Mineral
Properties is subject to any contractual or other arrangement whereby
payment for production is to be deferred for a substantial period after the
month in which such production is delivered (i.e., in the case of oil not
in excess of sixty (60) days, and in the case of gas not in excess of
ninety (90) days); (iii) none of the Mineral Properties is subject to a gas
sales contract which contains terms which are not customary in the
industry; (iv) none of the Mineral Properties is subject at the present
time to any regulatory refund obligation and, to the best of Mortgagor's
knowledge, no facts exist which might cause the same to be imposed; (v)
none of the Mineral Properties is subject to an arrangement or agreement
under which any purchaser or other Person is entitled to "make-up" or
otherwise receive deliveries of Hydrocarbons at any time after the date
hereof without paying at such time the full contract price therefor; and
(vi) no Person is entitled to receive any portion of the interest of the
Mortgagor in any Hydrocarbons or to receive cash or other payments from the
Mortgagor to "balance" any disproportionate allocation of Hydrocarbons
under any operating agreement, gas balancing and storage agreement, gas
processing or dehydration agreement, or other similar agreements.
Mortgagee acknowledges that Mortgagor may be obligated to escrow a portion
of the proceeds of the Hydrocarbons for certain plugging and abandonment
obligations.
Section 3.5 Consents and Preferential Rights. There are no
unwaived preferential purchase rights held by third parties affecting any
part of the Collateral or rights of third parties to prohibit the pledge or
mortgage of any part of the Collateral without the consent of such third
parties.
Section 3.6 No Inconsistent Agreements. The Mortgagor has not
performed any acts or signed any agreements which might prevent the
Mortgagee from enforcing any of the terms of this Mortgage or which would
limit the Mortgagee in any such enforcement.
Section 3.7 Status of Contracts. All of the Contracts and
obligations of the Mortgagor that relate to the Mineral Properties (i) are
in full force and effect and constitute legal, valid and binding
obligations of the Mortgagor, and (ii) neither the Mortgagor nor, to the
knowledge of the Mortgagor, any other party to the Contracts (a) is in
breach of or default, or with the lapse of time or the giving of notice, or
both, would be in breach or default, with respect to any of its obligations
thereunder or (b) has given or threatened to give notice of any default
under or inquiry into any possible default under, or action to alter,
terminate, rescind or procure a judicial reformation of any Contract.
Section 3.8 Accounts. The Accounts represent bona fide obligations
of the respective account debtors, which obligations are free and clear of
any set off, compensation, counterclaim, defense, allowance or adjustment
other than discounts for prompt payment shown on the invoice, and arose in
the ordinary course of the Mortgagor's business.
Section 3.9 Status of Equipment. The Equipment, fixtures and other
tangible personal property forming a part of the Collateral are in good
repair and condition and are adequate for the normal operation of the
Collateral in accordance with prudent industry standards; all of such
Collateral is located on the Mineral Properties, except for that portion
thereof which is located elsewhere (including that usually located ion the
Mineral Properties but now temporarily located elsewhere) in the course of
the normal operation of the Mineral Properties.
Section 3.10. Name. The legal name of the Mortgagor as it appears in
its Articles of Incorporation is as it appears on page 1 of this Mortgage.
Section 3.11 Taxpayer Identification Number. The federal taxpayer
identification number of the Mortgagor is as follows: 73-0797067.
Section 3.12 Chief Executive Office. The chief executive office of
the Mortgagor is located at 901 Threadneedle, Suite 200, Houston, Texas
77079.
Section 3.13 Filing Location. When UCC financing statement(s) have
been filed in the offices of a Louisiana Clerk of Court (or, the case of
Orleans Parish, the Recorder of Mortgages), the Security Interests shall
constitute perfected security interests in the Collateral to the extent
that a security interest therein may be perfected by filing in the Uniform
Commercial Code records of Louisiana, prior to all other Liens and rights
of others therein except for the Permitted Liens to the extent that such
priority is afforded by the UCC or otherwise.
ARTICLE 4.
Covenants
The Mortgagor covenants and agrees as follow:
Section 4.1 Taxes. The Mortgagor will pay and discharge promptly
when due all taxes, license fees, assessments and governmental charges or
levies imposed upon it or upon its income or upon the Collateral or any
part thereof (including production, severance, windfall profit, excise and
other taxes assessed against or measured by the production of, or the value
or proceeds of production of, Hydrocarbons; provided, however, the
Mortgagor shall not be required to pay any such tax, assessment, charge or
levy if the amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings diligently conducted and
if the contesting party shall have set up reserves therefor adequate under
generally accepted accounting principles (provided that such reserves may
be set up under generally accepted accounting principles).
Section 4.2 Insurance. The Mortgagor will procure and maintain for
the benefit of the Mortgagee and Mortgagor original paid-up insurance
policies against such liabilities, casualties, risks and contingencies, in
such amounts and form and substance, with such financially sound and
reputable companies, and with such expiration dates, as are reasonably
acceptable to the Mortgagee, and containing a noncontributory standard
mortgage clause or its equivalent in favor of the Mortgagee. The Mortgagor
will at all times maintain costs of regaining control of well insurance or
similar insurance to the extent customary in the industry in the pertinent
area of operations. Each policy shall contain an agreement by the insurer
not to cancel or amend the policy without giving the Mortgagee at least
thirty (30) days' prior written notice of its intention to do so. Upon
request of the Mortgagee, the Mortgagor will furnish or cause to be
furnished to the Mortgagee from time to time a summary of the insurance
coverage of the Mortgagor in form and substance reasonably satisfactory to
the Mortgagee and if requested will furnish the Mortgagee original
certificates of insurance and/or copies of the applicable policies and all
renewals thereof. In the event the Mortgagor should, for any reason
whatsoever, fail to keep the corporeal (tangible) Collateral or any part
thereof so insured, or to keep said policies so payable, or fail to deliver
to the Mortgagee the original or certified policies of insurance and the
renewals therefor upon demand, then Mortgagee, if it so elects, may itself
have such insurance effected in such amounts and with such companies as it
may deem proper and may pay the premiums therefor (as an Advance as defined
hereinbelow). The Mortgagor will notify the Mortgagee immediately in
writing of any material blowout, fire or other casualty to or accident
involving the Mortgaged Property, the Equipment or the Hydrocarbons,
whether or not such blowout, fire or other casualty to or accident
involving the Mortgaged Property, the Equipment or the Hydrocarbons,
whether or not such blowout, fire, casualty or accident is covered by
insurance. Further, the Mortgagor will notify promptly the Mortgagor's
insurance company and submit an appropriate claim and proof of claim to the
insurance company if such a casualty or accident occurs. In the event of
any loss on any of such policies, the Mortgagee may at its election, either
apply the net proceeds thereof toward the payment of the Indebtedness or
pay the net proceeds thereof to the Mortgagor, either wholly or in part,
and under such conditions as the Mortgagee may determine to enable the
Mortgagor to repair or restore the Collateral.
Section 4.3 Liens. The Mortgagor will not create, incur, assume or
permit to exist any Lien on any portion of the Collateral, except for (i)
the Lien and Security Interests hereof and the Permitted Liens, (ii) taxes,
assessments or governmental charges or levies if the same shall not at the
time be delinquent or thereafter can be paid without penalty, or are being
contested in compliance with the preceding Section 4.1 ("Taxes"), (iii)
defects or irregularities of title and Liens which are not such as to
interfere materially with the development, operation or value of the
Mortgaged Property or the title thereto, (iv) those imposed by law, such as
carriers', warehousemen's and mechanics' liens and other similar liens
arising in the ordinary course of business which would secure obligations
not more than ninety (90) days past due or which are being contested in
good faith by appropriate proceedings diligently conducted and for which
adequate reserves shall have been set aside on its books, (v) those arising
out of pledges or deposits under workmen's compensation laws, unemployment
insurance, old age pensions, or other social security or retirement
benefits, or similar legislation, (vi) utility easements, building
restrictions and such other encumbrances or charges against real property
as are of a nature generally existing with respect to properties of a
similar character as the Mortgaged Property and which do not in any
material way affect the merchantability of the same or interfere with the
use thereof and the business of the Mortgagor, and (vii) those consented to
in writing by the Mortgagee.
Section 4.4 Sale. Except for (i) sales of severed Hydrocarbons in
the ordinary course of the Mortgagor's business on the best terms which
would be available in bona fide and arms length transactions with third
parties not affiliated with the Mortgagor (which in the case of production
which is subject to price controls or is sold in accordance with customary
industry practice pursuant to long term purchase contracts, shall be
determined giving consideration to such matters), (ii) dispositions made in
connection with a permitted (as provided below) release, surrender or
abandonment of a lease, or (iii) in the absence of an Event of Default,
collection of Accounts and General Intangibles, the Mortgagor will not
sell, convey, lease or otherwise transfer or dispose of all or any portion
of the Collateral without the written consent of Mortgagee (which consent
shall not be unreasonably withheld).
Section 4.5 Compliance with Laws and Covenants. The Mortgagor will
observe and comply with all laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, certificates,
franchises, permits, licenses, authorizations, directions and requirements
of all federal, state, county, municipal an other governments, departments,
commissions, boards, courts, authorities, officials and officers domestic
or foreign, applicable to the Mortgagor or to the Collateral, except those
being contested in good faith.
Section 4.6 Payment of Debts. The Mortgagor will cause all debts
and liabilities of any character (including, without limitation, all debts
and liabilities for labor, material and equipment used or furnished for use
on the Mortgaged Property) incurred in the operation, maintenance and
development of the Collateral to be paid within ninety (90) days after same
becomes due. The Mortgagor may, however, delay paying or discharging any
such debts and liabilities so long as the validity thereof is contested in
good faith and by appropriate proceedings diligently conducted and the
Mortgagor has established adequate reserves therefor in accordance with
generally accepted accounting principles and so long as the payment of same
is not a condition to be met in order to maintain an oil, gas and/or
mineral lease in force.
Section 4.7 Operation of the Mortgaged Property. Whether or not
the Mortgagor is the operator of the Mortgaged Property, the Mortgagor
will, at the Mortgagor's own expense, (a) do all things necessary to keep
unimpaired the Mortgagor's rights in the Mortgaged Property (subject to any
permitted abandonment provisions hereinbelow), (b) use its best efforts to
cause the lands described in Exhibit "A" to be maintained, developed,
protected against drainage, and continuously operated for the production of
hydrocarbons in a good and workmanlike manner as would a prudent operator,
and in accordance with generally accepted practices and applicable
operating agreements, and (c) cause to be paid, promptly as and when due
and payable, all rentals and royalties payable in respect of the Mortgaged
Property, and all expenses incurred in or arising from the operation or
development of the Mortgaged Property. The Mortgagor will observe and
comply with all terms and provisions, express or implied, of the Mineral
Properties, and all agreements and contracts of any type relating to the
Mortgaged Property, in order to keep the same in full force and effect,
including, without limitation, maintenance of productive capacity of each
well or unit comprising the Mortgaged Property, and will not, without the
prior written consent, which consent shall not be unreasonably withheld, of
the Mortgagee, surrender, abandon or release (or otherwise reduce its
rights under) any such lease, in whole or in part, so long as any well
situated thereon (whether or not such well is located in the Mineral
Properties), or located on any unit containing all or any part of such
leases, is capable (or is subject to being made capable through drilling,
reworking or other operations which it would be economically feasible to
conduct) of producing hydrocarbons in commercial quantities (as determined
without considering the effect of this Mortgage); provided, however that
the Mortgagor may, to the extent expressly required by the terms of any
such lease under a "Pugh clause" or similar provision, or to the extent
otherwise required by law, confirm to the lessor thereof that the lease has
by its terms terminated as to any specified portion thereof on which no
such well exists. Without the express prior written consent of the
Mortgagee, which consent shall not be unreasonably withheld, Mortgagor will
not abandon or consent to the abandonment of any well producing from the
Mortgaged Property (or properties unitized therewith) so long as such well
is capable (or is subject to being made capable through drilling, reworking
or other operations which it would be commercially feasible to conduct) of
producing hydrocarbons in commercial quantities (as determined without
considering the effect of this Mortgage but considering the cost of such
drilling, reworking and other operations). The Mortgagor will not without
the express prior written consent of the Mortgagee, which consent shall not
be unreasonably withheld, elect not to participate in a proposed operation
on the Mortgaged Property where the effects of such election would be the
forfeiture either temporarily (i.e., until a certain sum of money is
received out of the forfeited interest) or permanently of any interest in
the Mortgaged Property.
Section 4.8 Pooling and Unitization. The Mortgagor has the right,
and is hereby authorized, to pool or unitize all or any part of the tract
of land described in Exhibit "A", insofar as relates to the Mortgaged
Property, with adjacent lands, leaseholds and other interests, when, in the
reasonable judgment of the Mortgagor, it is necessary or advisable to do so
in order to form a drilling unit to facilitate the orderly development of
that part of the Mortgaged Property affected thereby, or to comply with the
requirements of any law or governmental order or regulation relating to the
spacing of wells or proration of the production therefrom; provided,
however, that the Hydrocarbons produced from any unit so formed shall be
allocated among the separately owned tracts or interests comprising the
unit in proportion to the respective surface areas thereof; and provided
further that the Mortgagor shall not be entitled to form any such unit
without the written consent of the Mortgagee (which consent shall not be
unreasonably withheld) if the effect of such formation would be to decrease
the amount of Hydrocarbons which would be subject to this Mortgage. Any
unit so formed may relate to one or more zones or horizons, and a unit
formed for a particular zone or horizon need not conform in area to any
other unit relating to a different zone or horizon, and a unit formed for
the production of oil need not conform in area with any unit formed for the
production of gas. Immediately after formation of any such unit, the
Mortgagor shall furnish to the Mortgagee a true copy of the pooling
agreement, declaration of pooling or other instrument creating such unit,
in such number of counterparts as the Mortgagee may reasonably request.
The interest in any such unit attributable to the Mortgaged Property (or
any part thereof) included therein shall become a part of the Mortgaged
Property and shall be subject to the Lien hereof in the same manner and
with the same effect as though such unit and the interest of the Mortgagor
therein were specifically described in Exhibit "A". The Mortgagor may
enter into pooling or unitization agreements not hereinabove authorized
only with the prior written consent of the Mortgagee.
Section 4.9 Contracts. The Mortgagor will not enter into any
operating agreement, other than the Operating Agreement or other Contract
which materially adversely affects the Collateral or the Mineral
Properties, or which is not in the ordinary course of business. The
Mortgagor will promptly take all action necessary to enforce or secure the
observance or performance of any term, covenant, agreement or condition to
be observed or performed by third parties under any Contract, or any part
thereof, or to exercise any of is rights, remedies, powers and privileges
under any Contract, all in accordance with the respective terms thereof.
The Mortgagor will not do or permit anything to be done to the Collateral
that may violate the terms of any insurance covering the Collateral or any
part thereof.
Section 4.10 Condition of Equipment. The Mortgagor will maintain,
preserve and keep the Equipment at all times in thorough repair and good
working order and condition, and from time to time make all needful
repairs, renewals and additions so that its value and the Security
Interests shall at no time become impaired.
Section 4.11 Accounts Collection. The Mortgagor shall use its best
efforts to cause to be collected from its account debtors, as and when due,
any and all amounts owing under or on account of each Account (including,
without limitation, Accounts which are delinquent, such Accounts to be
collected in accordance with lawful collection procedures) and shall apply
forthwith upon receipt thereof all such amounts as are so collected to the
outstanding balance of such Account. Subject to the rights of the
Mortgagee hereunder if an Event of Default shall have occurred and be
continuing, the Mortgagor may allow in the ordinary course of business as
adjustments to amounts owing under its Accounts an extension of renewal of
the time or times of payment, or settlement for less than the total unpaid
balance, which the Mortgagor finds appropriate in accordance with sound
business judgment in accordance with the Mortgagor's ordinary course of
business consistent with its historical collection practices. The costs
and expenses (including, without limitation, attorneys' fees) of
collection, whether incurred by the Mortgagor or the Mortgagee, shall be
borne by the Mortgagor.
Section 4.12 Governmental Accounts. If the Collateral is or becomes
subject to the Federal Assignment of Claims Act, the Mortgagor will
immediately notify the Mortgagee thereof in writing and execute all
instruments and take all steps required by the Mortgagee to comply with
that act.
Section 4.13 Accounts Aging. The Mortgagor will from time to time
at the request of the Mortgagee furnish the Mortgagee with a schedule of
the Accounts which shall include the names and addresses of each account
debtor. The Mortgagee shall also have the right to make test verification
of the Accounts or any portion thereof. The Mortgagor at its expense shall
furnish to the Mortgagee from time to time upon request by the Mortgagee a
listing and aging of all Accounts.
Section 4.14 Right of Inspection an Information. The Mortgagor will
permit any officer, employee or agent of the Mortgagee to visit and inspect
the Collateral, examine the books of record and accounts of the Mortgagor,
take copies and extracts therefrom, and discuss the affairs, finances and
accounts of the Mortgagor with the Mortgagor's officers, accountants and
auditors, and the Mortgagor will furnish information concerning the
Collateral, including schedules of all internal and third party information
identifying the Collateral (such as, for example, lease and well names and
numbers assigned by the Mortgagor or the operator of any Mineral
Properties, division orders and payment names and numbers assigned by
purchasers of the Hydrocarbons, and internal identification names and
numbers used by the Mortgagor in accounting for revenues, costs and joint
interest transactions attributable to the Mineral Properties), all on
reasonable notice, at such reasonable times without hindrance or delay and
as often as the Mortgages may reasonably desire. The Mortgagor will
furnish to the Mortgagee promptly upon request and in the form and content
specified by the Mortgagee lists of purchasers of Hydrocarbons and other
account debtors, Schedules of Equipment and other data concerning the
Collateral as the Mortgagee may from time to time specify.
Section 4.15 Financial Statements and Reports. The Mortgagor will
furnish to the Mortgagee promptly upon the request of the Mortgagee, all
regular financial statements, reports, budgets and such other information
regarding the business and affairs and financial condition of the Mortgagor
as the Mortgagee may reasonably request. All financial statements shall be
in such detail as the mortgagee may reasonably request and shall conform to
generally accepted accounting principles applied on a consistent basis,
except only for such changes in accounting principles or practice with
which the independent certified public accountants concur.
Section 4.16 Further Assurances. The Mortgagor will keep the Lien
of this Mortgage valid and unimpaired except for the Permitted Liens. The
Mortgagor will promptly (and in no event later than thirty (30) days after
written notice from the Mortgagee is received) (i) correct any defect,
error or omission which may be discovered in the contents of this Mortgage
or any financing statement relating thereto or in the execution or
acknowledgment of this Mortgage or any financing statement; (ii) execute,
acknowledge, deliver and record such further instruments (including,
without limitation, further security agreements, financing statements,
continuation statements and assignments of accounts, contract rights,
general intangibles and proceeds) and do such further acts as may be
necessary, desirable or proper to carry out more effectively the purposes
of this Mortgage and to more fully identify and subject to the Liens hereof
any property intended to be covered hereby, including without limitation
any renewals, additions, substitution, replacements or accessions to the
Collateral; and (iii) execute, acknowledge, deliver and record any document
or instrument (including specifically any financing statement) and obtain
any consents necessary, desirable or proper to perfect, protect or preserve
the Lien and Security Interests hereunder against the rights or interests
of third persons.
Section 4.17 Notice of Changes. The Mortgagor will not change its
name, identify, federal tax identification number or corporate structure in
any manner unless it shall have given the Mortgagee at last thirty (30)
days' prior written notice thereof.
Section 4.18 Filing. The Mortgagor agrees that a carbon,
photographic, facsimile, photostatic or other reproduction of this Mortgage
or of a financing statement is sufficient as a financing statement. This
Mortgage may be effective as a financing statement filed as a fixture
filing with respect to all fixtures included within the Collateral, and
shall also be effective as the financing statement covering minerals or the
like (including oil and gas) and accounts subject to subsection (5) of
Section 9-103 of the UCC, as amended, and similar provisions (if any) of
the UCC as enacted in any other state where filing may be appropriate. The
mailing address of the Mortgagor and the address of the Mortgagee from
which information concerning the Security Interests evidenced hereunder may
be obtained are the respective addresses of the Mortgagor and the Mortgagee
set forth in Article 6. The Mortgagee shall pay all costs of or incidental
to the recording or filing of this Mortgage and of any financing,
amendment, continuation, termination or other statements concerning the
Collateral.
Section 4.19 Collateral Indemnity. If the validity or priority of
this Mortgage (except with respect to the Permitted Liens) or any rights,
security interests or other interests created or evidenced hereby shall be
attacked, endangered or questioned or if any legal proceedings are
instituted with respect thereto, the Mortgagor will give prompt written
notice thereof to the Mortgagee and at the Mortgagor's own cost and expense
will diligently endeavor to cure any defect that may be developed or
claimed, and will take all necessary and proper steps for the defense of
such legal proceedings, and the Mortgagee (whether or not named as a party
to legal proceedings with respect thereto) is hereby authorized an
empowered to take such additional steps as in its judgment and discretion
may be necessary or proper for the defense of any such legal proceedings or
the protection of the validity or priority of this Mortgage and the rights,
security interests and other interests created or evidenced hereby, and all
expenses so incurred of any kind and character shall be considered Payments
as provided in Section 4.23 ("Payments by Mortgagee") hereof, and shall be
a part of the Indebtedness.
Section 4.20 Environmental Indemnity. To the extent of its
interests in the Mineral Properties, the Mortgagor will defend, indemnify
and hold Mortgagee and its directors, officers, agents and employees
harmless from and against all claims, demands, causes of action,
liabilities, losses, costs and expenses (including, without limitation,
costs of suit, reasonable attorneys' fees and fees of expert witnesses)
arising from or in connection with (i) the presence in, on or under or the
removal from the Collateral of any hazardous substances or solid wastes (as
hereafter defined), or any releases or discharges of any hazardous
substances or solid wastes on, under or from such property, (ii) any
activity carried on or undertaken on or off the Collateral, whether prior
to or during the term of this Mortgage, and whether by the Mortgagor or any
predecessor in title or any officers, employees, agents, contractors or
subcontractors of Mortgagor or any predecessor in title, or any third
persons at any time operating the Collateral or occupying or present on the
Collateral, in connection with the handling, use, generation, manufacture,
treatment, removal, storage, decontamination, clean-up, transport or
disposal of any hazardous substances or solid wastes at any time located or
present on or under the Collateral or involving the use or operation of the
Collateral, or (iii) any breach of any representation, warranty or covenant
under the terms of this Mortgage. The foregoing indemnity shall further
apply to any residual contamination on or under the Collateral, or
affecting any natural resources, and to any contamination of the Collateral
or natural resources arising in connection with the generation, use,
handling, storage, transport or disposal of any such hazardous substances
or solid wastes, and irrespective of whether any of such activities were or
will be undertaken in accordance with applicable laws, regulations, codes
and ordinances. The terms "hazardous substance" and "release" as used in
this Mortgage shall have the meanings specified in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
by the Superfund Amendments and Reauthorization Act of 1986 (as amended,
"CERCLA"), and the terms "solid waste" and "disposal" (or "disposed") shall
have the meanings specified in the Resource Conservation and Recovery Act
of 1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste
Disposal Act Amendments of 1980, and the Hazardous and Solid Waste
Amendments of 1984 (as amended, "RCRA"); provided, in the event that the
laws of the State of Louisiana establish a meaning for "Hazardous
Substance," "Release," "Solid Waste" or "Disposal" which is broader than
that specified in either CERCLA or RCRA, such broader meaning shall apply.
Without prejudice to the survival of any other agreements of the Mortgagor
hereunder, the provisions of this Section shall survive the final payment
of all Indebtedness and the termination of this Mortgage and shall continue
thereafter in full force and effect.
Section 4.21 Release of Collateral. The Mortgagee may at any time
and without notice to the Mortgagor, release any part of the Collateral
from the effect of this Mortgage, or grant an extension or deferment of
time for the discharge of any obligation hereunder (or other Indebtedness),
without affecting the liability of the Mortgagor hereunder.
Section 4.22 Taxation of Mortgage. In the event that any
governmental authority shall impose any taxation of mortgages or the
indebtedness they secure, the Mortgagor agrees to pay such governmental
taxes, assessments or charges either to the governmental authority or to
the Mortgagee, as provided by law.
Section 4.23 Payments by Mortgagee. The Mortgagor authorizes the
Mortgagee in the Mortgagee's discretion to advance any sums necessary for
the purpose of paying (i) insurance premiums, (ii) taxes, forced
contributions, service charges, local assessments and governmental charges,
(iii) any Liens or encumbrances affecting the Collateral (whether superior
or subordinate to the Lien of this Mortgage) other than Permitted Liens,
(iv) necessary repairs and maintenance expenses or (v) any other amounts
which are covered by Section 4.16 ("Further Assurances") or which the
Mortgagee deems necessary and appropriate to preserve the validity and
ranking of this Mortgage, to cure any Defaults or to prevent the occurrence
of any Default, or otherwise authorized by this Mortgage (collectively, the
"Payments") of whatever kind; provided, however, that nothing herein
contained shall be construed as making such Payments obligatory upon
Mortgagee, or as making Mortgagee liable for any loss, damage, or injury
resulting from the nonpayment thereof. The Mortgagor covenants and agrees
that within five (5) days after demand therefor by the Mortgagee, the
Mortgagor will repay the Payments to the Mortgagee, together with interest
thereon at the rate of twelve (12%) percent per annum from the date
incurred. All such Payments (and interest) shall be included in the
Indebtedness secured hereby, subject to the maximum amount of the
Indebtedness set forth above in Section 2.5 ("Maximum Amount").
ARTICLE 5.
Default and Remedies
Section 5.1 Events of Default. Any of the following events shall
be considered an "Event of Default" as that term is used herein:
(a) Payment and Performance of the Indebtedness. The Mortgagor fails
to timely pay or perform any of the Indebtedness.
(b) Representations and Warranties. Any representation or warranty
made by the Mortgagor proves to have been incorrect in any material respect
as of the date thereof; or any representation, statement (including
financial statements), certificate or data furnished or made by the
Mortgagor (or any officer, accountant or attorney of the Mortgagor) under
this Mortgage, proves to have been untrue in any material adverse respect,
as of the date as of which the facts therein set forth were stated or
certified.
(c) Insurance. The Mortgagor fails to maintain at any time the
insurance required by this Mortgage.
(d) Alienation or Encumbrance of Collateral. The Mortgagor sells,
conveys or otherwise transfers or disposes of all or any portion of the
Collateral or grants any mortgage, security interest or other Lien (other
than Permitted Liens) affecting all or any portion of the Collateral, or
permits any judgment, Lien (other than Permitted Liens) or other
encumbrance against all or any portion of the Collateral.
(e) Covenants. The Mortgagor defaults in the observance or
performance of any of the covenants or agreements contained in this
Mortgage to be kept or performed by the Mortgagor (other than a default
under Subsections (a) through (d) hereof) and such default continues
unremedied for a period of 30 days after the notice thereof being given by
the Mortgagee to the Mortgagor.
(f) Involuntary Bankruptcy or Receivership Proceedings. A receiver,
conservator, liquidator or trustee of the Mortgagor, or of any of its
property (including the Collateral), is appointed by order or decree of any
court or agency or supervisory authority having jurisdiction; or an order
for relief is entered against the Mortgagor under the Federal Bankruptcy
Code; or the Mortgagor is adjudicated bankrupt or insolvent; or any
material portion of the property (including the Collateral) of the
Mortgagor is sequestered by court order and such order remains in effect
for more than 60 days; or a petition is filed against the Mortgagor under
any state, reorganization, arrangement, insolvency, readjustment of debt,
dissolution, liquidation or receivership law of any jurisdiction, whether
now or hereafter in effect, and such petition is not dismissed within 60
days.
(g) Voluntary Petitions. The Mortgagor files a case under the
Federal Bankruptcy Code or seeking relief under any provision of any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, or consents to the filing of any case or petition
against it under any such law.
(h) Assignments for Benefit of Creditors. The Mortgagor makes an
assignment for the benefit of its creditors', or admits in writing its
inability to pay its debts generally a they become due, or consents to the
appointment of a receiver, trustee or liquidator of the Mortgagor or of all
or any part of its property (including the Collateral).
(i) Undischarged Judgments. Judgment for the payment of money in
excess of $1,000,000 (which is not covered by insurance) is rendered by any
court or other governmental body against the Mortgagor, and the Mortgagor
does not discharge the same or provide for its discharge in accordance with
its terms, or procure a stay of execution thereof within 30 days from the
date of entry thereof, and within said 30-day period or such longer period
during which execution of such judgement shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal
while providing such reserves therefor as may be required under generally
accepted accounting principles.
(j) Attachment. A writ or warrant of executory process, fieri
facias, attachment or any similar process shall be issued by any court
against the Collateral and such writ or warrant is not released or bonded
within 10 days after its entry.
(k) Condemnation. The Collateral, or any portion thereof, is
condemned or expropriated under power of eminent domain by any legally
constituted governmental authority.
Section 5.2 Remedies. (a) Upon the happening of any Event of
Default specified in the preceding Section (other than Subsections (f) or
(g) thereof), the Mortgagee may by written notice to the Mortgagor declare
the entire principal amount of all Indebtedness then outstanding including
interest accrued thereon to be immediately due and payable without
presentment, demand, protest, notice of protest or dishonor or other notice
of default of any kind, all of which are hereby expressly waived by the
Mortgagor.
(b) Upon the happening of any Event of Default specified in
Subsections (f) or (g) of the preceding Section, the entire principal
amount of all obligations then outstanding, including interest accrued
thereon shall, without notice or action by the Mortgagee, be immediately
due and payable without presentment, demand, protest, notice of protest or
dishonor or other notice of default of any kind, all of which are hereby
expressly waived by the Mortgagor.
(c) Upon the occurrence of any Event of Default, the Mortgagee may
take such action, without notice or demand, as it deems advisable to
protect and enforce its rights against the Mortgagor and in and to the
Collateral, including, but not limited to, the following actions, each of
which may be pursued concurrently or otherwise, at such time and in such
order as the Mortgagee may determine, in its sole discretion, without
impairing or otherwise affecting the other rights and remedies of the
Mortgagee: (i) institute proceedings for the complete foreclosure of this
mortgage in which case the Collateral or any part thereof may be sold for
cash or upon credit in one or more portions; or (ii) to the extent
permitted and pursuant to the procedures provided by applicable law,
institute proceedings for the partial foreclosure of this Mortgage for the
portion of the Indebtedness then due and payable, subject to the continuing
Lien of this Mortgage for the balance of the Indebtedness not then due; or
(iii) institute an action, suit or proceeding in equity for the specific
performance of the Indebtedness or any covenant, condition or agreement
contained in this Mortgage; or (iv) apply for the appointment of a trustee,
receiver, liquidator or conservator of the Collateral, without regard for
the adequacy of the security for the Indebtedness and without regard for
the solvency of the Mortgagor or of any person, firm or other entity liable
for the payment of the Indebtedness; (v) exercise its rights under Section
2.3 ("Assignment") hereof; or (vi) pursue such other remedies as the
Mortgagee may have under applicable law.
(d) The proceeds or avails of any sale made under or by virtue of
this Section, together with any other sums which then may be held by the
Mortgagee under this Mortgage, whether under the provisions of this Section
or otherwise, shall be applied in such manner as the Mortgagee, in its sole
discretion, shall determine.
(e) Upon any sale made under or by virtue of this Section, the
Mortgagee may bid for and acquire the Collateral or any part thereof and in
lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Indebtedness the net sales price after deducting
therefrom the expenses of the sale and the costs of the action and any
other sums which the Mortgagee is authorized to deduct under this Mortgage.
Section 5.3 General authority and Power of Attorney. The Mortgagor
hereby irrevocably appoints the Mortgagee its agent and attorney in fact,
with full power of substitution, in the name of the Mortgagor or the
Mortgagee, for the sole use and benefit of the Mortgagee, but at the
Mortgagor's expense, to exercise, at any time and from time to time while
an Event of Default has occurred and is continuing, all or any of the
following powers with respect to all or any of the Collateral:
(i) to endorse the name of the Mortgagor upon any check, draft or
other instrument payable to the Mortgagor evidencing payment upon any
Accounts or General Intangible.
(ii) to demand, sue for, collect, receive and give acquittance for any
and all Accounts and other monies due or to become due for or as Collateral
or by virtue thereof,
(iii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect to any of the Collateral, and
(iv) to extend the time of payment of any or all of the Collateral and
to make any allowance and other adjustments with reference thereto.
The aforesaid mandate and power of attorney, being coupled with an
interest, is irrevocable so long as any of the Indebtedness remains
outstanding.
Section 5.4 Accounts and Contracts. While an Event of Default has
occurred and is continuing (i) the Mortgagor will make no material change
to the terms of any Account or Contract without the prior written
permission of the Mortgagee, and (ii) the Mortgagor upon request of the
Mortgagee will promptly notify (and the Mortgagor hereby authorizes the
Mortgagee so to notify) each account debtor in respect of any Account or
General Intangible that such Collateral has been assigned to the Mortgagee
hereunder, and that any payments due or to become due in respect of such
Collateral are to be made directly to the Mortgagee or its designee.
Section 5.5 Sale. Upon the occurrence of an Event of Default, the
Mortgagee may exercise all rights of a secured party under the UCC and
other applicable law (including the Uniform Commercial Code as in effect in
another applicable jurisdiction) and, in addition, the Mortgagee may,
without being required to give any notice, except as herein provided or as
may be required by mandatory provisions of law, sell the Collateral or any
part thereof at public sale, for cash, upon credit or for future delivery,
and at such price or prices as the Mortgagee may deem satisfactory. The
Mortgagee may be the purchaser of any or all of the Collateral so sold at
any public sale. The Mortgagor will execute and deliver such documents and
take such other action as the Mortgagee deems necessary or advisable in
order that any such sale may be made in compliance with law. Upon any such
sale the Mortgagee shall have the right to deliver, assign and transfer to
the purchaser thereof the Collateral so sold. Each purchaser at any such
sale shall hold the Collateral so sold to it absolutely and free from any
claim or right of whatsoever kind and the Mortgagor, to the extent
permitted by law, hereby specifically waives all rights of appraisal which
it has or may have under any law now existing or hereafter adopted. The
Mortgagor agrees that ten (10) days' prior written notice of the time and
place of any sale or other intended disposition of any of the Collateral
constitutes "reasonable notification" within the meaning of Section 9-
504(3) of the UCC. The notice (if any) of any such sale shall state the
time and place fixed for such sale. Any such public sale shall be held at
such time or times within ordinary business hours and at such place or
places as the Mortgagee may fix in the notice of such sale. At any such
sale the Collateral may be sold in one lot as an entirety or in separate
parcels, as the Mortgagee may determine. The Mortgagee shall not be
obligated to make any such sale pursuant to any such notice. The Mortgagee
may, without notice or publication, adjourn any public sale or cause the
same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any part
of the Collateral on credit or for future delivery, the Collateral so sold
may be retained by the Mortgagee until the selling price is paid by the
purchaser thereof, but the Mortgagee shall not incur any liability in case
of the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of such failure, such Collateral may again be sold upon
like notice.
Section 5.6 Set-Off. Upon the occurrence of any Event of Default,
the Mortgagee shall have the right to set-off any funds of the Mortgagor in
the possession of the Mortgagee against any amounts then due by the
Mortgagor to the Mortgagee pursuant to the Mortgage.
Section 5.7 Confession of Judgment. For purposes of foreclosure
under Louisiana executory process procedures, the Mortgagor hereby
acknowledges the Indebtedness and confesses judgment in favor of Mortgagee
for the full amount of the indebtedness.
Section 5.8 Expenses. The Mortgagor will pay all reasonable
expenses, including but not limited to reasonable attorneys' fees, incurred
in connection with the full protection and preservation of, and
foreclosure, collection or other realization of or on, the Collateral or
this Mortgage, or in connection with the enforcement of any of the
Mortgagor's obligations or the Mortgagee's rights and remedies set forth
herein, whether or not suit or any foreclosure proceedings are filed. All
insurance expenses and all expenses of protecting, storing, warehousing,
appraising, preparing for sale, handling, maintaining and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by
any federal, state or local authority on any of the Collateral, all
expenses in respect of periodic appraisals and inspections of the
Collateral to the extent the same may be requested from time to time, and
all expenses in respect of the sale or other disposition thereof shall be
borne and paid by the Mortgagor. All such expenses shall be treated as
Payments as provided in Section 4.23 ("Payments by Mortgagee") hereof and
thus included in the Indebtedness secured hereby.
Section 5.9 Keeper. In the event the Collateral, or any part
thereof, is seized as an incident to an action for the recognition or
enforcement of this Mortgage by executory process, ordinary process,
sequestration, writ of fieri facias or otherwise, the Mortgagor and the
Mortgagee agree that the court issuing any such order shall, if petitioned
for by Mortgagee, direct the applicable sheriff to appoint as a keeper of
the Collateral, the Mortgagee or any agent designated by Mortgagee or any
person named by the Mortgagee at the time such seizure is effected This
designation is pursuant to Louisiana Revised Statutes 9:5131 through 5135
and 9:5136 through 5140.3, as the same may be amended, and Mortgagee shall
be entitled to all the rights and benefits afforded thereunder. It is
hereby agreed that the keeper shall be entitled to receive as compensation,
in excess of its reasonable costs and expenses incurred in the
administration or preservation of the Collateral, an amount equal to 3% of
the gross revenues of the Collateral, which shall be included as
Indebtedness secured by this Mortgage. The designation of keeper made
herein shall not be deemed to require Mortgagee to provoke the appointment
of such a keeper.
Section 5.10 Waivers. The Mortgagor waives in favor of the
Mortgagee any and all homestead exemptions and other exemptions of seizure
or otherwise to which Mortgagor is or may be entitled under the
constitution and statutes of the State of Louisiana insofar as the
Collateral is concerned. The Mortgagor further waives: (a) the benefit of
appraisement as provided in Louisiana Code of Civil Procedure Articles
2332, 2336, 2723 and 2724, and all other laws conferring the same; (b) the
demand and three days' delay accorded by Louisiana Code of Civil Procedure
Articles 2639 and 2721; (c) the notice of seizure required by Louisiana
Code of Civil Procedure Articles 2293 and 2721; (d) the three days' delay
provided by Louisiana Code of Civil Procedure Articles 2331 and 2722; and
(e) the benefit of the other provisions of Louisiana Code of Civil
Procedure Articles 2331, 2722 and 2723, not specifically mentioned above.
Section 5.11 Authentic Evidence. Any and all declarations of facts
made by authentic act before a notary public in the presence of two
witnesses by a person declaring that such facts lie within his knowledge,
shall constitute authentic evidence of such facts for the purpose of
executory process. The Mortgagor specifically agrees that such an
affidavit by a representative of the Mortgagee as to the existence, amount,
terms and maturity of the Indebtedness and of a default thereunder shall
constitute authentic evidence of such facts for the purpose of executory
process.
Section 5.12 Assemble Collateral. For the purpose of enforcing any
and all rights and remedies under this Mortgage the Mortgagee may (i)
require the Mortgagor to, and the Mortgagor agrees that it will, at its
expense and upon the request of the Mortgagee, forthwith assemble all or
any part of the Collateral as directed by the Mortgagee and make it
available at a place designated by the Mortgagee which is, in its opinion,
reasonably convenient to the Mortgagee and the Mortgagor, whether at the
premises of the Mortgagor or otherwise, and Mortgagee shall be entitled to
specific performance of this obligation, (ii) to the extent permitted by
applicable law of this or any other state, enter, with or without process
of law and without breach of the peace, any premise where any of the
Collateral is or may be located, and without charge or liability to it
seize and remove such Collateral from such premises, (iii) have access to
and use the Mortgagor's books and records relating to the Collateral, and
(iv) prior to the disposition of the Collateral, store or transfer it
without charge in or by means of any storage or transportation facility
owned or leased by the Mortgagor, process, repair or recondition it or
otherwise prepare it for disposition in any manner and to the extent the
Mortgagee deems appropriate and, in connection with such preparation and
disposition, use without charge any trademark, trade name, copyright,
patent or technical process used by the Mortgagor.
Section 5.13 Limitation on Duty of Mortgagee. Beyond the exercise
of reasonable care in the custody thereof, the Mortgagee shall have no duty
a to any Collateral in its possession or control or in the possession or
control of any agent or bailee or any income thereon. The Mortgagee shall
be deemed to have exercised reasonable care in the custody of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords its own property, and shall
not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the
act or omission of any warehouseman, carrier, forwarding agency, consignee
or other agent or bailee selected by the Mortgagee in good faith.
Section 5.14 Appointment of Agent. At any time or times, in order
to comply with any legal requirement in any jurisdiction, the Mortgagee may
appoint a bank or trust company or one or more other Persons with such
power and authority as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of appointment.
ARTICLE 6.
Miscellaneous
Section 6.1 Notices. Any notice or demand which, by provision of
this Mortgage, is required or permitted to be given or served to the
Mortgagor or the Mortgagee shall be deemed to have been sufficiently given
and served for all purposes (if mailed) three calendar days after being
deposited, postage prepaid, in the United States Mail, or (if delivered by
express courier) one business day after being delivered to such courier, or
(if delivered in person) the same day as delivery, in each case if made
addressed to (i) the address of such party shown on page 1 hereof or (ii)
Mortgagor or Mortgagee at such different address(es) as shall have been
designated by written notice actually received by Mortgagor or Mortgagee,
as applicable at least ten (10) days in advance of the date upon which such
change of address shall be effective under this Section 6.1.
Section 6.2 Amendment. Neither this Mortgage nor any provisions
hereof may be changed, waived, discharged or terminated orally or in any
manner other than by an authentic instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought.
Section 6.3 Invalidity. In the event that any one or more of the
provisions contained in this Mortgage shall, for any reason, be held
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Mortgage.
Section 6.4 Waivers. No course of dealing on the part of the
Mortgagee, its officers, employees, consultants or agents, nor any failure
or delay by the Mortgagee with respect to exercising any of its rights,
powers or privileges under this Mortgage shall operate a waiver thereof.
Section 6.5 Cumulative Rights. The rights and remedies of the
Mortgagee under this Mortgage and the Collateral Documents shall be
cumulative, and the exercise or partial exercise of any such right or
remedy shall not preclude the exercise of any other right or remedy.
Section 6.6 Titles of Articles. Sections and Subsections. All
titles or headings to articles, sections, subsections or other divisions of
this Mortgage or the exhibits hereto are only for the convenience of the
parties and shall not be construed to have any effect or meaning with
respect to the other content of such articles, sections, subsections or
other divisions, such other content being controlling as to the agreement
between the parties hereto.
Section 6.7 Singular and Plural. Words used herein in the
singular, where the context so permits, shall be deemed to include the
plural and vice versa. The definitions of words in the singular herein
shall apply to such words when used in the plural where the context so
permits and vice versa.
Section 6.8 Termination. Upon full and final payment and
performance of the Indebtedness and the payment or redemption of the Note,
or upon Mortgagee's acquisition of the Mineral Properties (other than by
reason of an Event of Default hereunder), this Mortgage shall terminate,
and the Mortgagee shall pay to the Mortgagor all amounts then remaining in
the possession of the Mortgagee from collections on or proceeds of the
Collateral. Upon request of the Mortgagor, the Mortgagee shall execute and
deliver to the Mortgagor at the Mortgagor's expense such termination
statements as the Mortgagor may reasonably request to evidence such
termination.
Section 6.9 Successors and Assigns. (a) All covenants and
agreements contained by or on behalf of the Mortgagor in this Mortgagee
shall bind its successors and assigns and shall inure to the benefit of the
Mortgagee and its successors and assigns.
(b) This Mortgage is for the benefit of the Mortgagee and for such
other Person or Persons as may from time to time become or be the holder of
the Note and the other Indebtedness, and this Mortgage shall be
transferrable and negotiable, with the same force and effect and to the
same extent as the Note may be transferrable, it being understood that,
upon the transfer or assignment by the Mortgagee of the Note (to the extent
transfer is permitted thereby), the legal holder of such Note shall have
all of the rights granted to the Mortgagee under this Mortgage.
(c) The Mortgagor hereby recognizes and agrees that the Mortgagee
may, from time to time, one or more times, transfer all or any portion of
the Indebtedness to one or more third parties. Such transfers may
include, but not be limited to, sales of participation interests in such
Indebtedness in favor of one or more third party lenders. Upon any
transfer of all or any portion of the Indebtedness, the Mortgagee may
transfer and deliver any or all of the Collateral to the transferree of the
Indebtedness in favor of such a transferee then existing and thereafter
arising, and after any such transfer has taken place, the Mortgagee shall
be fully discharged from any and all future liability and responsibility to
the Mortgagor with respect to such Collateral, and the transferee
thereafter shall be vested with all the powers, rights and duties with
respect to such Collateral.
Section 6.10 Governing Law. This Mortgage is made under and shall
be construed in accordance with and governed by the laws of the United
States of America and the State of Louisiana.
Section 6.11 Certificates. The production of mortgage, conveyance,
tax research or other certificates is waived by consent, and the Mortgagor
and the Mortgagee agree to hold me, Notary, harmless for failure to procure
and attach same.
Section 6.12 No Paraph. The notes and other written obligations
that comprise a part of the Indebtedness have not been presented to me,
Notary, for purposes of being paraphed herewith.
THUS DONE AND PASSED as of the day and in the month and year
hereinabove first written, in the presence of the undersigned witnesses who
hereunto sign their names with the Mortgagor and Mortgagee and me, Notary,
after due reading of the whole.
WITNESSES: READING & BATES DEVELOPMENT CO.
______________________________ By:______________________________
Name:_________________________ Name:______________________
(Please Print) Title:_______________________
______________________________
Name:_________________________
(Please Print)
______________________________
Notary Public
My Commission Expires:_______________
______________________________, Notary Public
My Commission Expires:________________
THUS DONE AND PASSED as of the day and in the month and year
hereinabove first written, in the presence of the undersigned witnesses who
hereunto sign their names with the Mortgagee and me, Notary, after due
reading of the whole.
WITNESSES: BRITISH-BORNEO PETROLEUM, INC.
______________________________ By:______________________________
Name:_________________________ Name:______________________
(Please Print) Title:_______________________
______________________________
Name:_________________________
(Please Print)
__________________________________________
______________________________, Notary Public
My Commission Expires:________________
EXHIBIT "A"
TO
MORTGAGE AND SECURITY AGREEMENT
BY READING & BATES DEVELOPMENT CO.
IN FAVOR OF BRITISH-BORNEO PETROLEUM, INC.
The Mortgagor and the Mortgagee hereby agree and affirm that the
following is an explanation of the terminology, format and information
contained in this Exhibit "A" and that this instrument shall be construed a
a whole with reference to the entirety of its provisions (including all
Exhibits).
1. This instrument covers the Mortgagor's entire interest in each of
the mineral servitudes, mineral leases, mineral royalties and
other mineral rights described in Exhibit "A", as now owned or as
hereafter acquired. The inclusion of the Mortgagor's "Net
Revenue Interest," "Working Interest" and undivided leasehold
interests, by the listing of percentage, decimal or fractional
numbers or otherwise, as well as the inclusion of depth
limitations, spacing unit designations and agreements, well names
and well arabic numbers, are in some instances for purposes of
certain representations of the Mortgagor contained in this
instrument and are generally for descriptive purposes. The
inclusion (or the inaccuracy thereof) of this information is not
in any way a limitation or restriction on the interest of the
Mortgagor being subjected to the lien and encumbrance of this
instrument. In the event that the Mortgagor acquires additional
undivided interests in some or all of such mineral or leasehold
rights, this instrument shall automatically encumber such
additions or increases to the Mortgagor's interest in such
mineral or leasehold rights without need of further act or
document.
2. References in Exhibit "A" to instruments on file in the public
records are made for all purposes. Unless provided otherwise,
all recording references in Exhibit "A" are to the official real
property records of the parish or parishes in which the mortgaged
property is located and in which records of such documents are or
in the past have been customarily recorded, whether Conveyance
Records, Oil and Gas Records, Mineral Lease Records, Oil and Gas
Lease Records or other records.
3. A statement herein that a certain interest described herein is
subject to the terms of certain described or referred to
agreements, instruments or other matters shall not operate to
subject such interest to any such agreement, instrument or other
matter except to the extent that such agreement, instrument or
matter is otherwise valid and presently subsisting nor shall such
statement be deemed to constitute a recognition by the parties
hereto that any such agreement, instrument or other matter is
valid and presently subsisting or binding against the Mortgagee.
PROPERTY DESCRIPTION
1. LEASE OCS-G 7049. That certain Oil and Gas Lease of Submerged
Lands under the Outer Continental Shelf Lands Act made and
effective as of June 1, 1984, by and between the United States of
America, as Lessor, and Placid Oil Company, et al., as Lessees,
bearing Serial No. OCS-G 7049 covering all of Block 254, Green
Canyon, OCS Official Protraction Diagram, NA 15-3.
Working Interest 40.00000%
Net Revenue Interest 34.70133%
2. LEASE OCS-G 8010. That certain Oil and Gas Lease of Submerged
Lands under the Outer Continental Shelf Lands Act made and
effective as of July 1, 1985, by and between the United States of
America, as Lessor, and Placid Oil Company, et al., as Lessees,
bearing Serial No. OCS-G 8010 covering all of Block 298, Green
Canyon, OCS Official Protraction Diagram, NA 15-3.
Working Interest 40.00000%
Net Revenue Interest 34.70133%
3. LEASE OCS-G 8876. That certain Oil and Gas Lease of Submerged
Lands under the Outer Continental Shelf Lands Act made and
effective as of June 1, 1987, by and between the United Stated of
America, as Lessor, and Hunt Petroleum Corporation, et al., as
Lessees, bearing Serial No. OCS-G 8876 covering all of Block 297,
Green Canyon, OCS Official Protraction Diagram, NA 15-3.
Working Interest 40.00000%
Net Revenue Interest 34.66666%
4. LEASE OCS-G 8005. That certain Oil and Gas Lease of Submerged
Lands under the Outer Continental Shelf Lands Act made and
effective as of July 1, 1985, by and between the United Stated of
America, as Lessor, and Amerada Hess, et al., as Lessees, bearing
Serial No. OCS-G 8005 covering all of Block 253, Green Canyon,
OCS Official Protraction Diagram, NA 15-3.
Working Interest 40.00000%
Net Revenue Interest 33.00000%
EXHIBIT "B"
TO
MORTGAGE AND SECURITY AGREEMENT
BY READING & BATES DEVELOPMENT CO.
IN FAVOR OF BRITISH-BORNEO PETROLEUM, INC.
DEVELOPMENT PLAN
EXHIBIT "C"
TO
MORTGAGE AND SECURITY AGREEMENT
BY READING & BATES DEVELOPMENT CO.
IN FAVOR OF BRITISH-BORNEO PETROLEUM, INC.
1. Letter of Intent dated August 19, 1997, executed by and between
British-Borneo Petroleum, Inc. and Reading & Bates Development
Co., as such may have been amended.
2. Oil Gathering Agreement dated December 2, 1994, executed by and
between EP Operating Limited Partnership, as Producer and Manta
Ray Gathering Systems Inc., as Gatherer.
3. Gas Gathering Agreement dated December 2, 1994, executed by and
between EP Operating Limited Partnership, as Producer and Manta
Ray Gathering Systems, Inc., as Gatherer.
4. That certain Exploration, Drilling and Production Unit Agreement
dated June 22, 2995, executed by and between Enserch Offshore,
Inc. and Enserch Exploration, Inc., covering and pertaining to
Green Canyon Blocks 253, 254, 297 and 298.
5. That certain Operating Agreement dated May 1, 1995, executed by
and between Enserch Exploration, Inc., Reading & Bates
Development Co., et al., as amended by letters dated October 16,
1995, October 31, 1995 and May 17, 1996.
EXHIBIT "D"
TO
MORTGAGE AND SECURITY AGREEMENT
BY READING & BATES DEVELOPMENT CO.
IN FAVOR OF BRITISH-BORNEO PETROLEUM, INC.
1. WELLS:
WORKING REVENUE
INTEREST INTEREST
A. OCS-G 7049 #3 40.00000% 33.70133%
B. OCS-G 7049 #4 40.00000% 33.70133%
C. OCS-G 7049 #4ST1 40.00000% 33.70133%
D. OCS-G 7049 #5 40.00000% 33.70133%
E. OCS-G 8876 #1 40.00000% 33.66666%
2. TEMPLATE:
That certain three well drilling template acquired, inter alia, by
Mortgagor for use in connection with the drilling of the OCS-G 7049 #5
Well.
NOTE: All references in the Exhibit "D" made to "Working Interest" and
"Revenue Interest," and to the numbers set forth in connection
therewith, are for title warranty purposes only.
EXHIBIT "E"
R&B INTEREST IN THE LEASES
1. LEASE OCS-G 8005. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Amerada Hess, et al., as Lessees, bearing Serial No. OCS-G 8005
covering all of Block 253, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 33.00000%
2. LEASE OCS-G 7049. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1984, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
7049 covering all of Block 254, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 34.70133%
3. LEASE OCS-G 8876. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shell Lands Act made and effective as of
June 1, 1987, by and between the United States of America, as Lessor,
and Hunt Petroleum Corporation, et al., as Lessees, bearing Serial No.
OCS-G 8876 covering all of Block 297, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 33.66666%
4. LEASE OCS-G 8010. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8010 covering all of Block 298, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 34.70133%
NOTE: All references in this Exhibit "E" made to "Working Interest"
and "Revenue Interest," and to the numbers set forth in connection
therewith, are for title warranty purposes only.
FACT SHEET
Allegheny Development Plan
Location Green Canyon, Blocks 253, 254, 298, 297
Water Depth Range 2,900 - 3,250 ft
Processing Pipeline spec. oil and gas
Annualized average throughput - Oil 25,000 BOPD (27,500 Peak)
Annualized average throughput - Gas 35 MMSCFD (45 MM Peak)
Annualized average throughput - Produced water 8,000 BWPD
Number of Production Wells (subsea) 5 to 7
Production Risers 4 in. insulated steel catenary risers
Control Umbilicals 2
Well/riser Maintenance Chemical injection, Coiled tubing for riser cleanout
Export - Oil SCR and - 30 miles of 8" Pipeline to EW 953 (Poseidon)
or Ewing Bank 921 (Morpeth)
Export - Gas SCR and 25 miles of 6" Pipeline to EW 873 (Discovery)
or Ewing Bank 921 (Morpeth)
SeaStar TLP
Payload (Deck/Facilities/Risers) 3,500 tons
Hull weight 2,500 tons
Displacement 11,000 tons
Tendons 6 x 26 inch
Foundation Independent piles for each tendon
Hull Dimensions (as Morpeth)
Column Diameter 58 ft
Draft 91 ft
Pontoon Radius 115 ft
Pontoon Height 25 ft
Main Column Height 112 ft
Topsides
Dry Equipment Weight 1,500 tons
Deck Dimensions (two decks) 110 x 110 ft
Quarters 18 man
Helideck Bell 412
Allegheny Development Cost Estimate
SeaStar
Key Data Allegheny Comments
Data source In house Derived from Morpeth data
Water depth (ft) 2950 to 3250 Dependent upon field layout
Number of wells 5 to 7 Flowline access from two sectors
First oil date: Q3 1999 Same execution plan & contractors
as Morpeth
Field life (years) 7 to 10
Hull weight (t) 2,500 Same hull assumed as Morpeth
Topside payload (t) 3,500 Payload reduced due to increased
tendon lengths & riser load
Oil capacity gross (bbl/d) 27,500 Sized for 5 to 7 wells dependent
on field performance
Gas capacity gross (mmsc/d) 45 GOR 1300
WI capacity gross (bbl/d) None No WI required
Production flowlines 4" SCR (Ins) Move to SCR's for wt & cost
saving
Oil export line diameter 8" SCR Sized for 27,000 bopd
Gas export line diameter 6" SCR Sized for 45 MMscfd
$MM
Drilling and Completion Costs
Pre-Production 23.3 Complete 3 existing wells plus
1.1 mob/demob
Post-Production Startup
Drill new well 17.0 Assumed Atwood Hunter day rate
of 105.000 $/d
Complete new well (SCRAMS) 7.4
Complete 4th existing well 6.0
Drilling sub total: 53.7 (1 new well, ! completion)
Facilities Costs
Engineering & PMgmt. 11.0 Broadly similar to Morpeth
Mooring system 25.5 Increased to account for
deeper water
Hull 19.0 Same hull (no design saving)
Topsides 30.0 Smaller topsides (no WI)
Installation 21.0 Increased water depth
Risers (production) 19.0 4" SCR's - priced on 5500 ft
between well clusters (2750
ft standoff)
Trees 28.0 Increase to 5 wells & water
depth increase over Morpeth
Hookup & commissioning 5.0 Topsides HUC costs in yard
Facilities sub total: 158.5
Oil export risers 6.5 SCR - 8" diameter
Oil export lines 21.0 8" diameter - 30 miles (all of
which J layed) to EW953
Gas export risers 0.0 SCR 6" diameter - paid for in
tariff to Discovery system
Gas export lines 0.0 25 miles of 6" (all of which J
layed) - paid in tariff to
Discovery system
Export lines sub total: 27.5
Contingency: 4.0
Facilities & export
sub total 190.0
Drilling, Facilities &
export total: 243.7
Future well costs:
Recompletions as needed 6.0 Costs per well, as needed
New Wells 14.0 Costs per well, as needed
EXHIBIT 10.183
PURCHASE AND SALE AND ACREAGE EXCHANGE AGREEMENT
GREEN CANYON AREA, OUTER CONTINENTAL SHELF
This PURCHASE AND SALE AND ACREAGE EXCHANGE AGREEMENT (the Agreement")
is executed effective this 28th day of August. 1997. by and between Enserch
Exploration. Inc.. a Texas corporation, as seller ("Seller") and Reading &
Bates Development Co., a Texas corporation. as buyer ("Buyer"). Enserch
Exploration, Inc. is the successor by name change to Lone Star Energy Plant
Operations, Inc. ("LSEPO") and the successor by merger to Enserch
Exploration, Inc. ("EEX"), a subsidiary of ENSERCH Corporation. The
defined term "Seller" shall include Enserch Exploration, Inc., LSEPO and
EEX such that the rights, obligations ant commitments of Seller described
herein shall inure to and bear upon each of Enserch Exploration Inc., LSEPO
and EEX.
RECITALS
WHEREAS. Seller desires to convey and Buyer desires to acquire
certain oil and gas properties and related rights on the terms and
conditions provided in this Agreement.
AND WHEREAS, as consideration for the acquisition of such oil and gas
properties by Buyer, Buyer desires to make both a cash payment and a
conveyance to Seller of certain other oil and gas properties, and Seller
desires to accept such cash payment and conveyance of oil and gal
properties;
NOW. THEREFORE. Seller and Buyer hereby agree as follows:
1. SALE AND PURCHASE
1.1 Sale. Subject to the terms and conditions of this Agreement,
Seller shall sell and Buyer shall purchase and pay for, at the Closing, but
effective as of 12:01 a.m., Central Standard Time. August 28, 1997 (the
"Effective Date"), the undivided rights, titles and interest; reflected in
Exhibit 1.1 hereof, in and to the assets described below located in or
pertaining to the Green Canyon Area on the Outer Continental Shelf off the
coastline of the State of Louisiana (the "Assets"):
(a) The oil, gas and mineral leases. described on Exhibit l.1, Part
(a) (the Leases"), together with a like interest with respect to
the Leases in and to any and all (i) mineral interests, (ii)
overriding or landowners' royalty interests. (iii) surface and
subsurface interests and rights, (iv) beneficial convertible or
reversionary interests, (v) interest owned. claimed or acquired
or to be owned. claimed or acquired. by agreement. (vi)
production payments (vii) contractual interests owned pursuant to
participation agreements operating agreements or similar
agreements. and (viii) any and all like or unlike interests,
including without limitation those specific items identifies on
Exhibit 1.1, Part (a). This shall include any contractual rights
providing for the acquisition or earning of any of the foregoing,
and Seller's rights it respect of any pooled, communitized or
unitized acreage of which any of the foregoing is a part. (All of
the foregoing shall be called collectively the "Leasehold
Interests.")
(b) Any and all wells, wellbores, pipe. gathering lines, compressors,
facilities equipment. platforms, pipelines, templates and any and
all other personal real, movable and immovable property, fixtures
or equipment which are located on or used directly in connection
with the production, treatment or transportation of oil and gas
from the Leasehold Interests, including, without limitation,
those items specifically identified on Exhibit 1.1, Part (b) (the
"Equipment").
(c) Any and all easements, rights-of-way, and subsurface and surface
rights associated or used in connection with any such easements
or rights-of-way which easements. rights-of-way and subsurface
and surface rights have been obtained for use in connection with
the Leasehold Interests (the "Gathering Facilities").
(d) Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interests on or after the Effective
Date.
(e) To the extent the same are assignable or transferable by Seller
and to the extent and only to the extent that the same relate to
the ownership or operation of the Leasehold Interests the
Gathering Facilities or the Equipment on or after the Effective
Date, all of Seller's right, title and interest in and to all
orders. contracts (including, without limitation, all contracts
and agreements specifically identified on Exhibit 3.7),
agreements (including without limitation all operating
agreements, transportation agreements, unit agreements,
participation agreements and processing agreements) assignments,
files, instruments, licenses, authorizations, permits, audits
claims, liens, suits, settlements and demands, and other rights,
privileges benefits duties and powers conferred upon Seller.
1.2 Title Warranty. Seller warrants that:
(a) Except as specifically set forth in Exhibit 1.1 and/or Exhibit
3.7 or resulting from the application of the agreements listed
therein. neither Seller nor any parent, subsidiary or affiliate
of Seller during their respective periods of ownership has (A)
executed any deed. conveyance, assignment or other instrument as
an assignor, grantor. sublessor or in another capacity or (B) has
breached any obligation under any Asset that would (i) result in
Buyer's being entitled to receive less than the net revenue
interest for any Lease, well or unit set forth in Exhibit 1.1,
except as otherwise noted on Exhibit 1.1. of all oil and gas in,
under, and that may be produced. saved and marketed from or
attributable to such Lease, well or unit, or (ii) obligate Buyer
to bear the costs and expenses relating to the maintenance.
development and operator of such Lease. well or unit in an amount
greater than the working interest for such Lease. well or unit
set forth in Exhibit 1.1, unless the net revenue interest
attributable to said working interest is increased by a
proportionate or or greater amount; and
(b) Except as specifically set forth in Exhibit 1.1 and/or Exhibit
3.7 or resulting from the application of the agreements listed
therein, the Assets are free of all liens, mortgages, charges,
pledges, security interests and encumbrances, including, but not
limited to such as may arise under any contracts or judgments,
created by, through or under Seller as of the Closing Date;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the Special Limited Warranty") Seller shall
convey the Assets with no warranty whatsoever other than the Special
Limited Warranty, but with full substitution and subrogation to Buyer in
and to al covenants, agreements, representations and warranties made by
others heretofore given or made it connection with the Assets or any part
thereof.
1.3 Other Warranty Provisions. Except as set forth herein, Buyer
acknowledges that (a) Seller has not made any warranty or
representation, whether express, implied, at common law, by
statute or otherwise. relating to the fitness for an intended
purpose or condition of any movable property constituting a
portion of the Assets and (b) Buyer shall acquire such personal
property in AS IS, WHERE IS" condition Except as may be
specifically set forth to the contrary in this Agreement, Buyer
acknowledges that Seller has made no representations or
warranties whatever, expressed or implied, (Seller having hereby
expressly disclaimed all such warranties) as to the accuracy,
completeness, or materiality of any data, information, record or
materials now, heretofore, or hereafter made available in
connection with this Agreement (including, without limitation,
any descriptions of oil and gas leases; quality or quantity of
hydrocarbon reserves attributable to the Assets, if any;
production rates. exploratory or development drilling
opportunities, decline rates, potential for production of
hydrocarbons from the Assets; the environmental condition of said
Assets; the legal. tax or other consequences of owning Seller's
interest in the Assets; or any other information contained in any
material furnished in connection with this transaction) Any and
all such data, information, records or materials furnished by
Seller to Buyer are provided as convenience only and any reliance
on or use of same is at the Buyer's sole risk. EXCEPT AS SET
FORTH HEREIN, WITHOUT LIMITING THE GENERALITY OF THIS PARAGRAPH
SELLER DISCLAIMS AND NEGATES AS TO ANY PERSONAL PROPERTY,
FIXTURES IMPROVEMENTS AND APPURTENANCES SUBJECT TO THIS AGREEMENT
(INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY
OF CONFORMITY TO MODELS OR SAMPLE OR MATERIALS. THE PURCHASER
EXPRESSLY AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES,
IMPROVEMENTS AND APPURTENANCES WILL BE ACCEPTED "AS IS", "WHERE
IS", "WITH ALL FAULTS", AND IN ITS PRESENT CONDITION AND STATE OF
RFPAIR.
1.4 Exclusion of the Vessel Allegheny/nee Polymariner.
Notwithstanding anything to the contrary herein contained, this Purchase
and Sale Agreement shall not cover or pertain whatsoever to the vessel
Allegheny/nee Polymariner which is currently co-owned by Seller with others
and we; purchased for use in connection with the Assets.
2. PURCHASE PRICE AND OTHER CONSIDERATION.
2.1 Determination of Purchase Price. The cash portion of the purchase
price for the Assets (the "Purchase Price ") shall be Eight Million and
No/100 Dollars ($8,000,000.00) (the "Purchase Price");
2.2 Payment of Purchase Price. The payment of the Purchase Price
shall be made by Buyer to Seller in immediately available funds via wire
transfer at Closing.
2.3 Additional Consideration. In addition to the Purchase Price,
Buyer shall convey to the Seller at the Closing, but effective as of the
Effective Date. the undivided rights, titles and interests reflected in
Exhibit 1.2 hereof in and to the assets described in this Section 2.3
located in or pertaining to the Green Canyon Area on the Outer Continental
Shelf off the coastline of the State of Louisiana (the "Buyer's Assets"):
(a) The oil, gas and mineral leases, described on Exhibit 1.2. Part
(a) (the "Buyer's Leases"), together with a like interest with
respect to the Buyer's Leases in and to any and all (i) mineral
interests. (ii) overriding or landowners' royalty interests,
(iii) surface and subsurface interests and rights, (iv)
beneficial, convertible or reversionary interests, (v) interest
owned. claimed or acquired. or to be owned, claimed or acquired.
by agreement, (vi) production payments, (vii) contractual
interests overfed pursuant to participation agreements, operating
agreements or similar agreements, and (viii) any and all like or
unlike interests. including without limitation those specific
items identified on Exhibit 1.2. Part (a). This shall include any
contractual rights providing for the acquisition or earning of
any of the foregoing, and Buyer's rights in respect of any pooled
communitized or unitized acreage of which any of the foregoing is
part. (All of the foregoing shall be called collectively the
Buyers Leasehold Interests.")
(b) [INTENTIONALLY OMITTED]
(c) Any and all easements, rights-of-way, and subsurface and surface
rights associated or used in connection with any such easements
of rights-of-way, which easements, rights-of-way and subsurface
and surface rights have been obtained for use in connection with
the Buyer's Leasehold Interests.
(d) Any and all oil, gas and other minerals produced from or
attributable to the Buyer's Leasehold Interests on or after the
Effective Date.
(e) To the extent the same are assignable or transferable by Buyer
and to the extent and only to the extent that the same relate to
the ownership or operation of the Buyer's Leasehold Interests. on
or after the Effective Date. all of Buyer's right, title and
interest in and to all orders, contracts (including, without
limitation. all contracts and agreements specifically identified
on Exhibit 3.7), agreements (including without limitation all
operating agreements. transportation agreements, unit agreements,
participation agreements and processing agreements), assignments,
files, instruments, licenses. authorizations permits, audits,
claims. liens, suits, settlements and demands, and other rights,
privileges, benefits, duties and powers conferred upon Buyer.
2.3 Title Warrant. Buyer warrants that:
(a) Except as specifically set forth in Exhibit 1.2 and/or Exhibit
3.7 or resulting from the application of the agreements listed
therein, neither Buyer nor any parent, subsidiary or affiliate of
Buyer during their respective periods of ownership has (A)
executed any deed, conveyance, assignment or other instrument as
an assignor, grantor. sublessor or in another capacity or (B) has
breached any obligation under any Buyer's Asset that would (i)
result in Seller's being entitled to receive less than the net
revenue interest for any Buyer's Lease, well or unit set forth in
Exhibit 1.2. except as otherwise noted on Exhibit 1.2, of all oil
and gas in, under, and that may be produced, saved and marketed
from or attributable to such Buyer's Lease, well or unit, or (ii)
obligate Seller to bear the costs and expenses relating to the
maintenance, development and operation of such Buyer's Lease,
well or unit in an amount greater than the working interest for
such Buyer's Lease, well or unit set forth in Exhibit 1.2, unless
the net revenue interest attributable to said working interest is
increased by a proportionate or greater amount; and
(b) Except as specifically set forth in Exhibit 1.2 and/or Exhibit
3.7 or resulting from the application of the agreements listed
therein, the Buyer's Assets are free of all liens, mortgages,
charges, pledges, security interests and encumbrances, including,
but not limited to such as may arise under any contracts or
judgements, created by, through or under Buyer as of the Closing
Date;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the Buyer's Special Limited Warranty"). Buyer
shall convey the Buyer's Assets with no warranty whatsoever other than the
Buyer's Special Limited Warranty, but with full substitution and
subrogation to Seller in and to all covenants, agreements, representations
and warranties made by others heretofore given or made in connection with
the Buyer's Assets or any part thereof.
2.4 Other Warranty Provisions. Except as set forth herein, Seller
acknowledges that (a) Buyer has not made any warranty or representation,
whether express, implied, at common law, by statute or otherwise, relating
to the fitness for an intended purpose or condition of any movable property
constituting a portion of the Buyer's Assets and (b) Seller shall acquire
such personal property in "AS IS, WHERE IS" condition. Except as may be
specifically set forth to the contrary in this Agreement, Seller
acknowledges that Buyer has made no representations or warranties whatever,
expressed or implied, (Buyer having hereby expressly disclaimed all such
warranties) as to the accuracy, completeness, or materiality of any data,
information, record or materials now, heretofore, or hereafter made
available in connection with this Agreement (including, without limitation,
any descriptions of oil and gas leases; quality or quantity of hydrocarbon
reserves attributable to the Buyer's Assets, if any; production rates,
exploratory or development drilling opportunities, decline rates, potential
for production of hydrocarbons from the Buyer's Assets; the environmental
condition of said Buyer's Assets; the legal, tax or other consequences of
owning Buyer's interest in the Buyer's Assets; or any other information
contained in any material furnished in connection with this transaction).
Any and all such data, information, records or materials furnished by Buyer
to Seller is provided as a convenience only and any reliance on or use of
same is at the Seller's sole risk. EXCEPT AS SET FORTH HEREIN, WITHOUT
LIMITING THE GENERALITY OF THIS PARAGRAPH, BUYER DISCLAIMS AND NEGATES AS
TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND APPURTENANCES SUBJECT
TO THIS AGREEMENT (INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF
CONFORMITY TO MODELS OR SAMPLE OR MATERIALS. THE PURCHASER EXPRESSLY
AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES WILL BE ACCEPTED "AS IS", "WHERE IS", "WITH ALL FAULTS", AND
IN ITS PRESENT CONDITION AND STATE OF REPAIR.
3. REPRESENTATIONS OF SELLER.
As a principal cause and material inducement to Buyer's execution of
this Agreement and to Buyer's consummation of the transactions contemplated
hereby, and with the acknowledgment by Seller of Buyer's reliance hereon,
Seller, to the extent set forth below and with respect to the undivided
interests in the Assets covered hereby, represents to Buyer that as of the
date hereof:
3.1 Existence of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas
and is duly qualified or is in the process of becoming qualified with the
MMS, as hereinafter defined, to carry on its business on the Outer
Continental Shelf, Gulf of Mexico, federal waters.
3.2 Power of Seller. Seller has the requisite corporate power to
enter into and perform this Agreement and the transactions contemplated
hereby. Subject to rights to consent by, required notices to, and filings
with or other actions by governmental entities where the same are
customarily obtained subsequent to the assignment of oil and gas interests
and leases, the execution, delivery and performance of this Agreement by
Seller, and the transactions contemplated hereby, will not violate (i) any
provision of the articles of incorporation or bylaws of Seller, (ii) any
material agreement or instrument to which Seller is a party or by which
Seller is or the Assets owned by Seller are bound, (iii) any judgment,
order, ruling, or decree applicable to the Assets or to Seller as a party
in interest, or (iv) any law, rule or regulation applicable to Seller or to
the ownership or operation of the Assets.
3.3 Authorization of Seller. The execution, delivery and performance
of this Agreement and the transactions contemplated hereby have been duly
and validly authorized by all requisite corporate action on the part of
Seller. This Agreement has been duly executed and delivered on behalf of
Seller, and at the Closing all documents and instruments required hereunder
to be executed and delivered by Seller shall have been duly executed and
delivered. This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Seller enforceable in
accordance with their terms; subject, however, to the effect of bankruptcy,
insolvency, reorganization, moratorium and similar laws from time to time
in effect relating to the rights and remedies of creditors, as well as to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.4 Brokers. Seller has incurred no obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of the
matters provided for in this Agreement and any such obligation or liability
that might exist and which was incurred by Seller, shall be the sole
obligation or liability of Seller.
3.5 Foreign Person. Seller is not a "foreign person" within the
meaning of the Sections 1445 and 7701 of Internal Revenue Code of 1986, as
amended (the "Code") (i.e. Seller is not a non-resident alien, foreign
corporation, foreign partnership, foreign trust or foreign estate as those
terms are defined in the Code and any regulations promulgated thereunder).
3.6 Litigation. There are no claims, demands, disputes, actions,
suits or proceedings pending, or to the knowledge of Seller threatened;
against or affecting the Assets or any portion or portions thereof, or the
operations of Seller relating to the Assets or any portion or portions
thereof, and to the best of Seller's knowledge after reasonable inquiry,
except as set forth in Exhibit 3.9, no violation of any laws, statutes,
regulations or orders applicable to any Asset or the operation thereof
exists.
3.7 Contracts. Agreements, Commitments and Other Matters. Except as
set forth on Exhibit 3.7, to the best of Seller's knowledge, information
and belief after reasonable inquiry, there are no contracts, agreements,
understandings, commitments, or other obligations (other than the oil, gas
and mineral leases, surface leases, rights-of-way and other interests
described in Exhibit 1.1 hereto and conveyance documents that are a matter
of public record in the Louisiana coastal parishes of Jefferson, LaFourche
and/or Terrebonne or that are filed in the "Non-Required" filings or the
"Lease File" maintained for the Leases in the New Orleans District of the
Minerals Management Service (the "MMS") with respect to the Leases)
affecting the Assets which are in effect as of the date hereof. Neither
Seller nor any parent, subsidiary or affiliate of Seller has breached any
provision of the Leases or the agreements set forth in Exhibit 3.7 and to
the best of Seller's knowledge, information and belief after reasonable
inquiry, neither has any other party thereto.
3.8 Consents and Preferential Purchase Rights. There are no consents
(except governmental consents which are customarily obtained after the
assignment of an offshore federal oil and gas lease), agreements or waivers
of preferential rights necessary to the valid assignment of the Assets to
Buyer at Closing that have not been affirmatively waived or deemed to have
been waived by expiration of the appropriate notice period, and there are
no preferential purchase rights or calls on production with respect to the
production from the Leasehold Interests, except as may be provided in the
agreements listed in Exhibit 3.7, which limit the purchase price for oil or
gas, of which are not subject to termination upon 60 days' notice.
3.9 Environmental Matters. Except as specifically set forth on
Exhibit 3.9, to the best of Seller's knowledge, information and belief
after reasonable inquiry, there exists no Environmental Defect with respect
to the Assets or any lands pooled therewith. An Environmental Defect means
a condition or circumstance that exists in connection with the Leasehold
Interests or the other Assets that is not in material compliance with any
law, regulation, order or judgment of or agreement with any federal, state
or local agency or court relating to the environment or that under such
law, regulation, order, judgment or agreement requires the owner or
operator of such leases or assets to undertake any cleanup, remediation or
other expense (an "Environmental Defect").
3.10 Open Wells. To the best of Seller's knowledge, information and
belief after reasonable inquiry, except for wells identified in Exhibit
1.1, Part (b), there exists no well that it located on any of the Leasehold
Interests or lands pooled therewith and that is not plugged and abandoned
in accordance with applicable rules, regulations and contractual
obligations.
3.11 Casualty Losses. To the best of Seller's knowledge,
information and belief after reasonable inquiry, there has
occurred no casualty to any Asset since the Effective Date that materially
and adversely affects the value, use or operation of such Asset.
3.12 Information. No documents were intentionally removed or
information or documents omitted from the data or documentation
furnished by Seller to Buyer that is necessary to make the data furnished
not misleading in any material respect; provided, however, this
representation is limited solely to matters of fact and specifically
excludes any statement or forecast of existing or future reserves, geologic
and engineering interpretations, forecasts. estimates and economic
assumptions, including without limitation (i) future prices of production,
(ii) future operating costs, (iii) future capital expenditures, (iv)
projections and estimates of future reserves and production and (v) the
prospects for successfully completing wells.
3.13 Compliance with Laws. Except as specifically set forth on
Exhibit 3.9 and/or as to operations conducted by parties other
than Seller, to the best of Seller's knowledge, information and belief
after reasonable inquiry, Seller has operated the Assets, or caused the
Assets to be operated, in compliance with all laws, ordinances, regulations
and orders applicable to the Assets and the operations undertaken in
connection therewith.
3.14 Condition of the Equipment and Gathering Facilities. To
the best of Seller's knowledge, information and belief, after reasonable
inquiry, the Equipment and Gathering Facilities have been maintained in
accordance with prudent oil field practices.
3.15 MMS Approval. Seller is not aware of the existence of any fact
or condition with respect to Seller or the Assets that may cause the MMS to
withhold unconditional approval, to the extent MMS approval is required
under applicable law, of the transfer of the Assets from Seller to Buyer.
4. REPRESENTATIONS OF BUYER.
As a principal cause and material inducement to Seller's execution of
this Agreement and to Seller's consummation of the transactions
contemplated hereby, and with the acknowledgment by Buyer of Seller's
reliance hereon, Buyer, to the extent set forth below and with respect to
the undivided interests in the Buyer's Assets covered hereby, represents to
Seller that as of the date hererof:
4.1 Existence of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas
and is duly qualified with the MMS, as hereinafter defined, to carry on its
business on the Outer Continental Shelf, Gulf of Mexico, federal waters.
4.2 Power of Buyer. Buyer has the requisite corporate power to enter
into and perform this Agreement and the transactions contemplated hereby.
Subject to rights to consent by, required notices to, and filings with or
other actions by governmental entities where the same are customarily
obtained subsequent to the assignment of oil and gas interests and leases,
the execution, delivery and performance of this Agreement by Buyer, and the
transactions contemplated hereby, will not violate (i) any provision of the
articles of incorporation or bylaws of Buyer, (ii) any material agreement
or instrument to which Buyer is a party or by which Buyer is or the Buyer's
Assets owned by Buyer are bound, (iii) any judgment, order, ruling, or
decree applicable to the Buyer's Assets or to Buyer as a party in interest,
or (iv) any law, rule or regulation applicable to Buyer or to the ownership
or operation of the Buyer's Assets.
4.3 Authorization of Buyer. The execution, delivery and performance
of this Agreement and the transactions contemplated hereby have been duly
and validly authorized by all requisite corporate action on the part of
Buyer. This Agreement has been duly executed and delivered on behalf of
Buyer, and at the Closing all documents and instruments required hereunder
to be executed and delivered by Buyer shall have been duly executed and
delivered. This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Buyer enforceable in
accordance with their terms, subject, however, to the effect of bankruptcy,
insolvency, reorganization, moratorium and similar laws from time to time
in effect relating to the rights and remedies of creditors, as well as to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.4 Brokers. Buyer has incurred no obligation or liability.
contingent or otherwise, for brokers' or finders' fees in respect of the
matters provided for in this Agreement and any such obligation or liability
that might exist and which was incurred by Buyer, shall be the sole
obligation or liability of Buyer.
4.5 Foreign Person. Buyer is not a "foreign person" within the
meaning of the Sections 1445 and 7701 of Internal Revenue Code of 1986, as
amended (the "Code") (i.e. Buyer is not a nonresident alien, foreign
corporation, foreign partnership, foreign trust or foreign estate as those
terms are defined in the Code and any regulations promulgated thereunder).
4.6 Litigation. There are no claims, demands, disputes, actions,
suits or proceedings pending, or to the knowledge of Buyer threatened,
against or affecting the Buyer's Assets or any portion or portions thereof,
or the operations of Buyer relating to the Buyer's Assets or any portion or
portions thereof, and to the best of Buyer's knowledge after reasonable
inquiry, except as set forth in Exhibit 3 9, no violation of any laws,
statutes, regulations or orders applicable to any Buyer's Asset or the
operation thereof exists.
4.7 Contracts, Agreements, Commitments and Other Matters. Except as
set forth or Exhibit 3 7, to the best of Buyer's knowledge, information and
belief after reasonable inquiry, there are no contracts, agreements,
understandings, commitments, or other obligations (other than the oil, gas
and mineral leases, surface leases. rights-of-way and other interests
described in Exhibit 1.2 hereto and conveyance documents that are a matter
of public record in the Louisiana coastal parishes of Jefferson, LaFourche
and/or Terrebonne or that are filed in the "Non-Required" filings or the
"Lease File" maintained for the Leases in the New Orleans District of the
Minerals Management Service (the "MMS") with respect to the Leases)
affecting the Buyer's Assets which are in effect as of the date hereof.
Neither Buyer nor any parent, subsidiary or affiliate of Buyer has breached
any provision of the Buyer's Leases or the agreements set forth in Exhibit
3.7 and to the best of Buyer's knowledge, information and belief after
reasonable inquiry, neither has any other party thereto.
4.8 Consents and Preferential Purchase Rights. There are no consents
(except governmental consents which are customarily obtained after the
assignment of an offshore federal oil and gas lease), agreements or waivers
of preferential rights necessary to the valid assignment of the Buyer's
Assets to Seller at Closing that have not been affirmatively waived or
deemed to have been waived by expiration of the appropriate notice period,
and there are no preferential purchase rights or calls on production with
respect to the production from the Buyer's Leasehold Interests, except as
may be provided in the agreements listed in Exhibit 3.7, which limit the
purchase price for oil or gas, or which are not subject to termination upon
60 days' notice
4.9 Environmental Matters. Except as specifically set forth on
Exhibit 3.9, to the best of Buyer's knowledge, information and belief after
reasonable inquiry, there exists no Environmental Defect with respect to
the Buyer's Assets or any lands pooled therewith. An Environmental Defect
means a condition or circumstance that exists in connection with the
Buyer's Leasehold Interests or the other Buyer's Assets that is not in
material compliance with any law, regulation, order or judgment of or
agreement with any federal, state or local agency or court relating to the
environment or that under such law, regulation, order, judgment or
agreement requires the owner or operator of such leases or assets to
undertake any cleanup, remediation or other expense (an "Environmental
Defect").
4.10 Open Wells. To the best of Buyer's knowledge, information and
belief after reasonable inquiry, except for wells identified in Exhibit
1.1, Part (b), there exists no well that is located on any of the Buyer's
Leasehold Interests or lands pooled therewith and that is not plugged and
abandoned in accordance with applicable rules, regulations and contractual
obligations.
4.11 Casualty Losses. To the best of Buyer's knowledge,
information and belief after reasonable inquiry, there has occurred
no casualty to any Buyer's Asset since the Effective Date that
materially and adversely affects the value, use or operation of such
Buyer's Asset.
4.12 Information. No documents were intentionally removed
or information or documents omitted from the data or documentation
furnished by Buyer to Seller that is necessary to make the data furnished
not misleading in any material respect; provided, however, this
representation is limited solely to matters of fact and specifically
excludes any statement or forecast of existing or future reserves, geologic
and engineering interpretations, forecasts, estimates and economic
assumptions, including without limitation (i) future prices of production,
(ii) future operating costs, (iii) future capital expenditures, (iv)
projections and estimates of future reserves and production and (v) the
prospects for successfully completing wells.
4.13 Compliance with Laws. Except as specifically set forth on
Exhibit 3.9 and/or as to operations conducted by parties other than Buyer,
to the best of Buyer's knowledge, information and belief after reasonable
inquiry, Buyer has operated the Buyer's Assets, or caused the
Buyer's Assets to be operated, in compliance with all laws, ordinances,
regulations and orders applicable to the Buyer's Assets and the operations
undertaken in connection therewith.
4.14 [INTENTIONALLY OMITTED]
4.15 MMS Approval. Buyer is not aware of the existence of any
fact or condition with respect to Buyer or the Buyer's Assets that may
cause the MMS to withhold unconditional approval, to the extent MMS
approval is required under applicable law, of the transfer of the Buyer's
Assets from Buyer to Seller.
5. CLOSING.
5.1 Time and Place of Closing. The consummation of the transactions
contemplated hereby (the "Closing") is to be held at a mutually agreed
location in Houston, Texas on or before August 28, 1997 or within five (5)
business days after the receipt of any required governmental approvals or
within five (5) business days after the time for any governmental objection
has expired (namely Hart-Scott-Rodino approval), whichever of the three
dates is the later date, unless extender by the mutual consent of the
parties hereto. (The date on which the Closing occurs shall be referrer to
as the "Closing Date.")
5.2 Closing Obligations. At the Closing:
(a.) (i.) Seller shall execute, acknowledge and deliver to Buyer the
appropriate conveyance instruments in the form of Exhibit 5.2
which will convey title to the Assets to Buyer and deliver
possession thereof to Buyer together with all requisite forms
required to accompany such assignments for filing with the MMS.
(ii.) Buyer shall execute, acknowledge and deliver to Seller the
appropriate conveyance instruments in the form of Exhibit 5.2
which will convey title to the Buyer's Assets to Seller and
deliver possession thereof to Seller together with all requisite
forms required to accompany such assignments for filing with the
MMS.
(b.) (i.) Seller shall execute such other instruments and take
such other action as may be necessary to carry out its
obligations under this Agreement.
(ii.) Buyer shall execute such other instruments and take such
other action as may be necessary to carry out its obligations
under this Agreement.
(c.) (i.) Seller shall execute and deliver to Buyer designations of
operator naming British-Borneo Exploration, Inc. as operator of
the Assets and any and all units containing or pertaining to the
Assets.
(ii.) Buyer shall execute and deliver to Seller designations of
operator naming Enserch Exploration, Inc. as operator of the
Buyer's Assets and any and all units containing or pertaining to
the Buyer's Assets.
(d.) Buyer and Seller shall execute such other instruments and take
such other action as may be necessary to carry out its
obligations under this Agreement.
(e.) Buyer shall pay in cash to Seller. the sum of Eight Million and
No/l00 Dollars ($8,000,000.00).
6. POST-CLOSING OBLIGATIONS.
6.1. Assumption of Obligations and Grant of Indemnities Relating to
Operations.
(a) SUBJECT TO EACH OF THE FOLLOWING EXCEPTIONS:
(X) EXCEPT AS TO THOSE MATTERS DESCRIBED IN SECTION 6.1(b) AND TO THE
LIMITED EXTENT THAT SELLER HAS AGREED TO INDEMNIFY BUYER AS
PROVIDED IN SUCH SECTION 6.1(b) AND
(Y) EXCEPT TO THE EXTENT ANY OF THE FOLLOWING IS ATTRIBUTABLE TO THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLER AT ANY TIME
BETWEEN THE EFFECTIVE DATE AND THE CLOSING DATE;
TO THE EXTENT OF ITS INTEREST IN THE ASSETS HEREBY CONVEYED BY SELLER
TO BUYER, BUYER HEREBY ASSUMES ALL OF THE FOLLOWING DESCRIBED
OBLIGATIONS AND BUYER AGREES TO INDEMNIFY, DEFEND AND HOLD
HARMLESS SELLER, ITS OFFICERS, DIRECTORS SHAREHOLDERS, EMPLOYEES,
AGENTS AND REPRESENTATIVES (THE "SELLER GROUP"), REGARDLESS OF
WHETHER SELLER GROUP WAS WHOLLY OR PARTIALLY NEGLIGENT OR
OTHERWISE AT FAULT, FROM AND AGAINST ANY AND ALL CLAIMS,
LIABILITIES, LOSSES, COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, COURT COSTS AND REASONABLE ATTORNEYS' FEES) ARISING
FROM:
(I) EVENTS THAT TRANSPIRE OR CONDITIONS THAT COME INTO EXISTENCE
AFTER THE EFFECTIVE DATE THAT ARE ATTRIBUTABLE TO THE OWNERSHIP
OR OPERATION OF THE ASSETS ON OR AFTER THE EFFECTIVE DATE;
(II) THE PROPER PLUGGING AND ABANDONMENT OF ALL WELLS NOW OR
HEREAFTER LOCATED ON THE LEASEHOLD INTERESTS;
(III) THE ABANDONMENT OF THE GATHERING FACILITIES;
(IV) ALL LIABILITY FOR PROPERTY DAMAGE OR INJURY TO OR DEATH OF
PERSONS OCCURRING AFTER THE EFFECTIVE DATE AND ARISING OUT OF THE
OWNERSHIP OR OPERATION OF THE ASSETS; AND/OR
(V) ANY BREACH OR VIOLATION OF THIS AGREEMENT, INCLUDING A BREACH OF
ANY REPRESENTATION, WARRANTY OR COVENANT CONTAINED HEREIN FROM
BUYER TO SELLER.
ADDITIONALLY, SUBJECT TO EXCEPTIONS (X) AND (Y) ABOVE, BUYER HEREBY
ASSUMES, TO THE EXTENT OF ITS INTERESTS IN THE ASSETS CONVEYED BY
SELLER TO BUYER HEREUNDER AND TO THE EXTENT THE SAME ARE
ASSIGNABLE OR TRANSFERABLE BY SELLER (AND ARE SO ASSIGNED OR
TRANSFERRED) AND TO THE EXTENT AND ONLY TO THE EXTENT THAT THE
SAME RELATE TO THE OWNERSHIP OR OPERATION OF THE LEASEHOLD
INTERESTS, THE GATHERING FACILITIES OR THE EQUIPMENT ON OR AFTER
THE EFFECTIVE DATE, ANY AND ALL DUTIES AND OBLIGATIONS ARISING
FROM ANY AND ALL ORDERS, CONTRACTS, AGREEMENTS, (INCLUDING
WITHOUT LIMITATION ALL OPERATING AGREEMENTS, TRANSPORTATION
AGREEMENTS, UNIT AGREEMENTS, PARTICIPATION AGREEMENTS AND
PROCESSING AGREEMENTS), INSTRUMENTS, LICENSES, AUTHORIZATIONS,
PERMITS, AUDITS, CLAIMS, LIENS, SUITS, SETTLEMENTS AND DEMANDS,
AND OTHER RIGHTS, PRIVILEGES, BENEFITS AND POWERS CONFERRED UPON
SELLER, INCLUDING, BUT NOT LIMITED TO THOSE LISTED ON EXHIBIT 3.7
(COLLECTIVELY HEREINAFTER REFERRED TO IN THIS PARAGRAPH AS
"AGREEMENTS"). BUYER AGREES TO INDEMNIFY, DEFEND AND HOLD
HARMLESS SELLER, ITS OFFICERS, DIRECTORS, SHAREHOLDERS,
EMPLOYEES, AGENTS AND REPRESENTATIVES (THE "SELLER GROUP"),
REGARDLESS OF WHETHER SELLER GROUP WAS WHOLLY OR PARTIALLY
NEGLIGENT OR OTHERWISE AT FAULT, FROM AND AGAINST ANY AND ALL
CLAIMS, LIABILITIES, LOSSES, COSTS AND EXPENSES (INCLUDING,
WITHOUT LIMITATION, COURT COSTS AND REASONABLE ATTORNEYS' FEES)
ARISING FROM BUYER'S BREACH OR NON-PERFORMANCE OF SUCH
AGREEMENTS.
(b) SELLER AGREES TO RETAIN LIABILITY FOR ALL OF THE FOLLOWING
DESCRIBED OBLIGATIONS AND SELLER AGREES TO INDEMNIFY, DEFEND AND
HOLD HARMLESS BUYER, ITS PARENT AND THEIR RESPECTIVE
SUBSIDIARIES, PARTNERS, OFFICERS, DIRECTORS, SHAREHOLDERS,
EMPLOYEES, INSURERS, AGENTS AND REPRESENTATIVE AND ITS SUCCESSORS
AND ASSIGNS ("BUYER GROUP"), REGARDLESS OF WHETHER BUYER GROUP
WAS WHOLLY OR PARTIALLY NEGLIGENT OR OTHERWISE AT FAULT, FROM AND
AGAINST ANY AND ALL CLAIMS, LIABILITIES, LOSSES, COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, COURT COSTS AND
REASONABLE ATTORNEYS' FEES) ARISING FROM:
(I) EVENTS THAT TRANSPIRED OR CONDITIONS THAT CAME INTO EXISTENCE
PRIOR TO THE EFFECTIVE DATE THAT ARE ATTRIBUTABLE TO THE
OWNERSHIP OR OPERATION OF THE ASSETS:
(II) ALL LIABILITY FOR PROPERTY DAMAGE OR INJURY TO OR DEATH OF
PERSONS OCCURRING PRIOR TO THE EFFECTIVE DATE AND ARISING OUT OF
THE OWNERSHIP OR OPERATION OF THE ASSETS REGARDLESS OF WHETHER
CLAIMS RELATED TO SAID DAMAGE, INJURY OR DEATH ARE ASSERTED ON,
BEFORE OR AFTER THE EFFECTIVE DATE; AND/OR
(III) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLER WITH
REGARD TO THE ASSETS AT ANY TIME BETWEEN THE EFFECTIVE DATE AND
THE CLOSING DATE.
(IV) ANY BREACH OR VIOLATION OF THIS AGREEMENT, INCLUDING A BREACH
OF ANY REPRESENTATION, WARRANTY OR COVENENT CONTAINED HEREIN FROM
SELLER TO BUYER.
(c) SUBJECT TO EACH OF THE FOLLOWING EXCEPTIONS:
(X) EXCEPT AS TO THOSE MATTERS DESCRIBED IN SECTION 6.1(c) AND TO THE
LIMITED EXTENT THAT BUYER HAS AGREED TO INDEMNIFY SELLER AS
PROVIDED 1N SUCH SECTION 6.1(c) AND
(Y) EXCEPT TO THE EXTENT ANY OF THE FOLLOWING IS ATTRIBUTABLE TO THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF BUYER AT ANY TIME
BETWEEN THE EFFECTIVE DATE AND THE CLOSING DATE;
TO THE EXTENT OF ITS INTEREST IN THE BUYER'S ASSETS HEREBY CONVEYED BY
BUYER TO SELLER, SELLER HEREBY ASSUMES ALL OF THE FOLLOWING
DESCRIBED OBLIGATIONS AND SELLER AGREES TO INDEMNIFY, DEFEND AND
HOLD HARMLESS BUYER, ITS OFFICERS, DIRECTORS, SHAREHOLDERS,
EMPLOYEES, AGENTS AND REPRESENTATIVES (THE "BUYER GROUP"),
REGARDLESS OF WHETHER BUYER GROUP WAS WHOLLY OR PARTIALLY
NEGLIGENT OR OTHERWISE AT FAULT, FROM AND AGAINST ANY AND ALL
CLAIMS, LIABILITIES, LOSSES, COSTS AN EXPENSES (INCLUDING,
WITHOUT LIMITATION, COURT COSTS AND REASONABLE ATTORNEYS' FEES)
ARISING FROM:
(I) EVENTS THAT TRANSPIRE OR CONDITIONS THAT COME INTO EXISTENCE
AFTER THE EFFECTIVE DATE THAT ARE ATTRIBUTABLE TO THE OWNERSHIP
OR OPERATION OF THE BUYER'S ASSETS ON OR AFTER THE EFFECTIVE
DATE;
(II) THE PROPER PLUGGING AND ABANDONMENT OF ALL WELLS NOW OR HEREAFTER
LOCATED ON THE BUYER'S LEASEHOLD INTERESTS;
(III) THE ABANDONMENT OF THE GATHERING FACILITIES;
(IV) ALL LIABILITY FOR PROPERTY DAMAGE OR INJURY TO OR DEATH OF
PERSONS OCCURRING AFTER THE EFFECTIVE DATE AND ARISING OUT OF THE
OWNERSHIP OR OPERATION OF THE BUYER'S ASSETS AND/OR
(V) ANY BREACH OR VIOLATION OF THIS AGREEMENT, INCLUDING A BREACH OF
ANY REPRESENTATION, WARRANTY OR COVENANT CONTAINED HEREIN FROM
SELLER TO BUYER.
ADDITIONALLY, SUBJECT TO EXCEPTIONS (X) AND (Y) ABOVE, SELLER HEREBY
ASSUMES, TO THE EXTENT OF ITS INTERESTS IN THE BUYER'S ASSETS
CONVEYED BY BUYER TO SELLER HEREUNDER AND TO THE EXTENT THE SAME
ARE ASSIGNABLE OR TRANSFERABLE BY BUYER (AND ARE SO ASSIGNED OR
TRANSFERRED) AND TO THE EXTENT AND ONLY TO THE EXTENT THAT THE
SAME RELATE TO THE OWNERSHIP OR OPERATION OF THE BUYER'S
LEASEHOLD INTERESTS, THE GATHERING FACILITIES OR THE EQUIPMENT ON
OR AFTER THE EFFECTIVE DATE, ANY AND ALL DUTIES AND OBLIGATIONS
ARISING FROM ANY AND ALL ORDERS, CONTRACTS, AGREEMENTS (INCLUDING
WITHOUT LIMITATION ALL OPERATING AGREEMENTS, TRANSPORTATION
AGREEMENTS, UNIT AGREEMENTS, PARTICIPATION AGREEMENTS AND
PROCESSING AGREEMENTS), INSTRUMENTS, LICENSES, AUTHORIZATIONS,
PERMITS, AUDITS, CLAIMS, LIENS, SUITS, SETTLEMENTS AND DEMANDS,
AND OTHER RIGHTS, PRIVILEGES, BENEFITS AND POWERS CONFERRED UPON
BUYER, INCLUDING, BUT NOT LIMITED TO THOSE LISTED ON EXHIBIT 3.7
(COLLECTIVELY HEREINAFTER REFERRED TO IN THIS PARAGRAPH AS
"AGREEMENTS"). SELLER AGREES TO INDEMNIFY, DEFEND AND HOLD
HARMLESS BUYER, ITS OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES,
AGENTS AND REPRESENTATIVES (THE "BUYER GROUP"), REGARDLESS OF
WHETHFR BUYER GROUP WAS WHOLLY OR PARTIALLY NEGLIGENT OR
OTHERWISE AT FAULT, FROM AND AGAINST ANY AND ALL CLAIMS,
LIABILITIES, LOSSES, COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, COURT COSTS AND REASONABLE ATTORNEYS' FEES) ARISING
FROM SELLER'S BREACH OR NON-PERFORMANCE OF SUCH AGREEMENTS.
(d) BUYER AGREES TO RETAIN LIABILITY FOR ALL OF THE FOLLOWING
DESCRIBED OBLIGATIONS AND BUYER AGREES TO INDEMNIFY, DEFEND AND
HOLD HARMLESS SELLER, ITS PARENT AND THEIR RESPECTIVE
SUBSIDIARIES, PARTNERS, OFFICERS, DIRECTORS, SHAREHOLDERS,
EMPLOYEES, INSURERS, AGENTS AND REPRESENTATIVE AND ITS SUCCESSORS
AND ASSIGNS ("SELLER GROUP"), REGARDLESS OF WHETHER SELLER GROUP
WAS WHOLLY OR PARTIALLY NEGLIGENT OR OTHERWISE AT FAULT, FROM AND
AGAINST ANY AND ALL CLAIMS, LIABILITIES, LOSSES, COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, COURT COSTS AND
REASONABLE ATTORNEYS' FEES) ARISING FROM:
(I) EVENTS THAT TRANSPIRED OR CONDITIONS THAT CAME INTO EXISTENCE
PRIOR TO THE EFFECTIVE DATE THAT ARE ATTRIBUTABLE TO THE
OWNERSHIP OR OPERATION OF THE. BUYER'S ASSETS;
(II) ALL LIABILITY FOR PROPERTY DAMAGE OR INJURY TO OR DEATH OF
PERSONS OCCURRING PRIOR TO THE EFFECTIVE DATE AND ARISING OUT OF
THE OWNERSHIP OR OPERATION OF THE BUYER'S ASSETS REGARDLESS OF
WHETHER CLAIMS RELATED TO SAID DAMAGE, INJURY OR DEATH ARE
ASSERTED ON BEFORE OR AFTER THE EFFECTIVE DATE; AND/OR
(III) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF BUYER WITH REGARD
TO BUYER'S ASSETS AT ANY TIME BETWEEN THE EFFECTIVE DATE AND THE
CLOSING DATE.
(IV) ANY BREACH OR VIOLATION OF THIS AGREEMENT, INCLUDING A BREACH
OF ANY REPRESENTATION, WARRANTY OR COVENANT CONTAINED HEREIN FROM
BUYER TO SELLER.
6.2 Further Assurances. After Closing, Seller and Buyer agree to
take such further actions and to execute, acknowledge and deliver all such
further documents that are necessary or useful in carrying out the purposes
of this Agreement or of any document delivered pursuant hereto.
6.3 Governmental Approvals. After Closing, Seller and Buyer agree to
take all action and to execute all documents reasonably requested by the
other party to obtain all necessary permissions, approvals or consents
required by federal, state or local governmental authorities to consummate
the sale contemplated by this Agreement.
6.4 Cooperation. Each party to this Agreement shall provide the
other party with reasonable access to all relevant documents, data and
other information which may be required by the other parties for the
purpose of preparing tax returns and responding to any audit by any taxing
jurisdiction. Each party to this Agreement shall cooperate with all
reasonable requests of the other parties made in connection with contesting
the imposition of taxes. Notwithstanding anything to the contrary in this
Agreement, no party to this Agreement shall be required at any time to
disclose to the other parties any tax return or other confidential tax
information.
6.5 Access. Seller and Buyer each shall use its reasonable efforts
to afford the other with access to its employees, as follows: (i), in the
case of Seller, employees of Seller, as Buyer may reasonably request for
Buyer's proper business purposes, including without limitation, the defense
of legal proceedings, who remain employees of Seller following the date of
Closing and who are familiar with the operations of the Assets, and (ii),
in the case of Buyer, employees of Buyer, as Seller may reasonably request
for Seller's proper business purposes, including without limitation, the
defense of legal proceedings, who remain employees of Buyer following the
date of Closing and who are familiar with the operations of the Buyer's
Assets. Such access may include interviews or attendance at depositions or
legal proceedings; provided, however, that in any event all out-of-pocket
expenses (including wages and salaries) reasonably incurred by any party in
connection with this Section 6.5 shall be paid or promptly reimbursed by
the party requesting such services.
7 TAXES.
7.1 Apportionment of Ad Valorem and Property Taxes. All ad valorem
taxes, read property taxes, personal property taxes, and similar
obligations ("Property Taxes") with respect to the tax period in which the
Effective Date occurs shall be apportioned as of the Effective Date between
Seller and Buyer. The owner of record on the assessment date shall file or
cause to be filed all required reports and returns incident to the Property
Taxes and shall pay or cause to be paid to the taxing authorities all
Property Taxes relating to the tax period in which the Effective Date
occurs.
7.2 Sales Taxes. Any sales, use or other tax on the transfer of the
Assets from Seller to Buyer or on the transfer of Buyer's Assets from Buyer
to Seller shall be paid by the transferor.
7.3 Other Taxes. All taxes (other than income taxes) which are
imposed on or with respect to the production of oil, natural gas or other
hydrocarbons or minerals or the receipt of proceeds therefrom (including
but not limited to severance, production, and excise taxes) shall be
apportioned between the parties based upon the respective shares of
production taken by the parties. All such taxes which have accrued prior
to the Effective Date have been or will be properly paid or withheld by
transferor and all statements, returns. and documents pertinent thereto
have been or will be properly filed by transferor. Transferee shall be
responsible for paying or withholding or causing to be paid or withheld all
such taxes which have accrued after the Effective Date and for filing all
statements, returns, and documents incident thereto.
8 MISCELLANEOUS.
8.1 Governing Law. THIS AGREEMENT AND ALL INSTRUMENTS EXECUTED IN
ACCORDANCE WITH IT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH
THE SUBSTANTIVE LAWS OF THE STATE OF LOUISIANA, WITHOUT REGARD TO CONFLICT
OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
8.2 Entire Agreement. This Agreement, including all exhibits
attached hereto and made a part hereof, together with that certain letter
agreement relating to the purchase and sale and exchange of the Assets and
Buyer's Assets dated August 19, 1997 executed by and between Seller and
Buyer, as such may have been amended, including all exhibits attached
thereto and made a part thereof, (the "Letter of Intent") constitute the
entire agreement between the parties and together supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. In the event of any conflict between this
Agreement and the Letter of Intent, the provisions of this Agreement shall
take precedence. No supplement, amendment, alteration, modification, waiver
or termination of this Agreement or the Letter of Intent shall be binding
unless executed in writing by the parties hereto.
8.3 Waiver. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
8.4 Captions. The captions in this Agreement are for convenience
only and shall not be considered part of or affect the construction or
interpretation of any provision of this Agreement.
8.5 Notices. Any notice provided or permitted to be given under this
Agreement shall be in writing, and may be served by personal delivery, by
depositing same in the mail, addressed to the party to be notified, postage
prepaid, and registered or certified with a return receipt requested or by
facsimile transmission. Notice deposited in the mail in the manner
hereinabove described shall be deemed to have been given and received on
the date of the delivery as shown on the return receipt. Notice served in
any other manner shall be deemed to have been given and received only in
and when actually received by the addressee. For purposes of notice, the
addresses of the parties shall be as follows:
Seller's Mailing Address: Enserch Exploration, Inc.
2500 City West Blvd., Suite 1400
Houston, TX 77042
Attention: M. A. Altobelli
Offshore Land Representative
Telephone: (281) 271-3202
Fax: (281).271-3424
Buyer's Mailing Address: Reading & Bates Development Co.
901 Threadneedle, Suite 200
Houston, Texas 77096
Attention: Richard D. Stewart
Director of Legal/Land
Telephone: (281) 597-7542
Fax: (281) 597-7541
Each party shall have the right upon giving ten (10) days prior notice to
the other in the manner hereinabove provided, to change its address for
purposes of notice.
8.6 Expenses. Except as otherwise provided herein, each party shall
be solely responsible for all expenses incurred by it in connection with
this transaction (including, without limitation, fees and expenses of its
own counsel and accountants).
8.7 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced under any rule of law,
all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in a materially
adverse manner with respect to either party.
8.8 Survival. The warranties, representations, covenants, agreements
and obligations of the parties under this Agreement shall survive the
Closing of the transaction contemplated hereby
8.9 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives.
8.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.11 Attorneys' Fees. If a suit or action is filed by any party to
enforce this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees incurred in investigation or related matters and
in preparation for and prosecution or defense of such suit or action as
fixed by the trial court, and, if any appeal is taken from the decision of
the trial court, reasonable attorney's fees as fixed by the appellate court
or, if appropriate, by the trial court.
8.12 Indemnity. WITH RESPECT TO ANY OBLIGATION OF ANY PARTY UNDER
ANY PROVISION OF THIS AGREEMENT TO PROVIDE INDEMNITY, DEFEND THE
INDEMNITEE PARTY, AND PAY ATTORNEYS' FEES AND OTHER COSTS AND EXPENSES
OF LITIGATION ASSOCIATED WITH THE INDEMNITEE PARTY'S DEFENSE, IF
THE INDEMNITOR PARTY IS HONORING ITS OBLIGATION TO DEFEND THE INDEMNITEE
PARTY AND THE INDEMNITEE PARTY NEVERTHELESS ENGAGES AN ATTORNEY TO
REPRESENT ITSELF AGAINST SUCH CLAIM OR LAWSUIT, THE INDEMNITOR PARTY SHALL
NOT BE RESPONSIBLE FOR AND SHALL NOT PAY SUCH ATTORNEYS' FEES AND OTHER
COSTS AND EXPENSES OF LITIGATION INCURRED BY THE INDEMNITEE PARTY THAT ARE
ATTRIBUTABLE TO THE INDEMNITEE PARTY'S INDEPENDENT AND DUPLICATIVE DEFENSE.
IF ANY INDEMNITEE PARTY UNDER ANY CIRCUMSTANCES SETTLES OR DISCHARGES (OR
DELEGATES THE RIGHT TO SETTLE OR DISCHARGE TO ANY THIRD PARTY) ANY CLAIM OR
LAWSUIT COVERED BY ANY SUCH INDEMNITY PROVISION WITHOUT OBTAINING THE PRIOR
WRITTEN CONSENT OF THE INDEMNITOR PARTY, THEN THE INDEMNITOR PARTY'S
OBLIGATION TO DEFEND, INDEMNIFY AND HOLD HARMLESS SUCH INDEMNITEE PARTY
FROM SUCH CLAIM OR LAWSUIT SHALL TERMINATE AND INDEMNITOR PARTY SHALL HAVE
NO OBLIGATION TO FUND THE COST OF ANY SUCH SETTLEMENT.
8.13 NORM. Buyer and Seller acknowledge they have been informed that
oil and gas producing formations can contain naturally occurring
radioactive material ("NORM"). Formation of scale or deposits can
concentrate NORM on equipment and in sludges. The presence of NORM in
certain concentrations requires that certain appropriate health, safety,
and environmental precautions be taken.
8.14. Assignability. This Agreement may not be assigned,
transferred or conveyed by either party hereto without the express
prior written consent of the other party, which consent shall consent
shall not be unreasonably withheld.
8.15 Waiver and Release. In a letter dated July 1, 1997
and received by Buyer on July 2, 1997, Seller notified Buyer that
Seller contracted to sell to Enterprise Gulf of Mexico Inc. ("Enterprise")
a portion of Seller's interests in a group of oil and gas leases
("Enterprise Transaction") which includes several leases committed to that
certain Joint Operating Agreement dated effective May 1, 1995, between
Seller as operator, and Buyer, et al., as non-operators ("JOA") covering
the Allegheny Unit and the adjacent area as more fully described in Exhibit
A of the JOA.
Buyer has the prior preferential right to purchase the interests to be sold
in the Enterprise Transaction that are subject to the JOA. By letter to
Seller dated July 30, 1997, Buyer notified Seller that Buyer objected to
the Enterprise Transaction and refused to waive the maintenance of uniform
interest provision of the JOA. By letter to Seller dated July 31, 1997,
Buyer notified Seller that Buyer elected to exercise its preferential right
to purchase the interests in Green Canyon 252, 299 and 301 which Seller had
contracted to sell in the Enterprise Transaction.
As additional consideration for the mutual conveyances contained
herein and in order to remove the foregoing as an issue between Seller and
Buyer, Buyer hereby waives the maintenance of uniform interest provision of
the JOA insofar as it may apply to the Enterprise Transaction and Buyer
hereby withdraws its letter of July 31, 1997 and the exercise of
preferential rights contained therein. Seller and Buyer hereby mutually
release each other from any and all claims under the JOA that are
associated with the exercise of preferential rights and the maintenance of
uniform interest pursuant to the Enterprise Transaction.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
SELLER:
WITNESSES: ENSERCH EXPLORATION, INC.
Name:___________________________ ______________________________
Name:_________________________
Title:__________________________
Name:___________________________
BUYER:
WITNESSES: READING & BATES DEVELOPMENT CO..
Name:___________________________ ______________________________
Name:_________________________
Title:__________________________
Name:___________________________
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
_____________________, to me personally known to be the person whose
name is subscribed to the foregoing instrument, who declared and
acknowledged to me, notary, in the presence of the undersigned competent
witnesses, that he executed the above and foregoing instrument in his
capacity as _________________ of Reading & Bates Development Co., a Texas
corporation, on behalf of the said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of ______________________________ and
______________________________, competent witnesses, on the _____th day of
August, 1997.
WITNESSES:
________________________________ ___________________________________
________________________________
___________________________________
Notary Public in and for the
State of Texas
My Commission expires:
___________________________________
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
John C. Farris , to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that he
executed the above and foregoing instrument in his capacity as Regional
Director of Enserch Exploration, Inc., a Texas corporation, on behalf of
said corporation with full authority, and that the said instrument is the
free act and deed of the said corporation, and was executed for the uses,
purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of Michael Altobelli and David B. Openshaw, competent witnesses,
on the 28th day of August, 1997.
WITNESSES:
_______________________________ ___________________________________
_______________________________
___________________________________
Notary Public in and for the
State of Texas
My Commission expires:
_________________________
EXHIBIT 1.1
PART (a)
Assets To Be Assigned To Buyer by Seller
LEASEHOLD INTERESTS
1. LEASE OCS-G 8005. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
to Amerada Hess et al., as Lessees, bearing Serial No. OCS-G 8005
covering all of Block 253, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 16.50000%
(OPERATING RIGHTS SAVE AND EXCEPT THOSE RIGHTS AND HORIZONS SITUATED
BELOW AND NOT ABOVE A DEPTH OF 18,600' SUBSEA)
2. LEASE OCS-G 7049. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1984, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No OCS-G
7049 covering all of Block 254, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35067%
(OPERATING RIGHTS SAVE AND EXCEPT THOSE RIGHTS AND HORIZONS SITUATED
BELOW AND NOT ABOVE A DEPTH OF 18,600' SUBSEA)
3. LEASE OCS-G 8876. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June l, l 987, by and between the United States of America, as Lessor,
to Hunt Petroleum Corporation et al., as Lessees, bearing Serial No.
OCS-G8876 covering all of Block 297, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 16.83333%
(OPERATING RIGHTS IN THE NORTH HALF (N/2) AND THE SOUTHEAST QUARTER
(SE/4), SAVE AND EXCEPT THOSE RIGHTS AND HORIZONS SITUATED BELOW AND
NOT ABOVE A DEPTH OF 15,500' SUBSEA)
(OPERATING RIGHTS IN THE SOUTHWEST QUARTER (SW/4), SAVE AND EXCEPT
THOSE RIGHTS AND HORIZONS SITUATED BELOW AND NOT ABOVE A DEPTH OF
14,000' SUBSEA)
4. LEASE OCS-G 8010. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July l, l985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No OCS-G
8010 covering all of Block 298, Green Canyon, OCS Official Protraction
Diagram, NC 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35067%
(OPERATING RIGHTS SAVE AND EXCEPT THOSE RIGHTS AND HORIZONS SITUATED
BELOW AND NOT ABOVE A DEPTH OF 18,600' SUBSEA)
5. LEASE OCS-Gl 6718. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
September 1, l996, by and between the United States of America, as
Lessor, and Mobil Oil Exploration & Producing Southeast Inc., et al.,
as Lessees, bearing Serial No. OCS-G l 67 l 8 covering all of Block
252, Green Canyon OCS Official Protraction Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 35.00000%
(RECORD TITLE INTEREST AS TO ALL DEPTHS)
6. LEASE OCS-G l5571. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July l, l 995, by and between the United States of America, as Lessor,
and Enserch Exploration, Inc., et al., as Lessees, bearing Serial No.
OCS-G l557l covering all of Block 299, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 35.00000%
(RECORD TITLE INTEREST AS TO ALL DEPTHS)
7. LEASE OCS-G 15572. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1995, by and between the United States of America, as Lessor,
and Enserch Exploration, Inc., et al., as Lessees, bearing Serial No
OCS-G 15572 covering all of Block 301, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 35.00000%
(RECORD TITLE INTEREST AS TO ALL DEPTHS)
PART (b)
EQUIPMENT
1. WELLS:
WORKING REVENUE
INTEREST INTEREST
A. OCS-G 7049 #3 20.00000% 17.35067%
B. OCS-G 7049 #4 20.00000% 17.35067%
C. OCS-G 7049 #4ST1 20.00000% 17.35067%
D. OCS-G 749 #5 20.00000% 17.35067%
E. OCS-G 8876 #1 20.00000% 16.83333%
2. TEMPLATE:
That certain three well drilling template acquired, inter alia, by
Seller for use in connection with the drilling of the OCS-G 7049 #5
Well.
NOTE: All references in the Exhibit 1.1 made to "Working Interest" and
"Revenue Interest," and to the numbers set forth in connection
therewith, are for title warranty purposes only.
EXHIBIT 1.2
PART (a)
Buyer's Assets To Be Assigned To Seller by Buyer
BUYER'S LEASEHOLD INTERESTS
1. LEASE OCS-G 8876. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1987, by and between the United States of America, as Lessor,
to Hunt Petroleum Corporation et al., as Lessees, bearing Serial No.
OCS-G 8876 covering all of Block 295, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 16.83333%
(OPERATING RIGHTS IN THE NORTH HALF (N/2) AND THE SOUTHEAST QUARTER
(SE/4), SITUATED BELOW AND NOT ABOVE A DEPTH OF 15,500' SUBSEA)
(OPERATING RIGHTS IN THE SOUTHWEST QUARTER (SW/4), SITUATED BELOW AND
NOT ABOVE A DEPTH OF 14,000' SUBSEA)
2. LEASE OCS-G 15570. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1995, by and between the United States of America, as Lessor,
and Enserch Exploration Inc., et al., as Lessees, bearing Serial No.
OCS-G 1557O, covering all of Block 295, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.50000%
(RECORD TITLE INTEREST AS TO ALL DEPTHS
3. LEASE OCS-G 13171. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
May 1, 1991, by and between the United States of America, as Lessor,
and Exxon Corporation, et al., as Lessees, bearing Serial No. OCSG
13171, covering all of Block 341, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.500000%
(RECORD TITLE INTEREST AS TO ALL DEPTHS
PART (b)
EQUIPMENT
NONE
EXHIBIT 3.7
CONTRACTS, AGREEMENTS, COMMITMENTS AND OTHER MATTERS
1. Letter of Intent dated August 19, 1997, executed by and between
Reading & Bates Development Co. and Enserch Exploration, Inc., as such
may have been amended.
2. Oil Gathering Agreement dated December 2, 1994, executed by and
between EP Operating Limited Partnership, as Producer and Manta Ray
Gathering Systems Inc., as Gatherer.
3. Gas Gathering Agreement dated December 2, 1994, executed by and
between EP Operating Limited Partnership, as Producer and Manta Ray
Gathering Systems Inc., as Gatherer.
4. That certain Exploration, Drilling and Production Unit Agreement dated
June 22, l 995. executed by and between Enserch Offshore, Inc. and
Enserch Exploration, Inc., covering and pertaining to Green Canyon
Blocks 253, 254, 297, & 298.
5. That certain Operating Agreement dated May 1, 1995, executed by and
between Enserch Exploration, Inc., Reading & Bates Development Co., et
al., as amended by letters dated October 16, l995, October 31, l995
and May 17, 1996.
EXHIBIT 3.9
ENVIRONMENTAL DISCLOSURES
Incidents of Non-Compliance:
1. Blow out Preventor test using lower pressure than required for the OCS-
G 7049 #4 Well.
2. Blow out Preventor test did not indicate that each component was
effectively holding pressure for the OCS-G 7049 #4 Well.
Other:
1. OCS-G 7049 #3 Well
-loss from the MV Hoss Fortune of 2 drums containing 2 gallons
each of engine oil and "rig-rite" BOP fluid
-loss from a waste boat while traveling from Grand Isle base to
the Treasure Stawinner of a pallet containing miscellaneous items
from National Oilwell.
-loss of anchor shackle, and some chain which broke from chain
while demooring the rig and left on the bottom (below mudline) at
3300 feet.
ALL OF THE ABOVE WERE REPORTED TO THE MMS.
EXHIBIT 5.2(a)
TO PURCHASE AND SALE AND EXCHANGE AGREEMENT
FORMS OF CONVEYANCE INSTRUMENTS
FORM #1
STATE OF TEXAS
COUNTY OF HARRIS OCS-G ________
ASSIGNMENT OF OPERATING RIGHTS AND BILL OF SALE
THIS Assignment and Bill of Sale (the "Assignment") is entered
into and shall be effective as of 12:01 a.m., August 28, 1997 (hereinafter
referred to as the "Effective Date"), by and between ____________________,
a Texas corporation, (hereinafter referred to as "Assignor"), whose mailing
address is _______________________; and, a Texas corporation (hereinafter
referred to as "Assignee"), whose mailing address is
______________________________________.
W I T N E S S E T H:
1. Sale. THAT, FOR AND IN CONSIDERATION of the sum of One Hundred
and No/100 Dollars, cash in hand paid and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged
and confessed and for which due acquittance is hereby granted, Assignor
does hereby BARGAIN, GRANT, SELL, TRANSFER, ASSIGN, and CONVEY unto
Assignee an undivided twenty percent (20%) operating rights interest in and
to the following described properties (the "Assets"):
a. The oil, gas and mineral lease described on Exhibit 1, Part (a)
(the "Lease"), together with a like interest with respect to the
Lease in and to any and all (i) mineral interests, (ii)
overriding or landowners' royalty interests, (iii) surface and
subsurface interests and rights, (iv) beneficial, convertible or
reversionary interests, (v) interest owned, claimed or acquired,
or to be owned, claimed or acquired, by agreement, (vi)
production payments, (vii) contractual interests owned pursuant
to participation agreements, operating agreements or similar
agreements, and (viii) any and all like or unlike interests,
including without limitation those specific items identified on
Exhibit 1, Part (a). This shall include any contractual rights
providing for the acquisition or earning of any of the foregoing,
and Assignor's rights in respect of any pooled, communitized or
unitized acreage of which any of the foregoing is a part. (All of
the foregoing shall be referred to herein collectively as the
"Leasehold Interests.")
b. Any and all wells wellbores pipe, gathering lines, compressors,
facilities equipment, platforms, pipelines and any and all other
personal, real, movable and immovable property, fixtures or
equipment which are located on or used directly in connection
with the production, treatment or transportation of oil and gas
front the Leasehold Interests, including, without limitation,
those items specifically identified on Exhibit 1, Part (b), but
specifically excluding the vessel Allegheny (the "Equipment").
c. Any and all easements, rights-of-way, and subsurface and surface
rights associated or used in connection with any such easements
or rights-of-way, which easements, rights-of-way and subsurface
and surface rights have been obtained for use in connection with
the Leasehold Interests ("the Gathering Facilities").
d. Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interests on or after the Effective
Date.
e. To the extent the same are assignable or transferable by Assignor
and to the extent and only to the extent that the same relate to
the ownership or operation of the Leasehold Interests, the
Gathering Facilities or the Equipment on or after the Effective
Date, a like interest in and to all orders, contracts, agreements
(including without limitation all operating agreements,
transportation agreements, unit agreements, participation
agreements and processing agreements), instruments, licenses,
authorizations, permits, audits, claims, liens, suits settlements
and demands, and other rights, privileges, benefits and powers
conferred upon Assignor, including, but not limited to those
listed on Exhibit 1 part (c).
TO HAVE AND TO HOLD unto Assignee, subject to the terms, conditions
and reservation hereinbelow recounted.
2. Title Warranty. Assignor warrants that:
a. Except as specifically set forth in the Purchase and Sale and
Acreage Exchange Agreement described in Article 10. below or
under the contracts and agreements listed in Exhibit 1 to this
Assignment, and further except as a consequence of the formation
of a unit, neither Assignor nor any parent, subsidiary or
affiliate of Assignor during their respective periods of
ownership has (A) executed any deed, conveyance, assignment or
other instrument as an assignor, grantor, sublessor or in another
capacity or (B) has breached any obligation under the Lease that
would (i) result now or in the future, in Assignee's being
entitled to receive less than the net revenue interest for the
Lease, well or unit set forth in Exhibit 1 of all oil and gas in,
under, and that may be produced, saved and marketed from or
attributable to such Lease, well or unit, or (ii) obligate now or
in the future, Assignee to beat the costs and expenses relating
to the maintenance, development and operation of such Lease, well
or unit in an amount greater than the working interest for the
Lease, well or unit set forth in Exhibit 1, unless the net
revenue interest attributable to said working interest is
increased by a proportionate or greater amount; and
b. Except as specifically set forth in the Purchase and Sale and
Acreage Exchange Agreement described in Section 9. below or under
the contracts and agreements listed in Exhibit 1 to this
Assignment, the Assets are free of all liens, mortgages, charges,
pledges, security interests and encumbrances;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the "Special Limited Warranty"). Assignor
shall convey the Assets with no warranty whatsoever other that the Special
Limited Warranty, but with full substitution and subrogation to Assignee in
and to all covenants, agreements, representations and warranties made by
others heretofore given or made it connection with the Assets or any part
thereof.
3. Acceptance. Assignee accepts this Assignment and acknowledges
delivery of the Assets and accepts the obligations as provided in the
Purchase and Sale and Acreage Exchange Agreement described in Section 9.
below (including those contracts and agreements listed on Exhibit 1 of this
Assignment, insofar and only insofar as such contracts and agreements
cover, pertain or apply to the Leasehold Interests), on or after the
Effective Date.
4. Other Warranty Provisions. Except as may be specifically set
forth to the contrary in the Purchase and Sale Agreement, Assignee
acknowledges that (a) Assignor has not made any warranty or representation,
whether express, implied, at common law, by statute or otherwise, relating
to the fitness for an intended purpose or condition of any movable property
constituting a portion of the Assets and (b) Assignee shall acquire such
personal property in "AS IS, WHERE IS" condition. Except as may be
specifically set forth to the contrary in the Purchase and Sale Agreement
described in Section 9. below (the "Agreement"), Assignee acknowledges that
Assignor has made no representations or warranties whatever, expressed or
implied, (Assignor having hereby expressly disclaimed all such warranties)
as to the accuracy, completeness, or materiality of any data, information,
record or materials now, heretofore, or hereafter made available in
connection with this Agreement (including. without limitation, any
descriptions of oil and gas leases; quality or quantity or hydrocarbon
reserves attributable to the Assets, if any; production rates, exploratory
or development drilling opportunities, decline rates, potential for
production of hydrocarbons from the Assets; the environmental condition of
said Assets; the legal, tax or other consequences of owning Assignor's
interest in the Assets; or any other information contained in any material
furnished in connection with this transaction). Any and all such data,
information, records or materials furnished by Assignor to Assignee is
provided as a convenience only and any reliance on or use of same is at the
Assignee's sole risk. EXCEPT AS MAY BE SPECIFICALLY SET FORTH TO THE
CONTRARY IN THE PURCHASE AND SALE AND ACREAGE EXCHANGE AGREEMENT, WITHOUT
LIMITING THE GENERALITY OF THIS PARAGRAPH, ASSIGNOR DISCLAIMS AND NEGATES
AS TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND APPURTENANCES
SUBJECT TO THIS AGREEMENT (INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EMPRESS WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF
CONFORMITY TO MODELS OR S.AMPLE OR MATTERIALS. THE ASSIGNEE EXPRESSLY
AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES WILL BE ACCEPTED "AS IS", "WHERE IS", "WITH ALL FAULTS" AND
IN ITS PRESENT CONDITION AND STATE OF REPAIR.
5. Liability of Successors. The terms, conditions, rights and
obligations of this Assignment shall run with the land and extend to and be
binding upon the parties hereto and their respective successors, heirs
and/or assigns.
6. Counterparts. This Assignment may be executed in several original
counterparts, all of which are identical. Each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument. The signature
pages of the counterparts may be amalgamated to form complete documents for
the purpose of recording complete documents in the public registries.
7. Severability. If any provision of this Assignment is invalid or
unenforceable in part or in whole in any jurisdiction applicable to this
Assignment then, to the extent permitted by applicable law, (i) the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible, and (ii) the
invalidity or unenforceability of such provision in any jurisdiction shall
not affect the validity or enforceability thereof in any other
jurisdiction.
8. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
LOUISIANA, WITHOUT REGARD TO CONFLICT OF LAW RULES THAT WOULD DIRECT
APPLICATION OF THE. LAWS OF ANOTHER JURISDICTION.
9. Purchase and Sale and Acreage Exchange Agreement. Notwithstanding
anything to the contrary provided herein, this Assignment shall at all
times be subject to the terms, conditions and exceptions contained in that
certain unrecorded Purchase and Sale and Acreage Exchange Agreement dated
the same date as the effective date of this Assignment by and between
Assignor and Assignee. The unrecorded Purchase and Sale and Acreage
Exchange Agreement shall at all times govern the rights of the parties in
and to the Assets. All interested parties are hereby given notice of the
existence of the unrecorded Purchase and Sale and Acreage Exchange
Agreement.
10. MMS Approval. This Assignment is expressly made subject to the
approval of the Minerals Management Service, United States Department of
the Interior.
IN WITNESS WHEREFOF, this Assignment is executed in multiple originals
and in the presence of the undersigned witnesses on this _____th day of
August, 1997, but to be effective as of the Effective Date.
ASSIGNOR:
______________________________
WITNESSES: ______________________________
Name:________________________ Name:__________________________
Title:___________________________
Name:________________________
ASSIGNEE:
______________________________
WITNESSES: ______________________________
Name:________________________ Name:__________________________
Title:___________________________
Name:________________________
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
__________________________, to me personally known to be the person
whose name is subscribed to the foregoing instrument, who declared and
acknowledged to me, notary, in the presence of the undersigned competent
witnesses, that he executed the above and foregoing instrument in his
capacity as _________________________ of Enserch Exploration, Inc., a Texas
corporation, on behalf of said corporation with full authority, and that
the said instrument is the free act and deed of the said corporation, and
was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of ___________________ and ________________________________,
competent witnesses, on the ____th day of August. 1997.
WITNESSES:
_______________________________ ______________________________
_______________________________
______________________________
______________________________
Notary Public in and for the
State of Texas
My Commission expires:
________________________
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
______________________________, to me personally known to be the
person whose name is subscribed to the foregoing instrument, who declared
and acknowledged to me, notary, in the presence of the undersigned
competent witnesses, that he executed the above and foregoing instrument in
his capacity as ____________________________ of Reading & Bates Development
Co., a Texas corporation, on behalf of the said corporation with full
authority, and that the said instrument is the free act and deed of the
said corporation, and was executed for the uses, purposes and benefits
therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of ______________________________ and
______________________________, competent witnesses, on the ___th day of
August, 1997.
WITNESSES:
_______________________________ ______________________________
_______________________________
______________________________
______________________________
Notary Public in and for the
State of Texas
My Commission expires:
________________________
FORM #2
STATE OF TEXAS OCS-G__________
COUNTY OF HARRIS
ASSIGNMENT OF RECORD TITLE INTEREST
THIS Assignment of Record Title Interest (the "Assignment") is
entered into and shall be effective as of 12:01 a.m., August 28, 1997
(hereinafter referred to as the "Effective Date"), by and between
______________________________, a Texas corporation, (hereinafter referred
to as "Assignor"), whose mailing address is
___________________________________; and ______________________________, a
Texas corporation (hereinafter referred to as "Assignee"), whose mailing
address is _______________________________.
WITNESSETH:
1. Sale. THAT, FOR AND IN CONSIDERATION of the sum of One Hundred
and No/100 Dollars, cash in hand paid and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged
and confessed and for which due acquittance is hereby granted, Assignor
does hereby BARGAIN, GRANT, SELL, TRANSFER, ASSIGN, and CONVEY unto
Assignee an undivided __________ percent (_____%) record title interest in
and to the following described properties (the "Assets"):
a. The oil, gas and mineral lease described on Exhibit 1, Part (a)
the "Lease", together with a like interest with respect to the
Lease in and to any and all (i) mineral interests, (ii)
overriding or landowners' royalty interests, (iii) surface and
subsurface interests and rights, (iv) beneficial, convertible or
reversionary interests, (v) interest owned, claimed or acquired,
or to be owned, claimed or acquired, by agreement, (vi)
production payments, (vii) contractual interests owned pursuant
to participation agreements, operating agreements or similar
agreements, and (viii) any and all like or unlike interests,
including without limitation those specific items identified on
Exhibit 1, Part (a). This shall include any contractual rights
providing for the acquisition or earning of any of the foregoing,
and Assignor's rights in respect of any pooled, communitized of
unitized acreage of which any of the foregoing is a part. (All of
the foregoing shall be referred to herein collectively as the
"Leasehold Interests.")
b. Any and all easements, rights-of-way, and subsurface and surface
rights associated or used in connection with any such easements
or rights-of-way, which easements, rights-of-way and subsurface
and surface rights have been obtained for use in connection with
the Leasehold Interests.
c. Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interests on or after the Effective
Date.
d. To the extent the same are assignable or transferable by Assignor
and to the extent and only to the extent that the same relate to
the ownership or operation of the Leasehold Interests, on or
after the Effective Date, a like interest in and to all orders,
contracts, agreements (including without limitation all operating
agreements, transportation agreements, unit agreements,
participation agreements and processing agreements), instruments,
licenses, authorizations, permits, audits, claims, liens, suits,
settlements and demands, and other rights, privileges, benefits
and powers conferred upon Assignor, including, but not limited to
those listed on Exhibit 1 part (c).
TO HAVE AND TO HOLD unto Assignee, subject to the terms, conditions
and reservations hereinbelow recounted.
2. Title Warranty. Assignor warrants that:
a. Except as specifically set forth in the Purchase and Sale and
Acreage Exchange Agreement described in Article 10. below or
under the contracts and agreements listed in Exhibit 1 to this
Assignment, and further except as a consequence of the formation
of a unit, neither Assignor nor any parent, subsidiary or
affiliate of Assignor during their respective periods of
ownership has (A) executed any deed, conveyance, assignment or
other instrument as an assignor, grantor, sublessor or in another
capacity or (B) has breached any obligation under the Lease that
would (i) result now or in the future, in Assignee's being
entitled to receive less than the net revenue interest for the
Lease, well or unit set forth in Exhibit 1 of all oil and gas in,
under, and that may be produced, saved and marketed from or
attributable to such Lease, well or unit, or (ii) obligate now or
in the future, Assignee to bear the costs and expenses relating
to the maintenance, development and operation of such Lease, well
or unit in an amount greater than the working interest for the
Lease, well or unit set forth in Exhibit 1, unless the net
revenue interest attributable to said working interest is
increased by a proportionate or greater amount; and
b. Except as specifically set forth in the Purchase and Sale and
Acreage Exchange Agreement described in Section 9. below or under
the contracts and agreements listed in Exhibit 1 to this
Assignment, the Assets are free of all liens, mortgages, charges,
pledges, security interests and encumbrances;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the "Special Limited Warranty"). Assignor
shall convey the Assets with no warranty whatsoever other than the Special
Limited Warranty, but with full substitution and subrogation to Assignee in
and to all covenants, agreements, representations and warranties made by
others heretofore given or made in connection with the Assets or any part
thereof.
3. Acceptance. Assignee accepts this Assignment and acknowledges
delivery of the Assets and accepts the obligations as provided in the
Purchase and Sale and Acreage Exchange Agreement described in Section 9.
below (including those contracts and agreements listed on Exhibit 1 of this
Assignment, insofar and only insofar as such contracts and agreements
cover, pertain or apply to the Leasehold Interests), on or after the
Effective Date.
4. Other Warranty Provisions. Except as may be specifically set
forth to the contrary in the Purchase and Sale and Acreage Exchange
Agreement, Assignee acknowledges that (a) Assignor has not made any
warranty or representation, whether express, implied, at common law, by
statute or otherwise, relating to the fitness for an intended purpose or
condition of any movable property constituting a portion of the Assets and
(b) Assignee shall acquire such personal property in "AS IS, WHERE IS"
condition. Except as may be specifically set forth to the contrary in the
Purchase and Sale and Acreage Exchange Agreement described in Section 9.
below (the "Agreement"), Assignee acknowledges that Assignor has made no
representations or warranties whatever, expressed or implied, (Assignor
having hereby expressly disclaimed all such warranties) as to the accuracy,
completeness, or materiality of any data, information, record or materials
now, heretofore, or hereafter made available in connection with this
Agreement (including, without limitation, any descriptions of oil and gas
leases; quality or quantity or hydrocarbon reserves attributable to the
Assets, if any; production rates, exploratory or development drilling
opportunities, decline rates, potential for production of hydrocarbons from
the Assets; the environmental condition of said Assets; the legal, tax or
other consequences of owning Assignor's interest in the Assets; or any
other information contained in any material furnished in connection with
this transaction). Any and all such data, information, records or materials
furnished by Assignor to Assignee is provided as a convenience only and any
reliance on or use of same is at the Assignee's sole risk. EXCEPT AS MAY
BE SPECIFICALLY SET FORTH TO THE CONTRARY IN THE PURCHASE AND SALE AND
ACREAGE EXCHANGE AGREEMENT, WITHOUT LIMITING THE GENERALITY OF THIS
PARAGRAPH, ASSIGNOR DISCLAIMS AND NEGATES AS TO ANY PERSONAL PROPERTY,
FIXTURES, IMPROVEMENTS AND APPURTENANCES SUBJECT TO THIS AGREEMENT
(INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY
TO MODELS OR SAMPLE OR MATERIALS. THE ASSIGNEE EXPRESSLY AGREES THAT TITLE
TO SUCH PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND APPURTENANCES WILL BE
ACCEPTED "AS IS", "WHERE IS", "WITH ALL FAULTS", AND IN ITS PRESENT
CONDITION AND STATE OF REPAIR.
5. Liability of Successors. The terms, conditions, rights and
obligations of this Assignment shall run with the land and extend to and be
binding upon the parties hereto and their respective successors, heirs
and/or assigns.
6. Counterparts. This Assignment may be executed in several
original counterparts, all of which are identical. Each of such
counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same
instrument. The signature pages of the counterparts may be amalgamated to
form complete documents for the purpose of recording complete documents in
the public registries.
7. Severability. If any provision of this Assignment is invalid or
unenforceable in part or in whole in any jurisdiction applicable to this
Assignment, then, to the extent permitted by applicable law, (i) the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible, and (ii) the
invalidity or unenforceability of such provision in any jurisdiction shall
not affect the validity or enforceability thereof in any other
jurisdiction.
8. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
LOUISIANA, WITHOUT REGARD TO CONFLICT OF LAW RULES THAT WOULD DIRECT
APPLICATION OF THE LAWS OF ANOTEHR JURISDICTION.
9. Purchase and Sale and Acreage Exchange Agreement. Notwithstanding
anything to the contrary provided herein, this Assignment shall at all
times be subject to the terms, conditions and exceptions contained in that
certain unrecorded Purchase and Sale and Acreage Exchange Agreement dated
the same date as the effective date of this Assignment by and between
Assignor and Assignee. The unrecorded Purchase and Sale and Acreage
Exchange Agreement shall at all times govern the rights of the parties in
and to the Assets. All interested parties are hereby given notice of the
existence of the unrecorded Purchase and Sale and Acreage Exchange
Agreement.
10. MMS Approval. This Assignment is expressly made subject to the
approval of the Minerals Management Service, United States Department of
the Interior.
IN WITNESS WHEREFORE, this Assignment is executed in multiple
originals and in the presence of the undersigned witnesses on this this
_____th day of August, 1997, but to be effective as of the Effective Date.
ASSIGNOR:
______________________________
WITNESSES:
______________________________
Name:________________________
Name:_________________________
Title:__________________________
Name:________________________
ASSIGNEE:
______________________________
WITNESSES:
______________________________
Name:________________________
Name:_________________________
Title:__________________________
Name:________________________
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
______________________________, to me personally known to be the
person whose name is subscribed to the foregoing instrument, who declared
and acknowledged to me, notary, in the presence of the undersigned
competent witnesses, that he executed the above and foregoing instrument in
his capacity as ___________________________________of Enserch Exploration,
Inc., a Texas corporation, or behalf of said corporation with full
authority, and that the said instrument is the free act and deed of the
said corporation, and was executed for the uses, purposes and benefits
therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of ______________________________
and______________________________, competent witnesses, on the ___th day of
August, 1997.
WITNESSES:
_______________________________ ______________________________
_______________________________
______________________________
______________________________
Notary Public in and for the
State of Texas
My Commission expires:
________________________
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
______________________________, to me personally known to be the
person whose name is subscribed to the foregoing instrument, who declared
and acknowledged to me, notary, in the presence of the undersigned
competent witnesses, that he executed the above and foregoing instrument in
his capacity as ______________________________ of Reading & Bates
Development Co., a Texas corporation, on behalf of the said corporation
with full authority, and that the said instrument is the free act and deed
of the said corporation, and was executed for the uses, purposes and
benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of ______________________________ and
______________________________, competent witnesses, on the ___th day of
August, 1997.
WITNESSES:
_____________________________ ______________________________
_____________________________
______________________________
Notary Public in and for the
State of Texas
My Commission expires:
________________________
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated March 24, 1998, on the consolidated financial
statements of R&B Falcon Corporation and subsidiaries as of December 31,
1997 and 1996, and for the years ended December 31, 1997, 1996 and 1995
included in this Form 10-K, into the Company's previously filed
Registration Statement (file no. 333-43475).
/s/Arthur Andersen LLP
Houston, Texas
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of R&B Falcon Corporation as restated to reflect the
completion of a pooling of interests between Reading & Bates Corporation and
Falcon Drilling Company, Inc. for the three years ended December 31, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1997 JAN-01-1996 JAN-31-1995
<PERIOD-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 101 144 46
<SECURITIES> 0 0 0
<RECEIVABLES> 195 147 88
<ALLOWANCES> 7 3 1
<INVENTORY> 15 13 9
<CURRENT-ASSETS> 316 307 148
<PP&E> 2,007 1,427 1,062
<DEPRECIATION> 426 355 314
<TOTAL-ASSETS> 1,928 1,456 947
<CURRENT-LIABILITIES> 331 111 90
<BONDS> 0 0 0
0 0 0
0 0 3
<COMMON> 2 2 1
<OTHER-SE> 726 715 468
<TOTAL-LIABILITY-AND-EQUITY> 1,928 1,456 947
<SALES> 0 0 0
<TOTAL-REVENUES> 942 610 390
<CGS> 0 0 0
<TOTAL-COSTS> 649 429 325
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 46 43 35
<INCOME-PRETAX> 250 140 33
<INCOME-TAX> 85 27 6
<INCOME-CONTINUING> 156 106 23
<DISCONTINUED> (162) 0 0
<EXTRAORDINARY> 0 0 3
<CHANGES> 0 0 0
<NET-INCOME> (6) 103 22
<EPS-PRIMARY> (.04) .70 .19
<EPS-DILUTED> (.04) .67 .18
</TABLE>
