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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, 1998
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
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 15, 1999 - $1,281,215,842
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
ON MARCH 15, 1999 - 193,381,376
DOCUMENTS INCORPORATED BY REFERENCE
1) Proxy Statement for Annual Meeting of Stockholders to be held on
May 19, 1999 - Part III
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TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
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 7A.Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
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
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 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"). On December 1, 1998, R&B Falcon acquired all of
the outstanding stock of Cliffs Drilling Company ("Cliffs Drilling"), a
Delaware corporation incorporated in 1988. Cliffs Drilling is a contract
drilling company which provides daywork and turnkey drilling services,
mobile offshore production units and well engineering and management
services. Unless the context otherwise indicates, the term "Company"
herein refers to the total business conducted by R&B Falcon and its
subsidiaries.
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 and on
land. 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.
The Company owns and operates towing vessels and barges used to
transport and store equipment and material to support drilling
operations. These assets are deployed in the jack-up and barge rig
businesses. The Company also provides, to a minor extent, 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.
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 its oil and gas business, and
in the Company's financial statements previously filed with the SEC for
the three years ended December 31, 1997, 1996 and 1995 and the first
three quarters of 1998, the business was accounted for as a discontinued
operation. As of March 1999, the Company has not been able to divest
this business on terms it found acceptable and in accordance with
generally accepted accounting principles the Company has reclassified its
financial statements as if this business had not been discontinued. The
Company does not intend to engage in any material activities in this
business and still intends to divest this business. See Note N of Notes
to Consolidated Financial Statements.
Strategy
A major element of the Company's strategy since 1996 has been 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 12 drillships,
including five under construction or upgrade; 11 semisubmersibles,
including three under construction or upgrade and one floating production
vessel. 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.
Another element of the Company's strategy is to expand in markets
that can benefit from consolidation and allow it to provide services
related to its core drilling business. Pursuant to this strategy, the
Company has become the largest competitor in the worldwide shallow water
and barge rig markets and is also a leading competitor in the domestic
offshore and inland marine transportation markets.
Significant Developments During 1998
The two most significant developments for the Company during 1998
were the acquisition of Cliffs Drilling and the rapid and significant
decline in demand for contract drilling services.
1. Effective on December 1, 1998, pursuant to an Agreement and Plan of
Merger dated August 21, 1998, R&B Falcon acquired all of the
outstanding stock of Cliffs Drilling in exchange for approximately
27.1 million shares of R&B Falcon common stock. Each share of
Cliffs Drilling's common stock was converted into 1.7 shares of R&B
Falcon common stock. Total consideration for Cliffs Drilling was
approximately $405.1 million. The above transaction has been
recorded using the purchase method of accounting, accordingly
Cliffs Drilling's results of operations are included with the
Company's results of operations since the acquisition date.
2. A significant decline in the demand for contract drilling services
began in mid-1998 and has continued into 1999. The Company expects
these adverse market conditions to continue through 1999 and
perhaps into 2000. The decline has been particularly dramatic in
the domestic barge rig and jack-up markets, where the Company is
one of the largest contractors. In response to these conditions,
the Company has implemented cost-cutting measures, primarily laying
off employees and taking rigs off the market. In addition to cost-
cutting measures, the Company will try to expand its turnkey
drilling activities as a means of generating additional
opportunities for its idle rigs to be put to work.
The following are other significant developments that occurred in 1998:
1. The dynamically positioned drillship Deepwater Pathfinder was
delivered in September 1998 at a cost of approximately $275.0
million. 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 Deepwater Pathfinder commenced its five year
contract with an affiliate of Conoco, Inc. in the first quarter of
1999.
2. The dynamically positioned drillship Deepwater Frontier was
delivered in March 1999 at a cost of approximately $270.0 million.
This drillship is owned by a limited liability company, which is
in turn owned 60% by the Company and 40% by an affiliate of
Conoco, Inc. During the initial five years following delivery,
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 construction of the dynamically positioned drillship Deepwater
Millennium continued on schedule. The estimated cost of the
drillship is approximately $270.0 million. Immediately following
delivery of the drillship from the shipyard, which is expected to
be in the second quarter of 1999, the drillship is contracted for
4 years to Statoil.
4. The Company commenced the construction of the dynamically
positioned drillship Deepwater IV. The estimated cost of the
drillship is approximately $305.0 million. Immediately following
delivery of the drillship from the shipyard, which is expected to
be in the third quarter of 2000, the drillship is contracted for 3
years to Texaco. This contract is a substitute for the previously
contracted Peregrine VIII (see note 7 below).
5. Significant delays and cost overruns have been experienced in the
construction of the dynamically positioned drillship Peregrine IV.
The estimated cost of the drillship is approximately $210.0
million (original estimate: $160.0 million). Immediately
following delivery of the drillship from the shipyard, which is
expected to be in the second quarter of 1999 (original estimate:
fourth quarter of 1998), the drillship is contracted for six years
to Petrobras. Under the Petrobras contract, the Company is subject
to late delivery penalties up to a maximum of approximately $38.6
million.
6. Significant delays and cost overruns have been experienced in the
upgrade and refurbishment of the dynamically positioned drillship
Peregrine VII. It is currently estimated that this vessel will
cost approximately $270.0 million (original estimate: $145.0
million) and will be delivered from the shipyard in the third
quarter of 1999 (original estimate: second quarter of 1998). The
drillship is contracted for three years (with five one-year
extensions) to Amoco. However, Amoco has indicated that they may
cancel this contract as a result of delivery delays. The Company
believes that it will be able to find work for the Peregrine VII
at dayrates comparable to its previously contracted levels.
However, the Company expects that any new contracts will likely be
short-term or on a well-to-well basis.
7. In the third quarter of 1998, the Company cancelled the Peregrine
VI and the Peregrine VIII drillship conversion projects due to
continuing uncertainty as to final cost and expected delivery dates.
As a result, the drilling contract on the Peregrine VIII was
terminated on September 24, 1998, and the drilling contract on the
Peregrine VI was terminated on January 1, 1999. Both terminations
were without prejudice to the rights of the oil companies. The
Company believes that based on provisions of the contracts that
preclude recovery of indirect or consequential damages, and
projected rig availability in the offshore drilling industry, the
Company will not have any material liability under these drilling
contracts as a result of the termination thereof. The contracts
with the shipyard for conversion of the Peregrine VI and the
Peregrine VIII have been cancelled. In addition, in the fourth
quarter of 1998, the Company cancelled two additional drillship
conversion projects that were in the preliminary phases. As a
result of the termination of these four drillship conversion
projects, the Company expensed $118.3 million in related costs in
1998.
8. The construction of the new generation ultra deepwater moored
semisubmersible, the RBS8M, formerly the RBS6, continued on
schedule but over budget. The estimated cost of the unit is
approximately $315.0 million (original estimate: $275.0 million).
Immediately following the delivery of the unit from the shipyard,
which is expected to be in the first quarter of 2000, the unit is
contracted for five years to Shell.
9. The Company commenced the construction of a new generation ultra
deepwater moored semisubmersible, the RBS8D. The estimated cost
of the unit is approximately $325.0 million. Immediately following
delivery of the unit from the shipyard, which is expected to be in
the fourth quarter of 2000, the unit is contracted for 3 years
(with five one-year options) to Vastar.
10. Significant delays and cost overruns have been experienced in the
upgrade and refurbishment of the semisubmersible rig Falcon 100.
The upgrade and refurbishment is estimated to cost approximately
$118.0 million (original estimate: $60.0 million). Immediately
following the delivery of the unit from the shipyard, which is
expected to be in the second quarter of 1999 (original estimate:
fourth quarter of 1998), the unit is contracted for four years to
Petrobras. Under the terms of the Petrobras contract, the Company
is subject to late delivery penalties up to a maximum of
approximately $14.7 million.
11. In September 1998, the Company and Navis ASA ("Navis"), a
Norwegian public company which is constructing a dynamically
positioned drillship (the Navis Explorer I), entered into an
agreement pursuant to which the Company will make a capital
contribution to Navis of $50.0 million in exchange for stock in
Navis at the rate of 11 NOK per share. The Navis Explorer I is
designed to drill in 10,000 feet of water and is being constructed
at Samsung at an estimated cost of $280.0 million, with a
scheduled delivery in the second quarter of 2000. The Company
expects its capital contribution will be in the form of
approximately $30.0 million of equipment and equipment purchase
orders and approximately $20.0 million in cash. It is expected
that the Company will own approximately 38% of the outstanding
stock of Navis following such contributions and the completion of
an equity offering currently underway by Navis. Most of the
equipment and equipment purchase orders that will be contributed
by the Company was acquired by the Company in connection with the
Peregrine VI and Peregrine VIII projects and is no longer required
for such projects in light of their cancellation. Navis and the
Company have entered into agreements pursuant to which the Company
will supervise construction of the drillship and manage it
following its delivery.
12. In a series of transactions, the Company acquired 25 tugs, five
ocean going barges and six workover rigs for an aggregate cost of
$33.4 million in cash and the issuance of 763,680 shares of its
common stock. The Company has reserved for issuance 282,192 shares
of its common stock for contingent obligations relating to these
transactions.
13. The Company paid $10.7 million in cash for the acquisition of the
previously leased jackup Falrig 82.
14. The Company paid $5.8 million in cash for the acquisition of a two
story, 86,000 square foot office building in Houston, Texas that
serves as its corporate headquarters.
15. In December 1998, Mobil U.K. Ltd. ("Mobil") terminated its contract
to use the Company's Jack Bates semisubmersible rig on the grounds
that two of the rig's anchor cables broke. The contract provided
for Mobil's use of the rig at a dayrate of approximately $115,000
for the primary term through January 1999 and approximately
$200,000 for the extension term from February 1999 through December
2000. The Company does not believe that Mobil had the right to
terminate this contract. The Company has received a proposal from
Mobil to recontract the Jack Bates at a dayrate of approximately
$156,000 for a one or two well drilling program. The Company
believes this program may last approximately six months. This
proposal is without prejudice to either party's rights in the
dispute over the termination of the original contract. If the
Company is not successful in settling its dispute over the termin-
ation of the original contract, the Company intends to commence
legal proceedings to enforce its rights under the contract. The
Company believes that it will be able to find other work for the
Jack Bates, but that any such work will be at lower dayrates than
the $200,000 dayrate established for the extended term of the
original contract.
The Company's Fleet
The following sets forth a brief description of the types and
capabilities of the rigs operated by the Company. Rigs described as
"operating" are under contract (including rigs being mobilized under
contract). Rigs described as "available" are ready for service and are
being actively marketed. Rigs described as "stacked" are not being
actively marketed but are capable of being returned to service with
little or no refurbishment. Rigs described 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 to 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 self-propelled and move between locations under
their own power when afloat on the pontoons; however, most are relocated
with the assistance of tugs.
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. 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 following table provides certain information regarding the
Company's semisubmersible fleet as of March 15, 1999:
Year Water Drilling
Built/ Depth Depth
Rig Name Upgraded Capability Capability Location Status
- -------- -------- ---------- ---------- -------- ------
(expressed in feet)
Fourth-Generation Semisubmersibles
JACK BATES 1986/97 6,000 30,000 United Kingdom Under Repair
HENRY GOODRICH(1) 1985 2,000 30,000 United Kingdom Operating
PAUL B. LOYD,JR.(1) 1987 2,000 25,000 United Kingdom Operating
RBS8M (formerly RBS6) - 8,000 30,000 Korea Under
Construction
RBS8D - 10,000 30,000 Korea Under
Construction
Third-Generation Semisubmersibles
JIM CUNNINGHAM 1982/95 5,000 25,000 Angola Operating
M.G.HULME,JR.(2) 1983/96 5,000 25,000 Singapore Under Upgrade
IOLAIR (3) 1982 2,000 - United Kingdom Operating
Second-Generation Semisubmersibles
C.KIRK RHEIN,JR. 1976/97 3,300 25,000 U. S. Gulf Operating
J.W. McLEAN 1974/96 1,500 25,000 United Kingdom Operating
FALCON 100(4) 1974/99 2,450 25,000 U. S. Gulf Under Upgrade
RIG 82(5) 1975 1,500 - Norway Cold Stacked
________________________
(1) Unit is owned by Arcade Drilling AS ("Arcade"), a majority owned
subsidiary of the Company. The Company was a party to an agreement
with Transocean Offshore, Inc., the largest minority shareholder of
Arcade, which subjected the Company to certain restrictions on
engaging in transactions with Arcade. Such agreement expired
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 E of Notes
to Consolidated Financial Statements.
(3) The Iolair is designed for field support and living accommodations.
(4) The Falcon 100 is scheduled to be delivered in the second quarter of
1999.
(5) Rig 82 was originally built as a drilling unit, but was converted to
an accommodation vessel in 1978.
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 following table provides certain information regarding the
Company's drillship fleet as of March 15, 1999:
Year Water Drilling
Built or Depth Depth
Rig Name Converted Capability Capability Location Status
- -------- --------- ---------- ---------- -------- ------
(expressed in feet)
PEREGRINE I 1996 (1) 7,200 25,000 Brazil Under Repair
PEREGRINE II 1979 3,300 25,000 Malaysia Stacked
PEREGRINE III 1976 4,200 25,000 Angola Operating
FALCON DUCHESS 1975 1,500 20,000 Malaysia Stacked
FALCON ICE (2) 1975 1,500 20,000 Indonesia Cold Stacked
DEEPWATER
PATHFINDER (3) 1998 10,000 30,000 U.S. Gulf Operating
DEEPWATER
FRONTIER (4) 1999 10,000 30,000 Korea Delivered
DEEPWATER
MILLENNIUM - 10,000 30,000 Korea Under Construction
DEEPWATER IV
(unnamed) - 10,000 30,000 Korea Under Construction
PEREGRINE IV - 9,200 30,000 Singapore Under Construction
PEREGRINE VII - 7,800 25,000 United Kingdom Under Construction
NAVIS
EXPLORER I (5) - 10,000 30,000 Korea Under Construction
__________________________
(1) Although originally constructed in 1982, this unit was substantially
upgraded in 1996.
(2) Unit is being operated by the Company under an operating lease.
(3) Unit is owned by a limited liability company in which the Company
owns a 50% interest.
(4) Unit is owned by a limited liability company in which the Company
owns a 60% interest.
(5) Unit is being constructed for a company in which the Company will
own a 38% interest.
Floating Production Vessels. Floating production vessels are equipped
for oil production, processing and storage. The Company currently owns
and operates one floating production storage and offloading vessel, the
Seillean. The Seillean is currently operating in Brazil pursuant to a
long-term contract. During 1998, the Seillean was upgraded to work in
6,000 feet of water.
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.
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.
The following table provides certain information regarding the
Company's drilling tenders as of March 15, 1999:
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 Ivory Coast Stacked
W. D. KENT 1977 400 20,000 Malaysia Operating
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. 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 15, 1999:
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 Kingdom Operating
RON TAPPMEYER MLT 116-C 1978 300 25,000 Australia Stacked
C. E. THORNTON MLT 53-C 1974 300 25,000 Greece Stacked
RANDOLPH YOST MLT 116-C 1979 300 25,000 Angola Stacked
D. R. STEWART MLT 116-C 1980 300 25,000 Italy Operating
HARVEY H. WARD F&G L780 1981 300 25,000 Singapore Stacked
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 Stacked
J. T. ANGEL F&G L780 1982 300 25,000 India Operating
LaSALLE DMI 200-IC 1982 190 25,000 Qatar Operating
CLIFFS
DRILLING 150 MLT 150-44-C 1979 150 20,000 U.S. Gulf Operating
CLIFFS
DRILLING 151 BMC 150-H 1981 150 25,000 U.S. Gulf Stacked
CLIFFS
DRILLING 154 MLT 150-44-C 1979 150 20,000 U.S. Gulf Cold
Stacked
CLIFFS
DRILLING 155 Levingston011-C 1980 150 20,000 U.S. Gulf Stacked
CLIFFS
DRILLING 156 BMC 150-H 1983 150 25,000 U.S. Gulf Stacked
CLIFFS
DRILLING 160 BMC 150-IC 1980 160 20,000 Qatar Operating
Slot type Mat-Supported
Jack-up Rigs
FALRIG 17 Bethlehem 1974 250 25,000 U.S. Gulf Stacked
JU-250MS
FALRIG 18 Bethlehem 1978 250 25,000 U.S. Gulf Operating
JU-250MS
FALRIG 19 Bethlehem 1978 250 25,000 U.S. Gulf Stacked
JU-250MS
FALRIG 20 Bethlehem 1982 250 25,000 U.S. Gulf Stacked
JU-250MS
FALRIG 82 (1) Baker Marine 1978 200 25,000 U.S. Gulf Operating
BMC 250
FALRIG 83 Bethlehem 1978 250 25,000 Nigeria Stacked
JU-250MS
FALRIG 84 Bethlehem 1975 250 25,000 U.S. Gulf Operating
JU-250MS
ACHILLES BMC 250-MS 1981 250 25,000 U.S. Gulf Stacked
SEA HAWK Bethlehem 1976 250 25,000 U.S. Gulf Stacked
JU-250MS
TAURUS Bethlehem 1976 250 25,000 U.S. Gulf Stacked
JU-250MS
CLIFFS
DRILLING 180 BMC 250-MS 1978 184 25,000 U.S. Gulf Stacked
Cantilevered Mat-Supported
Jack-up Rigs
PHOENIX I Bethlehem 1981 200 25,000 U.S. Gulf Stacked
JU-200MC
PHOENIX II Bethlehem 1982 200 25,000 U.S. Gulf Stacked
JU-200MC
PHOENIX III Bethlehem 1981 200 25,000 U.S. Gulf Stacked
JU-200MC
PHOENIX IV Bethlehem 1981 200 25,000 U.S. Gulf Operating
JU-200MC
FALRIG 85 Bethlehem 1979 200 25,000 U.S. Gulf Stacked
JU-200MC
FALRIG 86 Bethlehem 1980 200 25,000 U.S. Gulf Stacked
JU-200MC
PHOENIX Bethlehem 1981 200 25,000 Mexico Operating
VI (2) JU-200MC
CLIFFS Bethlehem 1982 100 25,000 U.S. Gulf Stacked
DRILLING 100 JU-100MC
CLIFFS McDermott 1973 100 - Trinidad Operating
DRILLING 101 87-C
CLIFFS Bethlehem 1982 110 25,000 Trinidad Operating
DRILLING 110 JU-100MC
CLIFFS Bethlehem 1980 150 25,000 U.S. Gulf Stacked
DRILLING 152 JU-150MC
CLIFFS Bethlehem 1980 150 25,000 U.S. Gulf Operating
DRILLING 153 JU-150MC
CLIFFS Bethlehem 1979 200 25,000 U.S. Gulf Operating
DRILLING 200 JU-200MC
CLIFFS Bethlehem 1980 200 20,000 Mexico Stacked
DRILLING 201 JU-200MC
CLIFFS Bethlehem 1980 200 25,000 Venezuela Operating
DRILLING 202 JU-200MC
_____________________
(1) Operated by the Company under a lease with an option to purchase.
(2) The Company has bareboat chartered this rig to another contractor
for one well. As of March 15, 1999 such charter was on a month-
to-month basis.
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.
Submersible rigs typically operate in water depths of 12 to 85 feet.
The following table provides certain information regarding the
Company's submersible rig fleet as of March 15, 1999:
Water Drilling
Rig Year Depth
Rig Name Description Built Capability Capability Location Status
- -------- ----------- ----- ---------- ---------- -------- ------
(expressed in feet)
Rig 203 Pace 85G 1983 85 30,000 U.S. Gulf Stacked
FALRIG 77 Donhaiser
Marine DMI85 1983 85 30,000 U.S. Gulf Stacked
FALRIG 78 Donhaiser
Marine DMI85 1983 85 30,000 U.S. Gulf Stacked
Mobile Offshore Production Units. MOPUs are mobile offshore drilling
units which have been converted from drilling operations to a production
application. Conversion from drilling to production mode normally
requires removal of the drilling package, leaving an open deck for
placement of production equipment.
The following table provides certain information regarding the
Company's mobile offshore production units as of March 15, 1999:
Water
Year Depth
Rig Name Built Capability Location Status
-------- ----- ---------- -------- ------
(expressed
in feet)
CLIFFS DRILLING 4 1967 150 U. S. Gulf Operating
LANGLEY 1965 150 Nigeria Operating
CLIFFS DRILLING 8 1977 250 U. S. Gulf Operating
CLIFFS DRILLING 10 1979 250 Qatar Stacked
Platform Drilling Rigs. Platform drilling rigs are designed to be
placed on existing or newly built production platforms. The production
platform's crane is generally capable of lifting the modules that make up
the rig or lift the modularized rig crane that would set the rig modules.
The assembled rig has all the drilling, housing and support facilities
necessary for drilling multiple production wells but does not have many
of the marine systems that would be provided on a jack-up or
semisubmersible rig. The platform drilling rig requires a significantly
larger platform than a tender rig but is not as weather sensitive. Most
platform drilling rig contracts are for multiple wells and extended
periods of time on the same platform.
The following table provides certain information regarding the
Company's platform drilling rigs as of March 15, 1999:
Drilling
Year Year Depth
Rig Name Built Rebuilt Capability Location Status
-------- ----- ------- ---------- -------- ------
(expressed
in feet)
CLIFFS DRILLING 1 1988 1998 18,000 Trinidad Stacked
CLIFFS DRILLING 3 1993 1998 25,000 Trinidad Operating
CLIFFS DRILLING 17 1996 - 12,000 Brazil Operating
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 ten to 14 foot columns, which increases
the water depth capabilities of the rig. The Company's barge rigs are
generally rated for drilling to depths in excess of 20,000 feet.
The following table provides certain information regarding the
Company's domestic barge drilling fleet as of March 15, 1999:
Horse- Drilling
Drilling Equipment/ power Year Depth
Rig Main Power Rating Built Capability Status
- --- ------------------- ------ ----- ---------- ------
(expressed
in feet)
Conventional Barges
1 Skytop Brewster/
Caterpillar 2,000 1980 20,000 Operating
3 Mid-Continent/
Caterpillar (1) 3,000 1981 25,000 Stacked
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 Stacked
18 Skytop Brewster/
Caterpillar (2) 1,000 1980 12,000 Stacked
19 National/Caterpillar (2) 1,000 1996(3) 14,000 Stacked
20 National/Caterpillar (2) 1,000 1998(3) 14,000 Operating
21 Oilwell/Caterpillar 1,500 1982 15,000 Stacked
23 Mid-Continent/
Caterpillar (1)(2) 1,000 1995(3) 14,000 Stacked
24 National/
Caterpillar (1)(2) 1,500 1978 16,000 Stacked
25 Continental Emsco/
Caterpillar 3,000 1976 25,000 Cold Stacked
28 Continental Emsco/
Caterpillar 3,000 1979 30,000 Stacked
29 Continental Emsco/
Caterpillar 3,000 1980 30,000 Stacked
30 Continental Emsco/
Caterpillar 3,000 1981 30,000 Stacked
31 Continental Emsco/
Caterpillar 3,000 1981 30,000 Stacked
32 Continental Emsco/
Caterpillar 3,000 1982 30,000 Stacked
37 National/EMD 3,000 1965 20,000 Cold Stacked
38 National/EMD 3,000 1965 20,000 Cold Stacked
74 National/EMD (1) 2,000 1981 25,000 Cold Stacked
75 National/EMD (1) 3,000 1979 30,000 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 Stacked
8 Oilwell/Caterpillar 2,000 1978 25,000 Cold Stacked
9 Oilwell/Caterpillar 2,000 1981 25,000 Stacked
10 Oilwell/Caterpillar 2,000 1981 25,000 Stacked
16 National/EMD 3,000 1981 30,000 Operating
17 National/EMD 3,000 1981 30,000 Operating
22 Skytop Brewster/
Caterpillar (2) 1,500 1978 16,000 Stacked
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 Stacked
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 Stacked
47 Oilwell/EMD 3,000 1982 30,000 Stacked
48 Gardner Denver/Caterpillar 3,000 1982 30,000 Stacked
49 Oilwell/Caterpillar 3,000 1980 30,000 Stacked
52 Oilwell/Caterpillar 2,000 1981 25,000 Stacked
54 National/EMD 3,000 1970 30,000 Stacked
55 Ideco/EMD 3,000 1981 30,000 Operating
56 National/Caterpillar 2,000 1973 25,000 Stacked
57 National/Caterpillar 2,000 1975 25,000 Stacked
61 Mid-Continent/EMD 3,000 1978 30,000 Stacked
62 Mid-Continent/EMD 3,000 1978 30,000 Operating
63 Mid-Continent/EMD 3,000 1978 30,000 Stacked
64 Mid-Continent/EMD 3,000 1979 30,000 Stacked
____________________
(1) These rigs are leased to the Company.
(2) These rigs are also capable of performing workover operations.
(3) These rigs were reconstructed on the date indicated using an
existing hull.
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 15, 1999:
Drilling Horse-
Equipment/ power Year Year Depth
Rig Main Power Rating Built Rebuilt Capability Status
--- --------- ------ ----- ------- ---------- ------
(expressed
in feet)
40 Oilwell/EMD 3,000 1980 1994 25,000 Operating
42 National/EMD 3,000 1982 1994 25,000 Stacked
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.
The following table provides certain information regarding the
Company's workover fleet as of March 15, 1999:
Mast Workover
Capacity Year Depth
Rig Drawworks (Pounds) Built Capability Status
--- --------- -------- ----- ---------- ------
(expressed
in feet)
R&B Falcon Rig 90 Ideco H-30 250,000 1990(1) 15,000 Stacked
R&B Falcon Rig 91 IRI 1287 250,000 1981 15,000 Stacked
R&B Falcon Rig 92 IRI 2042 300,000 1981 15,000 Stacked
R&B Falcon Rig 93 Ideco H-35 450,000 1978 20,000 Stacked
R&B Falcon Rig 94 IRI 1287 250,000 1996(1) 15,000 Stacked
R&B Falcon Rig 95 Wilson 75 369,000 1991(1) 20,000 Stacked
R&B Falcon Rig 96 Wilson 75 400,000 1996(1) 20,000 Stacked
R&B Falcon Rig 97 Wilson 75 400,000 1997(1) 20,000 Stacked
R&B Falcon Rig 98 Mid-Continent U36A 550,000 1979 25,000 Stacked
R&B Falcon Rig 99 Gardner Denver 800 800,000 1972 25,000 Stacked
____________
(1) These rigs were reconstructed on the date indicated
using an existing hull.
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 15, 1999, the Company owned 102 tugs and 60
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.
Land Drilling Rigs. Land drilling rigs are completely equipped to
drill oil and gas wells on land. These rigs are designed to be
transported by truck and assembled by crane. They require a firm, level
area to be erected and sometimes require foundation work to be performed
to support the drill floor and derrick. These rigs are equipped with
living quarters.
The following table provides certain information regarding the
Company's land drilling rigs as of March 15, 1999:
Drilling
Rig Year Depth
Rig Name Description Built Capability Location Status
- -------- ----------- ----- ---------- -------- ------
(express
in feet)
CLIFFS DRILLING 28 National 1320 1977 25,000 Venezuela Operating
CLIFFS DRILLING 34 Oilwell E-2000 1980 18,000 Venezuela Operating
CLIFFS DRILLING 35 Oilwell E-2000 1980 18,000 Venezuela Operating
CLIFFS DRILLING 36 Oilwell E-2000 1982 18,000 Venezuela Operating
CLIFFS DRILLING 37 Oilwell E-2000 1982 18,000 Venezuela Operating
CLIFFS DRILLING 40 National 1320-UE 1980 25,000 Venezuela Operating
CLIFFS DRILLING 41 National 1320 1981 25,000 Venezuela Operating
CLIFFS DRILLING 42 National 1320-UE 1981 25,000 Venezuela Operating
CLIFFS DRILLING 43 National 1320-UE 1981 25,000 Venezuela Operating
CLIFFS DRILLING 54 National 1320-UE 1981 30,000 Venezuela Operating
CLIFFS DRILLING 55 National 1320-UE 1983 35,000 Venezuela Stacked
Land Workover Rig. The Company has one land workover rig, Rig 89,
which is a Cabot 300 with a workover depth capability of 15,000 feet and
it is currently stacked in Louisiana.
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.
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, and in the
financial statements for the three years ended December 31, 1997, 1996
and 1995, the business was accounted for as a discontinued operation. As
of March 1999, the Company has not been able to divest this business on
terms it found acceptable and in accordance with generally accepted
accounting principles the Company has reclassified its financial
statements as if this business had not been discontinued. The Company
does not intend to engage in any material activities in this business and
still intends to divest this business. See Note N 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. In 1997,
Devco acquired an additional 20% working interest in the Allegheny field
and British-Borneo Petroleum, Inc., ("British-Borneo") acquired the
remaining 60% working interest in the field. In August 1998, Devco sold
its 40% interest in the field to British-Borneo for approximately $25.0
million.
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, North Boomvang and East Bequia
prospects (collectively "Boomvang Area") 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 Boomvang Area 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 and East Boomvang prospects were drilled. Norcen thereby earned
the right to an assignment of a 37.5% working interest in the two
prospects. In lieu of accepting the assignments, Norcen's successor by
merger, Union Pacific Resources Company, elected to accept an assignment
of an overriding royalty in the Boomvang development. Devco currently
owns a 100% working interest. Devco anticipates bringing in a partner on
a promoted basis to pay for drilling a confirmation well on North
Boomvang in May 1999. If successful, Devco anticipates the Boomvang
development will be project financed.
Devco has acquired the right to re-enter and complete a gas well
previously drilled by Shell to earn a 100% working interest in Green
Canyon Block 20, in the U.S. Gulf of Mexico. Shell has retained a net
profits interest with the option to convert to a 40% working interest in
the project upon achieving threshold production levels. The gas well
will be completed subsea and tied back at a distance of 2.8 miles to
Shell's Boxer Platform for processing. TOPS Gyrfalcon LLC, a limited
liability company owned by Devco and INTEC Engineering Inc., is managing
all subsea engineering design and contracting. Completion of the
Gyrfalcon gas well is anticipated to commence in August 1999.
International Operations. In the first quarter of 1998, Devco
completed a transaction with Vanco Energy Company ("Vanco") and its
subsidiary companies to acquire a 22% 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 $11.5
million for signing bonuses and operating costs ("Vanco Loan").
Processing of new seismic data covering the Gabon prospect area commenced
at the end of 1997 and continued through 1998.
During the second quarter of 1998, Vanco and Devco jointly presented
the Gabon Project to selected major oil companies in an effort to sell
down their interests. Bids were taken and evaluated. The negotiation
process, which began in July 1998, culminated in the signing of a
Participation Agreement on November 2, 1998. Subsidiaries of Total S.A.
(28%), as Operator, Unocal Corporation (25%), Kerr-McGee Corporation
(14%), as farminees, joined Vanco Energy Company (22%) and Devco (11%),
as farminors, to form the Vanco Gabon Group. A 3-D seismic program is
scheduled to begin in 1999 followed by exploratory drilling in 2000. The
farminees will initially bear Devco's share of the cost of the 3-D
seismic and the cost of drilling the exploration wells. As part of the
transaction, Vanco repaid the Vanco Loan to Devco in full with interest
and Devco recorded a gain of $5.7 million on the partial sale of its
interest in the property.
In June 1997, Devco acquired a farmout from Avner Oil Exploration
Limited Partnership of a 10% working interest in nine petroleum licenses
covering 854,200 acres in deepwater offshore Israel. The assignment of
the 10% working interest was made at no cost to Devco. Devco has a
contingent option to acquire an additional 5% working interest at cost.
In 1997 and 1998, Devco participated in shooting and processing new
seismic data across the prospect. A subsidiary of Samedan Oil
Corporation has joined the project as operator and an initial test well
is anticipated to be spud in July 1999. Devco's subsidiary, RB
Mediterranean Ltd., will participate for its 10% working interest.
Other Properties
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 and a two story, 86,000 square foot office
building that serves as its corporate headquarters in Houston, Texas. In
addition, the Company leases other office space in Houston, Texas, an
office and yard facility in Belle Chase, Louisiana and facilities in most
of the countries where it conducts operations.
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 when the industry began
to see improved dayrates and utilization. However in 1997, oil prices
began to decline and in 1998 natural gas prices began to decline. Since
May 1998, demand for marine drilling rigs has decreased significantly. As
a result, rig utilization and dayrates have also declined significantly,
particularly in the domestic jack-up and barge rig markets. A prolonged
depression in the price of oil and gas would have a material adverse
effect on the Company.
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. Since 1982, the supply of rigs has 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. While the quality of
a company's fleet, the experience, quality and reputation of its
management and employees, and customer relationships are factors in
obtaining drilling contracts, the over-whelming consideration is normally
the price at which a contractor is willing to provide drilling services.
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.
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.
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.
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.
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.
Engineering Services and Land Operations. Through its Cliffs Drilling
subsidiary, the Company conducts land rig operations in Venezuela.
Although the majority of the Company's contracts are daywork contracts,
the Company has conducted "turnkey" operations. Under turnkey drilling
contracts, the Company contracts to drill a well to a contract depth
under specified conditions for a fixed price. The cumulative net results
of the Company's turnkey contracts have been immaterial in total and
insignificant as compared to the Company's operating income from the
traditional daywork contracts. However, as a result of the acquisition of
Cliffs Drilling, the Company now provides a larger portion of its
services under turnkey drilling contracts and in particular is operating
seven of its land rigs under a large turnkey contract in Venezuela. In
addition, because of the significant decline in the demand for contract
drilling services that began in mid 1998 which the Company expects to
continue through 1999, the Company expects to pursue more turnkey work as
a way of increasing utilization of its rigs.
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.
Although the majority of the Company's contracts are daywork
contracts, the Company has participated via a joint venture in "turnkey"
contracts. Under turnkey drilling contracts, the Company contracts to
drill a well to a contract depth under specified conditions for a fixed
price. The risks to the Company on a turnkey drilling contract are
substantially greater than on a well drilled on a daywork basis because
the Company assumes most of the risks associated with drilling operations
generally assumed by the operator in a daywork contract, including risk
of blowout, loss of hole, stuck drill stem, lost production or damage to
the reservoir, machinery breakdowns, abnormal drilling conditions and
risks associated with subcontractors' services, supplies and personnel.
The cumulative net results of the Company's turnkey contracts have been
immaterial in total and insignificant as compared to the Company's
operating income from the traditional daywork contracting method.
However, as a result of the acquisition of Cliffs Drillings, the Company
now provides a larger portion of its services under turnkey drilling
contracts. In addition, because of the significant decline in the demand
for contract drilling services that began in mid 1998 which the Company
expects to continue through 1999, the Company expects to pursue more
turnkey work as a way of increasing utilization of its rigs.
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 1998, the Company performed
services for approximately 171 different customers.
For the year ended December 31, 1998, revenues of approximately
$116.0 million from British Petroleum and affiliates accounted for 11.2%
of the Company's total operating revenues. 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.
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. The Company believes 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 L 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 expenditure 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 CWA 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, permits 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.
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 March 1, 1999, the Company employed approximately 6,200 persons.
There are no collective bargaining contracts covering the Company's
domestic employees. As of March 1, 1999, the Company employed 653 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.
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. A substantial number 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 E of Notes to Consolidated
Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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 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). Falcon, R&B and R&B Falcon did not declare any dividends on its
common stock for the periods indicated.
Falcon R&B
Common Stock Common Stock
--------------- ---------------
High Low High Low
------ ------ ------ ------
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
R&B Falcon
Common Stock
----------------
High Low
------- -------
1998
First Quarter $35.375 $23.125
Second Quarter 34.188 20.500
Third Quarter 23.188 8.750
Fourth Quarter 16.500 6.750
There were approximately 4,800 holders of record of the Company's
common stock as of March 1, 1999.
In December 1997, the Company adopted a preferred share Rights
Agreement. See Note I of Notes to Consolidated Financial Statements.
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 and Cliffs Drilling effective December 1, 1998. See
Note B of Notes to Consolidated Financial Statements.
Years Ended December 31,
-------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- ------- -------
Operating revenues $ 1,032.6 $ 933.0 $ 609.6 $ 390.3 $ 307.6
========= ========= ========= ======= =======
Income (loss) from
continuing operations before
extraordinary gain (loss) $ 91.0 $ 29.8 $ 106.7 $ 23.5 $ (12.7)
Income (loss) from
discontinued operations 36.0 (36.0) - - -
Extraordinary gain (loss) (1) (24.2) - - 3.4 -
--------- --------- --------- ------- -------
Net income (loss) 102.8 (6.2) 106.7 26.9 (12.7)
Dividends and accretion
on preferred stock (2) - - 3.6 5.2 5.4
--------- --------- --------- ------- -------
Net income (loss) applicable
to common stockholders $ 102.8 $ (6.2) $ 103.1 $ 21.7 $ (18.1)
========= ========= ========= ======= =======
Net income (loss) per common share:
Basic:
Continuing operations $ .54 $ .18 $ .70 $ .16 $ (.18)
Discontinued operations .21 (.22) - - -
Extraordinary gain (loss) (.14) - - .03 -
--------- --------- --------- ------- -------
Net income (loss) $ .61 $ (.04) $ .70 $ .19 $ (.18)
========= ========= ========= ======= =======
Diluted:
Continuing operations $ .54 $ .18 $ .67 $ .15 $ (.18)
Discontinued operations .21 (.22) - - -
Extraordinary gain (loss) (.14) - - .03 -
--------- --------- --------- ------- -------
Net income (loss) $ .61 $ (.04) $ .67 $ .18 $ (.18)
========= ========= ========= ======= =======
Total assets $ 3,709.3 $ 1,933.0 $ 1,455.8 $ 946.8 $ 810.9
========= ========= ========= ======= =======
Long-term obligations
(including current
portion) and redeemable
stocks $ 1,872.5 $ 827.4 $ 514.2 $ 296.7 $ 288.6
========= ========= ========= ======= =======
Dividends on Common Stock $ - $ - $ - $ - $ -
========= ========= ========= ======= =======
____________________
(1) The extraordinary gain for 1995 and the extraordinary loss for 1998
are both due to the extinguishment of debt obligations. The
extraordinary loss for 1998 is net of a tax benefit of $13.0 million.
(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 Combinations
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 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 Merger has been accounted for as a
pooling of interests and, accordingly, the consolidated financial
statements for the years ending 1997 and 1996 have been restated to
include the accounts of R&B and Falcon.
On December 1, 1998, the Company acquired all of the outstanding
stock of Cliffs Drilling Company ("Cliffs Drilling"). Cliffs Drilling is
a provider of daywork and turnkey drilling services, mobile offshore
production units and well engineering and management services. Cliffs
Drilling's fleet consists of 16 jack-up rigs, three self-contained
platform rigs, four mobile offshore production units and 11 land rigs.
The acquisition was effected pursuant to an Agreement and Plan of Merger
dated August 21, 1998, whereby each share of Cliffs Drilling's common
stock was converted into 1.7 shares of the Company's common stock and
cash in lieu of fractional shares. Total consideration for Cliffs
Drilling was approximately $405.1 million. The Company issued
approximately 27.1 million shares of its common stock valued at
approximately $385.3 million. This valuation was based upon a price of
$14.2125 per share of the Company's common stock, which was the average
closing price per share of the Company's common stock during the period
in which the principal terms of the merger were agreed upon and the
merger was announced. In addition, the Company assumed Cliffs Drilling's
outstanding stock options valued at approximately $6.2 million and the
Company paid approximately $13.6 million in acquisition costs. The
acquisition of Cliffs Drilling was recorded using the purchase method of
accounting. The excess of the purchase price over the estimated fair
value of net assets acquired amounted to approximately $70.7 million,
which has been accounted for as goodwill and is being amortized over 40
years using the straight-line method. The consolidated financial
statements include Cliffs Drilling since December 1, 1998.
Recontinuance of Oil and Gas Operations
In March 1998, the Company decided to divest its oil and gas
business, and in the Company's financial statements previously filed with
the SEC for the three years ended December 31, 1997, 1996 and 1995 and
the first three quarters of 1998, the business was accounted for as a
discontinued operation. As of March 1999, the Company has not been able
to divest this business on terms it found acceptable and in accordance
with generally accepted accounting principles the Company has
reclassified its financial statements as if this business had not been
discontinued. The Company does not intend to engage in any material
activities in this business and still intends to divest this business.
See "Oil & Gas Activities" and Note N of Notes to Consolidated Financial
Statements.
Results of Operations
The Company reported net income for 1998 of $102.8 million ($.61 per
diluted share) compared to a net loss of $6.2 million ($.04 per diluted
share) for 1997 and net income of $106.7 million ($.67 per diluted share
after preferred stock dividends of $3.6 million) for 1996. Included in
the 1998 results was a $118.3 million expense due to the cancellation of
four drillship conversion projects, an extraordinary loss of $24.2
million due to the extinguishment of debt obligations, the reversal of
$8.0 million of merger expenses due to an Internal Revenue Service ruling
and the reversal of discontinued operations expense of $36.0 million of
accrued estimated losses from operations until disposal resulting from
the accounting requirements for recontinuance. Included in the 1997
results are merger expenses of $66.4 million and accrued losses related
to discontinued operations of $36.0 million.
Operating Revenues
Years Ended December 31,
-------------------------------
Operating revenues (in millions) 1998 1997 1996
--------- -------- --------
Deepwater $ 392.5 $ 349.3 $ 211.2
Shallow water 382.9 333.2 224.9
Inland water 244.3 249.9 172.9
Engineering services and
land operations 12.5 - -
Development .4 .6 .6
--------- -------- --------
Total $ 1,032.6 $ 933.0 $ 609.6
========= ======== ========
Operating revenues are primarily a function of dayrates and
utilization. Operating revenues increased $99.6 million from 1997 to 1998
due to the following: The deepwater fleet revenues increased $43.2
million primarily due to an increase in dayrates and due to the
activation of the C. Kirk Rhein, Jr. The shallow water fleet revenues
increased $49.7 million primarily due to an increase in dayrates for the
jack-up fleet, specifically the international jack-up fleet. Although
the inland water fleet's revenues remained constant from 1997 to 1998,
there was an increase in the marine transportation fleet revenues
primarily due to fleet additions offset by a decrease in the barge fleet
due to decreased utilization. The engineering services and land
operations revenues were attributable to the purchase of Cliffs Drilling
on December 1, 1998.
Operating revenues increased $323.4 million from 1996 to 1997 due to
the following: The deepwater fleet revenues increased $138.1 million
primarily due to an increase in dayrates for the semisubmersibles and due
to the addition of two drillships. The shallow water fleet revenues
increased $108.3 million primarily due to an increase in dayrates for the
jack-up fleet. The inland water fleet revenues increased $77.0 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.
Operating Expenses
Years Ended December 31,
---------------------------
Operating expenses (in millions) 1998 1997 1996
------- ------- -------
Deepwater $ 184.4 $ 140.2 $ 90.1
Shallow water 161.5 158.7 128.3
Inland water 169.1 136.7 110.2
Engineering services and
land operations 10.5 - -
Development 22.0 130.2 2.9
------- ------- -------
Total $ 547.5 $ 565.8 $ 331.5
======= ======= =======
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 decreased $18.3 million from 1997 to 1998 due to
the following: The development division expenses decreased $108.2 million
due to dryhole costs and impairment charges relating to oil and gas
properties in 1997. Offsetting this decrease was a $44.2 million increase
in the deepwater fleet expenses primarily due to the activation of the C.
Kirk Rhein, Jr. and increased wage rates, a $32.4 million increase in the
inland water fleet expenses primarily due to the additions to the marine
transportation fleet and a $10.5 million increase in engineering services
and land operations due to the purchase of Cliffs Drilling.
Operating expenses increased $234.3 million from 1996 to 1997 due to
the following: The development division expenses increased $127.3 million
due to dryhole costs and impairment charges relating to oil and gas
properties. The deepwater fleet expenses increased $50.1 million
primarily due to the addition of two drillships and the purchase of an
FPSS vessel. The shallow water fleet expenses increased $30.4 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 expenses
increased $26.5 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.
Cancellation of Conversion Projects
Cancellation of conversion projects expense of $118.3 million in 1998
was the result of the termination of the Peregrine VI, Peregrine VIII
and two other drillship conversion projects that were in the preliminary
phases. Such expense includes shipyard costs (for services performed and
in settlement of contract cancellation), Company personnel and contractor
costs, engineering costs, capitalized interest, and write down of the
vessels that were purchased for conversion. Such projects were cancelled
due to continuing uncertainty as to the final cost and expected delivery
dates.
Depreciation and Amortization
Years Ended December 31,
------------------------
1998 1997 1996
------ ------ ------
Depreciation and amortization (in millions) $ 97.6 $ 84.7 $ 62.3
====== ====== ======
Despite the reduction in depreciation expense for the year ended
December 31, 1998 of approximately $20.7 million due to the extension of
the expected useful lives of the Company's marine units effective January
1, 1998, depreciation expense increased $12.9 million in 1998 from 1997
due to the purchase and/or significant upgrades of offshore and inland
marine vessels during 1998 and late 1997.
The $22.4 million increase in depreciation and amortization expense
in 1997 from 1996 is primarily due to the purchase and/or significant
upgrades of offshore and inland marine vessels.
General and Administrative Expenses
Years Ended December 31,
------------------------
1998 1997 1996
------ ------ ------
General and administrative
expenses (in millions) $ 61.4 $ 55.7 $ 37.0
====== ====== ======
General and administrative expenses increased $5.7 million in 1998
compared to 1997 primarily due to increases in payroll and related
expenses.
General and administrative expenses increased $18.7 million in 1997
compared to 1996 primarily due to increases in payroll and related
expenses associated with employee incentive plans.
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
payments 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. In 1998, the Company recorded an $8.0
million reduction of merger expenses primarily due to an Internal Revenue
Service ruling received relating to taxes on executive termination
payments.
Interest Expense
Years Ended December 31,
------------------------
1998 1997 1996
------ ------ ------
Interest expense, net of interest
capitalized (in millions) $ 63.9 $ 41.6 $ 40.8
====== ====== ======
The $22.3 million increase in interest expense in 1998 as compared to
1997 was primarily attributable to the issuance of $1.1 billion in senior
notes in April 1998. This increase was partially offset by increased
capitalized interest related to significant upgrade and new build
projects. Noncash interest expense attributable to amortization of
discounts associated with the Company's debt obligations for the year
ended December 31, 1998 was $3.4 million.
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
$.8 million. This increase was 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.
Income Tax Expense
Years Ended December 31,
------------------------
1998 1997 1996
------ ------ ------
Income tax expense (in millions) $ 58.9 $ 84.7 $ 27.0
====== ====== ======
The $25.8 million decrease in income tax expense in 1998 as compared
to 1997 was due to the non-deductible merger expenses, which were
incurred in 1997, and the tax benefits related to the recontinued
operations being fully reserved in 1997. Despite a decrease in taxable
income in 1997 as compared to 1996, income tax expense increased $57.7
million in 1997 due to the permanent differences in 1997 discussed in the
previous sentence and the use of previously reserved tax benefits in
1996.
In 1998, the Company began recording income taxes at the full
statutory rates as future tax benefit carryforwards will no longer be
reserved.
Minority Interest
Years Ended December 31,
------------------------
1998 1997 1996
------ ------ ------
Minority interest (in millions) $ 11.3 $ 9.4 $ 6.7
====== ====== ======
Minority interest relates primarily to the results of Arcade Drilling
and the 25.6% attributable to stockholders other than the Company.
Arcade Drilling reported income in 1998, 1997 and 1996 of $44.2 million,
$36.9 million and $26.3 million, respectively.
Extraordinary Loss
Extraordinary loss, net of tax, for 1998 is due to the extinguishment
of debt obligations in connection with the issuance of new debt
obligations (see Notes A and D of Notes to Consolidated Financial
Statements).
Oil & Gas Activities
The Company's oil and gas business is operated 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.
In 1998, Devco incurred dryhole costs of $11.7 million and asset
impairment charges of $11.3 million. In 1997, Devco incurred dryhole
costs of $65.1 million and asset impairment charges of $42.8 million. At
December 31, 1998, none of the Company's oil and gas properties contained
proved reserves and all such properties had been written off. It is the
Company's intention to dispose of this operation.
Year 2000
The Company has focused its Year 2000 ("Y2K") compliance efforts in
three areas: information technology systems, embedded technology systems
and systems used by third parties with which the Company has a
substantial relationship. The Company has substantially completed its
investigation and evaluation of these systems and is currently in the
process of correcting the identified problems.
Information Technology Systems. The testing and validation phase for
information technology systems includes testing of each individual
information technology system that could be affected. Through the
information technology systems investigation, the Company determined that
the accounting software utilized by Cliffs Drilling required substantial
modification or replacement. The domestic accounting software was
replaced with Y2K compliant software during the fourth quarter of 1998 at
a total cost of approximately $2.0 million, the majority of which was
capitalized. Software replacements in Cliffs Drilling's foreign offices
will be completed during 1999 at a total cost of approximately $.3
million. The Company additionally determined that certain of its
remaining accounting software and systems were not Y2K compliant.
Company personnel have completed the majority of these modifications and
the remaining non-compliant software will be undergoing a previously
planned upgrade in the second quarter of 1999. Additionally, the Company
is undergoing a third party review of its information technology systems
in the second quarter of 1999.
Embedded Technology Systems. Embedded technology systems primarily
relate to the technology on board the Company's drilling units. The
testing and validation phase for the embedded technology systems includes
testing each high and medium priority system, which consists primarily of
all systems located on drilling units included in the Deepwater and
Shallow Water Divisions. For systems on board the Inland Water units,
confirmation of Y2K compliance has been received from the manufacturers
of these systems.
To facilitate the embedded technology systems investigation, the
Company hired an additional employee whose primary responsibility is the
evaluation of these technology systems. This evaluation should be
completed by the second quarter of 1999. The equipment evaluated thus
far, which includes all drilling units located in the United Kingdom,
Africa, Greece, Singapore and the Gulf of Mexico, has not demonstrated
any equipment failures or other Y2K compliance issues. Based on the
number and type of drilling units tested thus far, the Company estimates
that the total cost to replace or upgrade non-compliant embedded
technology systems will be less than $.5 million.
Third Party Systems. The Company is contacting third parties with
which it has substantial relationships to determine what actions may be
needed to mitigate its risks relating to the effects third party
technology failures may have on the Company. The Company sent out
requests for information to all of our electrical and electronic
contractors in August 1998 and has received information from 80% of them
regarding their Y2K efforts. Questionnaires were sent in the first
quarter of 1999 to all of the Company's suppliers and third party
vendors. Based on the responses received thus far, it is evident that
our contractors and suppliers are placing a priority on achieving Y2K
compliance. In the event the Company's major suppliers or customers do
not successfully and timely achieve Y2K compliance, the Company's
operations could be adversely affected.
Contingency Plans. The Company is continuing to monitor, on an
ongoing basis, the problems and uncertainties associated with its Y2K
issues and their potential consequences. The Company has accepted the
position that there will be some finite levels of risk that some systems
will not fully function after Y2K. A risk-based approach has identified
those items where absolute compliance is not guaranteed by the vendor or
supplier, and contingency plans are being developed to deal with any
safety related possibilities. These contingency plans will be completed
in the second quarter of 1999.
In addition to the safety related contingency plans directly related
to uncertainties with equipment, the Company maintains plans for all
critical safety equipment as part of its normal business. These critical
safety plans are currently being modified to fit the Y2K criteria. These
modifications primarily include: having personnel standing by at critical
equipment stations before the specified time changes, having no crane
lifts in operation and have all drilling units in a non-drilling mode.
Failure of this type of equipment, whether related to normal operational
risk or Y2K problems, must be managed with contingency planning. For
this reason, additional risk due to the Y2K issue does not measurably
affect the risk to personnel or equipment beyond the normal failure due
to other causes.
Liquidity and Capital Resources
Cash Flows
Net cash provided by operating activities was $226.0 million for
1998, compared to $331.4 million and $167.6 million for 1997 and 1996,
respectively. Fluctuations between the years is primarily due to the
result of improved dayrates and fleet additions, net of changes in the
components of working capital.
Net cash used in investing activities was $1,052.2 million for 1998,
compared to $610.9 million for 1997 and $365.1 million for 1996. The
increases in each year were due to increasing levels of capital
expenditures, primarily related to the significant capital projects
involving the construction or upgrade of drilling units and rig and
vessel acquisitions.
Net cash provided by financing activities was $935.6 million for
1998, compared to $301.2 million for 1997 and $319.6 million for 1996.
The increase in net cash provided by financing activities in 1998 over
1997 was primarily due to proceeds from two senior note offerings during
1998. 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.
Net cash provided by business held for sale was $12.5 million for
1998 compared to net cash used in business held for sale of $94.0 million
for 1997 and $39.5 million for 1996. The cash provided in 1998 was
primarily due to the sale of oil and gas properties and the collection of
accounts receivable. The increase in use of cash from 1996 to 1997 was
primarily due to the increased level of purchases of oil and gas
properties.
Capital Expenditure Commitments
The Company has numerous significant capital expenditure projects
under way involving the construction or upgrade of drilling units. The
following is a list of such projects:
Water Expenditures
Depth Estimated Contract Made thru
Capability Delivery Term Estimated December 31,
(feet) Date (years) Cost 1998
------ ---- ------- ---- ----
Drillships: (in millions)
DEEPWATER PATHFINDER(1) 10,000 Delivered 5 $ 275.0 $ 257.7
DEEPWATER FRONTIER(2) 10,000 Delivered 2.5 $ 270.0 $ 191.9
DEEPWATER MILLENNIUM 10,000 2nd quarter 1999 4(3) $ 270.0 $ 151.8
DEEPWATER IV (unnamed) 10,000 3rd quarter 2000 3 $ 305.0 $ 84.0
PEREGRINE IV 9,200 2nd quarter 1999 6 $ 210.0 $ 152.8
PEREGRINE VII (4) 8,200 3rd quarter 1999 3 $ 270.0 $ 181.1
Semisubmersibles:
FALCON 100 2,450 2nd quarter 1999 4 $ 118.0 $ 91.4
RBS8M (formerly RBS6) 8,000 1st quarter 2000 5 $ 315.0 $ 130.9
RBS8D 8,000 4th quarter 2000 3 $ 325.0 $ .2
-------- --------
$2,358.0 $1,241.8
======== ========
__________________
(1) The Company owns a 50% interest in the limited liability company
that operates this drillship.
(2) The Company owns a 60% interest in the limited liability company
that operates this drillship. Under the drilling contract for
this drillship, the Company and Conoco have each committed to use
this rig for two and one half of the first five years after
delivery. Conoco will use the rig to drill a well after the rig's
delivery, and the Company will use it for the next 12 months.
After this period, Conoco and the Company will alternate the use
of this rig. The Company is currently marketing the rig for the
periods during which it is obligated to use the rig.
(3) Statoil will use this drillship for the first three years after
delivery, then the Company will alternate use of the rig with
Statoil every six months for the next two years.
(4) BP Amoco has indicated that it may cancel this contract because
the rig has not been delivered on time. The Company is currently
marketing this rig for work if BP Amoco cancels this contract.
In the third quarter of 1998, the Company cancelled the Peregrine VI
and the Peregrine VIII drillship conversion projects due to continuing
uncertainty as to final cost and expected delivery dates. As a result,
the drilling contract on the Peregrine VIII was terminated on September
24, 1998, and the drilling contract on the Peregrine VI was terminated on
January 1, 1999. Both terminations were without prejudice to any rights
of the oil companies. The Company believes that based on provisions of
the contracts that preclude recovery of indirect or consequential damages
and projected rig availability in the offshore drilling industry, the
Company will not have any material liability under these drilling
contracts as a result of the termination thereof. The contracts with the
shipyard for conversion of the Peregrine VI and the Peregrine VIII have
been cancelled. In addition, in the fourth quarter of 1998, the Company
cancelled two additional drillship conversion projects that were in the
preliminary phases. As a result of the termination of these four
drillship conversion projects, the Company expensed $118.3 million in
related costs in 1998 (see "Results of Operations").
In October 1998, the Company entered into a contract with Samsung
Heavy Industries Co. Ltd. ("Samsung") to construct a drillship (the
Deepwater IV), which will be similar to the Deepwater Pathfinder (which
was delivered by Samsung to the Company in September 1998) and the
Deepwater Frontier (which was delivered by Samsung to the Company in
March 1999) and the Deepwater Millennium (which is currently under
construction by Samsung for the Company). Immediately following delivery
of the Deepwater IV from the shipyard, the drillship is contracted for
three years to Texaco. This contract is a substitute for the previously
contracted Peregrine VIII.
In December 1998, the Company and Vastar Resources, Inc. ("Vastar")
entered into a contract pursuant to which the Company will construct and
provide a semisubmersible drilling rig (the RBS8D) for a term of three
years (with five one-year options), at an operating dayrate of $199,950.
In addition, Vastar may elect to extend the primary term to five years,
with three one-year options, in which case the dayrate would be between
$189,200 and $199,200, depending upon when the primary term is extended.
In September 1998, the Company and Navis ASA ("Navis"), a Norwegian
public company which is constructing a dynamically positioned drillship
(the Navis Explorer I), entered into an agreement pursuant to which the
Company agreed to make a capital contribution to Navis of $50.0 million
in exchange for stock in Navis. The Navis Explorer I is designed to drill
in 10,000 feet of water and is being constructed at Samsung at an
estimated cost of $280.0 million, with a scheduled delivery in the second
quarter of 2000. The Company has contributed $20.0 million in cash and
will contribute an additional $30.0 million of equipment and equipment
purchase orders. It is expected that the Company will own approximately
38% of the outstanding stock of Navis following such contributions. Most
of the equipment and equipment purchase orders that will be contributed
by the Company were acquired by the Company in connection with the
Peregrine VI and Peregrine VIII projects and are no longer required for
such projects in light of their cancellation. Navis and the Company have
entered into an agreement pursuant to which the Company will supervise
construction of the drillship and manage it following its delivery.
In connection with the Peregrine VI and Peregrine VIII projects and a
third drillship project, the Company purchased or committed to purchase
drilling equipment with an aggregate cost of approximately $285.0
million. This equipment constitutes all of the material drilling
equipment necessary to outfit two deepwater drillships (although a
substantial portion of such equipment can be used on semisubmersible
rigs). The Company expects to use approximately half of this equipment to
outfit the Deepwater IV, and approximately $30.0 million as a portion of
its contribution to Navis. The balance of the equipment is expected to be
maintained by the Company as inventory.
The Peregrine IV, Peregrine VII, and Falcon 100 will be completed
later than the required commencement dates under the drilling contracts
for such rigs and at costs significantly in excess of original estimates.
The customer for the Peregrine VII has indicated that it may cancel the
drilling contract due to construction delays. The Company believes that
it will be able to find work for the Peregrine VII at dayrates similar to
its previously contracted levels. However, the Company expects that any
new contracts will likely be short-term or on a well-to-well basis. Also,
the Company will be subject to late delivery penalties under the
applicable drilling contracts for the Peregrine IV and Falcon 100,
(approximately $41,500 per day, up to a maximum of approximately $38.6
million, for the Peregrine IV, and approximately $26,500 per day, up to a
maximum of approximately $14.7 million, for the Falcon 100). If the
Peregrine IV and Falcon 100 are not delivered within 240 and 180 days,
respectively, of the commencement date of the applicable drilling
contract, the customer may cancel its contract.
In December 1998, Mobil U.K. Ltd. ("Mobil") terminated its contract
to use the Company's Jack Bates semisubmersible rig on the grounds that
two of the rig's anchor cables broke. The contract provided for Mobil's
use of the rig at a dayrate of approximately $115,000 for the primary
term through January 1999 and approximately $200,000 for the extension
term from February 1999 through December 2000. The Company does not
believe that Mobil had the right to terminate this contract. The Company
has received a proposal from Mobil to recontract the Jack Bates at a
dayrate of approximately $156,000 for a one or two well drilling
program. The Company believes this program may last approximately six
months. This proposal is without prejudice to either party's rights in
the dispute over the termination of the original contract. If the
Company is not successful in settling its dispute over the termination of
the original contract, the Company intends to commence legal proceedings
to enforce its rights under the contract. The Company believes that it
will be able to find other work for the Jack Bates, but that any such
work will be at lower dayrates than the $200,000 dayrate established for
the extended term of the original contract.
Liquidity
At December 31, 1998, the Company had approximately $413.6 million in
the aggregate of cash, cash equivalents and borrowing capacity under its
revolving credit facilities.
At December 31, 1998, approximately $99.4 million of total
consolidated cash and cash equivalents of $177.4 million were restricted
from the Company's use outside of Arcade Drilling's activities. See Note
A of Notes to Consolidated Financial Statements.
The Company is currently constructing or significantly upgrading
seven wholly owned deepwater drilling rigs. The Company estimates the
gross capital expenditures on these projects will be approximately $1.8
billion, of which approximately $1.0 billion remains to be funded by the
Company. Since May 1998, there has been a downturn in demand for marine
drilling rigs resulting in a decline in rig utilization and dayrates.
The decline has been particularly dramatic in the domestic barge and jack-
up rig markets where the Company is one of the largest contractors. As a
result, although the Company's operating revenues increased by $99.6
million from 1997 to 1998, on a quarterly basis during 1998 the Company
experienced a decline in operating revenues from $279.4 million for the
first quarter of 1998 to $228.7 million for the fourth quarter of 1998.
As a result, the Company's cash flow from operations, cash on hand, and
funds available under its existing credit facilities will not be
sufficient to satisfy the Company's short-term and long-term working
capital needs, planned investments, capital expenditures, debt, lease and
other payment obligations, without selling certain assets or terminating
construction contracts.
On March 26, 1999, the Company issued three series of senior notes
with an aggregate principal amount of $1.0 billion. The senior notes
consisted of $400.0 million of 11% senior secured notes due 2006, $400.0
million of 11.375% senior secured notes due 2009 and $200.0 million of
12.25% senior notes due 2006 (collectively, the "Senior Notes"). The
$800.0 million senior secured notes are collateralized by ten of the
Company's drilling rigs. As a result, the Company received net proceeds
of approximately $971.5 million after deducting estimated offering
related expenses. The Company used the proceeds to repay existing
indebtedness of approximately $556.0 million and the remainder will be
used to acquire, construct, repair and improve drilling rigs and for
general corporate purposes.
Proceeds from the Senior Notes met a portion of the Company's capital
requirements. However, it will also be necessary for the Company to
obtain additional capital through debt and/or equity financings to meet
its currently projected obligations. The Company is currently evaluating
two project financings to meet a portion of its additional capital
requirements. The first is an approximately $270.0 million financing in
the form of a synthetic lease that would be collateralized by the
drillship Deepwater Frontier and drilling contract revenues from such
drillship. Proceeds of such financing, if obtained, would be used in
part to refinance the interim financing facility, under which $135.0
million ($81.0 million represents the Company's portion) had been
borrowed at March 15, 1999 and was repaid with a portion of the proceeds
from the Senior Notes. The foregoing interim loan has been made to a
limited liability company which will operate the Deepwater Frontier and
which is owned 60% by the Company and 40% by Conoco. The Company has
guaranteed repayment of 60% of this interim loan. The second financing
being contemplated is an approximately $250.0 million project financing
that would be collateralized by the semisubmersible RBS8M (formerly the
RBS6), as well as the drilling contract revenues from such rig.
The Company currently believes it will be able to consummate the
proposed project financings. However, there can be no assurance that
these or any other additional financings can be obtained, or if obtained,
that they will be on terms favorable to the Company or for the amounts
needed. Further, the Company has limited ability under its indenture
covenants to incur additional recourse indebtedness and to secure that
debt. In the event that the Company is unable to obtain its requisite
financing, the Company may have to sell assets or terminate or suspend
one or more construction projects. Termination or suspension of a
project may subject the Company to claims for penalties or damages under
the construction contracts or drilling contracts for rigs that are being
constructed. In addition, asset sales made under duress in today's
drilling market may not yield attractive sales prices. Accordingly, the
inability of the Company to complete such financings would have a
material adverse effect on the Company's financial condition and its
ability to repay its outstanding indebtedness.
Three of the Company's outstanding credit facilities were repaid and
terminated in March 1999 from proceeds from the Senior Notes. To assist
the Company's liquidity position, the Company may seek to establish a new
revolving bank credit facility of up to $180.0 million, and may sell
certain assets. There can be no assurance, however, that such facility
will be obtained or sales completed.
The liquidity of the Company should also be considered in light of
the significant fluctuations in demand that may be experienced by
drilling contractors as changes in oil and gas producers' expectations
and budgets occur, primarily in response to declines in prices for oil
and gas. These fluctuations can rapidly impact the Company's liquidity
as supply and demand factors directly affect utilization and dayrates,
which are the primary determinants of cash flow from the Company's
operations. The decline in oil and gas prices since 1997 has negatively
impacted the Company's performance, particularly in the shallow water
U.S. Gulf market, by adversely affecting the Company's rig utilization
and dayrates. Utilization of the Company's domestic jack-up fleet has
declined from approximately 100% in January 1998 to approximately 57% in
January 1999, and dayrates on new contracts have declined from a range of
$35,000 to $40,000 in January 1998 to a range of $10,000 to $13,000 at
present. Dayrates for the Company's domestic barge drilling rig fleet
have not declined materially, but utilization of the fleet declined from
approximately 96% in January 1998 to approximately 30% in January 1999.
The Company's international jack-up fleet has experienced declines in
utilization and dayrates since January 1998, but such declines have not
been as dramatic as those experienced in the domestic jack-up fleet. The
Company believes a continued depression in oil and gas prices will have a
material adverse effect on the Company's financial position and results
from operations.
The Company's construction and upgrade projects are subject to the
risks of delay and cost overruns inherent in any large construction
project, including shortages of equipment, unforeseen engineering
problems, work stoppages, weather interference, unanticipated cost
increases and shortages of materials or skilled labor. Significant cost
overruns or delays would adversely affect the Company's liquidity,
financial condition and results of operations. Delays could also result
in penalties under, or the termination of, the long-term contracts under
which the Company plans to operate these rigs.
The Company has based its estimates regarding its financing needs on
the assumption that conditions in the marine contract drilling industry
will remain approximately the same as currently exist through 1999 and
will improve in 2000. If conditions during these periods are less
favorable than the Company has assumed, the Company may be required to
seek additional financing. Any additional financing, if obtained, would
be subject to the risks and contingencies described above.
The impact of general economic inflation on the Company's operations
for the three years ended December 31, 1998 has not been material.
Debt Offerings
Pursuant to an offering in April 1998, the Company issued $1.1 billion
principal amount of senior notes resulting in net proceeds of
approximately $1,082.9 million. The senior notes bear interest at
varying rates from 6.5% to 7.375%. See Note D of Notes to Consolidated
Financial Statements.
Pursuant to an offering in December 1998, the Company issued $400.0
million principal amount of senior notes resulting in net proceeds of
approximately $392.3 million. The senior notes bear interest at 9.125%
and 9.5%. See Note D of Notes to Consolidated Financial Statements.
Pursuant to an offering in March 1999, the Company issued $1.0
billion principal amount of senior notes resulting in net proceeds of
approximately $971.5 million. The senior notes bear interest at varying
rates form 11% to 12.25% (see Liquidity).
Credit Facilities
At December 31, 1998, the Company had four bank facilities, three of
which were repaid in March 1999 from proceeds from the Senior Notes. The
first was a $350.0 million revolving credit facility with a syndicate of
banks. The first $100.0 million of borrowing under this credit facility
was secured by a pledge of the stock one of the Company's three major
operating subsidiaries. At December 31, 1998, interest was accruing under
this credit facility at LIBOR plus .75% for borrowings up to $100.0
million and at LIBOR plus 1.375% for borrowings in excess of $100.0
million. This credit facility would have matured on January 24, 2002. At
December 31, 1998, $200.0 million was available under this facility. See
Note D of Notes to Consolidated Financial Statements. In March 1999,
this credit facility which had been fully drawn was terminated and repaid
from proceeds from the Senior Notes (see Liquidity).
The second bank facility was a $125.0 million interim construction
facility with a syndicate of banks for the construction of the Deepwater
Millennium. This facility would have matured on June 30, 1999, and bore
interest at LIBOR plus 1.25%. At December 31, 1998, $1.6 million was
available under this facility. See Note C of Notes to Consolidated
Financial Statements. In March 1999, this credit facility which had been
fully drawn was terminated and repaid from proceeds from the Senior Notes
(see Liquidity).
The third bank facility was an interim construction facility with a
syndicate of banks for the construction of the Deepwater Frontier. This
interim loan was made to a limited liability company which will operate
the Deepwater Frontier and which is owned 60% by the Company and 40% by
Conoco. The Company had guaranteed repayment of 60% of this interim
loan. This facility would have matured March 31, 1999, and bore interest
at LIBOR plus .5%. In March 1999, this credit facility had been drawn to
$135.0 million and $81.0 million, which represents the Company's portion,
was repaid from proceeds from the Senior Notes (see Liquidity).
The fourth bank facility is a $35.0 million revolving credit facility
maintained by Cliffs Drilling. This facility matures May 31, 2000 and
bears interest at .25% plus the greater of the prevailing Federal Funds
Rate plus .5% or a referenced average prime; or at the adjusted LIBOR
rate plus 2%. At December 31, 1998, Cliffs Drilling had $.4 million in
letters of credit outstanding, thereby leaving $34.6 million available
under this credit facility. See Note D of Notes to Consolidated
Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company's earnings and cash flows are subject to fluctuations due
to changes in foreign currency exchange rates. The Company may enter
into forward exchange contracts to hedge specific commitments and
anticipated transactions but not for speculative or trading purposes.
However, the Company's contracts generally provide for payment in U.S.
dollars and the Company does not maintain significant foreign currency
cash balances. See Note A of Notes to Consolidated Financial Statements.
The Company is exposed to changes in interest rates with respect to
its long-term debt obligations. The following table sets forth the
average interest rate for the scheduled maturity of the Company's long-
term debt obligations as of December 31, 1998 (dollars in millions):
Estimated
Fair Value
at
December 31,
1999 2000 2001 2002 2003 Thereafter Total 1998
------ ------ ------ ------ ------ -------- -------- --------
Fixed Rate Debt:
Amount $ .2 $ .5 $ 5.2 $ - $553.3 $1,150.0 $1,709.2 $1,554.5
Average
interest rate 7.000% 8.000% 9.750% - 8.351% 7.647% 7.881%
Variable Rate Debt:
Amount $ 6.1 $ 6.1 $ 6.1 $150.5 $ - $ - $ 168.8 $ 168.8
Average
interest rate 7.375% 7.375% 7.375% 6.046% - - 6.190%
The Company is exposed to changes in the price of oil and natural gas.
The marine contract drilling industry is dependent upon the exploration
and production programs of oil and gas companies, which in turn are
influenced by the price of oil and natural gas.
Item 8. Financial Statements and Supplementary Data
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, 1998 and 1997, and the related consolidated statements of
operations, cash flows and stockholders' equity for each of the three
years in the period ended December 31, 1998. 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, 1998 and 1997,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
/s/Arthur Andersen LLP
Houston, Texas
March 26, 1999
R&B FALCON CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1998 and 1997
(in millions except share amounts)
1998 1997
--------- ---------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 177.4 $ 55.5
Short-term investments - 45.4
Accounts receivable:
Trade, net 197.0 168.0
Other 62.1 22.4
Materials and supplies inventory 36.1 15.2
Drilling contracts in progress 29.5 -
Other current assets 25.0 14.3
--------- ---------
Total current assets 527.1 320.8
--------- ---------
PROPERTY AND EQUIPMENT:
Drilling 3,369.2 1,926.5
Other 180.8 82.8
--------- ---------
Total property and equipment 3,550.0 2,009.3
Accumulated depreciation (519.4) (426.3)
--------- ---------
Net property and equipment 3,030.6 1,583.0
--------- ---------
GOODWILL, NET OF ACCUMULATED AMORTIZATION 70.6 -
--------- ---------
DEFERRED CHARGES AND OTHER ASSETS 74.0 29.2
--------- ---------
NET ASSETS OF BUSINESS HELD FOR SALE 7.0 -
--------- ---------
TOTAL ASSETS $ 3,709.3 $ 1,933.0
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Short-term obligations $ 123.4 $ -
Long-term obligations due within one year 6.3 135.2
Accounts payable - trade 83.1 54.4
Accrued liabilities 139.0 146.4
--------- ---------
Total current liabilities 351.8 336.0
LONG-TERM OBLIGATIONS 1,866.2 692.2
OTHER NONCURRENT LIABILITIES 35.9 38.6
DEFERRED INCOME TAXES 142.4 76.8
NET LIABILITIES OF BUSINESS HELD FOR SALE - 5.8
--------- ---------
Total liabilities 2,396.3 1,149.4
--------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 62.8 55.6
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 550,000,000 shares
authorized, 193,399,910 shares and 164,312,224
shares issued and outstanding at December 31,
1998 and 1997, respectively 1.9 1.6
Capital in excess of par value 1,061.5 631.4
Retained earnings 199.1 96.3
Other (12.3) (1.3)
--------- ---------
Total stockholders' equity 1,250.2 728.0
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,709.3 $ 1,933.0
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
R&B FALCON CORPORAITON
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions except per share amounts)
Years Ended December 31,
-------------------------------
1998 1997 1996
--------- ------- -------
OPERATING REVENUES:
Deepwater $ 392.5 $ 349.3 $ 211.2
Shallow water 382.9 333.2 224.9
Inland water 244.3 249.9 172.9
Engineering services and land operations 12.5 - -
Development .4 .6 .6
--------- ------- -------
Total operating revenues 1,032.6 933.0 609.6
--------- ------- -------
COSTS AND EXPENSES:
Deepwater 184.4 140.2 90.1
Shallow water 161.5 158.7 128.3
Inland water 169.1 136.7 110.2
Engineering services and land operations 10.5 - -
Development 22.0 130.2 2.9
Cancellation of conversion projects 118.3 - -
Depreciation and amortization 97.6 84.7 62.3
General and administrative 61.4 55.7 37.0
Merger expenses (8.0) 66.4 -
--------- ------- -------
Total costs and expenses 816.8 772.6 430.8
--------- ------- -------
OPERATING INCOME 215.8 160.4 178.8
--------- ------- -------
OTHER INCOME (EXPENSE):
Interest expense,
net of interest capitalized (63.9) (41.6) (40.8)
Interest income 9.6 6.1 3.4
Other, net (.3) (1.0) (1.0)
--------- ------- -------
Total other income (expense) (54.6) (36.5) (38.4)
--------- ------- -------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAX EXPENSE, MINORITY INTEREST
AND EXTRAORDINARY LOSS 161.2 123.9 140.4
--------- ------- -------
INCOME TAX EXPENSE:
Current 38.5 39.3 6.3
Deferred 20.4 45.4 20.7
--------- ------- -------
Total income tax expense 58.9 84.7 27.0
--------- ------- -------
MINORITY INTEREST (11.3) (9.4) (6.7)
--------- ------- -------
INCOME FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY LOSS 91.0 29.8 106.7
INCOME (LOSS) FROM DISCONTINUED OPERATIONS 36.0 (36.0) -
EXTRAORDINARY LOSS, NET OF TAX BENEFIT (24.2) - -
--------- ------- -------
NET INCOME (LOSS) 102.8 (6.2) 106.7
DIVIDENDS ON PREFERRED STOCK - - 3.6
--------- ------- -------
NET INCOME (LOSS) APPLICABLE TO COMMON
STOCKHOLDERS $ 102.8 $ (6.2) $ 103.1
========= ======= =======
NET INCOME (LOSS) PER COMMON SHARE:
Basic:
Continuing operations $ .54 $ .18 $ .70
Discontinued operations .21 (.22) -
Extraordinary loss (.14) - -
--------- ------- -------
Net income (loss) $ .61 $ (.04) $ .70
========= ======= =======
Diluted:
Continuing operations $ .54 $ .18 $ .67
Discontinued operations .21 (.22) -
Extraordinary loss (.14) - -
--------- ------- -------
Net income (loss) $ .61 $ (.04) $ .67
========= ======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 167.5 164.1 147.4
========= ======= =======
Diluted 168.8 166.2 157.7
========= ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
R&B FALCON CORPORAITON
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Years Ended December 31,
-------------------------------
1998 1997 1996
--------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 102.8 $ (6.2) $ 106.7
Adjustments to reconcile
net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 97.6 84.7 62.3
Gain on dispositions of property
and equipment (3.3) (6.9) (3.7)
Cancellation of conversion projects 118.3 - -
Deferred income taxes 20.4 47.4 15.9
Recognition of deferred expenses 12.2 7.1 8.0
Deferred compensation 1.1 17.8 3.2
Minority interest in income
of consolidated subsidiaries 11.3 9.4 6.7
Dryhole and exploration expenses
relating to oil and gas properties 11.9 114.9 -
Loss (income) from discontinued operations (36.0) 36.0 -
Extraordinary loss from
extinguishment of debt 24.2 - -
Changes in assets and liabilities:
Accounts receivable, net (21.1) (42.6) (56.1)
Materials and supplies inventory (9.9) (.8) (2.3)
Drilling contracts in progress (6.2) - -
Deferred charges and other assets (47.2) (19.9) (8.2)
Accounts payable - trade (18.0) 8.4 9.2
Accrued interest (5.9) 7.1 6.2
Accrued liabilities (24.2) 77.4 13.5
Other, net (2.0) (2.4) 6.2
--------- ------- -------
Net cash provided
by operating activities 226.0 331.4 167.6
--------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Dispositions of property and equipment 5.4 10.4 3.9
Purchases of property and equipment,
exclusive of noncash items (1,131.0) (592.2) (352.3)
Purchase of Cliffs Drilling Company,
net of cash acquired 28.0 - -
Sale (purchase) of short-term investments 45.4 (29.1) (15.5)
Other - - (1.2)
--------- ------- -------
Net cash used in investing activities (1,052.2) (610.9) (365.1)
--------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term obligations 123.4 - -
Net proceeds from (payments on)
revolving credit facilities (332.0) 316.0 141.0
Proceeds from long-term obligations 1,494.0 38.0 120.0
Principal payments on long-term obligations (323.2) (49.6) (45.8)
Premium paid on debt extinguishment (23.9) - -
Dividends paid on preferred stock - - (3.6)
Distribution to minority shareholders
of consolidated subsidiaries (4.0) - (5.1)
Issuance of common stock, net 1.3 2.7 110.7
Other - (5.9) 2.4
--------- ------- -------
Net cash provided by financing activities 935.6 301.2 319.6
--------- ------- -------
CASH PROVIDED BY (USED IN)
BUSINESS HELD FOR SALE 12.5 (94.0) (39.5)
--------- ------- -------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 121.9 (72.3) 82.6
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 55.5 127.8 45.2
--------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 177.4 $ 55.5 $ 127.8
========= ======= =======
Supplemental Cash Flow Disclosures:
Interest paid, net of capitalized interest $ 105.6 $ 36.5 $ 35.2
Income taxes paid $ 36.5 $ 13.9 $ 5.7
Noncash investing activities:
Purchase of Cliffs Drilling
Company in exchange for equity $ 391.5 $ - $ -
Other purchases of property and equipment
in exchange for equity or debt $ 35.5 $ 8.0 $ 30.9
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, 1998
(in millions)
Common Stock Capital in Retained
---------------- Excess of Earnings
Shares Amount(1) Par Value (Deficit) Other
------ -------- --------- ------- -----
Balances at December 31, 1995 143.5 $ 1.4 $ 477.8 $ (.6) $ (9.0)
Net income 106.7
Dividends paid on
preferred 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)
Net income 102.8
Purchase of assets 27.9 .3 416.4
Activity in Company stock plans .2 1.3
Restricted stock grant .9 12.3 (11.0)
Other .1 .1
----- ----- -------- ------ -----
Balances at December 31, 1998 193.4 $ 1.9 $1,061.5 $199.1 $(12.3)
===== ===== ======== ====== ======
____________________
(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 CORPORAITON
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(A) INDUSTRY CONDITIONS, LIQUIDITY AND 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 R&B Falcon (International &
Deepwater) Inc., formerly Reading & Bates Corporation ("R&B"); R&B Falcon
Holdings, Inc., formerly Falcon Drilling Company, Inc. ("Falcon"); Cliffs
Drilling Company ("Cliffs Drilling") effective December 1, 1998 and its
majority-owned (approximately 74.4%) subsidiary Arcade Drilling AS
("Arcade"). Investments in unconsolidated investees are accounted for
using the equity method. All significant intercompany accounts and
transactions have been eliminated.
INDUSTRY CONDITIONS/LIQUIDITY - The Company is currently constructing
or significantly upgrading seven wholly owned deepwater drilling rigs.
The Company estimates the gross capital expenditures on these projects
will be approximately $1.8 billion, of which approximately $1.0 billion
remains to be funded by the Company. Since May 1998, there has been a
downturn in demand for marine drilling rigs resulting in a decline in rig
utilization and dayrates. The decline has been particularly dramatic in
the domestic barge and jack-up rig markets where the Company is one of
the largest contractors. As a result, although the Company's operating
revenues increased by $99.6 million from 1997 to 1998, on a quarterly
basis during 1998 the Company experienced a decline in operating revenues
from $279.4 million for the first quarter of 1998 to $228.7 million for
the fourth quarter of 1998. As a result, the Company's cash flow from
operations, cash on hand, and funds available under its existing credit
facilities will not be sufficient to satisfy the Company's short-term and
long-term working capital needs, planned investments, capital
expenditures, debt, lease and other payment obligations, without selling
certain assets or terminating construction contracts.
On March 26, 1999, the Company issued three series of senior notes
with an aggregate principal amount of $1.0 billion. The senior notes
consisted of $400.0 million of 11% senior secured notes due 2006, $400.0
million of 11.375% senior secured notes due 2009 and $200.0 million of
12.25% senior notes due 2006 (collectively, the "Senior Notes"). The
$800.0 million senior secured notes are collateralized by ten of the
Company's drilling rigs. As a result, the Company received net proceeds
of approximately $971.5 million after deducting estimated offering
related expenses. The Company used the proceeds to repay existing
indebtedness of approximately $556.0 million and the remainder will be
used to acquire, construct, repair and improve drilling rigs and for
general corporate purposes.
Proceeds from the Senior Notes met a portion of the Company's capital
requirements. However, it will also be necessary for the Company to
obtain additional capital through debt and/or equity financings to meet
its currently projected obligations. The Company is currently evaluating
two project financings to meet a portion of its additional capital
requirements. The first is an approximately $270.0 million financing in
the form of a synthetic lease that would be collateralized by the
drillship Deepwater Frontier and drilling contract revenues from such
drillship. Proceeds of such financing, if obtained, would be used in
part to refinance the interim financing facility, under which $135.0
million ($81.0 million represents the Company's portion) had been
borrowed at March 15, 1999 and was repaid with a portion of the proceeds
from the Senior Notes. The foregoing interim loan has been made to a
limited liability company which will operate the Deepwater Frontier and
which is owned 60% by the Company and 40% by Conoco. The Company has
guaranteed repayment of 60% of this interim loan. The second financing
being contemplated is an approximately $250.0 million project financing
that would be collateralized by the semisubmersible RBS8M (formerly the
RBS6), as well as the drilling contract revenues from such rig.
The Company currently believes it will be able to consummate the
proposed project financings. However, there can be no assurance that
these or any other additional financings can be obtained, or if obtained,
that they will be on terms favorable to the Company or for the amounts
needed. Further, the Company has limited ability under its indenture
covenants to incur additional recourse indebtedness and to secure that
debt. In the event that the Company is unable to obtain its requisite
financing, the Company may have to sell assets or terminate or suspend
one or more construction projects. Termination or suspension of a
project may subject the Company to claims for penalties or damages under
the construction contracts or drilling contracts for rigs that are being
constructed. In addition, asset sales made under duress in today's
drilling market may not yield attractive sales prices. Accordingly, the
inability of the Company to complete such financings would have a
material adverse effect on the Company's financial condition and its
ability to repay its outstanding indebtedness.
Three of the Company's outstanding credit facilities were repaid and
terminated in March 1999 from proceeds from the Senior Notes. To assist
the Company's liquidity position, the Company may seek to establish a new
revolving bank credit facility of up to $180.0 million, and may sell
certain assets. There can be no assurance, however, that such facility
will be obtained or sales completed.
The liquidity of the Company should also be considered in light of
the significant fluctuations in demand that may be experienced by
drilling contractors as changes in oil and gas producers' expectations
and budgets occur, primarily in response to declines in prices for oil
and gas. These fluctuations can rapidly impact the Company's liquidity
as supply and demand factors directly affect utilization and dayrates,
which are the primary determinants of cash flow from the Company's
operations. The decline in oil and gas prices since 1997 has negatively
impacted the Company's performance, particularly in the shallow water
U.S. Gulf market, by adversely affecting the Company's rig utilization
and dayrates. Utilization of the Company's domestic jack-up fleet has
declined from approximately 100% in January 1998 to approximately 57% in
January 1999, and dayrates on new contracts have declined from a range of
$35,000 to $40,000 in January 1998 to a range of $10,000 to $13,000 at
present. Dayrates for the Company's domestic barge drilling rig fleet
have not declined materially, but utilization of the fleet declined from
approximately 96% in January 1998 to approximately 30% in January 1999.
The Company's international jack-up fleet has experienced declines in
utilization and dayrates since January 1998, but such declines have not
been as dramatic as those experienced in the domestic jack-up fleet. The
Company believes a continued depression in oil and gas prices will have a
material adverse effect on the Company's financial position and results
from operations.
The Company's construction and upgrade projects are subject to the
risks of delay and cost overruns inherent in any large construction
project, including shortages of equipment, unforeseen engineering
problems, work stoppages, weather interference, unanticipated cost
increases and shortages of materials or skilled labor. Significant cost
overruns or delays would adversely affect the Company's liquidity,
financial condition and results of operations. Delays could also result
in penalties under, or the termination of, the long-term contracts under
which the Company plans to operate these rigs.
The Company has based its estimates regarding its financing needs on
the assumption that conditions in the marine contract drilling industry
will remain approximately the same as currently exist through 1999 and
will improve in 2000. If conditions during these periods are less
favorable than the Company has assumed, the Company may be required to
seek additional financing. Any additional financing, if obtained, would
be subject to the risks and contingencies described above.
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. Arcade's cash and cash equivalents balance as
well as the short-term investments discussed below, are available to
Arcade for all purposes subject to restrictions under the Standstill
Agreement dated as of August 31, 1991 among Arcade, Transocean Offshore
Inc. and R&B which restrictions preclude R&B from borrowing any cash from
Arcade unless (i) Transocean is offered a pro-rata loan (based on stock
ownership in Arcade) on similar terms and (ii) any such loan(s) otherwise
comply with applicable laws. At December 31, 1998, $99.4 million of the
cash and cash equivalents balance related to Arcade. Arcade declared
distributions of approximately $82.2 million in the first quarter of
1999, of which the Company received approximately $61.2 million,
approximately $15.8 million in the first quarter of 1998, of which the
Company received approximately $11.8 million and 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 was
related to Arcade and was subject to restrictions (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. Gain (loss) on disposal of properties is credited (charged)
to income. Estimated useful lives range from three to twenty-five years.
In the first quarter of 1998, the Company had an independent appraiser
evaluate the expected useful lives of its marine units and, based on such
appraisal, the Company extended the useful lives of its marine units
effective January 1, 1998. Such change in estimate resulted in an
approximate $20.7 million reduction in depreciation expense for the year
ended December 31, 1998.
Costs incurred for construction and significant upgrades of marine
equipment are accumulated in construction in progress with no
depreciation being recorded on such amounts until the construction or
upgrade is completed and the equipment is placed into service. The
amount of construction in progress included in drilling equipment at
December 31, 1998 and 1997 was $921.4 million and $255.0 million,
respectively. Certain marine equipment is being held in non-operating
status pending modification and decisions regarding its deployment.
Management believes its market value exceeds its net book value of $65.7
million at December 31, 1998.
GOODWILL - Goodwill from the purchase of Cliffs Drilling (see Note B)
is amortized on a straight-line basis over 40 years. Amortization
charged to expense during the year ended December 31, 1998 was $.1
million. The Company's management periodically evaluates recorded
goodwill balances, net of accumulated amortization, for impairment based
on the undiscounted cash flows associated with the asset compared to the
carrying amount of that asset. Management believes that there have been
no events or circumstances which warrant revision to the remaining useful
life or affect the recoverability of its recorded goodwill.
DEFERRED CHARGES AND OTHER ASSETS - Deferred charges and other assets
includes investments in unconsolidated subsidiaries, deferred financing
costs and deferred rig mobilization and preparation costs. These amounts
are stated net of accumulated amortization costs and at net realizable
value.
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, 1998 or 1997. 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.
Revenues and expenses related to turnkey drilling contracts are
recognized when all terms and conditions of the contract have been
fulfilled. Consequently, the costs related to in-progress turnkey
drilling contracts are deferred as drilling contracts in progress until
the contract is completed and revenue is realized. The amount of
drilling contracts in progress is dependent on the volume of contracts,
the duration of the contract at the end of the reporting period and the
contract amount. Provision for losses on incomplete contracts is made
when such losses are probable and estimable.
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, 1998, 1997 and 1996 was $39.1 million, $13.7 million and $7.6
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 gain of $.2 million in 1998, a net loss of $.4 million
in 1997 and a net gain of $.8 million in 1996. 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. During
1998 and 1997 the Company did not enter into any forward exchange
contracts. At December 31, 1998, the Company did not have any
outstanding forward exchange contracts.
MINORITY INTEREST - Minority interest relates primarily to the
results of Arcade, which owns the drilling units Henry Goodrich and Paul
B. Loyd, Jr. The ownership percentage of Arcade attributable to
stockholders other than the Company was 25.6% for each of the years
ending December 31, 1998, 1997 and 1996. Arcade reported income in 1998,
1997 and 1996 of $44.2 million, $36.9 million and $26.3 million,
respectively.
EXTRAORDINARY LOSS - In the second quarter of 1998, the Company
incurred an extraordinary loss of $22.0 million, after a tax benefit of
$11.9 million, due to the early extinguishment of debt obligations. Such
loss consisted of premium payments and the expense of related deferred
debt issuance costs. In the fourth quarter of 1998, the Company incurred
an extraordinary loss of $2.2 million, after a tax benefit of $1.1
million, due to the early extinguishment of debt obligations. Such loss
consisted of the expense of related deferred debt issuance costs. See
Note D.
COMPREHENSIVE INCOME - In 1998 and 1997, the Company did not have any
non-owner changes in equity. In 1996, the Company recorded, in
stockholders' equity, $1.2 million of additional minimum liability
related to its pension plans. Therefore, comprehensive income for 1996
was $105.7 million as a result of adjusting net income for 1996 by $1.0
million of additional minimum liability, net of income taxes.
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 1998,
1997 and 1996.
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, 1998 and 1997 was $11.9 million and $7.4 million,
respectively.
NEWLY ISSUED ACCOUNTING STANDARDS - 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 adopted SFAS 130 in the first quarter of
fiscal 1998. See COMPREHENSIVE INCOME above.
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 adopted SFAS 131 in the fourth quarter
of 1998 and has made the appropriate disclosures. See Note L.
In February 1998, Statement of Financial Accounting Standards No.
132, Employers' Disclosures about Pensions and Other Postretirement
Benefits ("SFAS 132") was issued. SFAS 132 revises and standardizes
employers' disclosures about pension and other postretirement benefit
plans. The Company adopted SFAS 132 in the fourth quarter of 1998 and
has made the appropriate disclosures. See Note J.
In June 1998, Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133")
was issued. SFAS 133 establishes accounting and reporting standards
requiring that every derivative instrument be measured at its fair value,
recorded in the balance sheet as either an asset or liability and that
changes in the derivative's fair value be recognized currently in
earnings. SFAS 133 is effective for fiscal years beginning after June 15,
1999. The Company has not yet quantified the impacts of adopting SFAS 133
on its financial statements nor has it determined the timing of its
adoption.
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.
RECLASSIFICATION - Certain prior period amounts in the consolidated
financial statements have been reclassified for comparative purposes.
Such reclassifications had no effect on the net income (loss) or the
overall financial condition of the Company.
(B) BUSINESS COMBINATIONS
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 consolidated restated financial
statements of R&B Falcon. In 1996, R&B sold the drilling unit, Falrig
83, (formerly 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 and 1996 are as follows (in millions):
1997 1996
------ ------
Operating revenues
R&B $424.2 $290.3
Falcon 508.8 319.3
------ ------
Combined $933.0 $609.6
====== ======
Net income (loss)
R&B $(73.5) $ 74.1
Falcon 67.3 32.6
------ ------
Combined $ (6.2) $106.7
====== ======
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. In
1998, the Company reversed $8.0 million of merger expenses primarily due
to an Internal Revenue Service ruling received relating to taxes on
executive termination fees.
On December 1, 1998, R&B Falcon acquired all of the outstanding stock
of Cliffs Drilling. Cliffs Drilling is a provider of daywork and turnkey
drilling services, mobile offshore production units and well engineering
and management services. Cliffs Drilling's fleet consists of 16 jack-up
rigs, three self-contained platform rigs, four mobile offshore production
units and 11 land rigs. The acquisition was effected pursuant to an
Agreement and Plan of Merger dated August 21, 1998, whereby each share of
Cliffs Drilling's common stock was converted into 1.7 shares of R&B
Falcon common stock and cash in lieu of fractional shares. Total
consideration for Cliffs Drilling was approximately $405.1 million. The
Company issued approximately 27.1 million shares of its common stock
valued at approximately $385.3 million. This valuation was based upon a
price of $14.2125 per share of R&B Falcon common stock, which was the
average closing price per share of R&B Falcon's common stock during the
period in which the principal terms of the merger were agreed upon and
the merger was announced. In addition, the Company assumed Cliffs
Drilling's outstanding stock options valued at approximately $6.2 million
and the Company paid approximately $13.6 million in acquisition costs.
The acquisition of Cliffs Drilling was recorded using the purchase method
of accounting, accordingly Cliffs Drilling's results of operations are
included with the Company's results of operations since the acquisition
date. The excess of the purchase price over the estimated fair value of
net assets acquired amounted to approximately $70.7 million, which has
been accounted for as goodwill and is being amortized over 40 years using
the straight-line method.
Pro forma consolidated operating results of the Company and Cliffs
Drilling for the year ended December 31, 1998 and 1997, assuming the
Cliffs Drilling transaction occurred at the beginning of the respective
periods, are as follows:
Years Ended December 31,
------------------------
1998 1997
--------- ---------
(unaudited)
(in millions except per share amounts)
Operating revenues $ 1,349.0 $ 1,218.2
Income from continuing operations
before extraordinary loss 138.9 71.4
Net income 150.7 35.4
Net income per common share:
Basic .78 .19
Diluted .78 .18
(C) SHORT-TERM OBLIGATIONS
In 1998, the Company entered into a short-term credit facility for
the construction of the Deepwater Millennium. The facility bears interest
at the London Interbank Offered Rate ("LIBOR") plus 1.25% and is due on
June 30, 1999. At December 31, 1998, $1.6 million was available under
this facility. In March 1999, this credit facility which had been fully
drawn was terminated and repaid from proceeds from the Senior Notes (see
Note A).
(D) LONG-TERM OBLIGATIONS
Long-term obligations at December 31, 1998 and 1997 consisted of the
following (in millions):
1998 1997
-------- --------
Revolving credit facilities (1) $ 150.0 $ 482.0
6.5% Senior Notes, due April 2003 (2) 249.2 -
6.75% Senior Notes, due April 2005 (2) 348.1 -
6.95% Senior Notes, due April 2008 (2) 249.2 -
7.375% Senior Notes, due April 2018 (2) 248.0 -
9.125% Senior Notes, due December 2003
("9.125% Notes") (3) 100.0 -
9.5% Senior Notes, due December 2008("9.5% Notes")(3) 300.0 -
8% Senior Subordinated Convertible Debentures, due
December 1998 ("8% Debentures") (4) - 15.6
8.875% Senior Notes, due March 2003
("8.875% Notes") (5)(13) .4 120.0
9.75% Senior Notes, due January 2001
("9.75% Notes") (6)(13) 5.2 110.0
10.25% Senior Notes, due May 2003("10.25% Notes")(7) 202.9 -
12.5% Subordinated Notes, due March
2005 ("12.5% Notes") (8)(13) - 50.0
Floating Rate Notes (9) (13) - 10.0
NIC (10) 18.7 25.3
Deferred payment obligation (11) .5 7.5
Secured promissory note (12) - 6.4
Other debt obligations .3 .6
-------- --------
Total 1,872.5 827.4
Less long-term obligations due within one year (6.3) (135.2)
-------- --------
Long-term obligations $1,866.2 $ 692.2
======== ========
__________________________
(1) At December 31, 1998, the Company had two revolving credit
facilities outstanding.
The first is a $350.0 million revolving credit facility expiring
on January 24, 2002. This facility was previously at $500.0
million however, as a result of issuing the 9.125% Notes and the
9.5% Notes it was amended and reduced to $350.0 million.
Commencing March 31, 2001, the facility will be reduced by $15.0
million each calendar quarter. At December 31, 1998, interest was
accruing under this revolving credit facility at LIBOR plus .75%
for borrowings up to $100.0 million and at LIBOR plus 1.375% for
borrowings in excess of $100.0 million. In addition, a commitment
fee of .35% per annum is paid on the total amount of the facility.
The first $100.0 million of borrowing under this revolving credit
facility is secured by a pledge of the stock of one of the
Company's three major operating subsidiaries. The facility
contains covenants (with which the Company was in compliance at
December 31, 1998) which require the Company to meet certain
ratios and in many respects limit or prohibit, among other things,
the ability of the Company to incur additional indebtedness,
create liens and sell assets. At December 31, 1998, $200.0
million was available under this facility. In March 1999, this
credit facility which had been fully drawn was terminated and
repaid from proceeds from the Senior Notes (see Note A).
The second is a $35.0 million revolving credit facility expiring
on May 31, 2000. Interest accrues under this facility at .25% plus
the greater of the prevailing Federal Funds Rate plus .5% or a
referenced average prime; or at the adjusted LIBOR rate plus 2%.
In addition, a fee of 2% per annum is paid on outstanding letters
of credit and a commitment fee of .5% per annum is paid on the
unused portion of the facility. This facility is secured by
accounts receivable, certain rig inventory and equipment, certain
oil and gas properties and the stock of certain subsidiaries of
Cliffs Drilling. At December 31, 1998, $.4 million in letters of
credit were outstanding, thereby leaving $34.6 million available
under this facility.
At December 31, 1997, the Company had two revolving credit
facilities outstanding which during 1998 were both terminated and
repaid in full from proceeds from a senior note offering (see Note
(2) below).
The first was a $400.0 million revolving credit facility with a
syndicate of banks. This facility would have been 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 bore interest at LIBOR plus .85%. In addition,
a commitment fee of .35% per annum was paid on the unused portion
of the facility. The facility contained covenants which required
R&B to meet certain ratios and working capital conditions, and was
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 Arcade.
The second was a $215.0 million revolving credit facility with a
syndicate of banks. This facility consisted 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 was unsecured, maturing in October
1998. The facility required Falcon to meet certain tests related
to its net worth, interest coverage ratio, and current ratio, and
placed restrictions on dividends and investments by Falcon. The
facility provided 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 increased by .50%
during each calendar quarter commencing in the second quarter of
1998. The Company paid 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.
(2) In April 1998, the Company issued four series of senior notes with
an aggregate principal amount of $1.1 billion. As a result, the
Company received net proceeds of approximately $1,082.9 million
after deducting estimated offering related expenses. Interest on
these notes is payable semiannually on April 15 and October 15.
These notes are unsecured obligations of the Company, ranking pari
passu in right of payment with all other existing and future
senior unsecured indebtedness of the Company. The Company used the
proceeds to repay existing indebtedness of $874.4 million and the
remainder was used for planned capital expenditures, working
capital and other general corporate purposes. As a result of the
repayment of existing indebtedness, the Company incurred an
extraordinary loss of $22.0 million, net of tax, in the second
quarter of 1998. These notes were issued at a discount of
approximately $6.0 million which is being amortized as interest
expense over the term of the notes. The amount of unamortized
discount at December 31, 1998 was approximately $5.5 million and
the amount of amortized discount for the year ended December 31,
1998 was approximately $.5 million.
(3) In December 1998, the Company issued two series of senior notes
with an aggregate principal amount of $400.0 million. As a result,
the Company received net proceeds of approximately $392.3 million
after deducting estimated offering related expenses. Interest on
these notes is payable semiannually on June 15 and December 15.
These notes are unsecured obligations of the Company, ranking pari
passu in right of payment with all other existing and future
senior indebtedness of the Company. The Company used the proceeds
to reduce borrowings under an existing revolving credit facility.
As a result of such reduction, the Company incurred an
extraordinary loss of $2.2 million, net of tax, in the fourth
quarter of 1998.
(4) In December 1998, the 8% Debentures were repaid in full. The 8%
Debentures were convertible into the Company's common stock at
$31.386 per share. Accrued interest associated with the 8%
Debentures at December 31, 1997 was $11.9 million. 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.
(5) The 8.875% 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 8.875% Notes consisted of $120.0 million principal amount and
interest is payable semiannually on March 15 and September 15. The
8.875% Notes are unsecured obligations of Falcon, ranking pari
passu in right of payment with all other senior indebtedness of
Falcon. The 8.875% Notes are not guaranteed by any of Falcon's
subsidiaries, and thus are structurally subordinated to the 9.75%
Notes (described below) and other indebtedness of the subsidiaries.
Further, they are effectively subordinated to any secured indebted-
ness of Falcon to the extent of the collateral securing such
secured indebtedness. See Note (13) below.
(6) The 9.75% Notes were issued by Falcon pursuant to an offering in
January 1994. The 9.75% Notes consisted of $110.0 million principal
amount and interest is payable semiannually on January 15 and July
15. The 9.75% Notes are guaranteed by certain of the Company's
subsidiaries. The 9.75% 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. See Note (13) below.
(7) The 10.25% Notes were issued by Cliffs Drilling pursuant to
offerings in 1996 and 1997. The 10.25% Notes consist of $200.0
million principal amount and interest is payable semiannually on
May 15 and November 15. These notes are senior unsecured
obligations of Cliffs Drilling, ranking pari passu in right of
payment with all other senior indebtedness and senior to all
subordinated indebtedness. These notes are unconditionally
guaranteed on a senior unsecured basis by certain subsidiaries of
Cliffs Drilling (the "Cliffs Drilling Subsidiary Guarantors"),
which guarantees rank pari passu in right of payment with all
senior indebtedness of the Cliffs Drilling Subsidiary Guarantors
and senior to all subordinated indebtedness of the Cliffs Drilling
Subsidiary Guarantors. The 10.25% Notes are publicly traded and
are not guaranteed by R&B Falcon or any other subsidiary of the
parent, accordingly, separate financial statements of Cliffs
Drilling Subsidiary Guarantors are not required to be included in
these financial statements.
On or after May 15, 2000, the 10.25% Notes are redeemable at the
option of Cliffs Drilling, in whole or in part, at a price of 105%
of principal if redeemed during the twelve months beginning May
15, 2000, at a price of 102.5% of principal if redeemed during the
twelve months beginning May 15, 2001, or at a price of 100% of
principal if redeemed after May 15, 2002, in each case together
with interest accrued to the redemption date.
The indenture under which the 10.25% Notes are issued imposes
significant operating and financial restrictions on Cliffs
Drilling. Such restrictions affect, and in many respects limit or
prohibit, among other things, the ability of Cliffs Drilling to
incur additional indebtedness, make capital expenditures, create
liens and sell assets.
As a result of the Company acquiring Cliffs Drilling, Cliffs
Drilling was required to offer to purchase for cash all of the
outstanding 10.25% Notes at a purchase price equal to 101% of the
principal amount of each senior note, plus accrued and unpaid
interest, to the change of control payment date. On January 28,
1999, Cliffs Drilling repurchased approximately $.3 million
principal amount of the 10.25% Notes that were tendered pursuant
to this offer.
(8) The 12.5% Notes were issued by Falcon pursuant to an offering in
March 1995. The 12.5% Notes consisted of $50.0 million principal
amount and interest was payable semiannually on March 15 and
September 15. The 12.5% Notes were subordinated to all other
indebtedness of the Company except indebtedness that expressly
provides it shall not be senior in right of payment to the 12.5%
Notes. See Note (13) below.
(9) On February 23, 1994, Falcon issued $10.0 million of Floating Rate
Notes which bore interest at LIBOR plus 3.5%. In 1998,the Floating
Rate Notes were repaid in full. The principal amounts of the
Floating Rate Notes were 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 were guaranteed by certain of the Company's subsidiaries.
The Floating Rate Notes were unsecured obligations of Falcon,
ranking pari passu in right of payment with all other senior
indebtedness of Falcon, but were effectively subordinated to any
secured indebtedness of Falcon to the extent of the collateral
securing such secured indebtedness.
(10) 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.
(11) 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%. Principal repayments of $2.5
million and $7.0 million were paid in September 1996 and September
1998, respectively, and a final payment of $.5 million is due in
September 2000. The obligation is collateralized by a vessel
mortgage on the support vessel Iolair.
(12) 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. In June 1998, the
note was repaid in full. The note bore interest at 7.5%, payable
monthly, and matured in January 1999. The note was collateralized
by a vessel mortgage on the Peregrine VI.
(13) The indentures pursuant to which the 8.875% Notes, 9.75% Notes,
and the 12.5% 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.
As a result of the merger between R&B and Falcon, Falcon was
required to offer to purchase for cash all of the 8.875% Notes,
9.75% Notes and 12.5% Notes (collectively the "Old Notes") and the
Floating Rate Notes 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. As a
result, none of the notes were tendered for redemption.
On March 23, 1998, the Company offered to redeem the Old Notes.
The aggregate principal amount of the outstanding Old Notes was
$280.0 million and on April 20, 1998, $274.4 million in principal
amount of Old Notes was repaid from proceeds from the sale of the
$1.1 billion senior notes (see Note (2) above).
As of December 31, 1998, the Company estimates the fair value of its
debt obligations to be $1.7 billion compared to a book value of $1.9
billion.
Aggregate annual maturities of long-term obligations, (including the
current portion) for the next five years and thereafter are as follows
(in millions):
1999 $ 6.3
2000 6.6
2001 11.3
2002 150.5
2003 553.3
Thereafter 1,150.0
--------
1,878.0
Less the unamortized discount
on the senior notes (5.5)
--------
Total long-term obligations and long-
term obligations due within one year
at December 31, 1998 $1,872.5
========
(E) 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 1998.
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 aggregate option price for the three rigs
will be below the aggregate carrying value for such rigs by approximately
$4.0 million in 1999. 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.
CAPITAL EXPENDITURES - In 1999 and 2000, the Company expects to spend
approximately $1.1 billion to expand and upgrade its operating rig fleet,
primarily its deepwater rig fleet.
The Peregrine IV, Peregrine VII, and Falcon 100 will be completed
later than the required commencement dates under the drilling contracts
for such rigs and at costs significantly in excess of original estimates.
The customer for the Peregrine VII has indicated that they will cancel
the drilling contract due to construction delays. The Company believes
that it will be able to find work for the Peregrine VII at dayrates
similar to its previously contracted levels. However, the Company expects
that any new contracts will likely be short-term or on a well-to-well
basis. Also, the Company will be subject to late delivery penalties under
the applicable drilling contracts for the Peregrine IV and Falcon 100,
(approximately $41,500 per day, up to a maximum of approximately $38.6
million, for the Peregrine IV, and approximately $26,500 per day, up to a
maximum of approximately $14.7 million, for the Falcon 100). If the
Peregrine IV and Falcon 100 are not delivered within 240 and 180 days,
respectively, of the commencement date of the applicable drilling
contract, the customer may cancel its contract.
EMPLOYMENT CONTRACTS - The Company has entered into employment
contracts with 16 employees. Such employment contracts include certain
provisions which call for termination payments to the employee upon the
occurrence of certain events including change of control, which if
incurred at December 31, 1998 would have been approximately $40.0
million.
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 $47.8 million (1998), $40.2 million
(1997) and $22.7 million (1996). As of December 31, 1998, future minimum
rental payments relating to operating leases were as follows (in
millions):
1999 2000 2001 2002 2003 Thereafter
------ ------ ------ ------ ------ ----------
Drilling units $ 20.9 $ 13.8 $ 13.0 $ 13.0 $ 13.0 $ 24.9
Other 4.3 2.4 1.3 1.0 .3 .2
------ ------ ------ ------ ------ ------
Total $ 25.2 $ 16.2 $ 14.3 $ 14.0 $ 13.3 $ 25.1
====== ====== ====== ====== ====== ======
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 F).
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. A substantial number 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, 1998, the Company had letters of
credit outstanding and unused totalling $6.6 million and $38.4 million,
respectively (see Note D).
(F) ACCRUED LIABILITIES AND OTHER NONCURRENT LIABILITIES
The components of "Accrued liabilities" at December 31, 1998 and 1997
were as follows (in millions):
1998 1997
------- -------
Accrued expenses - general $ 64.7 $ 72.1
Accrued income and sales tax 23.9 28.7
Accrued interest expense 20.3 28.6
Accrued worker compensation claims 16.2 7.9
Accrued payroll 9.5 4.2
Accrued employee benefits 2.7 2.8
Other 1.7 2.1
------- -------
Total $ 139.0 $ 146.4
======= =======
The components of "OTHER NONCURRENT LIABILITIES" at December 31, 1998
and 1997 were as follows (in millions):
1998 1997
------ ------
Postretirement benefit obligations $ 14.9 $ 14.9
Foreign income taxes 6.1 6.1
Pension obligations 3.5 3.5
Deferred gain on sale of drilling
unit (see Note E) 2.0 5.6
Other 9.4 8.5
------ ------
Total $ 35.9 $ 38.6
====== ======
(G) CANCELLATION OF CONVERSION PROJECTS
In the third quarter of 1998, the Company cancelled the Peregrine VI
and the Peregrine VIII drillship conversion projects due to continuing
uncertainty as to final cost and expected delivery dates. As a result,
the drilling contract on the Peregrine VIII was terminated on September
24, 1998, and the drilling contract on the Peregrine VI was terminated on
January 1, 1999. Both terminations were without prejudice to the rights
of the oil companies. The Company believes that, based on provisions of
the contracts that preclude recovery of indirect or consequential damages
and projected rig availability in the offshore drilling industry, the
Company will not have any material liability under these drilling
contracts as a result of the termination thereof. The contracts with the
shipyard for conversion of the Peregrine VI and the Peregrine VIII have
been cancelled. In addition, in the fourth quarter of 1998, the Company
cancelled two additional drillship conversion projects that were in the
preliminary phases. As a result of the termination of these four
drillship conversion projects, the Company expensed $118.3 million in
related costs in 1998.
In connection with the Peregrine VI and Peregrine VIII projects and a
third drillship project, the Company purchased or committed to purchase
drilling equipment with an aggregate cost of approximately $285.0
million. This equipment constitutes all of the material drilling
equipment necessary to outfit two deepwater drillships (although a
substantial portion of such equipment can be used on semisubmersible
rigs). The Company expects to use this equipment to outfit other
deepwater projects and as inventory.
(H) INCOME TAXES
Income tax expense for the years ended December 31, 1998, 1997 and
1996 consisted of the following (in millions):
1998 1997 1996
------ ------ ------
Current:
Foreign $ 28.1 $ 9.4 $ 5.8
Federal 3.3 26.9 .4
State 7.1 3.0 .1
------ ------ ------
Total current 38.5 39.3 6.3
------ ------ ------
Deferred:
Foreign 4.9 17.9 4.0
Federal 13.7 26.6 15.0
State 1.8 .9 1.7
------ ------ ------
Total deferred 20.4 45.4 20.7
------ ------ ------
Total $ 58.9 $ 84.7 $ 27.0
====== ====== ======
The domestic and foreign components of income from continuing
operations before income tax expense, minority interest and extraordinary
loss for the years ended December 31, 1998, 1997 and 1996 were as follows
(in millions):
1998 1997 1996
------- ------- -------
Domestic $ (26.2) $ (95.0) $ 4.9
Foreign 187.4 218.9 135.5
------- ------- -------
Total $ 161.2 $ 123.9 $ 140.4
======= ======= =======
The effective tax rate, as computed on income from continuing
operations before income tax expense, minority interest and extraordinary
loss differs from the statutory U.S. income tax rate for the years ended
December 31, 1998, 1997 and 1996 due to the following:
1998 1997 1996
---- ---- ----
Statutory tax rate 35% 35% 35%
Use of previously reserved tax benefits - - (11)
Limitation on recognition of tax benefits 2 10 -
Foreign tax expense (net of federal benefit) (3) 2 (6)
State tax expense (net of federal benefit) 3 2 1
Non-deductible merger expenses (2) 17 -
Other 2 2 -
---- ---- ----
Effective tax rate 37% 68% 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, 1998 and 1997 were as follows (in millions):
1998 1997
------- -------
Deferred tax liabilities:
Depreciation $ 214.4 $ 208.0
Undistributed earnings 7.4 8.3
------- -------
Total deferred tax liabilities 221.8 216.3
------- -------
Deferred tax assets:
Postretirement benefits (5.4) (5.4)
Tax benefit carryforwards (139.4) (169.8)
Discontinued operations, net (2.2) (22.3)
Accrued expenses (5.7) (3.5)
Valuation allowance 75.7 63.5
Other (2.4) (2.0)
------- -------
Total deferred tax assets (79.4) (139.5)
------- -------
Net deferred tax liability $ 142.4 $ 76.8
======= =======
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 $25.4 million arising
since the 1991 ownership change are not subject to this limitation.
(I) 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 transferable 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 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 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.
In 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.
During 1998 in a series of transactions, the Company issued
approximately 763,680 shares of its common stock in partial consideration
for the acquisition of 25 tugs, five ocean going barges and six workover
rigs.
On December 1, 1998, the Company issued approximately 27.1 million
shares of its common stock for the acquisition of Cliffs Drilling (see
Note B).
As of December 31, 1998, 11,066,958 shares of authorized, unissued
shares of common stock were reserved for issuance under the Company's
stock plans (net of forfeitures) and 282,192 shares of authorized,
unissued shares of common stock were reserved for issuance for contingent
obligations relating to asset purchases.
(J) EMPLOYEE BENEFIT PLANS
PENSION AND POSTRETIREMENT BENEFITS - 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.
Effective January 1, 1998, substantially all of the Falcon employees paid
from a U.S. payroll began accruing benefit service although they were not
eligible to participate in the plans until January 1, 1999. 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.
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.
The following table includes the aggregate of the Company's three
pension plans and the Company's postretirement benefits plan. All three
pension plans have projected benefit obligations in excess of plan
assets. Only the Replacement Plan has an accumulated benefit obligation
in excess of plan assets, and such accumulated benefit obligation was
$3.8 million and $3.3 million as of December 31, 1998 and 1997,
respectively. There are no assets held in the Replacement Plan.
Pension Postretirement
-------------- --------------
1998 1997 1998 1997
------ ------ ------ ------
(dollars in millions)
Change in projected benefit obligation:
Projected benefit obligation at
beginning of year $ 77.5 $ 67.9 $ 10.5 $ 10.3
Service cost 2.0 1.8 .1 .1
Interest cost 5.5 4.9 .8 .7
Participant contributions - - .1 .1
Plan amendments (2.1) - - -
Actuarial (gain) loss 13.3 7.4 1.8 (.1)
Benefits paid (4.7) (4.5) (.8) (.6)
------ ------ ------ ------
Projected benefit obligation at
end of year 91.5 77.5 12.5 10.5
------ ------ ------ ------
Change in plan assets:
Plan assets at fair value at
beginning of year 69.8 59.1 - -
Actual return on plan assets 8.6 10.2 - -
Employer contributions 6.1 5.0 .7 .5
Participant contributions - - .1 .1
Benefits paid (4.7) (4.5) (.8) (.6)
------ ------ ------ ------
Plan assets at fair value at
end of year 79.8 69.8 - -
------ ------ ------ ------
Funded status of plan (11.7) (7.7) (12.5) (10.5)
Unrecognized net (gain) loss 22.2 10.9 (1.6) (3.5)
Unrecognized prior service cost (3.8) (2.0) (1.3) (1.7)
Unrecognized net transition
obligation .9 .7 - .2
------ ------ ------ ------
Prepaid (accrued) pension cost $ 7.6 $ 1.9 $(15.4) $(15.5)
====== ====== ====== ======
Weighted-average assumptions:
Discount rate 6.75% 7.40% 6.75% 7.40%
Long-term rate of return 10.00% 10.00% - -
Salary scale 6.90% 6.90% 4.50% 4.50%
Net benefit costs for the years ended December 31, 1998, 1997 and 1996
included the following (in millions):
Pension Postretirement
------------------- -------------------
1998 1997 1996 1998 1997 1996
----- ----- ----- ----- ----- -----
Service cost $ 1.9 $ 1.6 $ 1.8 $ .2 $ .1 $ .1
Interest cost 5.5 4.9 4.6 .8 .7 .8
Expected return on plan assets (6.9) (10.2) (5.2) - - -
Amortization of:
Unrecognized transition obligation (.1) (.1) (.1) - - -
Unrecognized prior service cost (.3) (.3) (.3) (.4) (1.0) (1.0)
Unrecognized actuarial (gain)/loss .4 .1 .2 (.1) (.1) (.1)
Loss due to change in attribution
period - - - .2 .2 .2
Deferral of asset gain - 4.4 - - - -
----- ----- ----- ----- ----- -----
Net benefit costs $ .5 $ .4 $ 1.0 $ .7 $ (.1) $ -
===== ===== ===== ===== ===== =====
The health care cost trend rates used to measure the expected cost in
1999 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.
A one-percentage-point change in assumed health care cost trend rates
would have the following effects (in millions):
1-Percentage- 1-Percentage-
Point Increase Point Decrease
-------------- --------------
Effect on total of service and
interest cost components $ .1 $ (.1)
Effect on postretirement
benefit obligation $1.4 $(1.1)
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 $4.6 million in 1998, $2.7 million in 1997 and $1.6 million
in 1996.
STOCK PLANS - The Company has 14 stock plans which are intended to
provide an incentive that will allow the Company to retain persons of the
training, experience and ability necessary for the development and
financial success of the Company. Such plans provide for grants of stock
options, stock appreciation rights, stock awards and cash awards, which
may be granted singly, in combination or in tandem. All stock options
awarded under these plans expire ten years from the date of their grant.
Four of these plans were originally adopted by Falcon, five by R&B, two
by Cliffs Drilling and three by the Company. As a result of the business
combination between R&B and Falcon, and R&B Falcon and Cliffs Drilling,
all of the R&B, Falcon and Cliffs Drilling plans were assumed by the
Company, and the options outstanding thereunder were converted to options
to acquire common stock of R&B Falcon (with appropriate adjustments to
reflect the exchange ratios).
The Company's Reading & Bates Corporation 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. In 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.
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 Director Stock Option
Plan authorized 236,000 shares of common stock to be available for awards
of stock options to non-employee members of the board of directors 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 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 grant). 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 and in August 1997 R&B
rescinded such option grants. 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 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 and in
August 1997 R&B rescinded such option grants. 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).
The Company's Falcon Drilling Company, Inc. 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. In 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.
The Company's Falcon Drilling Company, Inc. 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. In 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.
The Company's Falcon Drilling Company, Inc. 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. In 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. In 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 options with respect to
150,000 shares were granted at an adjusted option price of $9.72 per
share, vesting ratably over five years. In February 1997, options with
respect to 258,000 shares were granted at an adjusted option price of
$12.50 per share and in November 1997 Falcon rescinded such option
grants. 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 Falcon Drilling Company, Inc. 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 with respect to 3,000 shares were granted at an option price of
$12.50 per share and in November 1997 Falcon rescinded such option
grants. In July 1997, options for 40,000 shares were granted at an
option price of $29.00 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.
The Company's Cliffs Drilling Company 1988 Incentive Equity Plan and
Cliffs Drilling Company 1998 Incentive Equity Plan were both assumed by
the Company on December 1, 1998 as a result of the purchase of Cliffs
Drilling (see Note B). Under these plans, the Company assumed outstanding
options to purchase 1,052,300 shares of common stock at adjusted option
prices ranging from $3.79 to $40.89 per share and expiring at dates
ranging from 2000 to 2008. All such options vested on December 1, 1998
as a result of the Company's purchase of Cliffs Drilling.
The Company's 1998 Employee Long-Term Incentive Plan authorized 3.2
million shares of common stock to be available for awards. In 1998, stock
options with respect to 100,000 shares were granted to an employee of the
Company at an option price of $22.375 per share (the market price on the
date of grant) and stock options with respect to 1,832,500 shares were
granted to certain employees of the Company at an option price of
$12.9375 per share (the market price on the date of grant). Such options
become exercisable over a three year period. Also in 1998, restricted
stock awards with respect to 941,500 shares were granted to certain
employees of the Company. Such shares awarded are 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 will be amortized to expense over
the period during which the shares vest.
The Company's 1998 Director Long-Term Incentive Plan authorized
250,000 shares of common stock to be available for awards to non-employee
members of the board of directors. As of December 31, 1998, no awards
have been made under this plan.
The Company's 1998 Acquisition Option Plan authorized options with
respect to 1.0 million shares of common stock to be granted to certain
employees of Cliffs Drilling. On December 1, 1998, options with respect
to all 1.0 million shares were granted at an option price of $9.125 per
share (the market price on the date of grant) and vest over a three year
period.
Unearned compensation relating to the Company's restricted stock
awards is shown as a reduction of stockholders' equity. Compensation
recognized for the years ending December 31, 1998, 1997 and 1996 totaled
approximately $1.1 million, $17.8 million and $3.2 million, respectively.
Stock option transactions under the plans were as follows:
1998 1997 1996
------------------ ----------------- -------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Options Price of Options Price of Options Price
---------- ----- ---------- ----- ---------- -----
Outstanding at
beginning of year 2,794,101 $ 9.83 3,836,159 $ 8.20 5,009,071 $ 6.52
Granted 2,930,500 11.96 40,000 29.00 607,000 12.12
Assumed from
Cliffs Drilling 1,052,300 20.41 - - - -
Exercised (226,547) 6.03 (1,073,562) 4.75 (1,771,888) 4.79
Forfeited - - (8,496) 7.63 (8,024) 7.22
--------- ------ --------- ------ --------- ------
Outstanding at
end of year 6,550,354 12.61 2,794,101 9.83 3,836,159 8.20
========= ========= =========
Exercisable at
end of year 3,503,187 12.69 2,377,433 9.98 2,776,413 7.84
Available for grant
at end of year 4,516,604 - 5,415,772 - 1,338,694 -
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 1998 Employee Long-Term Incentive Plan and the
1998 Acquisition Option Plan: risk-free interest rate of 4.9%, an
expected life of 10 years and expected volatility of 68.2%. The
resulting fair value of such options granted was $9.32.
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):
1998 1997 1996
------- ------- -------
Net income (loss) applicable
to common stockholders:
As reported $ 102.8 $ (6.2) $ 103.1
Pro forma $ 101.3 $ (10.0) $ 98.4
Basic EPS:
As reported $ .61 $ (.04) $ .70
Pro forma $ .60 $ (.06) $ .67
Diluted EPS:
As reported $ .61 $ (.04) $ .67
Pro forma $ .60 $ (.06) $ .64
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.
(K) RELATED PARTY TRANSACTIONS
Arcade had rig management agreements with Transocean Offshore Inc.
(as successor to Sonat Offshore Drilling Inc.), a major shareholder of
Arcade, for the operation and marketing of both of its drilling units.
The management agreement for one of Arcade'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 the year ending
December 31, 1996, Arcade paid to Transocean Offshore Inc. approximately
$1.2 million for such management services. Additionally, for the year
ended December 31, 1996, Arcade received from Transocean Offshore Inc.
approximately $15.1 million pursuant to a bareboat charter agreement on
one of the rigs.
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,
1998, 1997 and 1996.
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 $.1
million, $.2 million and $.6 million for the years ended December 31,
1998, 1997, and 1996, respectively.
A director of the Company who provided consulting services to the
Company received $.4 million in the year ended December 31, 1998.
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 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 1994 and
has subsequently advanced approximately $.5 million to pay principal and
interest due on this debt for each of the years ended December 31, 1998,
1997 and 1996. 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 1997 and 1996, the Company paid $.4 million and $.9 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.
(L) SEGMENT INFORMATION
The Company's revenues are generated primarily from its marine
drilling rigs. The Company's management has organized these rigs by
general equipment types based on water depth capability. Any rig capable
of drilling in water depths greater than 400 feet is considered
deepwater. In addition, as a result of the purchase of Cliffs Drilling,
the Company provides turnkey drilling services and land drilling
operations both of which are included in the engineering services and
land operations segment. The Company's development segment primarily
consists of the Company's oil and gas activities that are currently being
held for sale (see Note N).
Operating income by segment for the years ended December 31, 1998,
1997 and 1996 is as follows (in millions):
1998 1997 1996
------- ------- -------
Deepwater:
Revenues $ 392.5 $ 349.3 $ 211.2
Operating expenses (184.4) (140.2) (90.1)
Cancellation of conversion projects (118.3) - -
Depreciation (45.7) (38.6) (22.4)
------- ------- -------
Operating income 44.1 170.5 98.7
------- ------- -------
Shallow water:
Revenues 382.9 333.2 224.9
Operating expenses (161.5) (158.7) (128.3)
Depreciation (27.0) (29.0) (26.8)
------- ------- -------
Operating income 194.4 145.5 69.8
------- ------- -------
Inland water:
Revenues 244.3 249.9 172.9
Operating expenses (169.1) (136.7) (110.2)
Depreciation (23.5) (16.7) (12.7)
------- ------- -------
Operating income 51.7 96.5 50.0
------- ------- -------
Engineering services and land operations:
Revenues 12.5 - -
Operating expenses (10.5) - -
Depreciation (.5) - -
------- ------- -------
Operating income 1.5 - -
------- ------- -------
Development:
Revenues .4 .6 .6
Operating expenses (22.0) (130.2) (2.9)
Depreciation (.1) (.1) -
------- ------- -------
Operating income (21.7) (129.7) (2.3)
------- ------- -------
Unallocated depreciation and
amortization (.8) (.3) (.4)
Unallocated general and
administrative (61.4) (55.7) (37.0)
Unallocated merger expenses 8.0 (66.4) -
------- ------- -------
Operating income $ 215.8 $ 160.4 $ 178.8
======= ======= =======
Total assets by segment at December 31, 1998, 1997 and 1996 were as
follows (in millions):
1998 1997 1996
--------- --------- ---------
Deepwater $ 2,078.6 $ 1,222.1 $ 574.6
Shallow water 1,038.5 445.2 681.3
Inland water 251.2 228.0 106.9
Engineering services and
land operations 156.9 - -
Development 10.5 .5 51.0
Corporate 173.6 37.2 42.0
--------- --------- ---------
Total $ 3,709.3 $ 1,933.0 $ 1,455.8
========= ========= =========
Geographic information about the Company's operations for the three
years ended December 31, 1998 is as follows (in millions):
1998 1997 1996
--------- --------- ---------
Operating revenues: (1)
United States $ 453.0 $ 451.2 $ 276.7
Europe 251.9 247.3 146.9
West Africa 126.5 69.9 25.5
Southeast Asia 83.4 82.4 59.0
South America 75.2 50.9 52.2
Australia 26.2 23.4 39.6
Mediterranean-
Middle East 16.4 7.9 8.7
Other Foreign - - 1.0
Corporate - - -
--------- --------- ---------
Total $ 1,032.6 $ 933.0 $ 609.6
========= ========= =========
Identifiable assets:
United States $ 1,112.4 $ 828.4 $ 458.5
Europe 922.4 535.2 402.2
Southeast Asia 659.3 92.7 133.4
South America 499.1 175.1 234.6
West Africa 242.2 190.3 47.0
Mediterranean-
Middle East 76.3 52.2 14.0
Australia 24.0 21.9 47.9
Other Foreign - - 76.2
Corporate 173.6 37.2 42.0
--------- --------- ---------
Total $ 3,709.3 $ 1,933.0 $ 1,455.8
========= ========= =========
(1) Revenues are shown by countries in which the Company's marine and
drilling units operated.
For the year ended December 31, 1998, revenues from one customer of
$116.1 million, reported in the deepwater segment, accounted for 11.2% of
the Company's total operating revenues. 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, $52.4
million reported in the deepwater segment, $15.0 million reported in the
shallow water segment and $3.2 million reported in the inland water
segment, accounted for 11.6% of the Company's total operating revenues.
(M) EARNINGS PER 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 and the issuance of restricted stock both
computed using the treasury stock method and the conversion of preferred
stock if dilutive.
The following table reconciles the numerators and denominators of the
basic and diluted per common share computations for income from
continuing operations before extraordinary loss for the three years ended
December 31, 1998, 1997 and 1996 as follows (in millions except per share
amounts):
1998 1997 1996
------- ------- -------
Numerator:
Income from continuing operations
before extraordinary loss $ 91.0 $ 29.8 $ 106.7
Dividends on preferred stock - - (3.6)
------- ------- -------
Income from continuing operations
before extraordinary loss - basic 91.0 29.8 103.1
Effect of dilutive securities:
Dividends on preferred stock - - 3.6
------- ------- -------
Income from continuing operations
before extraordinary loss - diluted $ 91.0 $ 29.8 $ 106.7
======= ======= =======
Denominator:
Weighted average common shares
outstanding - basic 167.5 164.1 147.4
Outstanding stock options and
restricted stock 1.3 2.1 2.7
Convertible preferred stock - - 7.6
------- ------- -------
Weighted average common shares
outstanding - diluted 168.8 166.2 157.7
======= ======= =======
Earnings per share:
Income from continuing operations
before extraordinary loss:
Basic $ .54 $ .18 $ .70
Diluted $ .54 $ .18 $ .67
(N) 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 in the financial
statements for the three years ended December 31, 1997, 1996 and 1995,
the segment was accounted for as a discontinued operation. As of March
1999, the Company has not been able to divest this segment on terms it
found acceptable and in accordance with generally accepted accounting
principles the Company has reclassified its financial statements as if
this segment had not been discontinued. The Company does not intend to
engage in any material activities in this segment and still intends to
divest this segment.
In 1998, Devco incurred dryhole costs of $11.7 million and asset
impairment charges of $11.3 million. In 1997, Devco incurred dryhole
costs of $65.1 million and asset impairment charges of $42.8 million. At
December 31, 1998, none of the Company's oil and gas properties contained
proved reserves and all such properties had been written off.
Oil and gas assets held for sale at December 31, 1998 which consisted
primarily of a receivable for the sale of an interest in an oil and gas
property were $11.7 million and related liabilities totaled $4.7 million
which consisted primarily of a payable for an interest in an oil and gas
property. Oil and gas assets held for sale at December 31, 1997 which
consisted primarily of oil and gas properties and receivables were $38.4
million and related liabilities totaled $44.2 million, including a $36.0
million reserve for estimated losses from operations until disposal.
Such $36.0 million reserve was reversed in 1998 in accordance with the
Company reclassifying the oil and gas segment as if it had not been
discontinued. There were no revenues from the business held for sale
during the years ended December 31, 1998, 1997, and 1996.
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.
(O) QUARTER FINANCIAL DATA (unaudited)
The following summarized quarterly financial data has been adjusted
to reflect the recontinuance of the Company's oil and gas operations (see
Note N). Summarized quarterly financial data for the two years ended
December 31, 1998, are as follows (in millions except for per share
amounts):
Quarter
--------------------------------------------
First Second Third Fourth Total
------- ------- ------- ------- --------
1998:
- ----
Operating revenues $ 279.4 $ 281.0 $ 243.5 $ 228.7 $ 1,032.6
Gross income (1) $ 130.1 $ 126.3 $ 77.3 $ 53.7 $ 387.4
Income (loss) from continuing
operations before
extraordinary loss (2) $ 61.5 $ 59.9 $ (28.2) $ (2.2) $ 91.0
Income from discontinued
operations $ 8.3 $ .5 $ 7.7 $ 19.5 $ 36.0
Extraordinary loss (3) $ - $ (22.0) $ - $ (2.2) $ (24.2)
Net income (loss) $ 69.8 $ 38.4 $ (20.5) $ 15.1 $ 102.8
Net income (loss) per
common share:
Basic:
Continuing operations $ .37 $ .37 $ (.17) $ (.01) $ .54
Discontinued operations .05 - .05 .11 .21
Extraordinary loss - (.13) - (.01) (.14)
------- ------- ------- ------- ---------
Net income (loss) $ .42 $ .24 $ (.12) $ .09 $ .61
======= ======= ======= ======= =========
Diluted:
Continuing operations $ .37 $ .37 $ (.17) $ (.01) $ .54
Discontinued operations .05 - .05 .11 .21
Extraordinary loss - (.13) - (.01) (.14)
------- ------- ------- ------- ---------
Net income (loss) $ .42 $ .24 $ (.12) $ .09 $ .61
======= ======= ======= ======= =========
1997:
- ----
Operating revenues $ 203.2 $ 218.4 $ 244.7 $ 266.7 $ 933.0
Gross income (1) $ 76.9 $ 82.3 $ 73.5 $ 48.8 $ 281.5
Income (loss) from
continuing operations (4) $ 38.9 $ 44.0 $ 35.0 $ (88.1) $ 29.8
Loss from discontinued
operations $ - $ - $ - $ (36.0) $ (36.0)
Net income (loss) $ 38.9 $ 44.0 $ 35.0 $(124.1) $ (6.2)
Net income (loss) per
common share:
Basic:
Continuing operations $ .24 $ .27 $ .21 $ (.54) $ .18
Discontinued operations - - - (.21) (.22)
------- ------- ------- ------- ---------
Net income (loss) $ .24 $ .27 $ .21 $ (.75) $ (.04)
======= ======= ======= ======= =========
Diluted:
Continuing operations $ .24 $ .27 $ .21 $ (.54) $ .18
Discontinued operations - - - (.21) (.22)
------- ------- ------- ------- ---------
Net income (loss) $ .24 $ .27 $ .21 $ (.75) $ (.04)
======= ======= ======= ======= =========
___________________
(1) Gross income represents operating revenues less operating expenses,
depreciation and amortization, and other, net.
(2) The third quarter of 1998 and the fourth quarter of 1998 include
cancellation of conversion project expense of $85.8 million and $32.5
million, respectively.
(3) The extraordinary losses incurred in the second and fourth quarters
of 1998 are shown net of a tax benefit of $11.9 million and $1.1
million, respectively.
(4) The fourth quarter of 1997 includes merger expenses of $66.4 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, 1999, 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, 1998 and 1997
Consolidated Statement of Operations for the years ended December
31, 1998, 1997 and 1996
Consolidated Statement of Cash Flows for the years ended December
31, 1998, 1997 and 1996
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1998, 1997 and 1996
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.)
2.2 - Agreement and Plan of Merger, dated August 21, 1998 by and
among Cliffs Drilling Company, R&B Falcon Corporation and
RBF Cliffs Drilling Acquisition Corp. (Filed as Exhibit 2
to R&B Falcon's Registration Statement No. 333-63471 on Form
S-4 dated September 15, 1998 and incorporated herein by
reference.)
3.1 - Amended and Restated Certificate of Incorporation of R&B
Falcon. (Filed as Exhibit 3.1 to R&B Falcon's Annual Report
on Form 10-K for 1997 and incorporated herein by reference.)
3.2 - Amended and Restated Bylaws of R&B Falcon. (Filed as
Exhibit 3.2 to R&B Falcon's Annual Report on Form 10-K for
1997 and incorporated herein by reference.)
4.1 - Form of R&B Falcon's Common Stock Certificate. (Filed as
Exhibit 4.1 to R&B Falcon's Annual Report on Form 10-K for
1997 and incorporated herein by reference.)
4.2 - Rights Agreement dated as of December 23, 1997 between R&B
Falcon and American Stock Transfer and Trust Company.
(Filed as Exhibit 4.2 to R&B Falcon's Annual Report on
Form 10-K for 1997 and incorporated herein by reference.)
4.3 - Registration Rights Agreement dated January 1, 1998 among
the Company and the Stockholders of BSI Workover and
Drilling, Inc. (Filed as Exhibit 4.1 to R&B Falcon's
Quarterly Report on Form 10-Q for the First Quarter of 1998
and incorporated herein by reference.)
4.4 - Registration Rights Agreement dated as of April 8, 1998
among R&B Falcon Corporation and Credit Suisse First Boston,
Chase Securities, Inc., Donaldson, Lufkin & Jenrette
Securities Corporation and Morgan Stanley Dean Witter.
(Filed as Exhibit 4.2 to R&B Falcon's Registration Statement
No. 333-56821 on Form S-4 dated June 15, 1998 and
incorporated herein by reference.)
4.5 - Registration Rights Agreement dated July 1, 1998 by and
between R&B Falcon Corporation, Kenneth Stage, T. George
Delsa, Vial J. LeBlanc and Dr. William T. Barfield. (Filed
as Exhibit 4 to R&B Falcon's Quarterly Report on Form 10-Q
for the Third Quarter of 1998 and incorporated herein by
reference.)
4.6 - Registration Rights Agreement dated December 17, 1998 among
R&B Falcon Corporation, Credit Suisse First Boston
Corporation, Nations Banc Montgomery Securities LLC, and
Paribas Corporation.
4.7 - 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.)
4.8 - 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.)
4.9 - 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.)
4.10 - First Supplemental Indenture dated as of December 23, 1997
among the Company, R&B and IBJ Schroder Bank & Trust
Company. (Filed as Exhibit 4.6 to R&B Falcon's Annual Report
on Form 10-K for 1997 and incorporated herein by reference.)
4.11 - 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.)
4.12 - 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.)
4.13 - 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.)
4.14 - 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.)
4.15 - 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.)
4.16 - 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 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.)
4.17 - 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.)
4.18 - 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.)
4.19 - 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.)
4.20 - Indenture dated as of April 14, 1998, between R&B Falcon
Corporation, as Issuer, and Chase Bank of Texas, National
Association, as Trustee, with respect to Series A and Series
B of each of $250,000,000 6.5% Senior Notes due 2003,
$350,000,000 6.75% Senior Notes due 2005, $250,000,000 6.95%
Senior Notes due 2008, and $250,000,000 7 3/8% Senior Notes
due 2018. (Filed as Exhibit 4.1 to R&B Falcon's Registration
Statement No. 333-56821 on Form S-4 dated June 15, 1998 and
incorporated herein by reference.)
4.21 - Indenture dated as of December 22, 1998, between R&B Falcon
Corporation, as Issuer and Chase Bank of Texas, National
Association, as Trustee, with respect to $400,000,000 Series
A and Series B 9 1/8% Senior notes due 2003, and 9 1/2%
Senior Notes due 2008.
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 subsidiaries 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* - 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.)
10.6* - 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.)
10.7* - 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.)
10.8* - 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.)
10.9* - 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.)
10.10* - 1998 Employee Long-Term Incentive Plan of R&B Falcon
Corporation. (Filed as Exhibit 99.A to the Company's Proxy
Statement dated April 23,1998 and incorporated by
reference.)
10.11* - 1998 Director Long-Term Incentive Plan of R&B Falcon
Corporation. (Filed as Exhibit 99.B to the Company's Proxy
Statement dated April 23,1998 and incorporated by
reference.)
10.12* - Cliffs Drilling Company 1988 Incentive Equity Plan. (Filed
as Exhibit 10.8 to Cliffs Drilling Registration Statement on
Form S-1, Registration No. 33-23508 and incorporated herein
by reference.)
10.13* - Amendment No. 1 dated May 17, 1990 to the Cliffs Drilling
Company 1988 Incentive Equity Plan (Filed as Exhibit 10.7.1
to Cliffs Drilling Annual Report on Form 10-K for 1993 and
incorporated herein by reference.)
10.14* - Amendment No. 2 dated May 20, 1993 to the Cliffs Drilling
Company 1988 Incentive Equity Plan (Filed as Exhibit 10.7.2
to Cliffs Drilling Annual Report on Form 10-K for 1993 and
incorporated herein by reference.)
10.15* - Amendment No. 3 dated May 22, 1996 to the Cliffs Drilling
Company 1988 Incentive Equity Plan (Filed as Exhibit 10.7.3
to Cliffs Drilling Annual Report on Form 10-K for 1996 and
incorporated herein by reference.)
10.16* - Cliffs Drilling Company 1998 Incentive Equity Plan. (Filed
under Cliffs Drilling Proxy Statement dated April 8, 1998
and incorporated herein by reference.)
10.17* - 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.)
10.18* - 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.)
10.19* - 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.)
10.20* - 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.)
10.21* - 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.)
10.22* - 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.)
10.23* - 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.)
10.24* - 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.)
10.25* - 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.)
10.26* - 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.)
10.27* - 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.)
10.28* - 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.)
10.29* - 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.)
10.30* - 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.)
10.31* - Employment Agreement dated March 25, 1998 between the
Company and Tim W. Nagle. (Filed as Exhibit 10.9 to R&B
Falcon's Quarterly Report on Form 10-Q for the First Quarter
of 1998 and incorporated herein by reference.)
10.32* - 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.)
10.33* - 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 10.24 to R&B's Annual
Report on Form 10-K for 1993 and incorporated herein by
reference.)
10.34* - Employment Agreement dated March 25, 1998 between the
Company and Charles R. Ofner. (Filed as Exhibit 10.12 to
R&B Falcon's Quarterly Report on Form 10-Q for the First
Quarter of 1998 and incorporated herein by reference.)
10.35* - 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.)
10.36* - 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.)
10.37* - 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.)
10.38* - 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.)
10.39* - Employment Agreement dated March 25, 1998 between the
Company and Wayne K. Hillin. (Filed as Exhibit 10.10 to R&B
Falcon's Quarterly Report on Form 10-Q for the First Quarter
of 1998 and incorporated herein by reference.)
10.40* - 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.)
10.41* - 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.)
10.42* - Employment Agreement dated March 25, 1998 between the
Company and Paul B. Loyd, Jr. (Filed as Exhibit 10.4 to R&B
Falcon's Quarterly Report on Form 10-Q for the First Quarter
of 1998 and incorporated herein by reference.)
10.43* - Employment Agreement dated March 25, 1998 between the
Company and Steve A. Webster. (Filed as Exhibit 10.5 to R&B
Falcon's Quarterly Report on Form 10-Q for the First Quarter
of 1998 and incorporated herein by reference.)
10.44* - Employment Agreement dated March 25, 1998 between the
Company and Andrew Bakonyi. (Filed as Exhibit 10.6 to R&B
Falcon's Quarterly Report on Form 10-Q for the First Quarter
of 1998 and incorporated herein by reference.)
10.45* - Employment Agreement dated March 25, 1998 between the
Company and Bernie Stewart. (Filed as Exhibit 10.7 to R&B
Falcon's Quarterly Report on Form 10-Q for the First Quarter
of 1998 and incorporated herein by reference.)
10.46* - Employment Agreement dated March 25, 1998 between the
Company and Robert F. Fulton. (Filed as Exhibit 10.8 to R&B
Falcon's Quarterly Report on Form 10-Q for the First Quarter
of 1998 and incorporated herein by reference.)
10.47* - Employment Agreement dated March 25, 1998 between the
Company and Leighton E. Moss. (Filed as Exhibit 10.11 to R&B
Falcon's Quarterly Report on Form 10-Q for the First Quarter
of 1998 and incorporated herein by reference.)
10.48* - 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.)
10.49* - 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.)
10.50* - 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.)
10.51* - 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.)
10.52* - 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.)
10.53* - 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.)
10.54* - 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.)
10.55* - 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.)
10.56* - 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.)
10.57* - 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.)
10.58* - 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.)
10.59* - 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.)
10.60* - 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.)
10.61* - 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. (Filed as Exhibit 10.53 to R&B Falcon's Annual Report
on Form 10-K for 1997 and incorporated herein by reference.)
10.62* - 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. (Filed as Exhibit 10.54 to R&B Falcon's Annual Report
on Form 10-K for 1997 and incorporated herein by reference.)
10.63* - 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. (Filed as Exhibit 10.55 to R&B Falcon's Annual Report
on Form 10-K for 1997 and incorporated herein by reference.)
10.64* - 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. (Filed as Exhibit 10.56 to R&B Falcon's Annual Report
on Form 10-K for 1997 and incorporated herein by reference.)
10.65* - 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. (Filed as Exhibit 10.57 to R&B Falcon's Annual Report
on Form 10-K for 1997 and incorporated herein by reference.)
10.66* - 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. (Filed as Exhibit 10.58 to R&B Falcon's Annual Report
on Form 10-K for 1997 and incorporated herein by reference.)
10.67* - Amended and Restated Stock Option Agreement dated as of
February 16, 1995 between Falcon and Robert F. Fulton.
(Filed as Exhibit 10.59 to R&B Falcon's Annual Report on
Form 10-K for 1997 and incorporated herein by reference.)
10.68* - Amended and Restated Stock Option Agreement dated as of
January 23, 1996 between Falcon and Steven A. Webster.
(Filed as Exhibit 10.60 to R&B Falcon's Annual Report on
Form 10-K for 1997 and incorporated herein by reference.)
10.69* - Stock Option Agreement dated as of April 15, 1996 between
Falcon and Bernie W. Stewart. (Filed as Exhibit 10.61 to R&B
Falcon's Annual Report on Form 10-K for 1997 and
incorporated herein by reference.)
10.70* - Rescission Agreement dated August 5, 1997 between R&B and
P.B. Loyd, Jr. (Filed as Exhibit 10.62 to R&B Falcon's
Annual Report on Form 10-K for 1997 and incorporated herein
by reference.)
10.71* - Rescission Agreement dated August 5, 1997 between R&B and T.
W. Nagle. (Filed as Exhibit 10.63 to R&B Falcon's Annual
Report on Form 10-K for 1997 and incorporated herein by
reference.)
10.72* - Rescission Agreement dated August 5, 1997 between R&B and C.
R. Ofner. (Filed as Exhibit 10.64 to R&B Falcon's Annual
Report on Form 10-K for 1997 and incorporated herein by
reference.)
10.73* - Rescission Agreement dated August 5, 1997 between R&B and D.
L. McIntire. (Filed as Exhibit 10.65 to R&B Falcon's Annual
Report on Form 10-K for 1997 and incorporated herein by
reference.)
10.74* - Rescission Agreement dated August 5, 1997 between R&B and W.
K. Hillin. (Filed as Exhibit 10.66 to R&B Falcon's Annual
Report on Form 10-K for 1997 and incorporated herein by
reference.)
10.75* - Stock Option Agreement dated February 11, 1999 between R&B
Falcon Corporation and Paul B. Loyd, Jr. under R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan.
10.76* - Stock Option Agreement dated February 11, 1999 between R&B
Falcon Corporation and Steven A. Webster under R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan.
10.77* - Stock Option Agreement dated February 11, 1999 between R&B
Falcon Corporation and T. W. Nagle under R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan.
10.78* - Stock Option Agreement dated February 11, 1999 between R&B
Falcon Corporation and Robert F. Fulton under R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan.
10.79* - Stock Option Agreement dated February 11, 1999 between R&B
Falcon Corporation and Andrew Bakonyi under R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan.
10.80* - Stock Option Agreement dated February 11, 1999 between R&B
Falcon Corporation and Bernie Stewart under R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan.
10.81* - Stock Option Agreement dated February 11, 1999 between R&B
Falcon Corporation and W. K. Hillin under R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan.
10.82* - Stock Option Agreement dated February 11, 1999 between R&B
Falcon Corporation and L. E. Moss under R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan.
10.83* - Stock Option Agreement dated February 11, 1999 between R&B
Falcon Corporation and C. R. Ofner under R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan.
10.84* - Affiliate Agreement effective December 31, 1997 between R&B
and P. B. Loyd, Jr. (Filed as Exhibit 10.67 to R&B Falcon's
Annual Report on Form 10-K for 1997 and incorporated herein
by reference.)
10.85* - Affiliate Agreement effective December 31, 1997 between R&B
and A. L. Chavkin. (Filed as Exhibit 10.68 to R&B Falcon's
Annual Report on Form 10-K for 1997 and incorporated herein
by reference.)
10.86* - Affiliate Agreement effective December 31, 1997 between R&B
and C. A. Donabedian. (Filed as Exhibit 10.69 to R&B
Falcon's Annual Report on Form 10-K for 1997 and
incorporated herein by reference.)
10.87* - Affiliate Agreement effective December 31, 1997 between R&B
and M. A. E. Laqueur. (Filed as Exhibit 10.70 to R&B
Falcon's Annual Report on Form 10-K for 1997 and
incorporated herein by reference.)
10.88* - Affiliate Agreement effective December 31, 1997 between R&B
and R. L. Sandmeyer. (Filed as Exhibit 10.71 to R&B Falcon's
Annual Report on Form 10-K for 1997 and incorporated herein
by reference.)
10.89* - Affiliate Agreement effective December 31, 1997 between R&B
and T. W. Nagle. (Filed as Exhibit 10.72 to R&B Falcon's
Annual Report on Form 10-K for 1997 and incorporated herein
by reference.)
10.90* - Affiliate Agreement effective December 31, 1997 between R&B
and C. R. Ofner. (Filed as Exhibit 10.73 to R&B Falcon's
Annual Report on Form 10-K for 1997 and incorporated herein
by reference.)
10.91* - Affiliate Agreement effective December 31, 1997 between R&B
and D. L. McIntire. (Filed as Exhibit 10.74 to R&B Falcon's
Annual Report on Form 10-K for 1997 and incorporated herein
by reference.)
10.92* - Affiliate Agreement effective December 31, 1997 between R&B
and W. K. Hillin. (Filed as Exhibit 10.75 to R&B Falcon's
Annual Report on Form 10-K for 1997 and incorporated herein
by reference.)
10.93* - Affiliate Agreement effective December 31, 1997 between
Falcon and Steven A. Webster. (Filed as Exhibit 10.76 to R&B
Falcon's Annual Report on Form 10-K for 1997 and
incorporated herein by reference.)
10.94* - Affiliate Agreement effective December 31, 1997 between
Falcon and Bernie W. Stewart. (Filed as Exhibit 10.77 to R&B
Falcon's Annual Report on Form 10-K for 1997 and
incorporated herein by reference.)
10.95* - Affiliate Agreement effective December 31, 1997 between
Falcon and Robert F. Fulton. (Filed as Exhibit 10.78 to R&B
Falcon's Annual Report on Form 10-K for 1997 and
incorporated herein by reference.)
10.96* - Affiliate Agreement effective December 31, 1997 between
Falcon and Leighton E. Moss. (Filed as Exhibit 10.79 to R&B
Falcon's Annual Report on Form 10-K for 1997 and
incorporated herein by reference.)
10.97* - Affiliate Agreement effective December 31, 1997 between
Falcon and Rodney W. Meisetschlaeger. (Filed as
Exhibit 10.80 to R&B Falcon's Annual Report on Form 10-K for
1997 and incorporated herein by reference.)
10.98* - Affiliate Agreement effective December 31, 1997 between
Falcon and Steven R. Meheen. (Filed as Exhibit 10.81 to R&B
Falcon's Annual Report on Form 10-K for 1997 and
incorporated herein by reference.)
10.99* - Affiliate Agreement effective December 31, 1997 between
Falcon and Douglas A.P. Hamilton. (Filed as Exhibit 10.82 to
R&B Falcon's Annual Report on Form 10-K for 1997 and
incorporated herein by reference.)
10.100*- Affiliate Agreement effective December 31, 1997 between
Falcon and Michael Porter. (Filed as Exhibit 10.83 to R&B
Falcon's Annual Report on Form 10-K for 1997 and
incorporated herein by reference.)
10.101*- Affiliate Agreement effective December 31, 1997 between
Falcon and William R. Ziegler. (Filed as Exhibit 10.84 to
R&B Falcon's Annual Report on Form 10-K for 1997 and
incorporated herein by reference.)
10.102*- Affiliate Agreement effective December 31, 1997 between
Falcon and Don P. Rodney. (Filed as Exhibit 10.85 to R&B
Falcon's Annual Report on Form 10-K for 1997 and
incorporated herein by reference.)
10.103 - 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.)
10.104 - 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.)
10.105 - 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.)
10.106 - 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.)
10.107 - 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.)
10.108 - 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.)
10.109 - 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.)
10.110 - 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.)
10.111 - 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.)
10.112 - 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.)
10.113 - 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.)
10.114 - 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.)
10.115 - 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.)
10.116 - 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.)
10.117 - 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.)
10.118 - 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.)
10.119 - 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.)
10.120 - 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.)
10.121 - 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.)
10.122 - 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.)
10.123 - 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.)
10.124 - 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.)
10.125 - 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.)
10.126 - 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.)
10.127 - 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.)
10.128 - 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.)
10.129 - 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.)
10.130 - 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.)
10.131 - 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.)
10.132 - 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.)
10.133 - 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.)
10.134 - 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.)
10.135 - 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.)
10.136 - 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.)
10.137 - 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.)
10.138 - Amendment No. 1 to Indenture of First Naval Mortgage on the
Charley 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.)
10.139 - 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.)
10.140 - 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.)
10.141 - 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.)
10.142 - 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.)
10.143 - 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.)
10.144 - 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.)
10.145 - 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.)
10.146 - 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.)
10.147 - 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.)
10.148 - 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.)
10.149 - Collateral Assignment of Insurance dated August 30, 1996
with respect to the Seillean between Reading & Bates
Development Co. and Christiana Bank og Kreditkasse, 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.)
10.150 - 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.)
10.151 - 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.)
10.152 - 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.)
10.153 - 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.)
10.154 - 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.)
10.155 - 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.)
10.156 - 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.)
10.157 - 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.)
10.158 - 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.)
10.159 - 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.)
10.160 - 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.)
10.161 - 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.)
10.162 - 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.)
10.163 - 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.)
10.164 - 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.)
10.165 - 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.)
10.166 - 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.)
10.167 - 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. (Filed as Exhibit 10.150 to R&B Falcon's Annual
Report on Form 10-K for 1997 and incorporated herein by
reference.)
10.168 - 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.)
10.169 - First Amendment to Letter of Credit Agreement, dated April
24, 1998, among R&B Falcon Corporation, R&B Falcon Drilling
(International & Deepwater) Inc., Reading & Bates Drilling
Co. and Christiania Bank OG Kreditkasse, New York Branch,
amending Letter of Credit Agreement dated December 30, 1996.
(Filed as Exhibit 10.3 to R&B Falcon's Quarterly Report on
Form 10-Q for the Second Quarter of 1998 and incorporated
herein by reference.)
10.170 - Second Amendment to Letter of Credit Agreement, dated
October 22, 1998, among R&B Falcon Corporation, R&B Falcon
Drilling (International & Deepwater) Inc., Reading & Bates
Drilling Co. and Christiania Bank OG Kreditkasse, New York
Branch, amending Letter of Credit Agreement dated December
30, 1996.
10.171 - Third Amendment to Letter of Credit Agreement, dated October
22, 1998, among R&B Falcon Corporation, R&B Falcon Drilling
(International & Deepwater) Inc., Reading & Bates Drilling
Co. and Christiania Bank OG Kreditkasse, New York Branch,
amending Letter of Credit Agreement dated December 30, 1996.
10.172 - Fourth Amendment to Letter of Credit Agreement, dated
January 21, 1999, among R&B Falcon Corporation, R&B Falcon
Drilling (International & Deepwater) Inc., Reading & Bates
Drilling Co. and Christiania Bank OG Kreditkasse, New York
Branch, amending Letter of Credit Agreement dated December
30, 1996.
10.173 - Fifth Amendment to Letter of Credit Agreement, dated
February 22, 1999, among R&B Falcon Corporation, R&B Falcon
Drilling (International & Deepwater) Inc., Reading & Bates
Drilling Co. and Christiania Bank OG Kreditkasse, New York
Branch, amending Letter of Credit Agreement dated December
30, 1996.
10.174 - 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.)
10.175 - 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.)
10.176 - Amended and Restated Bareboat Charter dated July 23, 1997 to
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.
10.177 - Amended and Restated Bareboat Charter dated July 1, 1998 to
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.
10.178 - 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.)
10.179 - 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.)
10.180 - 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.)
10.181 - 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.)
10.182 - 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.)
10.183 - Amendment No. 1 dated February 7, 1997 to Limited Liability
Company Agreement dated October 28, 1996 between Conoco
Development Company and RB Deepwater Exploration Inc.
10.184 - Amendment No. 2 dated April 30, 1997 to Limited Liability
Company Agreement dated October 28, 1996 between Conoco
Development Company and RB Deepwater Exploration Inc.
10.185 - Amendment No. 3 dated April 24, 1998 to Limited Liability
Company Agreement dated October 28, 1996 between Conoco
Development Company and RB Deepwater Exploration Inc.
10.186 - Amendment No. 4 dated August 7, 1998 to Limited Liability
Company Agreement dated October 28, 1996 between Conoco
Development Company and RB Deepwater Exploration Inc.
10.187 - Limited Liability Company Agreement dated April 30, 1997
between Conoco Development II Inc. and RB Deepwater
Exploration II Inc. (Filed as Exhibit 10.159 to R&B Falcon's
Annual Report on Form 10-K for 1997 and incorporated herein
by reference.)
10.188 - Amendment No. 1 dated April 24, 1998 to Limited Liability
Company Agreement dated April 30, 1997 between Conoco
Development II Inc. and RB Deepwater Exploration II Inc.
10.189 - 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.)
10.190 - 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.)
10.191 - First Amendment dated April 21, 1997 to Loan Agreement dated
as of December 14, 1996 among TRB Holding Corporation,
Reading & Bates (U.K.) Limited and Nissho Iwai Europe PLC.
10.192 - 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.)
10.193 - First Amendment dated April 21, 1997 to First Naval Mortgage
on the Seillean dated December 14, 1996 between TRB Holding
Corporation in favor of Nissho Iwai Europe PLC.
10.194 - Second Amendment dated April 25, 1997 to First Naval
Mortgage on the Seillean dated December 14, 1996 between TRB
Holding Corporation in favor of Nissho Iwai Europe PLC.
10.195 - 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.)
10.196 - 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.)
10.197 - 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. (Filed
as Exhibit 10.165 to R&B Falcon's Annual Report on Form 10-K
for 1997 and incorporated herein by reference.)
10.198 - Contract dated December 16, 1998 for Construction and Sale
of Vessel (Hull No. HRB8-D) between Hyundai Heavy Industries
Co., Ltd., Hyundai Corporation and R&B Falcon Drilling Co.
10.199 - 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. (Filed as
Exhibit 10.166 to R&B Falcon's Annual Report on Form 10-K
for 1997 and incorporated herein by reference.)
10.200 - Contract dated October 14, 1998 for Construction and Sale of
a 98,000 Metric Tons Displacement Drillship (Hull No. 1300)
between Samsung Heavy Industries Co., Ltd. and R&B Falcon
Drilling Co.
10.201 - 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.)
10.202 - 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.
(Filed as Exhibit 10.178 to R&B Falcon's Annual Report on
Form 10-K for 1997 and incorporated herein by reference.)
10.203 - 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. (Filed as Exhibit 10.179 to R&B Falcon's Annual
Report on Form 10-K for 1997 and incorporated herein by
reference.)
10.204 - 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.
(Filed as Exhibit 10.180 to R&B Falcon's Annual Report on
Form 10-K for 1997 and incorporated herein by reference.)
10.205 - 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. (Filed as Exhibit 10.182 to R&B Falcon's
Annual Report on Form 10-K for 1997 and incorporated herein
by reference.)
10.206 - 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.
(Filed as Exhibit 10.183 to R&B Falcon's Annual Report on
Form 10-K for 1997 and incorporated herein by reference.)
10.207 - Dealer Manager and Solicitation Agent Agreement dated March
23, 1998 between the Company and Credit Suisse First Boston
Corporation. (Filed as Exhibit 10.1 to R&B Falcon's
Quarterly Report on Form 10-Q for the First Quarter of 1998
and incorporated herein by reference.)
10.208 - Credit Agreement dated as of November 10, 1997 among
Deepwater Drilling II L.L.C., Bank of America National Trust
and Savings Association, as Administrative Agent, National
Westminster Bank Plc, New York Branch, as Documentation
Agent and other financial institutions. (Filed as Exhibit
10.13 to R&B Falcon's Quarterly Report on Form 10-Q for the
First Quarter of 1998 and incorporated herein by reference.)
10.209 - Guaranty Agreement dated November 10,1997 by Reading & Bates
Corporation, Reading & Bates Drilling Co., Reading & Bates
Exploration Co., Reading & Bates (A) Pty. Ltd., Reading &
Bates Borneo Drilling Co., Ltd., Reading & Bates Offshore,
Limited and RB Rig Corporation in favor of Bank of America
National Trust and Savings Association. (Filed as Exhibit
10.14 to R&B Falcon's Quarterly Report on Form 10-Q for the
First Quarter of 1998 and incorporated herein by reference.)
10.210 - First Amendment and Release of Guaranty dated April 24, 1998
to Credit Agreement dated as of November 10, 1997 among
Deepwater Drilling II L.L.C., Bank of America National Trust
and Savings Association, National Westminster Bank Plc, and
other financial institutions. (Filed as Exhibit 10.15 to R&B
Falcon's Quarterly Report on Form 10-Q for the First Quarter
of 1998 and incorporated herein by reference.)
10.211 - Guaranty Agreement dated April 24, 1998 by R&B Falcon
Corporation in favor of Bank of America National Trust and
Savings Association. (Filed as Exhibit 10.16 to R&B Falcon's
Quarterly Report on Form 10-Q for the First Quarter of 1998
and incorporated herein by reference.)
10.212 - Second Amendment to Credit Agreement and Release of Guaranty
dated November 9, 1998 to Credit Agreement dated as of
November 10, 1997 among Deepwater Drilling II L.L.C., Bank
of America National Trust and Savings Association, National
Westminster Bank Plc, and other financial institutions.
10.213 - Assignment and Acceptance Agreement dated as of November 9,
1998 between Great-West & Annuity Life Insurance Company and
Bank of America National Trust and Savings Association.
10.214 - Third Amendment dated January 29, 1999 to Credit Agreement
dated as of November 10, 1997 among Deepwater Drilling II
L.L.C., Bank of America National Trust and Savings
Association, National Westminster Bank Plc, and other
financial institutions.
10.215 - Credit Agreement, dated February 24, 1998, among Reading &
Bates Corporation, Reading & Bates Drilling Co., various
subsidiaries of Reading & Bates Drilling Co., RB Deepwater
Exploration III, Inc., various lending institutions, Credit
Lyonnais New York Branch and Christiania Bank OG
Kreditkasse, New York Branch. (Filed as Exhibit 10.1 to R&B
Falcon's Quarterly Report on Form 10-Q for the Second
Quarter of 1998 and incorporated herein by reference.)
10.216 - First Amendment to Credit Agreement, dated April 24, 1998,
among R&B Falcon Corporation, R&B Falcon Drilling
(International & Deepwater) Inc., Reading & Bates Drilling
Co., RB Deepwater Exploration III, Credit Lyonnais New York
Branch and Christiania Bank OG Kreditkasse, New York Branch,
amending Credit Agreement dated February 24, 1998 relating
to a $150 million facility. (Filed as Exhibit 10.2 to R&B
Falcon's Quarterly Report on Form 10-Q for the Second
Quarter of 1998 and incorporated herein by reference.)
10.217 - Second Amendment to Credit Agreement dated October 22, 1998
to Credit Agreement dated February 24, 1998 among R&B Falcon
Corporation, RBF Deepwater Exploration III Inc., Credit
Lyonnais New York Branch, Christiania Bank OG Kreditkasse,
New York Branch and various other lending institutions.
10.218 - Third Amendment to Credit Agreement dated December 9, 1998
to Credit Agreement dated February 24, 1998 among R&B Falcon
Corporation, RBF Deepwater Exploration III Inc., Credit
Lyonnais New York Branch, Christiania Bank OG Kreditkasse,
New York Branch and various other lending institutions.
10.219 - Fourth Consent and Amendment to Credit Agreement dated
December 18, 1998 to Credit Agreement dated February 24,
1998 among R&B Falcon Corporation, RBF Deepwater Exploration
III Inc., Credit Lyonnais New York Branch, Christiania Bank
OG Kreditkasse, New York Branch and various other lending
institutions.
10.220 - Fifth Amendment to Credit Agreement dated January 21, 1999
to Credit Agreement dated February 24, 1998 among R&B Falcon
Corporation, RBF Deepwater Exploration III Inc., Credit
Lyonnais New York Branch, Christiania Bank OG Kreditkasse,
New York Branch and various other lending institutions.
10.221 - Sixth Amendment to Credit Agreement dated February 22, 1999
to Credit Agreement dated February 24, 1998 among R&B Falcon
Corporation, RBF Deepwater Exploration III Inc., Credit
Lyonnais New York Branch, Christiania Bank OG Kreditkasse,
New York Branch and various other lending institutions.
10.222 - Guaranty, dated as of July 30, 1998, made by Registrant in
favor of the Deepwater Investment Trust 1998-A, Wilmington
Trust FSB, not in its individual capacity, but solely as
Investment Trustee, Wilmington Trust Company, not in its
individual capacity, except as specified herein, but solely
as Charter Trustee, BA Leasing & Capital Corporation, as
Documentation Agent, ABN Amro Bank N.V., as Administrative
Agent, The Bank of Nova Scotia, as Syndication Agent, BA
Leasing & Capital Corporation, ABN Amro Bank N.V., Bank
Austria Aktiengesellschaft New York Branch, The Bank of Nova
Scotia, Bayerische Vereinsbank AG New York Branch,
Commerzbank Aktiengesellschaft, Atlanta Agency, Credit
Lyonnais New York Branch, Great-West Life and Annuity
Insurance Company, Mees Pierson Capital Corporation,
Westdeutsche Landesbank Girozentrale, New York Branch, as
Certificate Purchasers, and ABN Amro Bank, N.V., Bank of
America National Trust and Savings Association and The Bank
of Nova Scotia, New York Branch, as Swap Counterparties, and
the other parties named therein. (Filed as Exhibit 10.1 to
R&B Falcon's Quarterly Report on Form 10-Q for the Third
Quarter of 1998 and incorporated herein by reference.)
10.223 - Letter agreement dated as of August 7, 1998 between RBF
Deepwater Exploration Inc., an indirect subsidiary of the
Registrant, and Conoco Development Company and
Acknowledgment by Conoco Inc. and the Registrant. (Filed as
Exhibit 10.2 to R&B Falcon's Quarterly Report on Form 10-Q
for the Third Quarter of 1998 and incorporated herein by
reference.)
10.224 - Letter agreement dated as of August 7, 1998 between RBF
Deepwater Exploration Inc., an indirect subsidiary of the
Registrant, and Conoco Development Company and
Acknowledgment by Conoco Inc. and the Registrant. (Filed as
Exhibit 10.3 to R&B Falcon's Quarterly Report on Form 10-Q
for the Third Quarter of 1998 and incorporated herein by
reference.)
10.225 - Purchase Agreement dated April 8, 1998 among R&B Falcon
Corporation, Credit Suisse First Boston Corporation, Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, and Morgan Stanley & Co., Incorporated. (Filed
as Exhibit 10.1 to R&B Falcon's Registration Statement No.
333-56821 on Form S-4 dated June 15, 1998 and incorporated
herein by reference.)
10.226 - $500,000,000 Credit Agreement dated as of April 24, 1998
among R&B Falcon Corporation, the lender parties thereto,
and The Chase Manhattan Bank, as Administrative Agent.
(Filed as Exhibit 10.2 to R&B Falcon's Registration
Statement No. 333-56821 on Form S-4 dated June 15, 1998 and
incorporated herein by reference.)
10.227 - First Amendment to $500,000,000 Credit Agreement, dated
November 13, 1998.
10.228 - Second Amendment to $500,000,000 Credit Agreement, dated as
of the Second Amendment Effective Date.
10.229 - Third Amendment to $500,000,000 Credit Agreement, dated
January 19, 1999.
21 - Schedule of Subsidiaries of the Company
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 R&B Falcon U.S.
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 Falcon filed five Current Reports on Form 8-K during the three
months ended December 31, 1998: (1) Report filed October 16, 1998
announcing the cancellation of the conversion projects Peregrine VI
and Peregrine VIII, the construction of a new drillship Deepwater IV,
the receipt of a letter of intent from Vastar Resources, Inc. for a
three year drilling contract and the Company entering into an
agreement to purchase an approximate 38% of Navis ASA which is
constructing the drillship Navis Explorer I; (2) Report filed October
16, 1998 announcing the Company's intent to issue up to $300 million
of trust preferred securities; (3) Report filed December 10, 1998
announcing that the customer which has contracted the Jack Bates
through December 2000 has alleged that the Company is in breach of
certain performance related provisions of its contract; (4) Report
filed December 15, 1998 announcing the purchase of Cliffs Drilling
Company; (5) Report filed December 21, 1998 announcing that the
Company had received notice from Mobil North Sea Limited that they
were terminating the drilling contract on the Jack Bates due to
certain performance breaches relating to equipment and personnel
deficiencies.
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, 1999.
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, 1999.
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 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/Douglas E. Swanson
-------------------------- -------------------------
Douglas A. P. Hamilton Douglas E. Swanson
Director Director
By /s/William R. Ziegler
-------------------------
William R. Ziegler
Director
Exhibit 4.6
$400,000,000
R&B FALCON CORPORATION
$100 Million 9-1/8% Senior Notes due 2003
$300 Million 9-1/2% Senior Notes due 2008
REGISTRATION RIGHTS AGREEMENT
December 17, 1998
Credit Suisse First Boston Corporation
NationsBanc Montgomery Securities LLC
Paribas Corporation
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Dear Sirs:
R&B Falcon Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to Credit Suisse First Boston Corporation,
NationsBanc Montgomery Securities LLC and Paribas Corporation
(collectively, the "Initial Purchasers"), upon the terms set forth in a
purchase agreement of even date herewith (the "Purchase Agreement"), $100
million aggregate principal amount of its 9-1/8 % Senior Notes due 2003
and $300 million aggregate principal amount of its 9-1/2% Senior Notes
due 2008 (collectively, the "Initial Securities"). The Initial
Securities will be issued pursuant to an Indenture to be dated as of
December 22, 1998 (the "Indenture")) among the Company and Chase Bank of
Texas, National Association, as trustee (the "Trustee"). As an
inducement to the Initial Purchasers to enter into the Purchase
Agreement, the Company agrees with the Initial Purchasers, for the
benefit of the holders of the Initial Securities (including, without
limitation, the Initial Purchasers), the Exchange Securities (as defined
below) and the Private Exchange Securities (as defined below)
(collectively the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall, at its own cost,
prepare and, not later than 60 days after (or if the 60th day is not a
business day, the first business day thereafter) the date of original
issue of the Initial Securities (the "Issue Date"), file with the
Securities and Exchange Commission (the "Commission") a registration
statement (the "Exchange Offer Registration Statement") on an appropriate
form under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to a proposed offer (the "Registered Exchange Offer") to the
Holders of Transfer Restricted Securities (as defined in Section 6
hereof), who are not prohibited by any law or policy of the Commission
from participating in the Registered Exchange Offer, to issue and deliver
to such Holders, in exchange for the Initial Securities, a like aggregate
principal amount of debt securities (the "Exchange Securities") of the
Company issued under the Indenture and identical in all material respects
to the Initial Securities (except for the transfer restrictions relating
to the Initial Securities and the provisions relating to the matters
described in Section 6 hereof) that would be registered under the
Securities Act. The Company shall use its best efforts to cause such
Exchange Offer Registration Statement to become effective under the
Securities Act within 180 days (or if the 180th day is not a business
day, the first business day thereafter) after the Issue Date of the
Initial Securities and shall keep the Exchange Offer Registration
Statement effective for not less than 30 days (or longer, if required by
applicable law) after the date notice of the Registered Exchange Offer is
mailed to the Holders (such period being called the "Exchange Offer
Registration Period").
If the Company effects the Registered Exchange Offer, the Company
will be entitled to close the Registered Exchange Offer 30 days after the
commencement thereof provided that the Company has accepted all the
Initial Securities theretofore validly tendered in accordance with the
terms of the Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the
Registered Exchange Offer, it being the objective of such Registered
Exchange Offer to enable each Holder of Transfer Restricted Securities
(as defined in Section 6 hereof) electing to exchange the Initial
Securities for Exchange Securities (assuming that such Holder is not an
affiliate of the Company within the meaning of the Securities Act,
acquires the Exchange Securities in the ordinary course of such Holder's
business and has no arrangements with any person to participate in the
distribution of the Exchange Securities and is not prohibited by any law
or policy of the Commission from participating in the Registered Exchange
Offer) to trade such Exchange Securities from and after their receipt
without any limitations or restrictions under the Securities Act and
without material restrictions under the securities laws of the several
states of the United States.
The Company acknowledges that, pursuant to current interpretations
by the Commission's staff of Section 5 of the Securities Act, in the
absence of an applicable exemption therefrom, (i) each Holder which is a
broker-dealer electing to exchange Securities, acquired for its own
account as a result of market making activities or other trading
activities, for Exchange Securities (an "Exchanging Dealer"), is required
to deliver a prospectus containing the information set forth in (a) Annex
A hereto on the cover, (b) Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section, and
(c) Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Securities
received by such Exchanging Dealer pursuant to the Registered Exchange
Offer and (ii) an Initial Purchaser that elects to sell Exchange
Securities acquired in exchange for Securities constituting any portion
of an unsold allotment is required to deliver a prospectus containing the
information required by Items 507 or 508 of Regulation S-K under the
Securities Act, as applicable, in connection with such sale.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit such prospectus to be
lawfully delivered by all persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such
persons must comply with such requirements in order to resell the
Exchange Securities; provided, however, that (i) in the case where such
prospectus and any amendment or supplement thereto must be delivered by
an Exchanging Dealer or an Initial Purchaser, such period shall be the
lesser of 180 days and the date on which all Exchanging Dealers and the
Initial Purchasers have sold all Exchange Securities held by them (unless
such period is extended pursuant to Section 3(j) below) and (ii) the
Company shall make such prospectus and any amendment or supplement
thereto, available to any broker-dealer for use in connection with any
resale of any Exchange Securities for a period of not less than 180 days
after the consummation of the Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the
Exchange Securities pursuant to the Registered Exchange Offer, shall
issue and deliver to such Initial Purchaser upon the written request of
such Initial Purchaser, in exchange (the "Private Exchange") for the
Initial Securities held by such Initial Purchaser, a like principal
amount of debt securities of the Company issued under the Indenture and
identical in all material respects (including the existence of
restrictions on transfer under the Securities Act and the securities laws
of the several states of the United States, but excluding provisions
relating to the matters described in Section 6 hereof) to the Initial
Securities (the "Private Exchange Securities"). The Initial Securities,
the Exchange Securities and the Private Exchange Securities are herein
collectively called the "Securities".
In connection with the Registered Exchange Offer, the Company shall:
(1) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(2) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date notice thereof
is mailed to the Holders;
(3) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York,
which may be the Trustee or an affiliate of the Trustee;
(4) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on
which the Registered Exchange Offer shall remain open; and
(5) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered Exchange
Offer or the Private Exchange, as the case may be, the Company shall:
(x) accept for exchange all the Securities validly tendered
and not withdrawn pursuant to the Registered Exchange Offer and the
Private Exchange;
(y) deliver to the Trustee for cancellation all the Initial
Securities so accepted for exchange; and
(z) cause the Trustee to authenticate and deliver promptly to
each Holder of the Initial Securities, Exchange Securities or Private
Exchange Securities, as the case may be, equal in principal amount to the
Initial Securities of such Holder so accepted for exchange.
The Indenture will provide that the Exchange Securities will not be
subject to the transfer restrictions set forth in the Indenture and that
all the Securities of each series will vote and consent together on all
matters as a class separate from each other series on any matter.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private
Exchange will accrue from the last interest payment date on which
interest was paid on the Initial Securities surrendered in exchange
therefor or, if no interest has been paid on the Initial Securities, from
the date of original issue of the Initial Securities.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation
of the Registered Exchange Offer (i) any Exchange Securities received by
such Holder will be acquired in the ordinary course of business,
(ii) such Holder will have no arrangements or understanding with any
person to participate in the distribution of the Securities or the
Exchange Securities within the meaning of the Securities Act, (iii) such
Holder is not an "affiliate," as defined in Rule 405 of the Securities
Act, of the Company or if it is an affiliate, such Holder will comply
with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if such Holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage
in, the distribution of the Exchange Securities and (v) if such Holder is
a broker-dealer, that it will receive Exchange Securities for its own
account in exchange for Initial Securities that were acquired as a result
of market-making activities or other trading activities and that it will
be required to acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Securities.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment
thereto and any prospectus forming part thereof and any supplement
thereto complies in all material respects with the Securities Act and the
rules and regulations thereunder, (ii) any Exchange Offer Registration
Statement and any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any prospectus forming part
of any Exchange Offer Registration Statement, and any supplement to such
prospectus, does not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the
Company is not permitted to effect a Registered Exchange Offer, as
contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is
not consummated within 180 days of the Issue Date, (iii) any Initial
Purchaser so requests with respect to the Initial Securities (or the
Private Exchange Securities) not eligible to be exchanged for Exchange
Securities in the Registered Exchange Offer and held by it following
consummation of the Registered Exchange Offer or (iv) any Holder (other
than an Exchanging Dealer) is not eligible to participate in the
Registered Exchange Offer or, in the case of any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer,
such Holder does not receive freely tradeable Exchange Securities on the
date of the exchange, the Company shall take the following actions:
(1) The Company shall, at its cost, as promptly as practicable (but in
no event more than 30 days after so required or requested pursuant to
this Section 2) file with the Commission and thereafter shall use its
best efforts to cause to be declared effective a registration statement
(the "Shelf Registration Statement" and, together with the Exchange Offer
Registration Statement, a "Registration Statement") on an appropriate
form under the Securities Act relating to the offer and sale of the
Transfer Restricted Securities (as defined in Section 6 hereof) by the
Holders thereof from time to time in accordance with the methods of
distribution set forth in the Shelf Registration Statement and Rule 415
under the Securities Act (hereinafter, the "Shelf Registration");
provided, however, that no Holder (other than an Initial Purchaser) shall
be entitled to have the Securities held by it covered by such Shelf
Registration Statement unless such Holder agrees in writing to be bound
by all the provisions of this Agreement applicable to such Holder.
(2) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of
the relevant Securities, for a period of two years (or for such longer
period if extended pursuant to Section 3(j) below) from the date of the
issuance of the Initial Securities or such shorter period that will
terminate when all the Securities covered by the Shelf Registration
Statement (i) have been sold pursuant thereto or (ii) can be sold
pursuant to Rule 144 under the Securities Act without any limitations
under clauses (c), (e), (f) and (h) of Rule 144, or any successor rule
thereof. The Company shall be deemed not to have used its best efforts
to keep the Shelf Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in Holders of
Securities covered thereby not being able to offer and sell such
Securities during that period, unless such action is required by
applicable law.
(3) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and
the related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3. Registration Procedures. In connection with any Shelf
Registration contemplated by Section 2 hereof and, to the extent
applicable, any Registered Exchange Offer contemplated by Section 1
hereof, the following provisions shall apply:
(1) The Company shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and, in the event that an Initial Purchaser
(with respect to any portion of an unsold allotment from the original
offering) is participating in the Registered Exchange Offer or the Shelf
Registration Statement, the Company shall use its best efforts to reflect
in each such document, when so filed with the Commission, such comments
as such Initial Purchaser reasonably may propose; (ii) include the
information set forth in Annex A hereto on the cover, in Annex B hereto
in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of the prospectus forming a part of the Exchange
Offer Registration Statement and include the information set forth in
Annex D hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; (iii) if requested by an Initial Purchaser,
include the information required by Items 507 or 508 of Regulation S-K
under the Securities Act, as applicable, in the prospectus forming a part
of the Exchange Offer Registration Statement; (iv) include within the
prospectus contained in the Exchange Offer Registration Statement a
section entitled "Plan of Distribution," reasonably acceptable to the
Initial Purchasers, which shall contain a summary statement of the
positions taken or policies made by the staff of the Commission with
respect to the potential "underwriter" status of any broker-dealer that
is the beneficial owner (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange
Securities received by such broker-dealer in the Registered Exchange
Offer (a "Participating Broker-Dealer"), whether such positions or
policies have been publicly disseminated by the staff of the Commission
or such positions or policies, in the reasonable judgment of the Initial
Purchasers based upon advice of counsel (which may be in-house counsel),
represent the prevailing views of the staff of the Commission; and (v) in
the case of a Shelf Registration Statement, include the names of the
Holders, who propose to sell Securities pursuant to the Shelf
Registration Statement, as selling securityholders.
(2) The Company shall give written notice to the Initial Purchasers,
the Holders of the Securities and any Participating Broker-Dealer from
whom the Company has received prior written notice that it will be a
Participating Broker-Dealer in the Registered Exchange Offer (which
notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an
instruction to suspend the use of the prospectus until the requisite
changes have been made):
(1) when the Registration Statement or any amendment thereto
has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become
effective;
(2) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information;
(3) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(4) of the receipt by the Company or its legal counsel of
any notification with respect to the suspension of the qualification
of the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(5) of the happening of any event that requires the Company
to make changes in the Registration Statement or the prospectus in
order that the Registration Statement or the prospectus do not
contain an untrue statement of a material fact nor omit to state a
material fact required to be stated therein or necessary to make the
statements therein (in the case of the prospectus, in light of the
circumstances under which they were made) not misleading.
(3) The Company shall make every reasonable effort to obtain
the withdrawal at the earliest possible time, of any order
suspending the effectiveness of the Registration Statement.
(4) The Company shall furnish to each Holder of Securities
included within the coverage of the Shelf Registration, without
charge, at least one copy of the Shelf Registration Statement and
any post-effective amendment thereto, including financial statements
and schedules, and, if the Holder so requests in writing, all
exhibits thereto (including those, if any, incorporated by
reference).
(5) The Company shall deliver to each Exchanging Dealer and
each Initial Purchaser, and to any other Holder who so requests,
without charge, at least one copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if any Initial Purchaser or
any such Holder requests, all exhibits thereto (including those
incorporated by reference).
(6) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Securities included within the coverage of
the Shelf Registration, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in the
Shelf Registration Statement and any amendment or supplement thereto
as such person may reasonably request. The Company consents, subject
to the provisions of this Agreement, to the use of the prospectus or
any amendment or supplement thereto by each of the selling Holders
of the Securities in connection with the offering and sale of the
Securities covered by the prospectus, or any amendment or supplement
thereto, included in the Shelf Registration Statement.
(7) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other
persons required to deliver a prospectus following the Registered
Exchange Offer, without charge, as many copies of the final
prospectus included in the Exchange Offer Registration Statement and
any amendment or supplement thereto as such persons may reasonably
request. The Company consents, subject to the provisions of this
Agreement, to the use of the prospectus or any amendment or
supplement thereto by any Initial Purchaser, if necessary, any
Participating Broker-Dealer and such other persons required to
deliver a prospectus following the Registered Exchange Offer in
connection with the offering and sale of the Exchange Securities
covered by the prospectus, or any amendment or supplement thereto,
included in such Exchange Offer Registration Statement.
(8) Prior to any public offering of the Securities, pursuant
to any Registration Statement, the Company shall register or
qualify or cooperate with the Holders of the Securities included
therein and their respective counsel in connection with the
registration or qualification of the Securities for offer and sale
under the securities or "blue sky" laws of such states of the United
States as any Holder of the Securities reasonably requests in writing
and do any and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of the Securities
covered by such Registration Statement; provided, however, that the
Company shall not be required to (i) qualify generally to do
business in any jurisdiction where it is not then so qualified or
(ii) take any action which would subject it to general service of
process or to taxation in any jurisdiction where it is not then so
subject.
(9) The Company shall cooperate with the Holders of the
Securities to facilitate the timely preparation and delivery of
certificates representing the Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders may
request a reasonable period of time prior to sales of the
Securities pursuant to such Registration Statement.
(10) Upon the occurrence of any event contemplated by
paragraphs (ii) through (v) of Section 3(b) above during the period
for which the Company is required to maintain an effective
Registration Statement, the Company shall promptly prepare and file
a post-effective amendment to the Registration Statement or a
supplement to the related prospectus and any other required
document so that, as thereafter delivered to Holders of the
Securities or purchasers of Securities, the prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading. If the Company notifies the Initial
Purchasers, the Holders of the Securities and any known
Participating Broker-Dealer in accordance with paragraphs (ii)
through (v) of Section 3(b) above to suspend the use of the
prospectus until the requisite changes to the prospectus have been
made, then the Initial Purchasers, the Holders of the Securities and
any such Participating Broker-Dealers shall suspend use of such
prospectus, and the period of effectiveness of the Shelf
Registration Statement provided for in Section 2(b) above and the
Exchange Offer Registration Statement provided for in Section 1
above shall each be extended by the number of days from and
including the date of the giving of such notice to and including the
date when the Initial Purchasers, the Holders of the Securities and
any known Participating Broker-Dealer shall have received such
amended or supplemented prospectus pursuant to this Section 3(j).
(11) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for
the Initial Securities, the Exchange Securities or the Private
Exchange Securities, as the case may be, and provide the applicable
trustee with printed certificates for the Initial Securities, the
Exchange Securities or the Private Exchange Securities, as the case
may be, in a form eligible for deposit with The Depository Trust
Company.
(12) The Company will comply with all rules and regulations
of the Commission to the extent and so long as they are applicable
to the Registered Exchange Offer or the Shelf Registration and will
make generally available to its security holders (or otherwise
provide in accordance with Section 11(a) of the Securities Act) an
earnings statement satisfying the provisions of Section 11(a) of the
Securities Act, no later than 45 days after the end of a 12-month
period (or 90 days, if such period is a fiscal year) beginning with
the first month of the Company's first fiscal quarter commencing
after the effective date of the Registration Statement, which
statement shall cover such 12-month period.
(13) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended, in a timely
manner and containing such changes, if any, as shall be necessary
for such qualification. In the event that such qualification would
require the appointment of a new trustee under the Indenture, the
Company shall appoint a new trustee thereunder pursuant to the
applicable provisions of the Indenture.
(14) The Company may require each Holder of Securities to be
sold pursuant to the Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution
of the Securities as the Company may from time to time reasonably
require for inclusion in the Shelf Registration Statement, and the
Company may exclude from such registration the Securities of any
Holder that unreasonably fails to furnish such information within a
reasonable time after receiving such request.
(15) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary
form) and take all such other action, if any, as any Holder of the
Securities shall reasonably request in order to facilitate the
disposition of the Securities pursuant to any Shelf Registration.
(16) In the case of any Shelf Registration, the Company
shall (i) make reasonably available for inspection by the Holders of
the Securities, any underwriter participating in any disposition
pursuant to the Shelf Registration Statement and any attorney,
accountant or other agent retained by the Holders of the Securities
or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and (ii)
cause the Company's officers, directors, employees, accountants and
auditors to supply all relevant information reasonably requested by
the Holders of the Securities or any such underwriter, attorney,
accountant or agent in connection with the Shelf Registration
Statement, in each case, as shall be reasonably necessary to enable
such persons, to conduct a reasonable investigation within the
meaning of Section 11 of the Securities Act; provided, however, that
the foregoing inspection and information gathering shall be
coordinated on behalf of the Initial Purchasers by you and on behalf
of the other parties, by one counsel designated by and on behalf of
such other parties as described in Section 4 hereof.
(17) In the case of any Shelf Registration, the Company, if
requested by any Holder of Securities covered thereby, shall cause
(i) its counsel to deliver an opinion and updates thereof relating
to the Securities in customary form addressed to such Holders and
the managing underwriters, if any, thereof and dated, in the case of
the initial opinion, the effective date of such Shelf Registration
Statement (it being agreed that such opinion shall be in the form
and substance reasonably satisfactory to the managing underwriters,
if any, and the Holders of a majority in aggregate principal amount
of the securities being registered by such Shelf Registration
Statement); (ii) its officers to execute and deliver all customary
documents and certificates and updates thereof requested by any
underwriters of the applicable Securities and (iii) its independent
public accountants and the independent public accountants with
respect to any other entity for which financial information is
provided in the Shelf Registration Statement to provide to the
selling Holders of the applicable Securities and any underwriter
therefor a comfort letter in customary form and covering matters of
the type customarily covered in comfort letters in connection with
primary underwritten offerings, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement
of Auditing Standards No. 72.
(18) In the case of the Registered Exchange Offer, if
requested by any Initial Purchaser or any known Participating Broker-
Dealer, the Company shall cause (i) its counsel to deliver to such
Initial Purchaser or such Participating Broker-Dealer a signed
opinion in the form set forth in Section 6(c) of the Purchase
Agreement with such changes as are customary in connection with the
preparation of a Registration Statement and (ii) its independent
public accountants and the independent public accountants with
respect to any other entity for which financial information is
provided in the Registration Statement to deliver to such Initial
Purchaser or such Participating Broker-Dealer a comfort letter, in
customary form, meeting the requirements as to the substance thereof
as set forth in Section 6(a) of the Purchase Agreement, with
appropriate date changes.
(19) If a Registered Exchange Offer or a Private Exchange is
to be consummated, upon delivery of the Initial Securities by
Holders to the Company (or to such other Person as directed by the
Company) in exchange for the Exchange Securities or the Private
Exchange Securities, as the case may be, the Company shall mark, or
caused to be marked, on the Initial Securities so exchanged that
such Initial Securities are being canceled in exchange for the
Exchange Securities or the Private Exchange Securities, as the case
may be; in no event shall the Initial Securities be marked as paid
or otherwise satisfied.
(20) The Company will use its best efforts to (i) if the
Initial Securities have been rated prior to the initial sale of such
Initial Securities, confirm such ratings will apply to the
Securities covered by a Registration Statement, or (ii) if the
Initial Securities were not previously rated, cause the Securities
covered by a Registration Statement to be rated with the appropriate
rating agencies, if so requested by Holders of a majority in
aggregate principal amount of Securities covered by such
Registration Statement, or by the managing underwriters, if any.
(21) In the event that any broker-dealer registered under
the Exchange Act shall underwrite any Securities or participate as a
member of an underwriting syndicate or selling group or "assist in
the distribution" (within the meaning of the Conduct Rules (the
"Rules") of the National Association of Securities Dealers, Inc.
("NASD")) thereof, whether as a Holder of such Securities or as an
underwriter, a placement or sales agent or a broker or dealer in
respect thereof, or otherwise, the Company will assist such broker-
dealer in complying with the requirements of such Rules, including,
without limitation, by (i) if such Rules, including Rule 2720, shall
so require, engaging a "qualified independent underwriter" (as
defined in Rule 2720) to participate in the preparation of the
Registration Statement relating to such Securities, to exercise
usual standards of due diligence in respect thereto and, if any
portion of the offering contemplated by such Registration Statement
is an underwritten offering or is made through a placement or sales
agent, to recommend the yield of such Securities, (ii) indemnifying
any such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof and
(iii) providing such information to such broker-dealer as may be
required in order for such broker-dealer to comply with the
requirements of the Rules.
(22) The Company shall use its best efforts to take all
other steps necessary to effect the registration of the Securities
covered by a Registration Statement contemplated hereby.
4. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance of its
obligations under Sections 1 through 3 hereof (including the
reasonable fees and expenses, if any, of Andrews & Kurth L.L.P.,
counsel for the Initial Purchasers, incurred in connection with the
Registered Exchange Offer), whether or not the Registered Exchange
Offer or a Shelf Registration is filed or becomes effective, and, in
the event of a Shelf Registration, shall bear or reimburse the
Holders of the Securities covered thereby for the reasonable fees
and disbursements of one firm of counsel designated by the Holders
of a majority in principal amount of the Initial Securities covered
thereby to act as counsel for the Holders of the Initial Securities
in connection therewith.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless
each Holder of the Securities, any Participating Broker-Dealer and
each person, if any, who controls such Holder or such Participating
Broker-Dealer within the meaning of the Securities Act or the
Exchange Act (each Holder, any Participating Broker-Dealer and such
controlling persons are referred to collectively as the "Indemnified
Parties") from and against any losses, claims, damages or
liabilities, joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of the
Securities) to which each Indemnified Party may become subject under
the Securities Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement or prospectus or
in any amendment or supplement thereto or in any preliminary
prospectus relating to a Shelf Registration, or arise out of, or are
based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse, as incurred,
the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action in respect thereof;
provided, however, that the Company shall not be liable in any such
case to the extent that such loss, claim, damage or liability arises
out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in a Registration
Statement or prospectus or in any amendment or supplement thereto or
in any preliminary prospectus relating to a Shelf Registration in
reliance upon and in conformity with written information pertaining
to such Holder and furnished to the Company by or on behalf of such
Holder specifically for inclusion therein; provided further,
however, that this indemnity agreement will be in addition to any
liability which the Company may otherwise have to such Indemnified
Party. The Company shall also indemnify underwriters participating
in the distribution, their officers and directors and each person
who controls such underwriters within the meaning of the Securities
Act or the Exchange Act to the same extent as provided above with
respect to the indemnification of the Holders of the Securities if
requested by such Holders.
(1) Each Holder of the Securities, severally and not
jointly, will indemnify and hold harmless the Company and each
person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act from and against any losses,
claims, damages or liabilities or any actions in respect thereof,
to which the Company or any such controlling person may become
subject under the Securities Act, the Exchange Act or otherwise,
insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in a Registration
Statement or prospectus or in any amendment or supplement thereto or
in any preliminary prospectus relating to a Shelf Registration, or
arise out of or are based upon the omission or alleged omission to
state therein a material fact necessary to make the statements
therein not misleading, but in each case only to the extent that the
untrue statement or omission or alleged untrue statement or omission
was made in reliance upon and in conformity with written
information pertaining to such Holder and furnished to the Company
by or on behalf of such Holder specifically for inclusion therein;
and, subject to the limitation set forth immediately preceding this
clause, shall reimburse, as incurred, the Company for any legal or
other expenses reasonably incurred by the Company or any such
controlling person in connection with investigating or defending any
loss, claim, damage, liability or action in respect thereof. This
indemnity agreement will be in addition to any liability which such
Holder may otherwise have to the Company or any of its controlling
persons.
(2) Promptly after receipt by an indemnified party under
this Section 5 of notice of the commencement of any action or
proceeding (including a governmental investigation), such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 5, notify the
indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraph (a)
or (b) above. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such
indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof the indemnifying party
will not be liable to such indemnified party under this Section 5
for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in
connection with the defense thereof. No indemnifying party shall,
without the prior written consent of the indemnified party (which
consent will not be unreasonably withheld), effect any settlement of
any pending or threatened action in respect of which any indemnified
party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement
includes an unconditional release of such indemnified party from all
liability on any claims that are the subject matter of such action.
(3) If the indemnification provided for in this Section 5
is unavailable or insufficient to hold harmless an indemnified party
under subsections (a) or (b) above, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified
party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on
the one hand and the indemnified party on the other from the
exchange of the Securities, pursuant to the Registered Exchange
Offer, or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the indemnifying
party or parties on the one hand and the indemnified party on the
other in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable
considerations. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information
supplied by the Company on the one hand or such Holder or such other
indemnified party, as the case may be, on the other, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d)
shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this
subsection (d). Notwithstanding any other provision of this Section
5(d), the Holders of the Securities shall not be required to
contribute any amount in excess of the amount by which the net
proceeds received by such Holders from the sale of the Securities
pursuant to a Registration Statement exceeds the amount of damages
which such Holders have otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d),
each person, if any, who controls such indemnified party within the
meaning of the Securities Act or the Exchange Act shall have the
same rights to contribution as such indemnified party and each
person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.
(4) The agreements contained in this Section 5 shall
survive the sale of the Securities pursuant to a Registration
Statement and shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement or any
investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a)
Additional interest (the "Additional Interest") with respect to the
Initial Securities shall be assessed as follows if any of the
following events occur (each such event in clauses (i) through
(iii) below a "Registration Default" and each period during which a
Registration Default has occurred and is continuing, a "Registration
Default Period"):
(1) If by February 20, 1999, neither the Exchange Offer
Registration Statement nor a Shelf Registration Statement has been
filed with the Commission;
(2) If by June 20, 1999, neither the Registered Exchange
Offer is consummated nor, if required in lieu thereof, the Shelf
Registration Statement is declared effective by the Commission; or
(3) If after either the Exchange Offer Registration
Statement or the Shelf Registration Statement is declared effective
(A) such Registration Statement thereafter ceases to be effective;
or (B) such Registration Statement or the related prospectus ceases
to be usable (except as permitted in paragraph (b)) in connection
with resales of Transfer Restricted Securities during the periods
specified herein because either (1) any event occurs as a result of
which the related prospectus forming part of such Registration
Statement would include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein in the light of the circumstances under which they were made
not misleading, or (2) it shall be necessary to amend such
Registration Statement or supplement the related prospectus, to
comply with the Securities Act or the Exchange Act or the respective
rules thereunder.
Additional Interest shall accrue on the Initial Securities over and
above the interest set forth in the title of the Securities from and
including the date on which any such Registration Default shall
occur to but excluding the date on which all such Registration
Defaults have been cured, at the rate of 0.25% per annum for the
first 90 days of each Registration Default Period and at the rate of
0.50% per annum thereafter for the remaining portion of such
Registration Default Period.
(2) A Registration Default referred to in Section 6(a)
(iii)(B) hereof shall be deemed not to have occurred and be
continuing in relation to a Shelf Registration Statement or the
related prospectus if (i) such Registration Default has occurred
solely as a result of (x) the filing of a post-effective amendment
to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-
effective amendment is not yet effective and needs to be declared
effective to permit Holders to use the related prospectus or (y)
other material events, with respect to the Company that would need
to be described in such Shelf Registration Statement or the related
prospectus and (ii) in the case of clause (y), the Company is
proceeding promptly and in good faith to amend or supplement such
Shelf Registration Statement and related prospectus to describe such
events; provided, however, that in any case if such Registration
Default occurs for a continuous period in excess of 30 days,
Additional Interest shall be payable in accordance with the above
paragraph from the day such Registration Default occurs until such
Registration Default is cured.
(3) Any amounts of Additional Interest due pursuant to
clause (i), (ii) or (iii) of Section 6(a) above will be payable in
cash on the regular interest payment dates with respect to the
Initial Securities. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by
the principal amount of the Initial Securities, multiplied by a
fraction, the numerator of which is the number of days such
Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-
day months), and the denominator of which is 360.
(4) "Transfer Restricted Securities" means each Security
until (i) thedate on which such Transfer Restricted Security has
been exchanged by a person other than a broker-dealer for a freely
transferable Exchange Security in the Registered Exchange Offer,
(ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of a Initial Security for an Exchange Security, the
date on which such Exchange Security is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such
sale a copy of the prospectus contained in the Exchange Offer
Registration Statement, (iii) the date on which such Initial
Security has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement
or (iv) the date on which such Initial Securities is distributed to
the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act.
7. Rules 144 and 144A. The Company shall use its best efforts
to file the reports required to be filed by it under the Securities
Act and the Exchange Act in a timely manner and, if at any time the
Company is not required to file such reports, it will, upon the
request of any Holder of Initial Securities, make publicly available
other information so long as necessary to permit sales of their
securities pursuant to Rules 144 and 144A. The Company covenants
that it will take such further action as any Holder of Initial
Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Initial Securities
without registration under the Securities Act within the limitation
of the exemptions provided by Rules 144 and 144A (including the
requirements of Rule 144A(d)(4)). The Company will provide a copy
of this Agreement to prospective purchasers of Initial Securities
identified to the Company by the Initial Purchasers upon request.
Upon the request of any Holder of Initial Securities, the Company
shall deliver to such Holder a written statement as to whether it
has complied with such requirements. Notwithstanding the foregoing,
nothing in this Section 7 shall be deemed to require the Company to
register any of its securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer
Restricted Securities covered by any Shelf Registration are to be
sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will administer the
offering ("Managing Underwriters") will be selected by the Holders
of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering.
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's
Transfer Restricted Securities on the basis reasonably provided in
any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
9. Miscellaneous.
(1) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers
or consents to departures from the provisions hereof may not be
given, except by the Company and the written consent of the Holders
of a majority in principal amount of the Securities affected by such
amendment, modification, supplement, waiver or consents.
(2) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand delivery,
first-class mail, facsimile transmission, or air courier which
guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current
address given by such Holder to the Company.
(2) if to the Initial Purchasers;
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Andrews & Kurth L.L.P.
805 Third Avenue
New York, New York 10022
Attention: Allan D. Reiss
(3) if to the Company, at its address as follows:
R&B Falcon Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Leighton E. Moss
with a copy to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201-4761
Attention: C. Robert Butterfield
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally
delivered; three business days after being deposited in the mail,
postage prepaid, if mailed; when receipt is acknowledged by
recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
(3) No Inconsistent Agreements. The Company has not, as of
the date hereof, entered into, nor shall it, on or after the date
hereof, enter into, any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders herein
or otherwise conflicts with the provisions hereof.
(4) Successors and Assigns. This Agreement shall be binding
upon the Company and its successors and assigns.
(5) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and
the same agreement.
(6) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(7) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(8) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be affected or
impaired thereby.
(9) Securities Held by the Company. Whenever the consent or
approval of Holders of a specified percentage of principal amount of
Securities is required hereunder, Securities held by the Company or
its affiliates (other than subsequent Holders of Securities if such
subsequent Holders are deemed to be affiliates solely by reason of
their holdings of such Securities) shall not be counted in
determining whether such consent or approval was given by the
Holders of such required percentage.
(10) Submission to Jurisdiction. The Company hereby submits
to the non-exclusive jurisdiction of the Federal and state courts in
the Borough of Manhattan in The City of New York in any suit or
proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart
hereof, whereupon this instrument, along with all counterparts, will
become a binding agreement among the several Initial Purchasers and
the Company in accordance with its terms.
Very truly yours,
R&B FALCON CORPORATION
By: /S/ LEIGHTON MOSS
------------------------
Name: Leighton Moss
Title: VP
The foregoing Registration
Rights Agreement is hereby confirmed and accepted as of the
date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
NATIONSBANC MONTGOMERY SECURITIES LLC
PARIBAS CORPORATION
by: Credit Suisse First Boston
Corporation
By: /S/ ROBERT A. HANSEN
-------------------------
Name: Robert A. Hansen
Title: Director
ANNEX A
Each broker-dealer that receives Exchange Securities for its
own account pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
Exchange Securities. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were
acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined
herein), it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of
Distribution."
ANNEX B
Each broker-dealer that receives Exchange Securities for its
own account in exchange for Initial Securities, where such Initial
Securities were acquired by such broker-dealer as a result of market-
making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such
Exchange Securities. See "Plan of Distribution."
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its
own account pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
Exchange Securities. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Securities received in exchange
for Initial Securities where such Initial Securities were acquired
as a result of market-making activities or other trading activities.
The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection
with any such resale.
The Company will not receive any proceeds from any sale of
Exchange Securities by broker-dealers. Exchange Securities received
by broker-dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the
writing of options on the Exchange Securities or a combination of
such methods of resale, at market prices prevailing at the time of
resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Securities.
Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to the Exchange Offer
and any broker or dealer that participates in a distribution of such
Exchange Securities may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by
any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company
will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that
requests such documents in the Letter of Transmittal. The Company
has agreed to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for the Holders of the
Securities) other than commissions or concessions of any brokers or
dealers and will indemnify the Holders of the Securities (including
any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:____________________________
Address:___________________________
___________________________
If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage
in, a distribution of Exchange Securities. If the undersigned is a
broker-dealer that will receive Exchange Securities for its own
account in exchange for Initial Securities that were acquired as a
result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with
any resale of such Exchange Securities; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the
Securities Act.
Exhibit 4.21
====================================================================
R&B FALCON CORPORATION
, as Issuer
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
, as Trustee
INDENTURE
Dated as of December 22, 1998
$400,000,000
SERIES A AND SERIES B
9-1/8% SENIOR NOTES DUE 2003
9-1/2% SENIOR NOTES DUE 2008
======================================================================
CROSS-REFERENCE TABLE*
TIA Section Indenture Section
310 (a)(1) 6.10
(a)(2) 6.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 6.10
(b) 6.10; 7.01(b)
(c) N.A.
311 (a) 6.11
(b) 6.11
(c) N.A.
312 (a) 2.05
(b) 11.03
(c) 11.03
313 (a) 6.06
(b) 6.06
(c) 6.06
(d) 6.06
314 (a) 3.03
(b) N.A.
(c)(1) 11.04
(c)(2) 11.04
(c)(3) N.A.
(d) N.A.
(e) 11.05
(f) N.A.
315 (a) 6.01(b)
(b) 6.05
(c) 6.01(a)
(d) 6.01(c)
(e) 5.11
316 (a)(last sentence) 2.09
(a)(1)(A) 5.05
(a)(1)(B) 5.04
(a)(2) N.A.
(b) 5.07
(c) 8.04
317 (a)(1) 5.08
(a)(2) 5.09
(b) 2.04
318 (a) 10.01
318 (c) 10.01
N.A. means not applicable
* This Cross-Reference Table is not part of this Indenture
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions 1
Section 1.02 Other Definitions 16
Section 1.03 Incorporation by Reference of
Trust Indenture Act 16
Section 1.04 Rules of Construction 17
ARTICLE II
THE SECURITIES
Section 2.01 Form and Dating 17
Section 2.02 Execution and Authentication 18
Section 2.03 Registrar and Paying Agent 19
Section 2.04 Paying Agent to Hold Money in Trust 20
Section 2.05 Holder Lists 20
Section 2.06 Transfer and Exchange 20
Section 2.07 Certificated Securities 24
Section 2.08 Replacement Securities 25
Section 2.09 Outstanding Securities 26
Section 2.10 Treasury Securities 26
Section 2.11 Temporary Securities 26
Section 2.12 Cancellation 27
Section 2.13 Defaulted Interest 27
Section 2.14 Persons Deemed Owners 27
ARTICLE III
COVENANTS
Section 3.01 Payment of Securities 27
Section 3.02 Maintenance of Office or Agency 28
Section 3.03 SEC Reports; Financial Statements 28
Section 3.04 Compliance Certificate 29
Section 3.05 Corporate Existence 29
Section 3.06 Maintenance of Properties 30
Section 3.07 Payment of Taxes and Other Claims 30
Section 3.08 Waiver of Stay, Extension or Usury Laws 30
Section 3.09 Limitation on Indebtedness 31
Section 3.10 Limitation on Sale/Leaseback Transactions 33
Section 3.11 Limitation on Liens 33
Section 3.12 Limitation on Restricted Payments 35
Section 3.13 Covenant Termination 37
Section 3.14 Registration Rights Agreement 37
ARTICLE IV
SUCCESSORS
Section 4.01 Limitations on Mergers and Consolidations 38
Section 4.02 Successor Corporation Substituted 38
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.01 Events of Default 39
Section 5.02 Acceleration 41
Section 5.03 Other Remedies 41
Section 5.04 Waiver of Existing Defaults 42
Section 5.05 Control by Majority 42
Section 5.06 Limitations on Suits 42
Section 5.07 Rights of Holders to Receive Payment 43
Section 5.08 Collection Suit by Trustee 43
Section 5.09 Trustee May File Proofs of Claim 43
Section 5.10 Priorities 44
Section 5.11 Undertaking for Costs 44
ARTICLE VI
TRUSTEE
Section 6.01 Duties of Trustee 44
Section 6.02 Rights of Trustee 46
Section 6.03 Individual Rights of Trustee 47
Section 6.04 Trustee's Disclaimer 47
Section 6.05 Notice of Defaults 47
Section 6.06 Reports by Trustee to Holders 47
Section 6.07 Compensation and Indemnity 48
Section 6.08 Replacement of Trustee 48
Section 6.09 Successor Trustee by Merger, etc 49
Section 6.10 Eligibility; Disqualification 50
Section 6.11 Preferential Collection of
Claims Against Company 50
ARTICLE VII
DISCHARGE OF INDENTURE
Section 7.01 Termination of Company's Obligations 50
Section 7.02 Application of Trust Money 53
Section 7.03 Repayment to Company 53
Section 7.04 Reinstatement 53
ARTICLE VIII
AMENDMENTS
Section 8.01 Without Consent of Holders 54
Section 8.02 With Consent of Holders 55
Section 8.03 Compliance with Trust Indenture Act 56
Section 8.04 Revocation and Effect of Consents 56
Section 8.05 Notation on or Exchange of Securities 57
Section 8.06 Trustee to Sign Amendments, etc 57
ARTICLE IX
GUARANTEES OF SECURITIES
Section 9.01 Unconditional Guarantees 58
Section 9.02 Limitation of Guarantor's Liability 60
Section 9.03 Contribution 60
Section 9.04 Execution and Delivery of Guarantees 60
Section 9.05 Addition of Guarantors 61
Section 9.06 Release of Guarantee 61
Section 9.07 Consent to Jurisdiction and Service of Process 62
Section 9.08 Waiver of Immunity 62
Section 9.09 Judgment Currency 63
ARTICLE X
REDEMPTION
Section 10.01 Notices to Trustee 63
Section 10.02 Selection of Securities to be Redeemed 63
Section 10.03 Notices to Holders 64
Section 10.04 Effect of Notices of Redemption 65
Section 10.05 Deposit of Redemption Price 65
Section 10.06 Securities Redeemed in Part 65
Section 10.07 Optional Redemption 65
ARTICLE XI
MISCELLANEOUS
Section 11.01 Trust Indenture Act Controls 66
Section 11.02 Notices 66
Section 11.03 Communication by Holders with Other Holders 68
Section 11.04 Certificate and Opinion as to
Conditions Precedent 68
Section 11.05 Statements Required in Certificate or Opinion 69
Section 11.06 Rules by Trustee and Agents 69
Section 11.07 Legal Holidays 69
Section 11.08 No Recourse Against Others 69
Section 11.09 Governing Law 70
Section 11.10 No Adverse Interpretation of Other Agreements 70
Section 11.11 Successors 70
Section 11.12 Severability 70
Section 11.13 Counterpart Originals 70
Section 11.14 Table of Contents, Headings, etc 70
EXHIBITS
EXHIBIT A Form of 5-Year Security A-1
EXHIBIT B Form of 10-Year Security B-1
EXHIBIT C Form of Supplemental Indenture C-1
Indenture dated as of December 22, 1998 between R&B Falcon Corporation, a
Delaware corporation (the "Company"), and Chase Bank of Texas, National
Association, a national banking association (the "Trustee").
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Company's (i) 9-1/8%
Series A Senior Notes due 2003 (the "Series A 5-Year Securities") and 9-
1/8% Series B Senior Notes due 2003 (the "Series B 5-Year Securities" and
with the Series A 5-Year Securities, the "5-Year Securities") and (ii) 9-
1/2% Series A Senior Notes due 2008 (the "Series A 10-Year Securities")
and 9-1/2% Series B Senior Notes due 2008 (the "Series B 10-Year
Securities" and with the Series A 10-Year Securities, the "10-Year
Securities"). The Series A 5-Year Securities and the Series A 10-Year
Securities are collectively referred to herein as the "Series A
Securities", and the Series B 5-Year Securities and the Series B 10-Year
Securities are collectively referred to herein as the "Series B
Securities." In addition, each of the 5-Year Securities and the 10-Year
Securities shall constitute a "series" of Securities:
ARTICLE II
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 DefinitionsSection
"Acquired Indebtedness" means, with respect to any specified Person (i)
Indebtedness of any other Person existing at the time such other Person
is merged with or into or became a Subsidiary of such specified Person,
whether or not such Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person and (ii) Indebtedness secured by a
Lien encumbering any asset acquired by such specified Person.
"Adjusted Net Assets" of a Guarantor at any date means the lesser of (x)
the amount by which the fair value of the property of such Guarantor at
such date exceeds the total amount of liabilities, including, without
limitation, the probable amount of contingent liabilities (after giving
effect to all other fixed and contingent liabilities incurred or assumed
on such date) of such Guarantor at such date, but excluding liabilities
under the Guarantee of such Guarantor, and (y) the amount by which the
present fair saleable value of the assets of such Guarantor at such date
exceeds the amount that will be required to pay the probable liability of
such Guarantor on its debts (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date and after giving
effect to any collection from any Subsidiary of such Guarantor in respect
of any obligations of such Subsidiary under the Guarantee of such
Guarantor), excluding debt in respect of the Guarantee of such Guarantor,
as they become absolute and matured.
"Affiliate" of any specified Person means any Person directly or
indirectly controlling or controlled by, or under direct or indirect
common control with, such specified Person. For purposes of this
definition, "control" of a Person shall mean the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise, and
the terms "controlling" and "controlled" shall have meanings correlative
to the foregoing. The Trustee may request and may conclusively rely upon
an Officers" Certificate to determine whether any Person is an Affiliate
of any specified Person.
"Agent" means any Registrar or Paying Agent.
"Attributable Indebtedness," when used with respect to any Sale/Leaseback
Transaction, means, as at the time of determination, the present value
(discounted at the rate set forth or implicit in the terms of the lease
included in such transaction) of the total obligations of the lessee for
rental payments (other than amounts required to be paid on account of
property taxes, maintenance, repairs, insurance, assessments, utilities,
operating and labor costs and other items which do not constitute
payments for property rights) during the remaining term of the lease
included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing
(i) the sum of the products of numbers of years from the date of
determination to the dates of each successive scheduled principal payment
of such Indebtedness or redemption or similar payment with respect to
such Preferred Stock multiplied by the amount of such payment by (ii) the
sum of all such payments.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal, state
or foreign law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized, with respect to any particular matter,
to act by or on behalf of the Board of Directors of the Company.
"Business Day" means any day that is not a Legal Holiday.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, rights to purchase, warrants or options (whether or not
currently exercisable), participations or other equivalents of or
interests in (however designated) the equity (which includes, but is not
limited to, common stock, preferred stock and partnership and joint
venture interests) of such Person (excluding any debt securities that are
convertible into, or exchangeable for, such equity).
"Capitalized Lease Obligation" of any Person means any obligation of such
Person to pay rent or other amounts under a lease of property, real or
personal, that is required to be capitalized for financial reporting
purposes in accordance with GAAP; and the amount of such obligation shall
be the capitalized amount thereof determined in accordance with GAAP.
"Cliffs Drilling Company" means Cliffs Drilling Company, a Delaware
corporation and a wholly-owned subsidiary of the Company.
"Cliffs Senior Notes" means $200 million aggregate principal amount of
10"% Senior Notes due 2003 of Cliffs Drilling Company.
"Common Equity" of any Person means and includes all Capital Stock of
such Person that is generally entitled (without regard to the occurrence
of any contingency) to (i) vote in the election of directors of such
Person, or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or
others that will control the management and policies of such Person.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor corporation shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation; provided, however, that
for purposes of any provision contained herein which is required by the
TIA, "Company" shall also mean each Guarantor, if any.
"Consolidated EBITDA Coverage Ratio" as of any date of determination
means the ratio of (a) the aggregate amount of EBITDA for the period of
the most recent four consecutive fiscal quarters ending at least 45 days
prior to the date of such determination to (b) Consolidated Interest
Expense for such four fiscal quarters; provided, however, that (i) if the
Company or any Restricted Subsidiary has Incurred any Indebtedness since
the beginning of such period that remains outstanding or if the
transaction giving rise to the need to calculate the Consolidated EBITDA
Coverage Ratio is an issuance of Indebtedness, or both, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been issued on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if
such discharge had occurred on the first day of such period, (ii) if
since the beginning of such period the Company or any Restricted
Subsidiary shall have made any asset disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such asset
disposition for such period, or increased by an amount equal to the
EBITDA (if negative), directly attributable thereto for such period, and
Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable
to any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company
and its continuing Restricted Subsidiaries in connection with such asset
dispositions for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary
to the extent the Company and its continuing Subsidiaries are no longer
liable for such Indebtedness after such sale), (iii) if since the
beginning of such period the Company or any Restricted Subsidiary (by
merger or otherwise) shall have made an Investment in any Restricted
Subsidiary (or any Person which becomes a Restricted Subsidiary) or an
acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder,
which constitutes all or substantially all of an operating unit of a
business, EBITDA and Consolidated Interest Expense for such period shall
be calculated after giving pro forma effect thereto (including the
issuance of any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period, and (iv) if since the beginning
of such period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any Restricted
Subsidiary since the beginning of such period) shall have made any asset
disposition or any Investment that would have required an adjustment
pursuant to clause (ii) or (iii) above if made by the Company or a
Restricted Subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro
forma effect thereto as if such asset disposition or Investment occurred
on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings
relating thereto, and the amount of Consolidated Interest Expense
associated with any Indebtedness issued in connection therewith, the pro
forma calculations shall be determined in good faith by a responsible
financial or accounting Officer of the Company. If any Indebtedness
bears a floating rate of interest and is being given pro forma effect,
the interest of such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Protection Agreement
applicable to such Indebtedness if such Interest Rate Protection
Agreement has a remaining term in excess of 12 months).
For purposes of this definition, in the case of the acquisition
since the beginning of such period of a drilling rig, drillship or
similar vessel (or of a Restricted Subsidiary owning same) by the Company
or by a Restricted Subsidiary pursuant to a binding purchase agreement or
the delivery since the beginning of such period of a drilling rig,
drillship or similar vessel to the Company or a Restricted Subsidiary
pursuant to a binding construction contract, if such drilling rig,
drillship or similar vessel has been earning a day rate for at least one
full fiscal quarter under a binding drilling contract constituting a
Qualifying Contract, pro forma effect shall be given to the earnings
(losses) of such drilling rig, drillship or similar vessel as if such
drilling rig, drillship or similar vessel were acquired on the first day
of such period, by basing such earnings (losses) on the annualized (x)
historical revenues actually earned from such Qualifying Contract and (y)
actual expenses related thereto, in each case for each full quarter
during such period in which such drilling rig, drillship or similar
vessel was earning a day rate under such Qualifying Contract.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries,
plus, to the extent not included in such interest expense: (i) interest
expense attributable to Capitalized Lease Obligations; (ii) amortization
of debt discount and debt issuance cost; (iii) capitalized interest; (iv)
non-cash interest payments; (v) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing; (vi) net costs under Interest Rate Protection Agreements
(including amortization of fees); (vii) dividends in respect of any
Redeemable Stock held by Persons other than the Company or a Restricted
Subsidiary; (viii) interest expense attributable to deferred payment
obligations, and (ix) interest expense on Indebtedness of another Person
to the extent that such Indebtedness is guaranteed by the Company or a
Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income (i) any net income
of any Person if such Person is not a Restricted Subsidiary, except that
(A) the Company's equity in the net income of any such Person for such
period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such
period to the Company or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to
a Restricted Subsidiary, to the limitations contained in clause (iii)
below) and (B) the Company's equity in a net loss of any such Person for
such period shall be included in determining such Consolidated Net
Income, (ii) any net income of any Person acquired by the Company or a
Restricted Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition, (iii) any net income of any
Restricted Subsidiary to the extent such Restricted Subsidiary is subject
to restrictions, directly or indirectly, on the payment of dividends or
the making of distributions by such Restricted Subsidiary, directly or
indirectly, to the Company, except that (A) the net income of Cliffs
Drilling Company shall be included notwithstanding the foregoing, (B) the
net income of a Restricted Subsidiary shall be included to the extent
such net income could be paid to the Company or a Restricted Subsidiary
by loans, advances, intercompany transfers, principal repayments or
otherwise, (C) the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to
another Restricted Subsidiary, to the limitation contained in this
clause) and (D) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income, (iv) any gain (but not loss) realized upon the
sale or other disposition of any property, plant or equipment of the
Company or its consolidated subsidiaries (including pursuant to any
sale-and-leaseback arrangement) which is not sold or otherwise disposed
of in the ordinary course of business and any gain (but not loss)
realized upon the sale or other disposition of any Capital Stock of any
Person, (v) extraordinary, unusual or nonrecurring charges, (vi) charges
relating to the extinguishment of debt obligations of Falcon Drilling
Company and (vii) the cumulative effect of a change in accounting
principles.
"Consolidated Net Worth" of the Company means the consolidated
stockholders' equity of the Company and its Subsidiaries, as determined
in accordance with GAAP.
"Corporate Trust Office of the Trustee" means the office of the Trustee
at which the corporate trust business of the Trustee shall be principally
administered, which office shall initially be located at the address of
the Trustee specified in Section 11.02 hereof and may be located at such
other address as the Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company or any Restricted
Subsidiary, one or more debt facilities or commercial paper facilities,
in each case with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including
through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or
letters of credit, in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time.
"Default" means any event, act or condition that is, or after notice or
the passage of time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and their
respective successors.
"EBITDA" for any period means the Consolidated Net Income for such
period, plus the following (but without duplication) to the extent
deducted in calculating such Consolidated Net Income for such period: (i)
income tax expense, (ii) Consolidated Interest Expense, (iii)
depreciation expense and (iv) amortization expense.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any successor statute.
"Exchange Offer" means the offer that may be made by the Company pursuant
to a Registration Rights Agreement to exchange each series of the Series
B Securities for the corresponding series of Series A Securities.
"Exchange Offer Registration Statement" means a registration statement
under the Securities Act relating to an Exchange Offer, including the
related prospectus.
"Exchangeable Stock" means any Capital Stock which is exchangeable or
convertible into another security (other than Capital Stock of the
Company which is neither Exchangeable Stock nor Redeemable Stock).
"Funded Indebtedness" means all Indebtedness (including Indebtedness
incurred under any revolving credit, letter of credit or working capital
facility) that matures by its terms, or that is renewable at the option
of any obligor thereon to a date, more than one year after the date on
which such Indebtedness is originally incurred.
"GAAP" means generally accepted accounting principles in the United
States set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may
be approved by a significant segment of the accounting profession of the
United States, as in effect from time to time.
"Guarantor" means (i) each Subsidiary of the Company that becomes a
guarantor of the Securities pursuant to Section 9.05 hereof, (ii) each
Subsidiary of the Company that executes a supplemental indenture in which
such Subsidiary agrees to be bound by Article IX hereof and (iii) any
Subsidiary of the Company that is a successor corporation of any
Subsidiary of the Company referred to in clauses (i) or (ii). The term
"Guarantor" shall not include any Subsidiary of the Company referred to
in clauses (i) through (iii) that shall have been released from its
obligations under Article IX pursuant to Section 9.06 hereof.
"Hedging Obligations" of any Person means the net obligations (not the
notional amount) of such Person pursuant to any interest rate swap
agreement, foreign currency exchange agreement, interest rate collar
agreement, option or futures contract or other similar agreement or
arrangement relating to interest rates or foreign exchange rates.
"Holder" means a Person in whose name a Security is registered.
"Incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary. The
term "Incurrence" when used as a noun shall have a correlative meaning.
"Indebtedness" of any Person at any date means, without duplication, (i)
all indebtedness of such Person for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof), (ii) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (iii) all
obligations of such Person in respect of letters of credit or other
similar instruments (or reimbursement obligations with respect thereto),
other than standby letters of credit and performance bonds issued by such
Person in the ordinary course of business, to the extent not drawn or, to
the extent drawn, if such drawing is reimbursed not later than the third
Business Day following demand for reimbursement, (iv) all obligations of
such Person to pay the deferred and unpaid purchase price of property or
services, except trade payables and accrued expenses incurred in the
ordinary course of business, (v) all Capitalized Lease Obligations of
such Person, (vi) all Indebtedness of others secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person, to the extent of the fair market value of all the assets of such
Person subject to such Lien, (vii) all Indebtedness of others guaranteed
by such Person to the extent of such guarantee, (viii) Redeemable Stock,
valued at its maximum fixed repurchase price, and (ix) all Hedging
Obligations of such Person.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Independent Investment Banker" means an independent investment banking
institution of national standing appointed by the Company for purposes of
calculating any Make-Whole Premium, provided, that if the Company fails
to make such appointment at least 45 Business Days prior to the
Redemption Date for any Security to be redeemed, or if the institution so
appointed is unwilling or unable to make such calculation, such
calculation will be made by Credit Suisse First Boston Corporation or, if
such firm is unwilling or unable to make such calculation, by an
independent investment banking institution of national standing appointed
by the Trustee.
"Initial Purchasers" means Credit Suisse First Boston Corporation,
NationsBanc Montgomery Securities LLC and Paribas Corporation, as initial
purchasers in the Offering.
"Interest Payment Date" shall have the meaning assigned to such term in
the Securities.
"Interest Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Company or any Restricted Subsidiary
against fluctuations in interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of the lender)
or other extensions of credit (including by way of guarantee or similar
arrangement) or capital contribution to (by means of any transfer of cash
or other property to others or any payment for property or services for
the account or use of others), or any purchase or acquisition of Capital
Stock, Indebtedness or other similar instruments issued by such Person.
For purposes of the definition of "Unrestricted Subsidiary," the
definition of "Restricted Payment" and Section 3.12, (i) "Investment"
shall include the portion (proportionate to the Company's equity interest
in such Subsidiary) of the fair market value of the net assets of any
Subsidiary of the Company at the time that such Subsidiary is designated
an Unrestricted Subsidiary; provided, however, that upon a redesignation
of such Subsidiary as a Restricted Subsidiary, the Company shall be
deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less
(y) the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of such Subsidiary
at the time of such redesignation, and (ii) any property transferred to
or from an Unrestricted Subsidiary shall be valued at its fair market
value at the time of such transfer, in each case as determined in good
faith by the Board of Directors.
"Investment Grade" means BBB- or above, in the case of S&P (or its
equivalent under any successor Rating Categories of S&P), Baa3 or above,
in the case of Moody's (or its equivalent under any successor Rating
Categories of Moody's), and the equivalent in respect of the Rating
Categories of any Rating Agencies substituted for S&P or Moody's.
"Issue Date" means the first date on which the Series A Securities are
issued under this Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in any of New York, New York, Houston, Texas or a place of
payment are authorized or obligated by law, regulation or executive order
to remain closed.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under
applicable law. For the purposes of this Indenture, the Company or any
Subsidiary of the Company shall be deemed to own subject to a Lien any
asset which it has acquired or holds subject to the interest of a vendor
or lessor under any conditional sale agreement, Capitalized Lease
Obligation or other title retention agreement relating to such asset.
"Make-Whole Premium" means, with respect to any 5-Year Security or 10-
Year Security (or portion thereof) to be redeemed, an amount equal to
the excess, if any, of:
(i) the sum of the present values, calculated as of the Redemption
Date, of:
(A) each interest payment that, but for such redemption, would
have been payable on the Security (or portion thereof) being
redeemed on each Interest Payment Date occurring after the
Redemption Date (excluding any accrued and unpaid interest for
the period prior to the Redemption Date); and
(B) the principal amount that, but for such redemption, would
have been payable at the final maturity of the Security (or
portion thereof) being redeemed;
over
(ii) the principal amount of the Security (or portion thereof) being
redeemed.
The present values of interest and principal payments referred to in
clause (i) above will be determined in accordance with generally accepted
principles of financial analysis. Such present values will be calculated
by discounting the amount of each payment of interest or principal from
the date that each such payment would have been payable, but for the
redemption, to the Redemption Date at a discount rate equal to the
Treasury Yield plus (i) 50 basis points in the case of the 5-Year
Securities and (ii) 50 basis points in the case of the 10-Year Securities
The Make-Whole Premium will be calculated by an Independent Investment
Banker.
For purposes of determining the Make-Whole Premium, "Treasury Yield"
means a rate of interest per annum equal to the weekly average yield to
maturity of United States Treasury Notes that have a constant maturity
that corresponds to the remaining term to maturity of the Securities,
calculated to the nearest 1/12 of a year (the "Remaining Term"). The
Treasury Yield will be determined as of the third Business Day
immediately preceding the applicable Redemption Date.
The weekly average yields of United States Treasury Notes will be
determined by reference to the most recent statistical release published
by the Federal Reserve Bank of New York and designated "H.15(519)
Selected Interest Rates" or any successor release (the "H.15 Statistical
Release").
If the H.15 Statistical Release sets forth a weekly average yield for
United States Treasury Notes having a constant maturity that is the same
as the Remaining Term, then the Treasury Yield will be equal to such
weekly average yield. In all other cases, the Treasury Yield will be
calculated by interpolation, on a straight-line basis, between the weekly
average yields on the United States Treasury Notes that have a constant
maturity closest to and greater than the Remaining Term and the United
States Treasury Notes that have a constant maturity closest to and less
than the Remaining Term (in each case as set forth in the H.15
Statistical Release). Any weekly average yields so calculated by
interpolation will be rounded to the nearest 1/100 of 1%, with any figure
of 1/200% or above being rounded upward. If weekly average yields for
United States Treasury Notes are not available in the H.15 Statistical
Release or otherwise, then the Treasury Yield will be calculated by
interpolation of comparable rates selected by the Independent Investment
Banker.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees
actually incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
"Net Proceeds" means, with respect to any Sale/Leaseback Transaction
entered into by the Company or any Subsidiary of the Company, the
aggregate net proceeds received by the Company or such Subsidiary from
such Sale/Leaseback Transaction after payment of expenses, taxes,
commissions and similar amounts incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof at the time of receipt, as determined by the Board of Directors).
"Non-Convertible Capital Stock" means, with respect to any corporation,
any non-convertible Capital Stock of such corporation and any Capital
Stock of such corporation convertible solely into non-convertible common
stock of such corporation; provided, however, that Non-Convertible
Capital Stock shall not include any Redeemable Stock or Exchangeable
Stock.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of an Unrestricted Subsidiary as to which neither the
Company nor any Restricted Subsidiary (i) provides credit support
including any undertaking, agreement or instrument which would constitute
Indebtedness; or (ii) is directly or indirectly liable for such
Indebtedness.
"Offering" means the offering of the Original Securities pursuant to the
Offering Circular.
"Offering Circular" means the Offering Circular of the Company, dated
December 17, 1998, relating to the Offering.
"Officer" means the Chairman of the Board, the President, any Vice
Chairman of the Board, any Vice President, the Chief Financial Officer,
the Treasurer, any Assistant Treasurer, the Controller, the Secretary or
any Assistant Secretary of a Person.
"Officers' Certificate" means a certificate signed by two Officers of a
Person, one of whom must be the Person's Chief Executive Officer, Chief
Financial Officer or Chief Accounting Officer.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. Such counsel may be an employee of or counsel
to the Company, a Guarantor or the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of the Company, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall be
subordinated in right of payment to the Securities.
"Permitted Investments" means (i) certificates of deposit, bankers
acceptances, time deposits, Eurocurrency deposits and similar types of
Investments routinely offered by commercial banks with final maturities
of one year or less issued by commercial banks having capital and surplus
in excess of $100 million, (ii) commercial paper issued by any
corporation, if such commercial paper has credit ratings of at least "A-
1" by S&P and at least "P-1" by Moody's, (iii) U.S. Government
Obligations with a maturity of four years or less, (iv) repurchase
obligations for instruments of the type described in clause (iii), (v)
shares of money market mutual or similar funds having assets in excess of
$100 million, (vi) payroll advances in the ordinary course of business,
(vii) other advances and loans to officers and employees of the Company
or any Restricted Subsidiary, so long as the aggregate principal amount
of such advances and loans does not exceed $500,000 at any one time
outstanding, (viii) Investments in any Person in the form of a capital
contribution of the Company's common stock, (ix) Investments made by the
Company in its Restricted Subsidiaries (or any Person that will be a
Restricted Subsidiary as a result of such Investment) or by a Restricted
Subsidiary in the Company or in one or more Restricted Subsidiaries (or
any Person that will be a Restricted Subsidiary as a result of such
Investment), (x) Investments in stock, obligations or securities received
in settlement of debts owing to the Company or any Restricted Subsidiary
as a result of bankruptcy or insolvency proceedings or upon the
foreclosure, perfection or enforcement of any Lien in favor of the
Company or any Restricted Subsidiary, in each case as to debt owing to
the Company or any Restricted Subsidiary that arose in the ordinary
course of business of the Company or any such Restricted Subsidiary, (xi)
Investments made in exchange for Indebtedness permitted by clauses (b)(4)
and (b)(5) of Section 3.09, (xii) Investments in the capital stock of
Navis ASA, a Norwegian corporation, in exchange for cash and non-cash
assets (the fair market value of which shall be determined in good faith
by the Board of Directors of the Company), in an aggregate amount not to
exceed $50 million at any time outstanding, (xiii) Investments consisting
of the redesignation of the Subsidiary owning or operating the drillships
Deepwater Millennium or Deepwater Frontier as an Unrestricted Subsidiary,
or the contribution, transfer or other disposition of the drillships
Deepwater Millennium and Deepwater Frontier and related equipment and
assets (including any drilling contract) by the Company or any Restricted
Subsidiary to a Person other than a Restricted Subsidiary, in connection
with the refinancing of the Indebtedness Incurred to finance the
construction of such drillships, (xiv) Investments in a Person other than
a Restricted Subsidiary for the purpose of financing the construction or
upgrade prior to delivery of the drillship Deepwater Frontier, the
drillship Deepwater Millennium or the semisubmersible RBS8M pursuant to
the terms of applicable construction and equipment installation
agreements and (xv) Investments in a Person other than a Restricted
Subsidiary for the purpose of financing the construction or upgrade of
new drilling rigs, drillships or similar vessels and related equipment,
in an aggregate amount not to exceed at any time outstanding (A) $100
million less (B) the aggregate amount of all payments actually made
pursuant to paragraph (xiv) of this definition that represent payments
for amounts in excess of the Company's estimated costs for the vessels
referred to therein, as in effect on the Issue Date; provided, however,
that at the time of such Investment, the Company or such Person has
entered into a Qualifying Contract with respect thereto.
"Person" means any individual, corporation, partnership, limited
liability company, limited or general partnership, joint venture,
incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of
such corporation, over shares of Capital Stock of any other class of such
corporation.
"Private Exchange" means the offer by the Company, pursuant to the
Registration Rights Agreement, to the Initial Purchasers to issue and
deliver to each Initial Purchaser, in exchange for the Original
Securities held by the Initial Purchaser as part of its initial
distribution, a like aggregate principal amount of Private Exchange
Securities.
"Private Exchange Securities" means the Securities to be issued pursuant
to this Indenture to the Initial Purchasers in a Private Exchange.
"Purchase Agreement" means the Purchase Agreement, dated as of
December 17, 1998, among the Company and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualifying Contract" with respect to a drilling rig, drillship or
similar vessel means a contract for the use thereof (i) between the
Company or a Restricted Subsidiary or, for the purpose of clause (xv) of
the definition of "Permitted Investments," a Person other than a
Restricted subsidiary, and a counterparty that, as certified in an
Officers' Certificate delivered to the Trustee in connection therewith,
is either generally recognized in the offshore drilling industry as a
major oil company or has an Investment Grade rating on its long-term debt
from Moody's or S&P's, (ii) having a minimum term of two years and (iii)
containing a minimum day rate for such drilling rig, drillship or similar
vessel.
"Rating Agencies" means (a) S&P and Moody's or (b) if S&P or Moody's or
both of them are not making ratings of the Securities publicly available,
a nationally recognized U.S. rating agency or agencies, as the cases may
be, selected by the Company, which will be substituted for S&P or Moody's
or both, as the case may be.
"Rating Categories" means (i) with respect to S&P, any of the following
categories (any of which may include a "+" or "`"): AAA, AA, A, BBB, BB,
B, CCC, CC, C and D (or equivalent successor categories), (ii) with
respect to Moody's, any of the following categories (any of which may
include a "1," "2" or "3"): Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or
equivalent successor categories) and (iii) the equivalent of any such
categories of S&P or Moody's used by another Rating Agency, if
applicable.
"Redeemable Stock" means, with respect to any series of Securities, any
Capital Stock that, by its terms (or by the terms of any security into
which it is convertible, or for which it is exchangeable, in each case at
the option of the holder thereof), or upon the happening of any event,
matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date on which the
Securities of such series mature. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Redeemable Stock solely
because the holders thereof have the right to require the Company to
repurchase such Capital Stock upon the occurrence of a change of control
or an asset sale shall not constitute Redeemable Stock if the terms of
such Capital Stock provide that the Company may not repurchase or redeem
any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the provisions of Section 3.12.
"Redemption Date," when used with respect to any security to be redeemed,
means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price" shall have the meaning assigned to such term in the
Securities.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of December 17, 1998, among the Company and the
Initial Purchasers relating to the Original Securities.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Sale/Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the
Company, for a period of more than three years, of any real or tangible
personal property, which property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in
contemplation of such leasing.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Series A Securities and the Series B Securities.
For purposes of this Indenture, the term "Securities" shall, except where
the context otherwise requires, include any future Guarantees.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor statute.
"Security Custodian" means the Trustee, as custodian with respect to the
Securities in global form, or any successor entity thereto.
"Series A Securities" means, collectively, the Company's (i) 9-1/8%
Series A Senior Notes due 2003 and (ii) 9-1/2% Series A Senior Notes due
2008 to be issued pursuant to this Indenture.
"Series B Securities" means, collectively, the Company's (i) 9-1/8%
Series B Senior Notes due 2003 and (ii) 9-1/2% Series B Senior Notes due
2008 to be issued pursuant to this Indenture in the Exchange Offer.
"Shelf Registration Statement" means the registration statement issued by
the Company, in connection with the offer and sale of Original Securities
or Private Exchange Securities, pursuant to the Registration Rights
Agreement.
"Significant Subsidiary" has the meaning set forth in Regulation S-X
under the Exchange Act.
"S&P" means Standard & Poor's Rating Service, a division of the McGraw-
Hill Companies, Inc., and its successors.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the date hereof or hereafter incurred) which is
subordinate or junior in right of payment to the Securities.
"Subsidiary" means, with respect to any Person (i) any corporation of
which more than 50% of the total voting power of all classes of the
Common Equity is owned by such Person directly or through one or more
other Subsidiaries of such Person, and (ii) any entity other than a
corporation at least a majority of the Common Equity of which is owned by
such Person directly or through one or more other Subsidiaries of such
Person.
"Tangible Property" means all land, buildings, machinery and equipment
and leasehold interests and improvements which would be reflected on a
balance sheet of the Company prepared in accordance with GAAP, excluding
(a) all rights, contracts and other intangible assets of any nature
whatsoever and (b) all inventories and other current assets.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C.
Sections 77aaa-77bbbb), as in effect on the Issue Date.
"Transfer Restricted Securities" shall have the meaning assigned to such
term in the Registration Rights Agreement.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer any of its corporate trust matters.
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"U.S. Government Obligations" means direct obligations of the United
States of America for the payment of which the full faith and credit of
the United States of America is pledged.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination will be designated an Unrestricted Subsidiary
by the Board of Directors of the Company as provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary.
The Board of Directors of the Company may designate any Subsidiary
of the Company as an Unrestricted Subsidiary so long as (1) it has no
Indebtedness other than Non-Recourse Indebtedness; provided, however,
that notwithstanding any other provision of this Indenture, a Subsidiary
shall not fail to constitute an Unrestricted Subsidiary by reason of (A)
the guarantee by the Company or a Restricted Subsidiary in connection
with synthetic lease obligations Incurred to finance the construction or
upgrade of drilling rigs, drillships or similar vessels; and (B)
obligations of the Company or a Restricted Subsidiary relating to
Indebtedness of an Unrestricted Subsidiary if such Indebtedness
constituted a Permitted Investment or a Restricted Payment permitted by
the "Limitation on Restricted Payments" covenant at the time of its
Incurrence or at the time of designation of such Subsidiary as an
Unrestricted Subsidiary; and (2) after giving effect thereto, such
designation was permitted by the "Limitation on Restricted Payments"
covenant.
Any such designation by the Board of Directors of the Company shall
be evidenced to the Trustee by filing a resolution of the Board of
Directors with the Trustee giving effect to such designation. The Board
of Directors of the Company may designate any Unrestricted Subsidiary as
a Restricted Subsidiary if, immediately after giving effect to such
designation, (x) no Default or Event of Default shall have occurred and
be continuing and (y) the Company could incur $1.00 of additional
Indebtedness under Section 3.09(a).
Section 1.2Other Definitions
Term Defined in
Section
"Agent Members" 2.01(c)
"Authorized Agent" 9.07
"Custodian" 5.01
"DTC" 2.03
"Event of Default" 5.01
"Funding Guarantor" 9.03
"Global Security" 2.01(b)
"Guarantees" 9.01(a)
"Judgement Currency" 9.09
"Non-U.S. Guarantor" 9.07
"Original Securities" 2.02
"Paying Agent" 2.03
"Registrar" 2.03
"Regulation S" 2.01(b)
"Restricted Payment" 3.12
"Rule 144A" 2.01(b)
"Significant Subsidiary" 5.01
"Successor" 4.01
"Suspended Covenants" 3.13
Section I.3Incorporation by Reference of Trust Indenture Act
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and each
Guarantor.
All terms used in this Indenture that are defined by the TIA, defined by
a TIA reference to another statute or defined by an SEC rule under the
TIA have the meanings so assigned to them.
Section 1.04 Rules of ConstructionSection
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE II
THE SECURITIES
Section 2.01 Form and Dating
(a) General. The [ ]-Year Securities and the 10-Year Securities, any
notations thereon relating to the Guarantees and the Trustee's
certificate of authentication shall be substantially in the form of
Exhibits A and B, respectively, to this Indenture, the terms of which are
hereby incorporated into this Indenture. The Securities may have
notations, legends or endorsements required by law, securities exchange
rule, the Company's certificate of incorporation or bylaws, agreements to
which the Company is subject, if any, or usage (provided that any such
notation, legend or endorsement is in a form acceptable to the Company).
Each Security shall be dated the date of its authentication. The
Securities shall be in registered form without coupons and only in
denominations of $1,000 and any integral multiples thereof. The terms
and provisions contained in the Securities shall constitute, and are
hereby expressly made, a part of this Indenture and to the extent
applicable, the Company, the Guarantors, if any, and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby.
(b) Global Securities. Original Securities of any Series offered and
sold to a QIB in reliance on Rule 144A under the Securities Act ("Rule
144A") or in reliance on Regulation S under the Securities Act
("Regulation S"), in each case as provided in the Purchase Agreement,
shall be issued initially in the form of one or more permanent global
Securities in definitive, fully registered form without interest coupons
with the global securities legend and restricted securities legend set
forth in Section 2.06 (each, a "Global Security"), which shall be
deposited on behalf of the purchasers of the Original Securities
represented thereby with the Trustee, at its New York office, as
custodian for the Depositary (or with such other custodian as the
Depositary may direct), and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. The aggregate principal amount of
the Global Securities may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee as hereinafter provided.
(c) Book-entry Provisions. This Section 2.01(c) shall apply only to a
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.01(c), authenticate and deliver initially one or more Global
Securities that (i) shall be registered in the name of the Depositary for
such Global Security or Global Securities or the nominee of such
Depositary and (ii) shall be delivered by the Trustee to such Depositary
or pursuant to such Depositary's instructions or held by the Trustee as
custodian for the Depositary.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depositary or by the Trustee as the custodian
of the Depositary or under such Global Security, and the Depositary may
be treated by the Company, the Trustee and any agent of the Company or
the Trustee as the absolute owner of such Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices of
such Depositary governing the exercise of the rights of a holder of a
beneficial interest in any Global Security.
(d) Certificated Securities. Except as provided in this Section 2.01 or
Section 2.06 or 2.07, owners of beneficial interests in Global Securities
will not be entitled to receive physical delivery of certificated
Securities.
Section 2.02 Execution and Authentication
One Officer of the Company shall sign the Securities on behalf of the
Company by manual or facsimile signature. The Company's seal may be
impressed, affixed, imprinted or reproduced on the Securities and may be
in facsimile form.
If an Officer of the Company whose signature is on a Security no longer
holds that office at the time the Security is authenticated, the Security
shall be valid nevertheless.
A Security shall not be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose until authenticated by the manual
signature of an authorized signatory of the Trustee, which signature
shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) for original issue on the Issue Date
each of (A) the 5-Year Series A Securities in the aggregate principal
amount of $100,000,000 and (B) the 10-Year Series A Securities in the
aggregate principal amount of $300,000,000 (collectively, the "Original
Securities"), and (ii) the Series B Securities for original issue,
pursuant to an Exchange Offer or Private Exchange, for a like principal
amount of Series A Securities, in each case, upon a written order of the
Company signed by one Officer of the Company. Such order shall specify
(a) the amount of the Securities of each series to be authenticated and
the date of original issue thereof, and (b) whether the Securities are
Series A Securities or Series B Securities. The aggregate principal
amount of Securities outstanding at any time may not exceed (i)
$100,000,000 in the case of the 5-Year Securities and (ii) $300,000,000
in the case of the 10-Year Securities, except as provided in Section 2.08
hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the
Company, or an Affiliate of any of them.
The Series A Securities of any series and the corresponding Series B
Securities of such series shall be considered collectively to be a single
class for all purposes of this Indenture, including, without limitations
waivers, amendments, redemptions and offers to purchase.
Section 2.03 Registrar and Paying Agent
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying
Agent"). The Registrar shall keep a register of the Securities and of
their transfer and exchange. The Company may appoint one or more
co-registrars and one or more additional paying agents. The term
"Registrar" includes any co-registrar and the term "Paying Agent"
includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture. The agreement
shall implement the provisions of this Indenture that relate to such
Agent. The Company shall notify the Trustee of the name and address of
any Agent not a party to this Indenture. The Company may change any
Paying Agent or Registrar without notice to any Holder. If the Company
fails to appoint or maintain another entity as Registrar or Paying Agent,
the Trustee shall act as such. The Company or any of its Subsidiaries
may act as Paying Agent or Registrar.
The Company initially appoints the Trustee as Registrar and Paying Agent.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect each Global Security.
Section 2.04 Paying Agent to Hold Money in Trust
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit
of Holders or the Trustee all money held by the Paying Agent for the
payment of principal of or premium, if any, or interest on the
Securities, whether such money shall have been paid to it by the Company
or any Guarantor, and will notify the Trustee of any default by the
Company or any Guarantor in making any such payment. While any such
default continues, the Trustee may require a Paying Agent to pay all
money held by it to the Trustee and to account for any funds disbursed.
The Company at any time may require a Paying Agent to pay all money held
by it to the Trustee and to account for any funds disbursed. Upon
payment over to the Trustee and upon accounting for any funds disbursed,
the Paying Agent (if other than the Company or a Subsidiary of the
Company) shall have no further liability for the money. If the Company
or a Subsidiary of the Company acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent.
Section 2.05 Holder Lists
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and
addresses of Holders and shall otherwise comply with TIA Section 312(a).
If the Trustee is not the Registrar, the Company shall furnish to the
Trustee at least seven Business Days before each Interest Payment Date,
and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably require of
the names and addresses of Holders, and the Company shall otherwise
comply with TIA Section 312(a).
Section 2.06 Transfer and Exchange
(a) Transfer and Exchange of Global Securities. (i) The transfer and
exchange of Global Securities or beneficial interests therein shall be
effected through the Depositary, in accordance with this Indenture
(including applicable restrictions on transfer set forth herein, if any)
and the procedures of the Depositary therefor. A transferor of a
beneficial interest in a Global Security shall deliver to the Registrar a
written order given in accordance with the Depositary's procedures
containing information regarding the participant account of the
Depositary to be credited with a beneficial interest in the Global
Security. The Registrar shall, in accordance with such instructions,
instruct the Depositary to credit to the account of the Person specified
in such instructions a beneficial interest in the Global Security and to
debit the account of the Person making the transfer the beneficial
interest in the Global Security being transferred.
(ii) Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in Section 2.07), a Global Security
may not be transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary
or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
(iii) In the event that a Global Security is exchanged for
Securities in definitive registered form pursuant to this Section
2.06 or Section 2.07 of this Indenture, prior to the consummation of
an Exchange Offer or prior to or in a transfer made pursuant to an
effective Shelf Registration Statement with respect to such
Securities, such Securities may be exchanged only in accordance with
such procedures as are substantially consistent with the provisions
of this Section 2.06 (including the certification and other
requirements set forth on the reverse of the Original Securities
intended to ensure that such transfers comply with Rule 144A or
Regulation S, as the case may be, or are otherwise in compliance
with the requirements of the Securities Act) and such other
procedures as may from time to time be adopted by the Company.
(b) Legend.
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Security certificate evidencing the Global Securities
(and all Securities issued in exchange therefor or in substitution
thereof) shall bear a legend in substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) AND ANY GUARANTEE
THEREOF WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY
IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS
OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE
HEREOF, AGREES FOR THE BENEFIT OF THE ISSUER THAT (A)
THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (i) INSIDE THE UNITED
STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(ii) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE), OR (iv) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (i) THROUGH (iv) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS SECURITY FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security
represented by a Global Security) pursuant to Rule 144
under the Securities Act, in the case of any Transfer
Restricted Security that is represented by a Global
Security, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a
certificated Security that does not bear the legend set
forth above and rescind any restriction on the transfer of
such Transfer Restricted Security, if the Holder certifies
in writing to the Registrar that its request for such
exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse
of the Security).
(iii) After a transfer of any Original Securities or
Private Exchange Securities during the period of the
effectiveness of and pursuant to a Shelf Registration
Statement with respect to such Original Securities or
Private Exchange Securities, as the case may be, all
requirements pertaining to legends on such Initial
Security or such Private Exchange Security will cease to
apply, the requirements requiring any such Initial
Security or such Private Exchange Security issued to
certain Holders be issued in global form will cease to
apply, and a certificated Original Security or Private
Exchange Security without legends will be available to the
transferee of the Holder of such Original Securities or
Private Exchange Securities upon exchange of such
transferring Holder's certificated Original Security or
Private Exchange Security or directions to transfer such
Holder's interest in the Global Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer
with respect to the Original Securities pursuant to which
Holders of such Original Securities are offered Exchange
Securities in exchange for their Original Securities, all
requirements pertaining to such Original Securities that
Original Securities issued to certain Holders be issued in
global form will cease to apply and certificated Original
Securities with the restricted securities legend set forth
in Section 2.06(b) will be available to Holders of such
Original Securities that do not exchange their Original
Securities, and Exchange Securities in certificated or
global form will be available to Holders that exchange
such Original Securities in such Exchange Offer.
(v) Upon the consummation of a Private Exchange with
respect to the Original Securities pursuant to which
Holders of such Original Securities are offered Private
Exchange Securities in exchange for their Original
Securities, all requirements pertaining to such Original
Securities that Original Securities issued to certain
Holders be issued in global form will still apply, and
Private Exchange Securities in global form with the
Restricted Securities Legend set forth in Section 2.06(b)
will be available to Holders that exchange such Original
Securities in such Private Exchange.
(c) Cancellation or Adjustment of Global Security. At such time as all
beneficial interests in a Global Security have either been exchanged for
certificated Securities, redeemed, repurchased or canceled, such Global
Security shall be returned to the Depositary for cancellation or retained
and canceled by the Trustee. At any time prior to such cancellation, if
any beneficial interest in a Global Security is exchanged for
certificated Securities, redeemed, repurchased or canceled, the principal
amount of Securities represented by such Global Security shall be reduced
and an adjustment shall be made on the books and records of the Trustee
(if it is then the Securities Custodian for such Global Security) with
respect to such Global Security, by the Trustee or the Securities
Custodian, to reflect such reduction.
(d) Obligations with Respect to Transfers and Exchanges of Securities.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall
authenticate certificated Securities and Global Securities
at the Registrar's or co-registrar's request. No service
charge shall be made for any registration of transfer or
exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or
similar governmental charge payable in connection
therewith (other than any such transfer taxes, assessments
or similar governmental charge payable upon exchange or
transfer pursuant to Sections 5.11, 8.05 and 10.06 of the
Indenture).
(ii) The Registrar or co-registrar shall not be required
to register the transfer of or exchange of (a) any
certificated Security selected for redemption in whole or
in part pursuant to Article X of this Indenture, except
the unredeemed portion of any certificated Security being
redeemed in part, or (b) any Security for a period
beginning 15 Business Days before the mailing of a notice
of an offer to repurchase or redeem Securities or 15
Business Days before an interest payment date.
(iii) Prior to the due presentation for registration
of transfer of any Security, the Company, the Trustee, the
Paying Agent, the Registrar or any co-registrar may deem
and treat the person in whose name a Security is
registered as the absolute owner of such Security for the
purpose of receiving payment of principal of and interest
on such Security and for all other purposes whatsoever,
whether or not such Security is overdue, and none of the
Company, the Trustee, the Paying Agent, the Registrar or
any co-registrar shall be affected by notice to the
contrary.
(iv) All Securities issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the
same debt and shall be entitled to the same benefits under
this Indenture as the Securities surrendered upon such
transfer or exchange.
(e) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Security, a
member of, or a participant in the Depositary or other
Person with respect to the accuracy of the records of the
Depositary or its nominee or of any participant or member
thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any
participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including any
notice of redemption) or the payment of any amount, under
or with respect to such Securities. All notices and
communications to be given to the Holders and all payments
to be made to Holders under the Securities shall be given
or made only to or upon the order of the registered
Holders (which shall be the Depositary or its nominee in
the case of a Global Security). The rights of beneficial
owners in any Global Security shall be exercised only
through the Depositary subject to the applicable rules and
procedures of the Depositary. The Trustee may rely and
shall be fully protected in relying upon information
furnished by the Depositary with respect to its members,
participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or
under applicable law with respect to any transfer of any
interest in any Security (including any transfers between
or among Depositary participants, members or beneficial
owners in any Global Security) other than to require
delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and
when expressly required by, the terms of this Indenture,
and to examine the same to determine substantial
compliance as to form with the express requirements
hereof.
Section 2.07 Certificated Securities
(a) A Global Security deposited with the Depositary or with the Trustee
as custodian for the Depositary pursuant to Section 2.01 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount
of such Global Security, in exchange for such Global Security, only if
such transfer complies with Section 2.06 and (i) the Depositary notifies
the Company that it is unwilling or unable to continue as Depositary for
such Global Security or if at any time such Depositary ceases to be a
"clearing agency" registered under the Exchange Act and a successor
depositary is not appointed by the Company within 90 days of such notice,
or (ii) the Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of certificated Securities
under this Indenture.
(b) Any Global Security that is transferred to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depositary
to the Trustee at its office located in the Borough of Manhattan, The
City of New York, to be so transferred, in whole or from time to time in
part, without charge, and the Trustee shall authenticate and deliver,
upon such transfer of each portion of such Global Security, an equal
aggregate principal amount of certificated Original Securities of
authorized denominations. Any portion of a Global Security transferred
pursuant to this Section shall be executed, authenticated and delivered
only in denominations of $1,000 and any integral multiple thereof and
registered in such names as the Depositary shall direct. Any certificated
Initial Security delivered in exchange for an interest in the Global
Security shall, except as otherwise provided by Section 2.06(d), bear the
restricted securities legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.06(b), the registered Holder
of a Global Security may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests
through Agent Members, to take any action which a Holder is entitled to
take under this Indenture or the Securities.
(d) In the event of the occurrence of either of the events specified in
Section 2.07(a), the Company will promptly make available to the Trustee
a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
(e) In the event that a certificated Security issued pursuant to this
Section 2.07 is exchanged for another certificated Security prior to the
consummation of an Exchange Offer or prior to or in a transfer made
pursuant to an effective Shelf Registration Statement with respect to
such Securities, such Securities may be exchanged only in accordance with
such procedures as are substantially consistent with the provisions of
(i) Section 2.06(a)(iii) (including the certification and other
requirements set forth on the reverse of the Original Securities intended
to ensure that such transfers comply with Rule 144A or Regulation S, as
the case may be, or are otherwise in compliance with the requirements of
the Securities Act) and such other procedures as may from time to time be
adopted by the Company and (ii) Section 2.06(b).
Section 2.08 Replacement Securities
If any mutilated Security is surrendered to the Trustee, or the Company
and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, the Company shall issue and
the Trustee shall authenticate a replacement Security if the Trustee's
requirements are met. If required by the Trustee, the Company or any
Guarantor, such Holder must furnish an indemnity bond that is sufficient
in the judgment of the Trustee, the Company and the Guarantors to protect
the Company, the Guarantors, the Trustee, any Agent or any authenticating
agent from any loss which any of them may suffer if a Security is
replaced. The Company, the Trustee and the Guarantors may charge for
their expenses in replacing a Security. If, after the delivery of such
replacement Security, a bona fide purchaser of the original Security in
lieu of which such replacement Security was issued presents for payment
or registration such original Security, the Trustee shall be entitled to
recover such replacement Security from the person to whom it was
delivered or any person taking therefrom, except a bona fide purchaser,
and shall be entitled to recover upon the security or indemnity provided
therefor to the extent of any loss, damage, cost or expense incurred by
the Trustee, the Company or any Guarantor in connection therewith.
Every replacement Security is an additional obligation of the Company and
the Guarantors.
Section 2.09 Outstanding Securities.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those canceled by it, those
delivered to it for cancellation, those reductions in the interest in a
Global Security effected by the Trustee hereunder and those described in
this Section 2.09 as not outstanding.
If a Security is replaced pursuant to Section 2.08 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that
the replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under Section
3.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
A Security does not cease to be outstanding because the Company, a
Guarantor or an Affiliate of any of them holds the Security.
Section 2.10 Treasury Securities
In determining whether the Holders of the required principal amount of
Securities of any series have concurred in any direction, waiver or
consent, Securities owned by the Company, any Guarantor or an Affiliate
of any of them shall be disregarded, except that for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities which the Trustee knows are
so owned shall be so disregarded.
Section 2.11 Temporary Securities
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive
Securities, but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate definitive
Securities in exchange for temporary Securities. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities.
Section 2.12 CancellationSection 2.12 Cancellation.
The Company or any Guarantor at any time may deliver Securities to the
Trustee for cancellation. The Registrar and the Paying Agent shall
forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Trustee shall cancel
all Securities surrendered for registration of transfer, exchange,
payment, replacement or cancellation. Unless the Company shall direct
that canceled Securities be returned to it, after written notice to the
Company all canceled Securities held by the Trustee shall be disposed of
in accordance with the usual disposal procedures of the Trustee, and the
Trustee shall maintain a record of their disposal. The Company may not
issue new Securities to replace Securities that have been paid or that
have been delivered to the Trustee for cancellation.
Section 2.13 Defaulted Interest
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest on the defaulted interest, in each case at the rate
provided in the Securities and in Section 3.01 hereof. The Company may
pay the defaulted interest to the Persons who are Holders on a subsequent
special record date. At least 15 days before any special record date,
the Company (or the Trustee, in the name of and at the expense of the
Company) shall mail to Holders a notice that states the special record
date, the related payment date and the amount of such interest to be
paid.
Section 2.14 Persons Deemed Owners
The Company, the Trustee, any Agent and any authenticating agent may
treat the Person in whose name any Security is registered as the owner of
such Security for the purpose of receiving payments of principal of or
premium, if any, or interest on such Security and for all other purposes.
None of the Company, the Trustee, any Agent or any authenticating agent
shall be affected by any notice to the contrary.
ARTICLE III
COVENANTS
Section 3.01 Payment of Securities
The Company shall pay the principal of and premium, if any, and interest
(including additional interest, if any, required by the Registration
Rights Agreement referred to in Section 3.11 hereof) on the Securities on
the dates and in the manner provided in the Securities and in this
Indenture. Principal, premium, if any, and interest shall be considered
paid on the date due if the Paying Agent, other than the Company or a
Subsidiary of the Company, holds by 11:00 a.m., Eastern time, on that
date money deposited by the Company designated for and sufficient to pay
all principal, premium and interest then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal, and premium,
if any, at a rate equal to the then applicable interest rate on the
Securities to the extent lawful; and it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace
period) at the same rate to the extent lawful.
Section 3.02 Maintenance of Office or Agency
The Company will maintain, in the Borough of Manhattan, The City of New
York, an office or agency (which may be an office of the Trustee, the
Registrar or the Paying Agent) where Securities may be presented for
registration of transfer or exchange, where Securities may be presented
for payment and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. Unless
otherwise designated by the Company by written notice to the Trustee,
such office or agency shall be the principal office of the agent of the
Trustee, in The City of New York which, on the date hereof, is located at
the address set forth in Section 11.02 hereof. The Company will give
prompt written notice to the Trustee of the location, and any change in
the location, of such office or agency. If at any time the Company shall
fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate
Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an
office or agency in the Borough of Manhattan, The City of New York for
such purposes. The Company will give prompt written notice to the
Trustee of any such designation or rescission and of any change in the
location of any such other office or agency. The Company hereby
designates the Corporate Trust Office of the Trustee as one such office
or agency of the Company in accordance with Section 2.03 hereof.
Section 3.03 SEC Reports; Financial Statements
(a) Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the SEC and provide the Trustee
and the Holders with such annual reports and such information, documents
and other reports specified in Sections 13 and 15(d) of the Exchange Act
within 15 days after the date it is required (or would otherwise have
been required) to file such reports, information and documents.
(b) In addition, whether or not required by the rules and regulations of
the SEC, the Company will file a copy of all such information and reports
with the SEC for public availability (unless the SEC will not accept such
filing). In addition, the Company shall furnish to the Holders and to
prospective investors, upon the requests of Holders, any information
required to be delivered pursuant to Rule 144A (d) (4) under the
Securities Act so long as the Securities are not freely transferable
under the Securities Act.
(c) The Company shall provide the Trustee with a sufficient number of
copies of all reports and other documents and information that the
Trustee may be required to deliver to Holders under this Section 3.03.
Section 3.04 Compliance Certificate
(a) The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company, a statement signed by two
Officers of the Company, which need not constitute an Officers'
Certificate, complying with TIA Section 314(a)(4) and stating that in the
course of performance by the signing Officers of the Company of their
duties as such Officers of the Company they would normally obtain
knowledge of the keeping, observing, performing and fulfilling by the
Company of its obligations under this Indenture, and further stating, as
to each such Officer signing such statement, that to the best of his
knowledge the Company and each Guarantor, if any, has kept, observed,
performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any
of the terms, provisions and conditions hereof (or, if a Default or Event
of Default shall have occurred, describing all such Defaults or Events of
Default of which such Officer may have knowledge and what action the
Company or such Guarantor, as the case may be, is taking or proposes to
take with respect thereto).
(b) The Company and the Guarantors, if any, shall, so long as any of the
Securities are outstanding, deliver to the Trustee, forthwith upon any
Officer of the Company or any Guarantor becoming aware of any Default or
Event of Default under this Indenture, an Officers' Certificate
specifying such Default or Event of Default and what action the Company
or such Guarantor is taking or proposes to take with respect thereto.
Section 3.05 Corporate Existence
Subject to Article IV hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate existence and the corporate, partnership and other existence of
each of its Subsidiaries and all rights (charter and statutory) and
franchises of the Company and its Subsidiaries, provided that the Company
shall not be required to preserve the corporate existence of any
Subsidiary of the Company or any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its
Subsidiaries taken as a whole and that the loss thereof would not have a
material adverse effect on the business, prospects, assets or financial
condition of the Company and its Subsidiaries taken as a whole and would
not have any material adverse effect on the payment and performance of
the obligations of the Company and the Guarantors under the Securities
and this Indenture.
Section 3.06 Maintenance of Properties
The Company shall cause all material properties owned by or leased to the
Company or any Subsidiary of the Company or used or held for use in the
conduct of its business or the business of any such Subsidiary to be
maintained and kept in good condition, repair and working order
(reasonable wear and tear and casualty losses excepted) and will cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be
necessary so that the business carried on in connection therewith may be
properly conducted at all times; provided that nothing in this Section
3.06 shall prevent the Company from discontinuing the operation or
maintenance of any of such properties if such discontinuance is, in the
judgment of the Company, desirable in the conduct of its business or the
business of any such Subsidiary and not disadvantageous in any material
respect to the Holders.
Section 3.07 Payment of Taxes and Other Claims
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges levied or imposed upon the Company
or any of its Subsidiaries or upon the income, profits or property of the
Company or any of its Subsidiaries, and (ii) all material lawful claims
for labor, materials and supplies which, if unpaid, might by law become a
Lien upon the property of the Company or any of its Subsidiaries;
provided that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith,
and by appropriate proceedings.
Section 3.08 Waiver of Stay, Extension or Usury Laws
The Company and each Guarantor, if any, covenant (to the extent that they
may lawfully do so) that they will not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law or any usury law or other law, which would
prohibit or forgive the Company or any Guarantor from paying all or any
portion of the principal of, or premium, if any, or interest on the
Securities as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance
of this Indenture; and (to the extent that they may lawfully do so) the
Company and each Guarantor hereby expressly waive all benefit or
advantage of any such law, and covenant that they will not hinder, delay
or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no
such law had been enacted.
Section 3.09 Limitation on Indebtedness
(a) The Company will not, and will not permit any Restricted Subsidiary
to, Incur, directly or indirectly, any Indebtedness; provided, however,
the Company may Incur Indebtedness if the pro forma Consolidated EBITDA
Coverage Ratio at the date of such Incurrence exceeds 2.25 to 1.0.
(b) Notwithstanding clause (a), the following Indebtedness may be
incurred:
(1) Indebtedness of the Company pursuant to one or more
Credit Facilities (and the guarantee of such Indebtedness
by Restricted Subsidiaries); provided, however, that the
aggregate amount of such Indebtedness outstanding at such
time shall not exceed $350 million;
(2) Indebtedness of the Company or a Restricted
Subsidiary owed to and held by a Restricted Subsidiary or
Indebtedness of a Restricted Subsidiary owed to and held
by the Company; provided, however, that any subsequent
issuance or transfer of any Capital Stock that results in
such Restricted Subsidiary to whom Indebtedness is owed
ceasing to be a Restricted Subsidiary or any transfer of
such Indebtedness (other than to the Company or another
Restricted Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness;
(3) The Securities and Indebtedness Incurred in exchange
for, or the proceeds of which are used to refund or
refinance, any Indebtedness permitted by this clause (3);
provided, however, that (i) the principal amount of the
Indebtedness so Incurred shall not exceed the principal
amount of the Indebtedness so exchanged, refunded or
refinanced (plus the amount of reasonable fees and
expenses incurred in connection therewith, including any
premium or defeasance costs) and (ii) the Indebtedness so
Incurred (A) shall not mature prior to the Stated Maturity
of the Indebtedness so exchanged, refunded or refinanced
and (B) shall have an Average Life equal to or greater
than the remaining Average Life of the Indebtedness so
exchanged, refunded or refinanced;
(4) Indebtedness of the Company or any Restricted
Subsidiary (other than Indebtedness described in clause
(1), (2) or (3) above) (x) outstanding on the Issue Date
(including without limitation, the Cliffs Senior Notes) or
Incurred pursuant to agreements as in effect on the Issue
Date and (y) Indebtedness Incurred in exchange for, or the
proceeds of which are used to refund or refinance, any
Indebtedness permitted by this clause (4) or permitted by
clause (a) above; provided, however, that (i) the
principal amount of the Indebtedness so Incurred shall not
exceed the principal amount of the Indebtedness so
exchanged, refunded or refinanced (plus the amount of
reasonable fees and expenses incurred in connection
therewith, including any premium or defeasance costs); and
(ii) the Indebtedness so Incurred (A) shall not mature
prior to the Stated Maturity of the Indebtedness so
exchanged, refunded or refinanced and (B) shall have an
Average Life equal to or greater than the remaining
Average Life of the Indebtedness so exchanged, refunded or
refinanced;
(5) Indebtedness of the Company or any Restricted
Subsidiary consisting of guarantees in connection with
any synthetic lease obligations of Persons Incurred to
finance the construction or upgrade of the drillship
Deepwater Frontier and the drillship Pathfinder pursuant
to agreements governing such obligations;
(6) Acquired Indebtedness of any Restricted Subsidiary in
an aggregate amount not to exceed $300 million, provided
that the Company on a pro forma basis could Incur $1.00 of
additional Indebtedness pursuant to paragraph (a) of this
covenant;
(7) Indebtedness of the Company or any Restricted
Subsidiary consisting of guarantees, indemnities or
obligations in respect of purchase price adjustments in
connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock;
(8) The Incurrence by the Company's Unrestricted
Subsidiaries of Non-Recourse Indebtedness; provided,
however, that if any such Indebtedness ceases to be Non-
Recourse Indebtedness of any Unrestricted Subsidiary,
subject to the definition of "Unrestricted Subsidiary",
such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of the Company
that was not permitted by this clause (8);
(9) Obligations of the Company or a Restricted Subsidiary
under performance or surety bonds relating to building
contracts for the construction of drilling rigs,
drillships or similar vessels or contracts for the
installation of related equipment;
(10) Hedging Obligations; and
(11) Indebtedness of the Company or any Restricted
Subsidiary in an aggregate principal amount which,
together with all other Indebtedness of the Company then
outstanding (other than Indebtedness permitted by clauses
(1) through (10) of this paragraph (b) or paragraph (a))
does not exceed $50 million.
(c) Notwithstanding clauses (a) and (b), the Company shall not issue any
Indebtedness if the proceeds thereof are used, directly or indirectly, to
repay, prepay, redeem, defease, retire, refund or refinance any
Subordinated Obligations unless such Indebtedness shall be subordinated
to the Securities to at least the same extent as such Subordinated
Obligations.
Section 3.10 Limitation on Sale/Leaseback Transactions
The Company shall not, and shall not permit any Restricted Subsidiary of
the Company to, enter into any Sale/Leaseback Transaction with any Person
(other than the Company or a Restricted Subsidiary of the Company)
unless:
(a) the Company or such Restricted Subsidiary would be entitled to incur
Indebtedness, in a principal amount equal to the Attributable
Indebtedness with respect to such Sale/Leaseback Transaction, secured by
a Lien on the property subject to such Sale/Leaseback Transaction
pursuant to Section 3.10 hereof without equally and ratably securing the
Securities pursuant to such Section;
(b) after the Issue Date and within a period commencing six months prior
to the consummation of such Sale/Leaseback Transaction and ending six
months after the consummation thereof, the Company or such Restricted
Subsidiary shall have expended for property used or to be used in the
ordinary course of business of the Company and its Restricted
Subsidiaries an amount equal to all or a portion of the Net Proceeds of
such Sale/Leaseback Transaction and the Company shall have elected to
designate such amount as a credit against such Sale/Leaseback Transaction
(with any such amount not being so designated to be applied as set forth
in clause (c) below); or
(c) the Company, during the 12-month period after the effective date of
such Sale/Leaseback Transaction, shall have applied to the voluntary
defeasance or retirement of Securities or any Pari Passu Indebtedness an
amount equal to the greater of the Net Proceeds of the sale or transfer
of the property leased in such Sale/Leaseback Transaction and the fair
value, as determined by the Board of Directors, of such property at the
time of entering into such Sale/Leaseback Transaction (in either case
adjusted to reflect the remaining term of the lease and any amount
expended by the Company as set forth in clause (b) above), less an amount
equal to the principal amount of Securities and Pari Passu Indebtedness
voluntarily defeased or retired by the Company within such 12-month
period and not designated as a credit against any other Sale/Leaseback
Transaction entered into by the Company or any Restricted Subsidiary of
the Company during such period.
Section 3.11 Limitation on Liens
The Company shall not, and shall not permit any Restricted Subsidiary of
the Company to, issue, assume or guarantee any Indebtedness for borrowed
money secured by any Lien on any property or asset now owned or hereafter
acquired by the Company or such Restricted Subsidiary without making
effective provision whereby any and all Securities then or thereafter
outstanding will be secured by a Lien equally and ratably with any and
all other obligations thereby secured for so long as any such obligations
shall be so secured. Notwithstanding the foregoing, the Company or any
Restricted Subsidiary of the Company may, without so securing the
Securities, issue, assume or guarantee Indebtedness for borrowed money
secured by the following Liens:
(a) Liens existing on the Issue Date or provided for under the terms of
agreements existing on the Issue Date;
(b) Liens on property securing (i) all or any portion of the cost of
acquiring, constructing, altering, improving or repairing any property or
assets, real or personal, or improvements used or to be used in
connection with such property or (ii) Indebtedness incurred by the
Company or any Restricted Subsidiary of the Company prior to or within
one year after the later of the acquisition, the completion of
construction, alteration, improvement or repair or the commencement of
commercial operation thereof, which Indebtedness is incurred for the
purpose of financing all or any part of the purchase price thereof or
construction or improvements thereon;
(c) Liens securing Indebtedness owed by a Restricted Subsidiary of the
Company to the Company or to any other Restricted Subsidiary of the
Company;
(d) Liens on property existing at the time of acquisition of such
property by the Company or any of its Restricted Subsidiaries or Liens on
the property of any Person existing at the time such Person becomes a
Restricted Subsidiary of the Company and, in any case, not incurred as a
result of (or in connection with or in anticipation of) the acquisition
of such Property or such Person becoming a Restricted Subsidiary of the
Company, provided that such Liens do not extend to or cover any property
or assets of the Company or any of its Restricted Subsidiaries other than
the property encumbered at the time such property is acquired by the
Company or any of its Restricted Subsidiaries or such Person becomes a
Restricted Subsidiary of the Company and, in any case, do not secure
Indebtedness with a principal amount in excess of the principal amount
outstanding at such time;
(e) Liens on any property securing (i) Indebtedness incurred in
connection with the construction, installation or financing of pollution
control or abatement facilities or other forms of industrial revenue bond
financing or (ii) Indebtedness issued or guaranteed by the United States
or any State thereof or any department, agency or instrumentality of
either;
(f) any Lien extending, renewing or replacing (or successive extensions,
renewals or replacements of) any Lien of any type permitted under clause
(a), (b), (d) or (e) above, provided that such Lien extends to or covers
only the property that is subject to the Lien being extended, renewed or
replaced and that the principal amount of the Indebtedness secured
thereby shall not exceed the principal amount of Indebtedness so secured
at the time of such extension, renewal or replacement; or
(g) Liens (exclusive of any Lien of any type otherwise permitted under
clauses (a) through (f) above) securing Indebtedness for borrowed money
of the Company or any Restricted Subsidiary of the Company in an
aggregate principal amount which, together with the aggregate amount of
Attributable Indebtedness deemed to be outstanding in respect of all
Sale/Leaseback Transactions entered into pursuant to clause (a) of
Section 3.09 hereof (exclusive of any such Sale/Leaseback Transactions
otherwise permitted under clauses (a) through (f) above), does not at the
time such Indebtedness is incurred exceed 15% of the Consolidated Net
Worth of the Company (as shown in the most recent audited consolidated
balance sheet of the Company and its Restricted Subsidiaries).
Section 3.12 Limitation on Restricted Payments
(a) The Company will not, and will not permit any Restricted Subsidiary,
directly or indirectly, to:
(1) declare or pay any dividend or make any distribution
on or in respect of its Capital Stock (including any
payment in connection with any merger or consolidation
involving the Company) or to the direct or indirect
holders of its Capital Stock, except:
(A) dividends or distributions payable solely in its
Non-Convertible Capital Stock or in options, warrants
or other rights to purchase its Non-Convertible
Capital Stock,
(B) dividends or distributions payable to the
Company or a Restricted Subsidiary, and
(C) pro rata dividends or distributions on the
Capital Stock of a Restricted Subsidiary held by
minority stockholders (including, without limitation,
minority stockholders of Arcade Drilling AS, a
Norwegian corporation);
(2) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or of any direct or
indirect parent of the Company, or any Restricted
Subsidiary (except Capital Stock held by the Company or a
Restricted Subsidiary);
(3) purchase, repurchase, redeem, defease or otherwise
acquire or retire for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a
sinking fund obligation, principal installment or final
maturity, in each case due within one year of the date of
acquisition); or
(4) make any Investment other than a Permitted Investment
(any such dividend, distribution, purchase, redemption,
repurchase, defeasance, other acquisition, retirement or
Investment being herein referred to as a "Restricted
Payment"),
if at the time the Company or such Restricted Subsidiary makes
such Restricted Payment:
(i) a Default shall have occurred and be continuing (or
would result therefrom); or
(ii) the Company would not be permitted to Incur an
additional $1.00 of Indebtedness pursuant to
Section 3.09(a) after giving pro forma effect to such
Restricted Payment; or
(iii) the aggregate amount of such Restricted Payment
and all other Restricted Payments since the Issue Date
would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued
during the period (treated as one accounting period)
from the beginning of the fiscal quarter during which
the Securities were originally issued to the end of
the most recent fiscal quarter ending at least 45
days prior to the date of such Restricted Payment
(or, in case such Consolidated Net Income shall be a
deficit, minus 100% of such deficit);
(B) 100% of the aggregate net proceeds (including
the fair market value of non-cash proceeds, which
shall be determined in good faith by the Board of
Directors of the Company) received by the Company
from the issue or sale of its Capital Stock (other
than Redeemable Stock or Exchangeable Stock)
subsequent to the Issue Date (other than an issuance
or sale to a Restricted Subsidiary or an employee
stock ownership plan or similar trust);
(C) the amount by which Indebtedness of the Company
is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Restricted
Subsidiary) subsequent to the Incurrence of any
Indebtedness of the Company convertible or
exchangeable for Capital Stock (other than Redeemable
Stock or Exchangeable Stock) of the Company (less the
amount of any cash, or other property, distributed by
the Company upon such conversion or exchange);
(D) to the extent not otherwise included in
Consolidated Net Income, the net reduction in
Investments in Unrestricted Subsidiaries resulting
from dividends, repayments of loans or advances, or
other transfers of assets, in each case to the
Company or any Restricted Subsidiary after the Issue
Date from any Unrestricted Subsidiary or from the
redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary (valued in each case as
provided in the definition of Investment), not to
exceed in the case of any Restricted Subsidiary the
total amount of Investments (other than Permitted
Investments) in such Restricted Subsidiary made by
the Company and its Restricted Subsidiaries in such
Unrestricted Subsidiary after the Issue Date; and
(E) $20 million.
(b) The provisions of clause (a) of this Section shall not prohibit:
(1) any purchase or redemption of Capital Stock or
Subordinated Obligations of the Company made by exchange
for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other
than Redeemable Stock or Exchangeable Stock and other than
Capital Stock issued or sold to a Restricted Subsidiary or
an employee stock ownership plan); provided, however, that
(i) such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (ii)
the Net Cash Proceeds from such sale shall be excluded
from clauses (4)(iii)(B) and (4)(iii)(C) of Section (a);
(2) any purchase or redemption of Subordinated
Obligations of the Company made by exchange for, or out of
the proceeds of the substantially concurrent sale of,
Indebtedness of the Company which is permitted to be
Incurred pursuant to the provisions of Section 3.09;
provided, however, that such purchase or redemption shall
be excluded in the calculation of the amount of Restricted
Payments; and
(3) dividends paid within 60 days after the date of
declaration if at such date of declaration such dividend
would have complied with this provision; provided,
however, that at the time of payment of such dividend, no
other Default shall have occurred and be continuing (or
would result therefrom); provided further, however, that
such dividend shall be included in the calculation of the
amount of Restricted Payments.
Section 3.13 Covenant Termination
In the event that at any time (a) the ratings assigned to the Securities
by both of the Rating Agencies are Investment Grade Ratings and (b) no
Default has occurred and is continuing under this Indenture, the Company
and its Restricted Subsidiaries will no longer be subject to the
provisions of Sections 3.09 and 3.12 (together, the "Suspended
Covenants"). In the event that the Company is not subject to the
Suspended Covenants for any period of time as a result of the preceding
sentence and, subsequently, one or both Rating Agencies withdraws its
ratings or downgrades the ratings assigned to the Securities below the
required Investment Grade Ratings, then the Company and its Restricted
Subsidiaries will again be subject to the Suspended Covenants and
compliance with the Suspended Covenants with respect to Restricted
Payments made after the time of such withdrawal or downgrade will be
calculated in accordance with the provisions of Section 3.12 as if such
Section had been in effect during the entire period of time from the date
of this Indenture.
Section 3.14 Registration Rights Agreement
The Company shall perform its obligations under the Registration Rights
Agreement and shall comply in all material respects with the terms and
conditions contained therein including, without limitation, the payment
of any additional interest required by Section 6 of the Registration
Rights Agreement.
ARTICLE IV
SUCCESSORS
Section 4.01 Limitations on Mergers and Consolidations
Neither the Company nor any Guarantor (other than any Guarantor that has
been released from its Guarantee pursuant to the provisions of Section
9.06 hereof) shall consolidate with or merge into any Person, or sell,
lease, convey, transfer or otherwise dispose of all or substantially all
of its assets to any Person, unless:
(i) the Person formed by or surviving such consolidation
or merger (if other than the Company or such Guarantor, as
the case may be), or to which such sale, lease,
conveyance, transfer or other disposition shall be made
(collectively, the "Successor"), is a corporation
organized and existing under the laws of the United States
or any State thereof or the District of Columbia (or,
alternatively, in the case of a Guarantor organized under
the laws of a jurisdiction outside the United States, a
corporation organized and existing under the laws of such
foreign jurisdiction), and the Successor assumes by
supplemental indenture in a form satisfactory to the
Trustee all of the obligations of the Company or such
Guarantor, as the case may be, under this Indenture and
the Securities;
(ii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be
continuing;
(iii) in the case of the Company, immediately after
giving effect to such transaction, the resulting,
surviving or transferee Person would be able to Incur at
least $1.00 of Indebtedness pursuant to Section 3.09(a);
and
(iv) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that the transaction and such supplemental
indenture comply with this Indenture.
Section 4.02 Successor Corporation Substituted
Upon any consolidation or merger of the Company or any Guarantor, or any
sale, lease, conveyance, transfer or other disposition of all or
substantially all of the assets of the Company or any Guarantor in
accordance with Section 4.01 hereof, the Successor formed by such
consolidation or into or with which the Company or such Guarantor is
merged or to which such sale, lease, conveyance, transfer or other
disposition or assignment is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company or such
Guarantor, as the case may be, under this Indenture and the Securities
with the same effect as if such Successor had been named as the Company
or such Guarantor herein and the predecessor Company or Guarantor, in the
case of a sale, conveyance, transfer or other disposition, shall be
released from all obligations under this Indenture and the Securities.
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.01 Events of Default
An "Event of Default" with respect to any series of Securities occurs if:
(1) the Company or any Guarantor defaults in the payment
of interest on any Security of such series when the same
becomes due and payable and such default continues for a
period of 30 days;
(2) the Company or any Guarantor defaults in the payment
of the principal of or premium, if any, on any Security of
such series when the same becomes due and payable at
maturity, upon acceleration, upon redemption or otherwise;
(3) the Company or any Guarantor fails to comply with any
of its other agreements or covenants in, or provisions of,
the Securities of such series, any Guarantees or this
Indenture and such failure continues for the period and
after the notice specified in the last paragraph of this
Section 5.01;
(4) any default shall occur which results in the
acceleration of the maturity of any Indebtedness of the
Company or any Restricted Subsidiary of the Company (other
than the Securities of such series or any Non-Recourse
Indebtedness) having an outstanding principal amount of
$20 million or more individually or, taken together with
all other such Indebtedness that has been so accelerated,
in the aggregate; or any default shall occur in the
payment of any principal or interest in respect of any
Indebtedness of the Company or any Restricted Subsidiary
of the Company (other than the Securities of such series
or any Non-Recourse Indebtedness) having an outstanding
principal amount of $20 million or more individually or,
taken together with all other such Indebtedness with
respect to which any such payment has not been made, in
the aggregate and such default shall be continuing for a
period of 30 days without the Company or such Restricted
Subsidiary, as the case may be, effecting a cure of such
default;
(5) a final judgment or order for the payment of money in
excess of $20 million (net of applicable insurance
coverage) shall be rendered against the Company, any
Guarantor or any other "significant subsidiary" (as such
term is defined in Regulation S-X under the Exchange Act,
a "Significant Subsidiary") of the Company that is a
Restricted Subsidiary and such judgment or order shall
continue unsatisfied and unstayed for a period of 60 days;
(6) the Company, any Guarantor or any other Significant
Subsidiary of the Company that is a Restricted Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of it
or for all or for a substantial part of its property,
or
(D) makes a general assignment for the benefit of
its creditors; or
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that remains unstayed and
in effect for 60 days and that:
(A) is for relief against the Company, any Guarantor
or any other Significant Subsidiary of the Company
that is a Restricted Subsidiary as debtor in an
involuntary case,
(B) appoints a Custodian of the Company, any
Guarantor or any other Significant Subsidiary of the
Company that is a Restricted Subsidiary or a
Custodian for all or for a substantial part of the
property of the Company, any Guarantor or any other
Significant Subsidiary of the Company that is a
Restricted Subsidiary, or
(C) orders the liquidation of the Company, any
Guarantor or any other Significant Subsidiary of the
Company that is a Restricted Subsidiary.
The term "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
The Trustee shall not be deemed to know of a Default or Event of Default
unless a Trust Officer at the Corporate Trust Office of the Trustee has
actual knowledge of such Default or the Trustee receives written notice
at the Corporate Trust Office of the Trustee of such Default or Event of
Default with specific reference to such Default.
When a Default is cured, it ceases.
A Default under clause (3) of this Section is not an Event of Default
until the Trustee notifies the Company and, in the case of a Default by a
Guarantor, such Guarantor, or the Holders of at least 25% in principal
amount of the Securities of any series then outstanding notify the
Company, such Guarantor (where applicable) and the Trustee, of the
Default, and neither the Company nor such Guarantor cures the Default
within 60 days after receipt of the notice. The notice must specify the
Default, demand that it be remedied and state that the notice is a
"Notice of Default."
Section 5.02 Acceleration
If an Event of Default (other than an Event of Default specified in
clause (6) or (7) of Section 5.01 hereof with respect to the Company or
any Guarantor) with respect to any series of Securities occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at
least 25% in principal amount of the then outstanding Securities of such
series by notice to the Company and the Trustee, may declare the
principal of and premium, if any, and accrued and unpaid interest on all
then outstanding Securities of such series to be due and payable
immediately. Upon any such declaration the amounts due and payable on
the Securities of such series, as determined in accordance with the next
succeeding paragraph, shall be due and payable immediately. If an Event
of Default specified in clause (6) or (7) of Section 5.01 hereof with
respect to the Company or any Guarantor occurs, the principal of and
premium, if any, and accrued and unpaid interest on all Securities then
outstanding shall ipso facto become and be immediately due and payable
without any declaration, notice or other act on the part of the Trustee
or any Holder. The Holders of a majority in principal amount of the
Securities of any series then outstanding by written notice to the
Trustee may rescind an acceleration and its consequences with respect to
such series (other than nonpayment of principal of, or premium, if any,
or interest on the Securities of such series) if the rescission would not
conflict with any judgment or decree and if all existing Events of
Default have been cured or waived, except nonpayment of principal, or
premium, if any, or interest that has become due solely because of the
acceleration.
In the event that the maturity of the Securities of any series is
accelerated pursuant to this Section 5.02, 100% of the principal amount
thereof shall become due and payable plus, premium, if any, and accrued
interest to the date of payment.
Section 5.03 Other Remedies
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal of, or premium,
if any, or interest on the Securities or to enforce the performance of
any provision of the Securities, this Indenture or the Registration
Rights Agreement.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default.
All remedies are cumulative to the extent permitted by law.
Section 5.04 Waiver of Existing Defaults
Subject to Sections 5.07 and 8.02 hereof, the Holders of a majority in
principal amount of the Securities of any series then outstanding by
notice to the Trustee may waive an existing Default or Event of Default
and its consequences (including waivers obtained in connection with a
tender offer or exchange offer for the Securities of such series or a
solicitation of consents in respect of the Securities of such series,
provided that in each case such offer or solicitation is made to all
Holders of the Securities of such series then outstanding on equal
terms), except (1) a continuing Default or Event of Default in the
payment of the principal of, or premium, if any, or interest on the
Securities of any series or (2) a continuing Default in respect of a
provision that under Section 8.02 hereof cannot be amended without the
consent of each Holder affected. Upon any such waiver, such Default
shall cease to exist, and any Event of Default arising therefrom shall be
deemed to have been cured for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or impair any
right consequent thereon.
Section 5.05 Control by Majority
The Holders of a majority in principal amount of the Securities of any
series then outstanding may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it hereunder with respect to
such series. However, the Trustee may refuse to follow any direction
that conflicts with applicable law or this Indenture, that the Trustee
determines may be unduly prejudicial to the rights of other Holders, or
that may involve the Trustee in personal liability; provided, however,
that the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction. Prior to taking any action
hereunder, the Trustee shall be entitled to indemnification satisfactory
to it in its sole discretion against all losses and expenses caused by
taking or not taking such action.
Section 5.06 Limitations on Suits
Subject to Section 5.07 hereof, a Holder may pursue a remedy with respect
to this Indenture (including the Guarantees) or the Securities of any
series only if:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in principal amount of
the Securities of such series then outstanding make a
written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
reasonably satisfactory to the Trustee against any loss,
liability or expense;
(4) the Trustee does not comply with the request within
60 days after receipt of the request and the offer of
indemnity; and
(5) during such 60-day period the Holders of a majority
in principal amount of the Securities of such series do
not give the Trustee a direction inconsistent with the
request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
Section 5.07 Rights of Holders to Receive Payment
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of, and premium, if
any, and interest on the Security, on or after the respective due dates
expressed in the Security, or to bring suit for the enforcement of any
such payment on or after such respective dates, is absolute and
unconditional and shall not be impaired or affected without the consent
of the Holder.
Section 5.08 Collection Suit by Trustee
If an Event of Default specified in clause (1) or (2) of Section 5.01
hereof occurs and is continuing, the Trustee is authorized to recover
judgment in its own name and as trustee of an express trust against the
Company and any Guarantor for the amount of principal and premium, if
any, and interest remaining unpaid on any series of Securities, and
interest on overdue principal and premium, if any, and, to the extent
lawful, interest on overdue interest, and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
Section 5.09 Trustee May File Proofs of Claim
The Trustee is authorized to file such proofs of claim and other papers
or documents and to take such actions, including participating as a
member, voting or otherwise, of any committee of creditors, as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
the Holders allowed in any judicial proceedings relative to the Company
and any Guarantor or their respective creditors or properties and shall
be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any
Custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section
6.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel, and any other amounts due the Trustee under Section 6.07 hereof
out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out
of, any and all distributions, dividends, money, securities and other
properties which the Holders of the Securities of any series may be
entitled to receive in such proceeding whether in liquidation or under
any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the
Securities of any series or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in
any such proceeding.
Section 5.10 Priorities
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee for amounts due under Section 6.07 hereof;
Second: to Holders for amounts due and unpaid on the Securities for
principal, premium, if any, and interest ratably, without preference
or priority of any kind, according to the amounts due and payable on
the Securities for principal, premium, if any, and interest,
respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this
Article.
Section 5.11 Undertaking for Costs
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or
omitted by it as a trustee, a court in its discretion may require the
filing by any party litigant in the suit of an undertaking to pay the
costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant
in the suit, having due regard to the merits and good faith of the claims
or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 5.07 hereof,
or a suit by a Holder or Holders of more than 10% in principal amount of
the Securities of any series then outstanding.
ARTICLE VI
TRUSTEE
Section 6.01 Duties of Trustee
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in such exercise, as
a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine such
certificates and opinions to determine whether or not, on their
face, they appear to conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b) and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives
indemnity reasonably satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money
held in trust by the Trustee need not be segregated from other funds
except to the extent required by law. All money received by the Trustee
shall, until applied as herein provided, be held in trust for the payment
of the principal of, and premium if any, and interest on the Securities.
Section 6.02 Rights of Trustee
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel.
The Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company or any Guarantor
shall be sufficient if signed by an Officer of the Company or such
Guarantor.
(f) The Trustee is not required to give any bond or surety with respect
to the performance of its duties or the exercise of its powers under this
Indenture.
(g) In the event the Trustee receives inconsistent or conflicting
requests and indemnity from two or more groups of holders of Securities
of a series, each representing less than a majority in aggregate
principal amount of the Securities outstanding of such series, pursuant
to the provisions of this Indenture, the Trustee, in its sole discretion,
may determine what action, if any, shall be taken.
(h) The Trustee's immunities and protections from liability and its
right to indemnification in connection with the performance of its duties
under this Indenture shall extend to the Trustee's officers, directors,
agents, attorneys and employees. Such immunities and protections and
right to indemnity, together with the Trustee's right to compensation,
shall survive the Trustee's resignation or removal, the discharge of this
Indenture and final payment of the Securities.
(i) The permissive right of the Trustee to take the actions permitted by
the Indenture shall not be construed as an obligation or duty to do so.
(j) Except for information provided by the Trustee concerning the
Trustee, the Trustee shall have no responsibility for any information in
any offering memorandum or other disclosure material distributed with
respect to the Securities, and the Trustee shall have no responsibility
for compliance with any state or federal securities laws in connection
with the Securities.
Section 6.03 Individual Rights of Trustee
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company, the
Guarantors or any of their Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee is subject to Sections 6.10 and 6.11 hereof.
Section 6.04 Trustee's Disclaimer
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the
Company's use of the proceeds from the Securities or any money paid to
the Company or upon the Company's direction under any provision hereof,
it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee and it shall not be
responsible for any statement or recital herein or any statement in the
Securities other than its certificate of authentication.
Section 6.05 Notice of Defaults
If a Default or Event of Default occurs and is continuing and it is known
to the Trustee, the Trustee shall mail to Holders a notice of the Default
or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, or premium,
if any, or interest on any Security, the Trustee may withhold the notice
if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of Holders.
Section 6.06 Reports by Trustee to Holders
As promptly as practicable after each [May 15, beginning with May 15,
1999], the Trustee shall mail to Holders a brief report dated as of such
reporting date that complies with TIA Section 313(a); provided, however,
that if no event described in TIA Section 313(a) has occurred within the
twelve months preceding the reporting date, no report need be
transmitted. The Trustee also shall comply with TIA Section 313(b). The
Trustee shall also transmit by mail all reports as required by TIA
Sections 313(c) and 313(d).
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each securities exchange, if any, on which the
Securities are listed. The Company shall notify the Trustee if and when
the Securities are listed on any stock exchange.
Section 6.07 Compensation and Indemnity
The Company and the Guarantors jointly and severally agree to pay to the
Trustee from time to time reasonable compensation for its acceptance of
this Indenture and services hereunder. The Trustee's compensation shall
not be limited by any law on compensation of a trustee of an express
trust. The Company and the Guarantors jointly and severally agree to
reimburse the Trustee upon request for all reasonable disbursements,
advances and expenses incurred by it. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company and the Guarantors jointly and severally agree to indemnify
the Trustee against any loss, liability or expense incurred by it arising
out of or in connection with the acceptance or administration of its
duties under this Indenture, except as set forth in the next paragraph.
The Trustee shall notify the Company and the Guarantors promptly of any
claim for which it may seek indemnity. The Company shall defend the
claim and the Trustee shall cooperate in the defense. The Trustee may
have separate counsel and the Company and the Guarantors shall pay the
reasonable fees and expenses of such counsel. The Company need not pay
for any settlement made without its consent.
Neither the Company nor the Guarantors shall be obligated to reimburse
any expense or indemnify against any loss or liability incurred by the
Trustee through negligence or bad faith.
To secure the payment obligations of the Company and the Guarantors in
this Section 6.07, the Trustee shall have a Lien prior to the Securities
on all money or property held or collected by the Trustee, except that
held in trust to pay principal of, and premium, if any, and interest on
the Securities. Such Lien shall survive the satisfaction and discharge
of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.01(6) or (7) hereof occurs, the expenses
and the compensation for the services are intended to constitute expenses
of administration under any Bankruptcy Law.
Section 6.08 Replacement of Trustee
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 6.08.
The Trustee may resign and be discharged from the trust hereby created by
so notifying the Company and the Guarantors. The Holders of a majority
in principal amount of the then outstanding Securities may remove the
Trustee by so notifying the Trustee and the Company. The Company may
remove the Trustee if:
(1) the Trustee fails to comply with Section 6.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company and the Guarantors shall promptly
appoint a successor Trustee. Within one year after the successor Trustee
takes office, the Holders of a majority in principal amount of the
Securities then outstanding may appoint a successor Trustee to replace
the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company
or the Holders of at least 10% in principal amount of the Securities then
outstanding may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.10 hereof, any Holder may
petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company and the Guarantors. Thereupon
the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers
and duties of the Trustee under this Indenture. The successor Trustee
shall mail a notice of its succession to Holders. The retiring Trustee
shall promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the Lien provided for in Section 6.07
hereof. Notwithstanding replacement of the Trustee pursuant to this
Section 6.08 hereof, the obligations of the Company and the Guarantors
under Section 6.07 hereof shall continue for the benefit of the retiring
Trustee.
Section 6.09 Successor Trustee by Merger, etc
Subject to Section 6.10 hereof, if the Trustee consolidates, merges or
converts into, or transfers all or substantially all of its corporate
trust business to, another corporation, the successor corporation without
any further act shall be the successor Trustee; provided, however, that
in the case of a transfer of all or substantially all of its corporate
trust business to another corporation, the transferee corporation
expressly assumes all of the Trustee's liabilities hereunder.
In case any Securities shall have been authenticated, but not delivered,
by the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated; and in case
at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the
name of any predecessor hereunder or in the name of the successor to the
Trustee; and in all such cases such certificates shall have the full
force which it is anywhere in the Securities or in this Indenture
provided that the certificate of the Trustee shall have.
Section 6.10 Eligibility; Disqualification
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia and
authorized under such laws to exercise corporate trust power, shall be
subject to supervision or examination by Federal or State (or the
District of Columbia) authority and shall have, or be a Subsidiary of a
bank or bank holding company having, a combined capital and surplus of at
least $50 million as set forth in its most recent published annual report
of condition.
The Indenture shall always have a Trustee who satisfies the requirements
of TIA Sections 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee is
subject to and shall comply with the provisions of TIA Section 310(b)
during the period of time required by this Indenture. Nothing in this
Indenture shall prevent the Trustee from filing with the SEC the
application referred to in the penultimate paragraph of TIA Section
310(b).
Section 6.11 Preferential Collection of Claims Against Company
The Trustee is subject to and shall comply with the provisions of TIA
Section 311(a), excluding any creditor relationship listed in TIA Section
311(b). A Trustee who has resigned or been removed shall be subject to
TIA Section 311(a) to the extent indicated therein.
ARTICLE VII
DISCHARGE OF INDENTURE
Section 7.01 Termination of Company's Obligations
(a) This Indenture shall cease to be of further effect with respect to
Securities of a series (except that the Company's and any Guarantors'
obligations under Section 6.07 hereof and the Trustee's and Paying
Agent's obligations under Section 7.03 hereof shall survive), and the
Trustee, on demand of the Company, shall execute proper instruments
acknowledging the satisfaction and discharge of this Indenture with
respect to such series, when:
(1) either
(A) all outstanding Securities of such series theretofore
authenticated and issued (other than destroyed, lost or stolen
Securities that have been replaced or paid) have been delivered
to the Trustee for cancellation; or
(B) all outstanding Securities of such series not theretofore
delivered to the Trustee for cancellation:
(i) have become due and payable, or
(ii) will become due and payable at their stated maturity within one
year,
and the Company, in the case of clause (i) or (ii) above, has
deposited or caused to be deposited with the Trustee as funds
(immediately available to the Holders in the case of clause (i)) in
trust for such purpose an amount which, together with earnings
thereon, will be sufficient to pay and discharge the entire
indebtedness on such Securities of such series for principal,
premium, if any, and interest to the date of such deposit (in the
case of Securities which have become due and payable) or to the
stated maturity, as the case may be;
(1) the Company has paid all other sums payable by it hereunder
with respect to such series; and
(2) the Company has delivered to the Trustee an Officers'
Certificate stating that all conditions precedent to satisfaction
and discharge of this Indenture with respect to such series have
been complied with, together with an Opinion of Counsel to the same
effect.
(b) The Company and the Guarantors may, subject as provided herein,
terminate all of their obligations under this Indenture with respect to
Securities of a series if:
(1) the Company has irrevocably deposited or caused to be
irrevocably deposited with the Trustee as trust funds in trust for
the purpose of making the following payments dedicated solely to the
benefit of the Holders (i) cash in an amount, or (ii) U.S.
Government Obligations or (iii) a combination thereof, sufficient,
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered
to the Trustee, to pay, without consideration of the reinvestment of
any such amounts and after payment of all taxes or other charges or
assessments in respect thereof payable by the Trustee, the principal
of, and premium, if any, and interest on all Securities of such
series on each date that such principal, premium, if any, or
interest is due and payable and to pay all other sums payable by it
hereunder; provided that the Trustee shall have been irrevocably
instructed to apply such money and/or the proceeds of such U.S.
Government Obligations to the payment of said principal, premium, if
any, and interest with respect to the Securities of such series as
the same shall become due;
(2) the Company has delivered to the Trustee an Officers'
Certificate stating that all conditions precedent to satisfaction
and discharge of this Indenture with respect to Securities of such
series have been complied with, and an Opinion of Counsel to the
same effect;
(3) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as clauses (6)
and (7) of Section 5.01 hereof are concerned, at any time during the
period ending on the 91st day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied
until the expiration of such period);
(4) the Company shall have delivered to the Trustee an Opinion of
Counsel from a nationally recognized counsel acceptable to the
Trustee or a tax ruling to the effect that the Holders of Securities
of such series will not recognize income, gain or loss for Federal
income tax purposes as a result of the Company's exercise of its
option under this Section 7.01(b) and will be subject to Federal
income tax on the same amount and in the same manner and at the same
times as would have been the case if such option had not been
exercised;
(5) such deposit and discharge will not result in a breach or
violation of, or constitute a default under, any other agreement or
instrument to which the Company is a party or by which it is bound;
(6) such deposit and discharge shall not cause the Trustee to have
a conflicting interest as defined in TIA Section 310(b); and
(7) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the passage of 91 days following
the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally.
In such event, this Indenture shall cease to be of further effect with
respect to Securities of such series (except as provided in the next
succeeding paragraph), and the Trustee, on demand of the Company, shall
execute proper instruments acknowledging satisfaction and discharge under
this Indenture.
However, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06,
2.07, 2.08, 3.01, 4.01, 6.07, 6.08 and 7.04 hereof, the Company's and any
Guarantors' obligations in Sections 4.01, 6.07, 7.04 and 9.01 hereof and
the Trustee's and Paying Agent's obligations in Section 7.03 hereof shall
survive until the Securities of such series are no longer outstanding.
Thereafter, only the Company's and any Guarantors' obligations in Section
6.07 hereof and the Trustee's and Paying Agent's obligations in Section
7.03 hereof shall survive.
After such irrevocable deposit made pursuant to this Section 7.01(b) and
satisfaction of the other conditions set forth herein, the Trustee upon
request shall acknowledge in writing the discharge of the Company's
obligations under this Indenture except for those surviving obligations
specified above.
In order to have money available on a payment date to pay principal of,
or premium, if any, or interest on the Securities of such series, the
U.S. Government Obligations shall be payable as to principal or interest
on or before such payment date in such amounts as will provide the
necessary money. U.S. Government Obligations shall not be callable at
the issuer's option.
Section 7.02 Application of Trust Money
The Trustee or a trustee satisfactory to the Trustee and the Company
shall hold in trust money or U.S. Government Obligations deposited with
it pursuant to Section 7.01 hereof. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent
and in accordance with this Indenture to the payment of principal of, and
premium, if any, and interest on Securities of the series with respect to
which the deposit was made.
Section 7.03 Repayment to Company
The Trustee and the Paying Agent shall promptly pay to the Company upon
written request any excess money or securities held by them at any time.
Subject to the requirements of any applicable abandoned property laws,
the Trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal, or premium,
if any, or interest that remains unclaimed for two years after the date
upon which such payment shall have become due; provided, however, that
the Company shall have either caused notice of such payment to be mailed
to each Holder entitled thereto no less than 30 days prior to such
repayment or within such period shall have published such notice in a
financial newspaper of widespread circulation published in The City of
New York. After payment to the Company, Holders entitled to the money
must look to the Company for payment as general creditors unless an
applicable abandoned property law designates another Person, and all
liability of the Trustee and the Paying Agent with respect to such money
shall cease.
Section 7.04 Reinstatement
If the Trustee or the Paying Agent is unable to apply any money or U. S.
Government Obligations in accordance with Section 7.01 hereof by reason
of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the obligations of the Company and any
Guarantors under this Indenture and the Securities of the applicable
series shall be revived and reinstated as though no deposit had occurred
pursuant to Section 7.01 hereof until such time as the Trustee or the
Paying Agent is permitted to apply all such money or U. S. Government
Obligations in accordance with Section 7.01 hereof; provided, however,
that if the Company or any Guarantor has made any payment of principal of
or interest on any Securities of such series because of the reinstatement
of its obligations, the Company or such Guarantor shall be subrogated to
the rights of the Holders of such Securities to receive such payment from
the money or U.S. Government Obligations held by the Trustee or the
Paying Agent.
ARTICLE VIII
AMENDMENTS
Section 8.01 Without Consent of Holders
The Company, the Guarantors, if any, and the Trustee may amend or
supplement this Indenture or any of the Securities or waive any provision
hereof or thereof without the consent of any Holder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Sections 4.01 and 4.02 hereof;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(4) to reflect the release of any Guarantor from its Guarantee, or
the addition of any Subsidiary of the Company as a Guarantor, in the
manner provided by Section 9.06 hereof;
(5) to comply with any requirement in order to effect or maintain
the qualification of this Indenture under the TIA;
(6) to add guarantees of the Securities;
(7) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA;
(8) to add to the covenants of the Company or any Guarantor for the
benefit of the Holders or to surrender any right or power herein
conferred upon the Company or any Guarantor; or
(9) to make any change that does not adversely affect the rights
hereunder of any Holder in any material respect.
Upon the request of the Company and the Guarantors, if any, accompanied
by a resolution of the Board of Directors and of the board of directors,
board of trustees or managing partners of each Guarantor authorizing the
execution of any such supplemental indenture, and upon receipt by the
Trustee of the documents described in Section 8.06 hereof, the Trustee
shall join with the Company and any Guarantors in the execution of any
supplemental indenture authorized or permitted by the terms of this
Indenture and make any further appropriate agreements and stipulations
that may be therein contained. After an amendment, supplement or waiver
under this Section 8.01 becomes effective, the Company shall mail to the
Holders of each Security affected thereby a notice briefly describing the
amendment, supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture.
Section 8.02 With Consent of Holders
Except as provided below in this Section 8.02, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture with
respect to the Securities of a series or the Securities of any series
with the written consent (including consents obtained in connection with
a tender offer or exchange offer for the Securities of such series or a
solicitation of consents in respect of the Securities of such series,
provided that in each case such offer or solicitation is made to all
Holders of the Securities of such series then outstanding on equal terms)
of the Holders of at least a majority in principal amount of the
Securities of such series then outstanding.
Upon the request of the Company and the Guarantors, if any, accompanied
by a resolution of the Board of Directors and of the board of directors,
board of trustees or managing partners of each Guarantor, if any,
authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of the Holders as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 8.06 hereof, the Trustee shall join with the Company and the
Guarantors, if any, in the execution of such supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section 8.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves
the substance thereof.
The Holders of a majority in principal amount of the Securities of any
series then outstanding may waive compliance in a particular instance by
the Company or the Guarantors with any provision of this Indenture or the
Securities of such series (including waivers obtained in connection with
a tender offer or exchange offer for the Securities of such series or a
solicitation of consents in respect of the Securities of such series,
provided that in each case such offer or solicitation is made to all
Holders of the Securities of such series then outstanding on equal
terms).
However, without the consent of each Holder affected, an amendment,
supplement or waiver under this Section may not:
(1) reduce the amount of the Securities of any series whose Holders
must consent to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of interest,
including default interest, on any Security;
(3) reduce the principal of or change the fixed maturity of any
Security or alter the premium or other provisions with respect to
redemption under Section 10.07 or specified in the Securities;
(4) make any Security payable in money other than that stated in
the Security;
(5) impair the right to institute suit for the enforcement of any
payment of principal of, or premium, if any, or interest on any
Security pursuant to Sections 5.07 and 5.08 hereof, except as
limited by Section 5.06 hereof;
(6) make any change in the percentage of principal amount of the
Securities of any series necessary to waive compliance with certain
provisions of this Indenture pursuant to Section 5.04 or 5.07 hereof
or this clause of this Section 8.02; or
(7) waive a continuing Default or Event of Default in the payment
of principal of, or premium, if any, or interest on the Securities
of any series.
The right of any Holder to participate in any consent required or sought
pursuant to any provision of this Indenture (and the obligation of the
Company to obtain any such consent otherwise required from such Holder)
may be subject to the requirement that such Holder shall have been the
Holder of record of the Securities with respect to which such consent is
required or sought as of a date identified by the Trustee in a notice
furnished to Holders in accordance with the terms of this Indenture.
Section 8.03 Compliance with Trust Indenture Act
Every amendment to this Indenture or the Securities of any series shall
comply in form and substance with the TIA as then in effect.
Section 8.04 Revocation and Effect of Consents
A consent to an amendment (which includes a supplement) or waiver by a
Holder is a continuing consent by the Holder and every subsequent Holder
of a Security of any series or portion of a Security of such series that
evidences the same debt as the consenting Holder's Security, even if
notation of the consent is not made on any Security. However, any such
Holder or subsequent Holder may revoke the consent as to his or her
Security or portion of a Security if the Trustee receives written notice
of revocation at any time pror to (but not after) the date the Trustee
receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Securities have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver.
An amendment, supplement or waiver becomes effective in accordance with
its terms and thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment
or waiver or to take any other action with respect to the Securities of
any series under this Indenture. If a record date is fixed, then
notwithstanding the provisions of the immediately preceding paragraph,
those Persons who were Holders at such record date (or their duly
designated proxies), and only those Persons, shall be entitled to consent
to such amendment, supplement or waiver or to revoke any consent
previously given, whether or not such Persons continue to be Holders
after such record date. No consent shall be valid or effective for more
than 90 days after such record date unless consents from Holders of the
principal amount of the Securities of such series required hereunder for
such amendment or waiver to be effective shall have also been given and
not revoked within such 90-day period.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder, unless it is of the type described in any of clauses (1)
through (7) of Section 8.02 hereof. In such case, the amendment or
waiver shall bind each Holder who has consented to it and every
subsequent Holder that evidences the same debt as the consenting Holder's
Security.
Section 8.05 Notation on or Exchange of Securities
If an amendment changes the terms of a Security, the Trustee may require
the Holder of the Security to deliver it to the Trustee. The Trustee may
place an appropriate notation on the Security regarding the changed terms
and return it to the Holder. Alternatively, if the Company or the
Trustee so determines, the Company in exchange for the Security shall
issue and the Trustee shall authenticate a new Security that reflects the
changed terms. Failure to make the appropriate notation or to issue a new
Security shall not affect the validity of such amendment.
Section 8.06 Trustee to Sign Amendments, etc
The Trustee shall sign any amendment, waiver or supplemental indenture
authorized pursuant to this Article if the amendment, waiver or
supplemental indenture does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may,
but need not, sign it. In signing or refusing to sign such amendment,
waiver or supplemental indenture, the Trustee shall be entitled to
receive and subject to Section 6.01 hereof, shall be fully protected in
relying upon, an Opinion of Counsel as conclusive evidence that such
amendment, waiver or supplemental indenture is authorized or permitted by
this Indenture, that it is not inconsistent herewith, and that it will be
valid and binding upon the Company and the Guarantors, if any, in
accordance with its terms.
ARTICLE IX
GUARANTEES OF SECURITIES
Section 9.01 Unconditional Guarantees
(a) For value received, the Guarantors, jointly and severally, hereby
fully, unconditionally and absolutely guarantee (the "Guarantees") to the
Holders and to the Trustee the due and punctual payment of the principal
of, and premium, if any, and interest on the Securities and all other
amounts due and payable under this Indenture and the Securities by the
Company, when and as such principal, premium, if any, and interest shall
become due and payable, whether at the stated maturity, upon redemption
or by declaration of acceleration or otherwise, according to the terms of
the Securities and this Indenture.
(b) Failing payment when due of any amount guaranteed pursuant to the
Guarantees, for whatever reason, each Guarantor will be obligated to pay
the same immediately. Each Guarantee hereunder is intended to be a
general, unsecured, senior obligation of each Guarantor and will rank
pari passu in right of payment with all Indebtedness of each such
Guarantor that is not, by its terms, expressly subordinated in right of
payment to the Guarantee of such Guarantor. Each of the Guarantors
hereby agrees that its obligations hereunder shall be full, unconditional
and absolute, irrespective of the validity, regularity or enforceability
of the Securities, the Guarantees or this Indenture, the absence of any
action to enforce the same, any waiver or consent by any Holder with
respect to any provisions hereof or thereof, any release of any other
Guarantor, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a Guarantor. Each
of the Guarantors hereby agrees that in the event of a default in payment
of the principal of, or premium, if any, or interest on the Securities of
any series, whether at the stated maturity, upon redemption or by
declaration of acceleration or otherwise, legal proceedings may be
instituted by the Trustee on behalf of the Holders or, subject to Section
5.06 hereof, by the Holders, on the terms and conditions set forth in
this Indenture, directly against each of the Guarantors to enforce the
Guarantees without first proceeding against the Company.
(c) The obligations of each Guarantor under this Article IX shall be as
aforesaid full, unconditional and absolute and shall not be impaired,
modified, released or limited by any occurrence or condition whatsoever,
including, without limitation, (i) any compromise, settlement, release,
waiver, renewal, extension, indulgence or modification of, or any change
in, any of the obligations and liabilities of the Company or any
Guarantor contained in any of the Securities or this Indenture, (ii) any
impairment, modification, release or limitation of the liability of the
Company, any Guarantor or any of their estates in bankruptcy, or any
remedy for the enforcement thereof, resulting from the operation of any
present or future provision of any applicable Bankruptcy Law, as amended,
or other statute or from the decision of any court, (iii) the assertion
or exercise by the Company, any Guarantor or the Trustee of any rights or
remedies under any of the Securities or this Indenture or their delay in
or failure to assert or exercise any such rights or remedies, (iv) the
assignment or the purported assignment of any property as security for
any of the Securities, including all or any part of the rights of the
Company or any Guarantor under this Indenture, (v) the extension of the
time for payment by the Company or any Guarantor of any payments or other
sums or any part thereof owing or payable under any of the terms and
provisions of any of the Securities or this Indenture or of the time for
performance by the Company or any Guarantor of any other obligations
under or arising out of any such terms and provisions or the extension or
the renewal of any thereof, (vi) the modification or amendment (whether
material or otherwise) of any duty, agreement or obligation of the
Company or any Guarantor set forth in this Indenture, (vii) the voluntary
or involuntary liquidation, dissolution, sale or other disposition of all
or substantially all of the assets, marshaling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of,
or other similar proceeding affecting, the Company or any of the
Guarantors or any of their respective assets, or the disaffirmance of any
of the Securities, the Guarantees or this Indenture in any such
proceeding, (viii) the release or discharge of the Company or any
Guarantor from the performance or observance of any agreement, covenant,
term or condition contained in any of such instruments by operation of
law, (ix) the unenforceability of any of the Securities, the Guarantees
or this Indenture or (x) any other circumstance which might otherwise
constitute a legal or equitable discharge of a surety or guarantor.
(d) Each of the Guarantors hereby (i) waives diligence, presentment,
demand of payment, filing of claims with a court in the event of the
merger, insolvency or bankruptcy of the Company or a Guarantor, and all
demands whatsoever, (ii) acknowledges that any agreement, instrument or
document evidencing the Guarantees may be transferred and that the
benefit of its obligations hereunder shall extend to each holder of any
agreement, instrument or document evidencing the Guarantees without
notice to them and (iii) covenants that its Guarantee will not be
discharged except by complete performance of the Guarantees. Each
Guarantor further agrees that if at any time all or any part of any
payment theretofore applied by any Person to any Guarantee is, or must
be, rescinded or returned for any reason whatsoever, including without
limitation, the insolvency, bankruptcy or reorganization of any
Guarantor, such Guarantee shall, to the extent that such payment is or
must be rescinded or returned, be deemed to have continued in existence
notwithstanding such application, and the Guarantees shall continue to be
effective or be reinstated, as the case may be, as though such
application had not been made.
(e) Each Guarantor shall be subrogated to all rights of the Holders and
the Trustee against the Company in respect of any amounts paid by such
Guarantor pursuant to the provisions of this Indenture; provided,
however, that no Guarantor shall be entitled to enforce or to receive any
payments arising out of, or based upon, such right of subrogation with
respect to any of the Securities until all of the Securities and the
Guarantees thereof shall have been paid in full or discharged.
(f) A director, officer, employee or stockholder, as such, of any
Guarantor shall not have any liability for any obligations of such
Guarantor under this Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation.
Section 9.02 Limitation of Guarantor's Liability
Each Guarantor and by its acceptance hereof each Holder hereby confirms
that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer
or conveyance for purposes of any federal, state or foreign law. To
effectuate the foregoing intention, the Holders and each Guarantor hereby
irrevocably agree that each Guarantor's liability shall be limited to the
lesser of (i) the aggregate amount of the obligations of the Company
under the Securities and this Indenture and (ii) the amount, if any,
which would not have (A) rendered such Guarantor "insolvent" (as such
term is defined in the Bankruptcy Law and in the Debtor and Creditor Law
of the State of New York) or (B) left such Guarantor with unreasonably
small capital at the time its Guarantee of the Securities was entered
into; provided that it will be a presumption in any lawsuit or other
proceedings in which a Guarantor is a party that the amount guaranteed
pursuant to the Guarantee is the amount set forth in clause (i) above
unless any creditor, or representative of creditors of such Guarantor, or
debtor in possession or trustee in bankruptcy of the Guarantor, otherwise
proves in such a lawsuit that the aggregate liability of the Guarantor is
the amount set forth in clause (ii) above. In making any determination
as to solvency or sufficiency of capital of a Guarantor in accordance
with the previous sentence, the right of such Guarantor to contribution
from other Guarantors, and any other rights such Guarantor may have,
contractual or otherwise, shall be taken into account.
Section 9.03 Contribution
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment
or distribution is made by any Guarantor (a "Funding Guarantor") under
its Guarantee, such Funding Guarantor shall be entitled to a contribution
from each other Guarantor in a pro rata amount based on the Adjusted Net
Assets of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by the Funding Guarantor in
discharging the Company's obligations with respect to the Securities or
any other Guarantor's obligations with respect to its Guarantee thereof.
Section 9.04 Execution and Delivery of Guarantees
To further evidence the Guarantees, each Guarantor hereby agrees that a
notation relating to such Guarantees shall be endorsed on each Security
authenticated and delivered by the Trustee and executed by either manual
or facsimile signature of an Officer of each Guarantor.
Each of the Guarantors hereby agrees that its Guarantee shall remain in
full force and effect notwithstanding any failure to endorse on each
Security a notation relating to such Guarantee.
If an Officer of a Guarantor whose signature is on this Indenture or a
Security no longer holds that office at the time the Trustee
authenticates such Security or at any time thereafter, such Guarantor's
Guarantee of such Security shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set
forth in this Indenture on behalf of the Guarantor.
Section 9.05 Addition of Guarantors
(a) If any Subsidiary of the Company guarantees (or becomes a co-obligor
on) any Funded Indebtedness of the Company other than the Securities at
any time subsequent to the Issue Date (including, without limitation,
following any release of such Subsidiary pursuant to Section 9.06 hereof
from any Guarantee previously provided by it under this Article IX), then
the Company shall (i) cause the Securities then outstanding to be equally
and ratably guaranteed by such Subsidiary, but only to the extent that
such Securities are not already guaranteed by such Subsidiary on
reasonably comparable terms and (ii) cause such Subsidiary to execute and
deliver a supplemental indenture, in substantially the form of Exhibit C
hereto, evidencing its provision of a Guarantee in accordance with clause
(b) below.
(b) Any Person may become a Guarantor by executing and delivering to the
Trustee (i) a supplemental indenture in form and substance satisfactory
to the Trustee, which subjects such Person to the provisions (including
the representations and warranties) of this Indenture as a Guarantor and
(ii) an Opinion of Counsel and Officers' Certificate to the effect that
such supplemental indenture has been duly authorized and executed by such
Person and constitutes the legal, valid, binding and enforceable
obligation of such Person (subject to such customary exceptions
concerning creditors' rights and equitable principles as may be
acceptable to the Trustee in its discretion and provided that no opinion
need be rendered concerning the enforceability of the Guarantee).
Section 9.06 Release of Guarantee
Notwithstanding anything to the contrary in this Article IX, in the event
that any Guarantor shall no longer be a guarantor of (or co-obligor on)
any Funded Indebtedness of the Company other than the Securities and
other than Funded Indebtedness of the Company (i) subject to a release
provision substantially similar to this Section 9.06 and (ii) the related
guarantee (or obligation) of which will be released substantially
concurrently with the release of the Guarantee of such Guarantor pursuant
to this Section 9.06, and so long as no Default or Event of Default shall
have occurred or be continuing, such Guarantor, upon giving notice to the
Trustee to the foregoing effect, shall be deemed to be released from all
of its obligations under this Indenture and the Guarantee of such
Guarantor shall be of no further force or effect. Following the receipt
by the Trustee of any such notice, the Company shall cause this Indenture
to be amended as provided in Section 8.01 hereof; provided, however, that
the failure to so amend this Indenture shall not affect the validity of
the termination of the Guarantee of such Guarantor.
Section 9.07 Consent to Jurisdiction and Service of Process
Each Guarantor that is not organized under the laws of the United States
(including the States and the District of Columbia) (each a "Non-U.S.
Guarantor") hereby appoints the principal office of CT Corporation System
in The City of New York which, on the date hereof, is located at 1633
Broadway, New York, New York 10019, as the authorized agent thereof (the
"Authorized Agent") upon whom process may be served in any action, suit
or proceeding arising out of or based on this Indenture or the Securities
which may be instituted in the Supreme Court of the State of New York or
the United States District Court for the Southern District of New York,
in either case in The Borough of Manhattan, The City of New York, by the
Holder of any Security, and each Non-U.S. Guarantor hereby waives any
objection which it may now or hereafter have to the laying of venue of
any such proceeding and expressly and irrevocably accepts and submits,
for the benefit of the Holders from time to time of the Securities, to
the nonexclusive jurisdiction of any such court in respect of any such
action, suit or proceeding, for itself and with respect to its
properties, revenues and assets. Such appointment shall be irrevocable
unless and until the appointment of a successor authorized agent for such
purpose, and such successor's acceptance of such appointment, shall have
occurred. Each Non-U.S. Guarantor agrees to take any and all actions,
including the filing of any and all documents and instruments, that may
be necessary to continue such appointment in full force and effect as
aforesaid. Service of process upon the Authorized Agent with respect to
any such action shall be deemed, in every respect, effective service of
process upon any such Non-U.S. Guarantor. Notwithstanding the foregoing,
any action against any Non-U.S. Guarantor arising out of or based on any
Security may also be instituted by the Holder of such Security in any
court in the jurisdiction of organization of such Non-U.S. Guarantor, and
such Non-U.S. Guarantor expressly accepts the jurisdiction of any such
court in any such action. The Company shall require the Authorized Agent
to agree in writing to accept the foregoing appointment as agent for
service of process.
Section 9.08 Waiver of Immunity
To the extent that any Non-U.S. Guarantor or any of its properties,
assets or revenues may have or may hereafter become entitled to, or have
attributed to it, any right of immunity, on the grounds of sovereignty or
otherwise, from any legal action, suit or proceeding, from the giving of
any relief in any thereof, from set-off or counterclaim, from the
jurisdiction of any court, from service of process, from attachment upon
or prior to judgment, from attachment in aid of execution of judgment, or
from execution of judgment, or other legal process or proceeding for the
giving of any relief or for the enforcement of any judgment, in any
jurisdiction in which proceedings may at any time be commenced, with
respect to its obligations, liabilities or any other matter under or
arising out of or in connection with this Indenture or the Securities,
such Non-U.S. Guarantor, to the maximum extent permitted by law, hereby
irrevocably and unconditionally waives, and agrees not to plead or claim,
any such immunity and consents to such relief and enforcement.
Section 9.09 Judgment Currency
Each Non-U.S. Guarantor agrees to indemnify the Trustee and each Holder
against any loss incurred by it as a result of any judgment or order
being given or made and expressed and paid in a currency (the "Judgment
Currency") other than United States dollars and as a result of any
variation as between (i) the rate of exchange at which the United States
dollar amount is converted into the Judgment Currency for the purpose of
such judgment or order and (ii) the spot rate of exchange in The City of
New York at which the Trustee or such Holder on the date of payment of
such judgment or order is able to purchase United States dollars with the
amount of the Judgment Currency actually received by the Trustee or such
Holder. The foregoing indemnity shall constitute a separate and
independent obligation of each Non-U.S. Guarantor and shall continue in
full force and effect notwithstanding any such judgment or order as
aforesaid. The term "spot rate of exchange" shall include any premiums
and costs of exchange payable in connection with the purchase of, or
conversion into, United States dollars.
ARTICLE X
REDEMPTION
Section 10.01 Notices to Trustee
If the Company elects to redeem the Securities of any series pursuant to
the redemption provisions of Section 10.07, it shall furnish to the
Trustee, at least 45 days but not more than 60 days before a Redemption
Date (unless the Trustee consents in writing to a shorter period of at
least 30 days prior to the Redemption Date), an Officers' Certificate
setting forth the Redemption Date, the principal amount of such
Securities to be redeemed and the Redemption Price.
Section 10.02 Selection of Securities to be Redeemed
If less than all of the Securities of a series are to be redeemed, the
Trustee shall select the Securities of such series to be redeemed by such
method as the Trustee in its sole discretion shall deem fair and
appropriate. The particular Securities of such series to be redeemed
shall be selected, unless otherwise provided herein, not less than 30
days nor more than 60 days prior to the Redemption Date by the Trustee
from the outstanding Securities of such series not previously called for
redemption.
The Trustee shall promptly notify the Company in writing of the
Securities of such series selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to
be redeemed. Securities and portions of them selected shall be in
amounts of $1,000 or whole multiples of $1,000. Except as provided in
the preceding sentence, provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities
called for redemption.
Section 10.03 Notices to Holders
(a) At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail in conformity with Section 11.02 a notice of
redemption to each Holder whose Securities are to be redeemed.
The Notice shall identify the Securities to be redeemed and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) if any Security is being redeemed in part, the portion of
the principal amount of such Security to be redeemed and that, after
the Redemption Date, upon surrender of such Security, a new Security
or Securities in principal amount equal to the unredeemed portion
will be issued;
(iv) the name and address of the Paying Agent;
(v) that Securities called for redemption must be surrendered to
the Paying Agent at the address specified in such notice to collect
the Redemption Price;
(vi) that unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to
accrue on and after the Redemption Date and the only remaining right
of the Holders is to receive payment of the Redemption Price upon
surrender to the Paying Agent of the Securities; and
(vii) the aggregate principal amount of Securities of each
series being redeemed.
If any of the Securities to be redeemed is in the form of a Global
Security, then the Company shall modify such notice to the extent
necessary to accord with the procedures of the Depositary applicable to
redemptions.
(b) At the Company's request, the Trustee shall give the notice required
in Section 10.03(a) in the Company's name; provided, however, that the
Company shall deliver to the Trustee, at least 45 days prior to the
Redemption Date (unless the Trustee consents in writing to a shorter
period at least 30 days prior to the Redemption Date), an Officer's
Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in Section
10.03(a).
Section 10.04 Effect of Notices of Redemption
Once notice of redemption is mailed pursuant to Section 10.03, Securities
called for redemption become due and payable on the Redemption Date at
the Redemption Price. Upon surrender to the Paying Agent, such
Securities shall be paid out at the Redemption Price.
Section 10.05 Deposit of Redemption Price
At least one Business Day prior to the Redemption Date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay
the Redemption Price of all Securities to be redeemed on that date. The
Trustee or the Paying Agent shall return to the Company any money not
required for that purpose less the expenses of the Trustee as provided
herein.
If the Company complies with the preceding paragraph, interest on the
Securities or portions thereof to be redeemed (whether or not such
Securities are presented for payment) will cease to accrue on the
applicable Redemption Date. If any Security called for redemption shall
not be so paid upon surrender because of the failure of the Company to
comply with the preceding paragraph, then interest will be paid on the
unpaid principal and premium, if any, from the Redemption Date until such
principal and premium are paid and, to the extent lawful, on any interest
not paid on such unpaid principal, in each case at the rate provided in
the Securities and in Section 3.01.
Section 10.06 Securities Redeemed in Part
Upon surrender of a Security that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder, at the expense
of the Company, a new Security equal in principal amount to the
unredeemed portion of the Security surrendered.
Section 10.07 Optional Redemption
The Securities of any series (other than the 5-year Securities) may be
redeemed at any time, at the option of the Company, in whole or from time
to time in part, at the Redemption Price specified in such Securities.
Any redemption pursuant to this Section 10.07 shall be made, to the
extent applicable, pursuant to the provisions of Sections 10.01 through
10.06.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Trust Indenture Act Controls
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by
the TIA, the required provision shall control. If this Indenture excludes
any provision of the TIA that is required to be included, such provision
shall be deemed included herein.
Section 11.02 Notices
Any notice or communication by the Company, the Guarantors, if any, or
the Trustee to the others is duly given if in writing and delivered in
person or mailed by first-class mail (registered or certified, return
receipt requested), telecopier or overnight air courier guaranteeing next
day delivery, to the other's address:
If to the Company or the Guarantors:
R&B Falcon Corporation
901 Threadneedle Street
Houston, Texas 77079
Attention: Leighton E. Moss
Telecopier No. (281) 496-0285
If to the Trustee:
For payment registration, transfer or exchange of the Securities:
By Hand:
Chase Bank of Texas, National Association
One Main Place
1201 Main Street, 18th Floor
Dallas, Texas 75202
Attention: Registered Bond Events
Telecopier No. (214) 672-5932
By Mail:
Chase Bank of Texas, National Association
P. O. Box 2320
Dallas, Texas 75221-2320
Attention: Registered Bond Events
For all other communications relating to the Securities:
Chase Bank of Texas, National Association
Global Trust Services
600 Travis Street, Suite 1150
Houston, Texas 77002
Telephone: (713) 216-6686
Telecopy: (713) 216-5476
Address of the Trustee in New York:
For Physical Securities:
The Chase Manhattan Bank
55 Water Street, North Building
Room 234, Windows 20 and 21
New York, New York 10041
Telephone: (212) 638-0454
Telecopy: (212) 638-7380 or 7381
For Book Entry Securities:
The Chase Manhattan Bank
DTC Participant #2423
Telephone: (212) 638-0454
Telecopy: (212) 638-7380 or 7381
The Company, the Guarantors or the Trustee by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
receipt acknowledged, if telecopied; and the next Business Day after
timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery. Notwithstanding the foregoing, notices
to the Trustee shall be effective only upon receipt.
Any notice or communication to a Holder shall be mailed by first-class
mail, postage prepaid, to the Holder's address shown on the register kept
by the Registrar. Failure to mail a notice or communication to a Holder
or any defect in it shall not affect its sufficiency with respect to
other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company or any Guarantor mails a notice or communication to
Holders, it shall mail a copy to the Trustee and each Agent at the same
time.
All notices or communications, including without limitation notices to
the Trustee or the Company or any Guarantor by Holders, shall be in
writing, except as set forth below, and in the English language.
In case by reason of the suspension of regular mail service, or by reason
of any other cause, it shall be impossible to mail any notice required by
this Indenture, then such method of notification as shall be made with
the approval of the Trustee shall constitute a sufficient mailing of such
notice.
Section 11.03 Communication by Holders with Other Holders
Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Securities. The
Company, the Guarantors, the Trustee, the Registrar and anyone else shall
have the protection of TIA Section 312(c).
Section 11.04 Certificate and Opinion as to Conditions Precedent
Upon any request or application by the Company or any Guarantor to the
Trustee to take any action under this Indenture, the Company or such
Guarantor shall, if requested by the Trustee, furnish to the Trustee:
(1) an Officers' Certificate (which shall include the
statements set forth in Section 11.05 hereof) stating
that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this
Indenture relating to the proposed action have been
complied with; and
(2) an Opinion of Counsel (which shall include the
statements set forth in Section 11.05 hereof) stating
that, in the opinion of such counsel, all such conditions
precedent and covenants have been complied with.
Section 11.05 Statements Required in Certificate or Opinion
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such Person, he
has made such examination or investigation as is necessary
to enable him to express an informed opinion as to whether
or not such covenant or condition has been complied with;
and
(4) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been complied
with.
Section 11.06 Rules by Trustee and Agents
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or the Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
Section 11.07 Legal Holidays
If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
Section 11.08 No Recourse Against Others
A director, officer, employee or stockholder of the Company or any
Guarantor, as such, shall not have any liability for any obligations of
the Company or such Guarantor under the Securities or this Indenture or
for any claim based on, in respect of or by reason of such obligations or
their creation. Each Holder by accepting a Security waives and releases
all such liability. The waiver and release shall be part of the
consideration for the issue of the Securities.
Section 11.09 Governing Law
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUCTED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
Section 11.10 No Adverse Interpretation of Other Agreements
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company, any Guarantor or any other Subsidiary of
the Company. Any such indenture, loan or debt agreement may not be used
to interpret this Indenture.
Section 11.11 Successors
All agreements of the Company and the Guarantors in this Indenture and
the Securities shall bind their respective successors. All agreements of
the Trustee in this Indenture shall bind its successor.
Section 11.12 Severability
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 11.13 Counterpart Originals
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 11.14 Table of Contents, Headings, etc
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no
way modify or restrict any of the terms or provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
R&B FALCON CORPORATION
By: /S/ ROBERT F. FULTON
-------------------------
Name: Robert F. Fulton
Title: Executive Vice President
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION
By: /S/ MAURI J. COWEN
------------------------
Name: Mauri J. Cowen
Title: Vice President and
Trust Officer
EXHIBIT A
[FACE OF 5-YEAR SECURITY]
R&B FALCON CORPORATION
9-1/8% SERIES [A/B] SENIOR NOTE DUE 2003
CUSIP 74912 EAJ0
No. ___ $___________
R&B Falcon Corporation, a Delaware corporation (the "Company"), for value
received promises to pay to ___________________________ or registered
assigns, the principal sum of $_________ Dollars on December [ ],
200__ [or such greater or lesser amount as is indicated on the Schedule
of Exchanges of Securities on the other side of this Security].*
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated:
R&B FALCON CORPORATION
By:_________________________
By:_________________________
Certificate of Authentication:
_________________________
as Trustee, certifies that this is one
of the Securities referred to in the
within-mentioned Indenture.
By:______________________
Authorized Signature
[Global Securities Legend]
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE
BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY
THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITARY. THE DEPOSITARY TRUST COMPANY SHALL ACT AS
THE DEPOSITARY UNTIL A SUCCESSOR SHALL BE APPOINTED BY THE COMPANY AND
THE REGISTRAR. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW
YORK, NEW YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.]*
[Transfer Restricted Securities Legend]
[THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS
HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) INSIDE THE UNITED STATES TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN
AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF
THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A)
ABOVE.]*
[REVERSE OF 5-YEAR SECURITY]
R&B FALCON CORPORATION
9-1/2% SERIES [A/B] SENIOR NOTE DUE 2003
This Security is one of a duly authorized issue of 9-1/2% Series [A/B]
Senior Notes due 2003 (the "Securities") of R&B Falcon Corporation, a
Delaware corporation (the "Company").
1. Interest. The Company promises to pay interest on the principal
amount of this Security at 9-1/2% per annum from December 22, 1998 until
maturity. The Company will pay interest semiannually on June 15 and
December 15 of each year (each an "Interest Payment Date"), or if any
such day is not a Business Day, on the next succeeding Business Day.
Interest on the Securities will accrue from the most recent Interest
Payment Date on which interest has been paid or, if no interest has been
paid, from December 22, 1998; provided that if there is no existing
Default in the payment of interest, and if this Security is authenticated
between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first
Interest Payment Date shall be June 15, 1999. The Company also promises
to pay any additional interest required by Section 6 of the Registration
Rights Agreement (as defined in paragraph 17 below), upon the conditions,
at the rates and for the periods specified therein. Further, the Company
shall pay interest on overdue principal and premium, if any, from time to
time on demand at a rate equal to the interest rate then in effect; it
shall pay interest on overdue installments of interest (without regard to
any applicable grace periods) from time to time on demand at the same
rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Securities
(except defaulted interest) to the Persons who are registered Holders of
Securities at the close of business on the record date next preceding the
Interest Payment Date, even if such Securities are canceled after such
record date and on or before such Interest Payment Date. The Holder must
surrender this Security to a Paying Agent to collect principal and
premium, if any, payments. The Company will pay the principal of, and
premium, if any, and interest on the Securities in money of the United
States of America that at the time of payment is legal tender for payment
of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium, if any,
and interest) will be made by wire transfer of immediately available
funds to the accounts specified by The Depository Trust Company. The
Company will make all payments in respect of a certificated Security
(including principal, premium, if any, and interest) by mailing a check
to the registered address of each Holder thereof; provided, however, that
payments on a certificated Security will be made by wire transfer to a
U.S. dollar account maintained by the payee with a bank in the United
States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 30 days immediately preceding the relevant due date
for payment (or such other date as the Trustee may accept in its
discretion).
3. Ranking and Guarantees. The Securities are senior unsecured
obligations of the Company. The Indenture provides that any Subsidiary
that guarantees Funded Indebtedness of the Company after the Issue Date
will be required to equally and ratably guarantee the Securities. The
Guarantee of the Securities by any subsidiary may be released if, but
only so long as, no other Funded Indebtedness of the Company is
guaranteed by such Subsidiary. Each of the Guarantees is an unsecured
obligation of the Guarantor providing such Guarantee. Certain
limitations to the obligations of the Guarantors are set forth in further
detail in the Indenture. References herein to the Indenture or the
Securities shall be deemed also to refer to the Guarantees set forth in
the Indenture except where the context otherwise requires.
4. Optional Redemption. The Securities may be redeemed at any time, at
the option of the Company, in whole or from time to time in part, at a
price equal to 100% of their principal amount plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of holders
of record on the relevant record date to receive interest due on an
interest payment date that is on or prior to the Redemption Date) plus
the Make-Whole Premium, if any (the "Redemption Price").
The amount of the Make-Whole Premium with respect to any Security (or
portion thereof) to be redeemed will be equal to the excess, if any, of:
(i) the sum of the present values, calculated as of the Redemption
Date, of:
(A) each interest payment that, but for such redemption would
have been payable on the Security (or portion thereof) being
redeemed on each Interest Payment Date occurring after the
Redemption Date (excluding any accrued and unpaid interest for
the period prior to the Redemption Date); and
(B) the principal amount that, but for such redemption, would
have been payable at the final maturity of the Security (or
portion thereof) being redeemed;
over
(ii) the principal amount of the Security (or portion thereof) being
redeemed.
The present values of interest and principal payments referred to in
clause (i) above will be determined in accordance with generally accepted
principles of financial analysis. Such present values will be calculated
by discounting the amount of each payment of interest or principal from
the date that each such payment would have been payable, but for the
redemption, to the Redemption Date at a discount rate equal to the
Treasury Yield plus 50 basis points. The Make-Whole Premium will be
calculated by an Independent Investment Banker (as defined in the
Indenture).
For purposes of determining the Make-Whole Premium, "Treasury Yield"
means a rate of interest per annum equal to the weekly average yield to
maturity of United States Treasury Notes that have a constant maturity
that corresponds to the remaining term to maturity of the Securities,
calculated to the nearest 1/12 of a year (the "Remaining Term"). The
Treasury Yield will be determined as of the third Business Day
immediately preceding the applicable Redemption Date. The weekly average
yields of United States Treasury Notes will be determined by reference to
the most recent statistical release published by the Federal Reserve Bank
of New York and designated "H.15(519) Selected Interest Rates" or any
successor release (the "H.15 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States
Treasury Notes having a constant maturity that is the same as the
Remaining Term, then Treasury Yield will be equal to such weekly average
yield. In all other cases, the Treasury Yield will be calculated by
interpolation, on a straight-line basis, between the weekly average
yields on the United States Treasury Notes that have a constant maturity
closest to and greater than the Remaining Term and the United States
Treasury Notes that have a constant maturity closest to and less than the
Remaining Term (in each case as set forth in the H.15 Statistical
Release). Any weekly average yields so calculated by interpolation will
be rounded to the nearest 1/100 of 1%, with any figure of 1/200% or above
being rounded upward. If weekly average yields for United States
Treasury Notes are not available in the H.15 Statistical Release or
otherwise, then the Treasury Yield will be calculated by interpolation of
comparable rates selected by the Independent Investment Banker.
Periodic interest installments with respect to which the Interest Payment
Date is on or prior to any Redemption Date will be payable to Holders of
record at the close of business on the relevant record dates referred to
herein, all as provided in the Indenture.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger
than $1,000 may be redeemed in part but only in whole multiples of
$1,000. On or after the Redemption Date interest will cease to accrue on
Securities or on the portions thereof called for redemption, as the case
may be.
5. Paying Agent and Registrar. Initially, Chase Bank of Texas,
National Association (the "Trustee"), the Trustee under the Indenture,
will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar, co-registrar or additional paying agent without
notice to any Holder. The Company may act in any such capacity.
6. Indenture. The Company issued the Securities under an Indenture
dated as of December 22, 1998 (the "Indenture") among the Company and the
Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb),
as in effect on the date of execution of the Indenture. The Securities
are subject to all such terms, and Holders are referred to the Indenture
and such Act for a statement of such terms. The Securities are unsecured
general obligations of the Company.
7. Denominations, Transfer, Exchange. The Securities are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Securities may be registered and Securities may
be exchanged as provided in the Indenture. The Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not
exchange or register the transfer of any Securities during the period
between a record date and the corresponding Interest Payment Date.
8. Persons Deemed Owners. The registered Holder of a Security shall be
treated as its owner for all purposes.
9. Amendments and Waivers. Subject to certain exceptions and
limitations, the Indenture or the Securities may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Securities, and any existing
Default under, or compliance with any provision of, the Indenture may be
waived (other than any continuing Default or Event of Default in the
payment of the principal of, or premium, if any, or interest on the
Securities) by the Holders of at least a majority in principal amount of
the Securities then outstanding in accordance with the terms of the
Indenture. Without the consent of any Holder, the Company, any
Guarantors and the Trustee may amend or supplement the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency; to
provide for uncertificated Securities in addition to or in place of
certificated Securities; to provide for the assumption of the obligations
of the Company and any Guarantor under the Indenture to Holders in the
case of the merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company or any Guarantor; to
reflect the release of any Guarantor from its Guarantee to the extent
permitted by the Indenture; to add guarantees to the Securities; to add
to the covenants of the Company or any Guarantors or to surrender any
right of the Company or any Guarantor; to make any change that does not
materially adversely affect the rights of any Holder; or to comply with
the qualification of the Indenture under the Trust Indenture Act of 1939,
as amended.
The right of any Holder to participate in any consent required or sought
pursuant to any provision of the Indenture (and the obligation of the
Company to obtain any such consent otherwise required from such Holder)
may be subject to the requirement that such Holder shall have been the
Holder of record of any Securities with respect to which such consent is
required or sought as of a date identified by the Trustee in a notice
furnished to Holders in accordance with the terms of the Indenture.
Without the consent of each Holder affected, the Company may not (i)
reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the rate of or change the
time for payment of interest, including default interest, on any
Security, (iii) reduce the principal of or change the fixed maturity of
any Security or alter the premium or other provisions with respect to
redemption, (iv) make any Security payable in money other than that
stated in the Security, (v) impair the right to institute suit for the
enforcement of any payment of principal of, or premium, if any, or
interest on any Security, (vi) make any change in the percentage of
principal amount of Securities necessary to waive compliance with certain
provisions of the Indenture or (vii) waive a continuing Default or Event
of Default in the payment of principal of, or premium, if any, or
interest on the Securities.
10. Defaults and Remedies. Events of Default include: default in payment
of interest on the Securities for 30 days; default in payment of
principal of, or premium, if any, on the Securities; failure by the
Company or any Guarantor for 60 days after written notice by the Trustee
or by the Holders of at least 25% of the aggregate principal amount of
the Securities then outstanding to it to comply with any of its other
covenants or agreements in the Indenture, the Guarantees or the
Securities; the acceleration of the maturity of any Indebtedness of the
Company or any Subsidiary of the Company (other than the Securities or
any Non-Recourse Indebtedness) that has an outstanding principal amount
of $20 million or more individually or in the aggregate; a default in the
payment of principal or interest in respect of any Indebtedness of the
Company or any Subsidiary of the Company (other than the Securities or
any Non-Recourse Indebtedness) having an outstanding principal amount of
$20 million or more individually or in the aggregate, and such default
shall be continuing for a period of 30 days without the Company or such
Subsidiary, as the case may be, effecting a cure of such default; a final
judgment or order for the payment of money in excess of $20 million (net
of applicable insurance coverage) having been rendered against the
Company, any Guarantor or any other "significant subsidiary" (as such
term is defined in Regulation S-X under the Securities Exchange Act of
1934, as amended; a "Significant Subsidiary") of the Company and such
judgment or order shall continue unsatisfied and unstayed for a period of
60 days; or certain events involving bankruptcy, insolvency or
reorganization of the Company, any Guarantor or any other Significant
Subsidiary of the Company. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Securities may declare the principal of,
and premium, if any, and interest on all the Securities to be immediately
due and payable, except that in the case of an Event of Default arising
from certain events of bankruptcy, insolvency or reorganization of the
Company or any Guarantor, all outstanding Securities become due and
payable immediately without further action or notice. The amount due and
payable upon the acceleration of any Security is equal to 100% of the
principal amount thereof plus premium, if any, and accrued interest to
the date of payment. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may require
indemnity reasonably satisfactory to it before it enforces the Indenture
or the Securities. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Securities may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders notice of any continuing default (except a default in
payment of principal or premium, if any, or interest) if it determines
that withholding notice is in their interests. The Company must furnish
an annual compliance certificate to the Trustee.
11. Discharge Prior to Maturity. The Indenture shall be discharged and
canceled upon the payment of all of the Securities and shall be
discharged except for certain obligations upon the irrevocable deposit
with the Trustee of funds or U.S. Government Obligations sufficient for
such payment.
12. Trustee Dealings with Company and Guarantors. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Company, any Guarantors or their
respective Affiliates, and may otherwise deal with the Company, any
Guarantors or their respective Affiliates, as if it were not Trustee.
13. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company or any Guarantor shall not have any
liability for any obligations of the Company or any Guarantor under the
Securities or the Indenture or for any claim based on, in respect of or
by reason of such obligations or their creation. Each Holder by
accepting a Security waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the
Securities.
14. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
15. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities as a convenience to
the Holders of the Securities. No representation is made as to the
accuracy of such numbers as printed on the Securities and reliance may be
placed only on the other identification numbers printed thereon.
16. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
17. Additional Rights of Holders of Transfer Restricted Securities. In
addition to the rights provided to Holders of Securities under the
Indenture, Holders of Transfer Restricted Securities shall have all the
rights set forth in the Registration Rights Agreement, dated as of the
Issue Date (the "Registration Rights Agreement"), among the Company and
the Initial Purchasers.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: Leighton E. Moss
FORM OF NOTATION ON SECURITY
RELATING TO FUTURE GUARANTEES
Each Guarantor (which term includes any successor Person under the
Indenture), has fully, unconditionally and absolutely guaranteed, to the
extent set forth in the Indenture and subject to the provisions in the
Indenture, the due and punctual payment of the principal of, and premium,
if any, and interest on the Securities and all other amounts due and
payable under the Indenture and the Securities by the Company.
The obligations of the Guarantors to the Holders of Securities and to the
Trustee pursuant to the Guarantees and the Indenture are expressly set
forth in Article IX of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Guarantees.
[NAMES OF GUARANTORS]
By:____________________
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to _________________________________________
______________________________________________________________________
(Insert assignee's social security or tax I.D. number)
_______________________________________________________________________
_______________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ____________________________________________ as
agent to transfer this Security on the books of the Company. The agent
may substitute another to act for him.
Date: ___________________________
Your Signature:________________________________________________________
(Sign exactly as your name appears on the face of this Security)
Signature Guarantee:___________________________________________________
(Participant in a Recognized Signature Guaranty Medallion
Program)
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in
Rule 144(k) under the Securities Act after the later of the date of original
issuance of such Securities and the last date, if any, on which such
Securities were owned by the Company or any Affiliate of the Company, the
undersigned confirms that such Securities are being transferred as specified
below:
CHECK ONE
(1) [] to the Company or a Subsidiary thereof; or
(2) [] to a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act of 1933, as amended) that purchases for its own
account or for the account of a qualified institutional buyer to
whom notice is given that such transfer is being made in reliance
on Rule 144A, in each case pursuant to and in compliance with Rule
144A under the Securities Act of 1933, as amended; or
(3) [] outside the United States to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as
amended; or
(4) [] pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(5) [] pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended, provided by Rule 144 thereunder.
and unless the box below is checked, the undersigned confirms that such
Security is not being transferred to an "affiliate" of the Company as
defined in Rule 144 under the Securities Act of 1933, as amended (an
"Affiliate"):
[] The transferee is an Affiliate of the Company.
Unless one of items (1) through (5) above is checked, the Trustee will
refuse to register any of the Securities evidenced by this certificate in
the name of any person other than the registered Holder thereof; provided,
however, that if item (3), or (5) is checked, the Company or the Trustee
may require, prior to registering any such transfer of the Securities, in
their sole discretion, such written legal opinions, certifications
(including an investment letter) and other information as the Trustee or
the Company have reasonably requested to confirm that such transfer is
being made pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act of 1933, as amended.
If none of the foregoing items are checked, the Trustee or Registrar shall
not be obligated to register this Security in the name of any person other
than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.06 of the
Indenture shall have been satisfied.
Signed:____________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities
Act of 1933, as amended and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Dated:_________________ _________________________
Notice: to be executed by an
executive officer*
SCHEDULE OF EXCHANGES OF SECURITIES*
The following exchanges, redemptions or repurchases of a part of this Global
Security have been made:
Principal
Amount of Signature of
Global authorized
Security Officer,
Amount of decrease Amount of increase following Trustee
Date of in Principal Amount in Principal Amount such decrease or Securities
Transaction of Global Security of Global Security (or increase) Custodian
- ----------- ------------------- ------------------- ------------- -------------
*This Schedule should be included only if the Security is a Global Security.
EXHIBIT B
[FACE OF 10-YEAR SECURITY]
R&B FALCON CORPORATION
9-1/2% SERIES [A/B] SENIOR NOTE DUE 2008
CUSIP 74912 EAL5
No. ___ $___________
R&B Falcon Corporation, a Delaware corporation (the "Company"), for value
received promises to pay to ___________________________ or registered
assigns, the principal sum of $_________ Dollars on December ___, 2008
[or such greater or lesser amount as is indicated on the Schedule of
Exchanges of Securities on the other side of this Security.*]
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated:
R&B FALCON CORPORATION
By:_________________________
By:_________________________
Certificate of Authentication:
____________________________
as Trustee, certifies that this is one
of the Securities referred to in the
within-mentioned Indenture.
By:_____________________
Authorized Signature
[Global Securities Legend]
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE
BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY
THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITARY. THE DEPOSITORY TRUST COMPANY SHALL ACT AS
THE DEPOSITARY UNTIL A SUCCESSOR SHALL BE APPOINTED BY THE COMPANY AND
THE REGISTRAR. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW
YORK, NEW YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.]*
[Transfer Restricted Securities Legend]
[THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS
HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) INSIDE THE UNITED STATES TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN
AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF
THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A)
ABOVE.]*
[REVERSE OF 10-YEAR SECURITY]
R&B FALCON CORPORATION
9-1/2% SERIES [A/B] SENIOR NOTE DUE 2008
This Security is one of a duly authorized issue of 9-1/2% Series [A/B]
Senior Notes due 2008 (the "Securities") of R&B Falcon Corporation, a
Delaware corporation (the "Company").
1. Interest. The Company promises to pay interest on the principal
amount of this Security at 9-1/2% per annum from December 22, 1998 until
maturity. The Company will pay interest semiannually on June 15 and
December 15 of each year (each an "Interest Payment Date"), or if any
such day is not a Business Day, on the next succeeding Business Day.
Interest on the Securities will accrue from the most recent Interest
Payment Date on which interest has been paid or, if no interest has been
paid, from December 22, 1998; provided that if there is no existing
Default in the payment of interest, and if this Security is authenticated
between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first
Interest Payment Date shall be June 15, 1999. The Company also promises
to pay any additional interest required by Section 6 of the Registration
Rights Agreement (as defined in paragraph 17 below), upon the conditions,
at the rates and for the periods specified therein. Further, the Company
shall pay interest on overdue principal and premium, if any, from time to
time on demand at a rate equal to the interest rate then in effect; it
shall pay interest on overdue installments of interest (without regard to
any applicable grace periods) from time to time on demand at the same
rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Securities
(except defaulted interest) to the Persons who are registered Holders of
Securities at the close of business on the record date next preceding the
Interest Payment Date, even if such Securities are canceled after such
record date and on or before such Interest Payment Date. The Holder must
surrender this Security to a Paying Agent to collect principal and
premium, if any, payments. The Company will pay the principal of, and
premium, if any, and interest on the Securities in money of the United
States of America that at the time of payment is legal tender for payment
of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium, if any,
and interest) will be made by wire transfer of immediately available
funds to the accounts specified by The Depository Trust Company. The
Company will make all payments in respect of a certificated Security
(including principal, premium, if any, and interest) by mailing a check
to the registered address of each Holder thereof; provided, however, that
payments on a certificated Security will be made by wire transfer to a
U.S. dollar account maintained by the payee with a bank in the United
States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 30 days immediately preceding the relevant due date
for payment (or such other date as the Trustee may accept in its
discretion).
3. Ranking and Guarantees. The Securities are senior unsecured
obligations of the Company. The Indenture provides that any Subsidiary
that guarantees Funded Indebtedness of the Company after the Issue Date
will be required to equally and ratably guarantee the Securities. The
Guarantee of the Securities by any subsidiary may be released if, but
only so long as, no other Funded Indebtedness of the Company is
guaranteed by such Subsidiary. Each of the Guarantees is an unsecured
obligation of the Guarantor providing such Guarantee. Certain
limitations to the obligations of the Guarantors are set forth in further
detail in the Indenture. References herein to the Indenture or the
Securities shall be deemed also to refer to the Guarantees set forth in
the Indenture except where the context otherwise requires.
4. Optional Redemption. The Securities may be redeemed at any time, at
the option of the Company, in whole or from time to time in part, at a
price equal to 100% of their principal amount plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of holders
of record on the relevant record date to receive interest due on an
interest payment date that is on or prior to the Redemption Date) plus
the Make-Whole Premium, if any (the "Redemption Price").
The amount of the Make-Whole Premium with respect to any Security (or
portion thereof) to be redeemed will be equal to the excess, if any, of:
(i) the sum of the present values, calculated as of the Redemption
Date, of:
(A) each interest payment that, but for such redemption would
have been payable on the Security (or portion thereof) being
redeemed on each Interest Payment Date occurring after the
Redemption Date (excluding any accrued and unpaid interest for
the period prior to the Redemption Date); and
(B) the principal amount that, but for such redemption, would
have been payable at the final maturity of the Security (or
portion thereof) being redeemed;
over
(ii) the principal amount of the Security (or portion thereof) being
redeemed.
The present values of interest and principal payments referred to in
clause (i) above will be determined in accordance with generally accepted
principles of financial analysis. Such present values will be calculated
by discounting the amount of each payment of interest or principal from
the date that each such payment would have been payable, but for the
redemption, to the Redemption Date at a discount rate equal to the
Treasury Yield plus 50 basis points. The Make-Whole Premium will be
calculated by an Independent Investment Banker (as defined in the
Indenture).
For purposes of determining the Make-Whole Premium, "Treasury Yield"
means a rate of interest per annum equal to the weekly average yield to
maturity of United States Treasury Notes that have a constant maturity
that corresponds to the remaining term to maturity of the Securities,
calculated to the nearest 1/12 of a year (the "Remaining Term"). The
Treasury Yield will be determined as of the third Business Day
immediately preceding the applicable Redemption Date. The weekly average
yields of United States Treasury Notes will be determined by reference to
the most recent statistical release published by the Federal Reserve Bank
of New York and designated "H.15(519) Selected Interest Rates" or any
successor release (the "H.15 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States
Treasury Notes having a constant maturity that is the same as the
Remaining Term, then Treasury Yield will be equal to such weekly average
yield. In all other cases, the Treasury Yield will be calculated by
interpolation, on a straight-line basis, between the weekly average
yields on the United States Treasury Notes that have a constant maturity
closest to and greater than the Remaining Term and the United States
Treasury Notes that have a constant maturity closest to and less than the
Remaining Term (in each case as set forth in the H.15 Statistical
Release). Any weekly average yields so calculated by interpolation will
be rounded to the nearest 1/100 of 1%, with any figure of 1/200% or above
being rounded upward. If weekly average yields for United States
Treasury Notes are not available in the H.15 Statistical Release or
otherwise, then the Treasury Yield will be calculated by interpolation of
comparable rates selected by the Independent Investment Banker.
Periodic interest installments with respect to which the Interest Payment
Date is on or prior to any Redemption Date will be payable to Holders of
record at the close of business on the relevant record dates referred to
herein, all as provided in the Indenture.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger
than $1,000 may be redeemed in part but only in whole multiples of
$1,000. On or after the Redemption Date interest will cease to accrue on
Securities or on the portions thereof called for redemption, as the case
may be.
5. Paying Agent and Registrar. Initially, Chase Bank of Texas,
National Association (the "Trustee"), the Trustee under the Indenture,
will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar, co-registrar or additional paying agent without
notice to any Holder. The Company may act in any such capacity.
6. Indenture. The Company issued the Securities under an Indenture
dated as of December 22, 1998 (the "Indenture") among the Company and the
Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb),
as in effect on the date of execution of the Indenture. The Securities
are subject to all such terms, and Holders are referred to the Indenture
and such Act for a statement of such terms. The Securities are unsecured
general obligations of the Company.
7. Denominations, Transfer, Exchange. The Securities are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Securities may be registered and Securities may
be exchanged as provided in the Indenture. The Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not
exchange or register the transfer of any Securities during the period
between a record date and the corresponding Interest Payment Date.
8. Persons Deemed Owners. The registered Holder of a Security shall be
treated as its owner for all purposes.
9. Amendments and Waivers. Subject to certain exceptions and
limitations, the Indenture or the Securities may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Securities, and any existing
Default under, or compliance with any provision of, the Indenture may be
waived (other than any continuing Default or Event of Default in the
payment of the principal of, or premium, if any, or interest on the
Securities) by the Holders of at least a majority in principal amount of
the Securities then outstanding in accordance with the terms of the
Indenture. Without the consent of any Holder, the Company, any
Guarantors and the Trustee may amend or supplement the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency; to
provide for uncertificated Securities in addition to or in place of
certificated Securities; to provide for the assumption of the obligations
of the Company and any Guarantor under the Indenture to Holders in the
case of the merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company or any Guarantor; to
reflect the release of any Guarantor from its Guarantee to the extent
permitted by the Indenture; to add guarantees to the Securities; to add
to the covenants of the Company or any Guarantors or to surrender any
right of the Company or any Guarantor; to make any change that does not
materially adversely affect the rights of any Holder; or to comply with
the qualification of the Indenture under the Trust Indenture Act of 1939,
as amended.
The right of any Holder to participate in any consent required or sought
pursuant to any provision of the Indenture (and the obligation of the
Company to obtain any such consent otherwise required from such Holder)
may be subject to the requirement that such Holder shall have been the
Holder of record of any Securities with respect to which such consent is
required or sought as of a date identified by the Trustee in a notice
furnished to Holders in accordance with the terms of the Indenture.
Without the consent of each Holder affected, the Company may not (i)
reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the rate of or change the
time for payment of interest, including default interest, on any
Security, (iii) reduce the principal of or change the fixed maturity of
any Security or alter the premium or other provisions with respect to
redemption, (iv) make any Security payable in money other than that
stated in the Security, (v) impair the right to institute suit for the
enforcement of any payment of principal of, or premium, if any, or
interest on any Security, (vi) make any change in the percentage of
principal amount of Securities necessary to waive compliance with certain
provisions of the Indenture or (vii) waive a continuing Default or Event
of Default in the payment of principal of, or premium, if any, or
interest on the Securities.
10. Defaults and Remedies. Events of Default include: default in payment
of interest on the Securities for 30 days; default in payment of
principal of, or premium, if any, on the Securities; failure by the
Company or any Guarantor for 60 days after written notice by the Trustee
or by the Holders of at least 25% of the aggregate principal amount of
the Securities then outstanding to it to comply with any of its other
covenants or agreements in the Indenture, the Guarantees or the
Securities; the acceleration of the maturity of any Indebtedness of the
Company or any Subsidiary of the Company (other than the Securities or
any Non-Recourse Indebtedness) that has an outstanding principal amount
of $20 million or more individually or in the aggregate; a default in the
payment of principal or interest in respect of any Indebtedness of the
Company or any Subsidiary of the Company (other than the Securities or
any Non-Recourse Indebtedness) having an outstanding principal amount of
$20 million or more individually or in the aggregate, and such default
shall be continuing for a period of 30 days without the Company or such
Subsidiary, as the case may be, effecting a cure of such default; a final
judgment or order for the payment of money in excess of $20 million (net
of applicable insurance coverage) having been rendered against the
Company, any Guarantor or any other "significant subsidiary" (as such
term is defined in Regulation S-X under the Securities Exchange Act of
1934, as amended; a "Significant Subsidiary") of the Company and such
judgment or order shall continue unsatisfied and unstayed for a period of
60 days; or certain events involving bankruptcy, insolvency or
reorganization of the Company, any Guarantor or any other Significant
Subsidiary of the Company. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Securities may declare the principal of,
and premium, if any, and interest on all the Securities to be immediately
due and payable, except that in the case of an Event of Default arising
from certain events of bankruptcy, insolvency or reorganization of the
Company or any Guarantor, all outstanding Securities become due and
payable immediately without further action or notice. The amount due and
payable upon the acceleration of any Security is equal to 100% of the
principal amount thereof plus premium, if any, and accrued interest to
the date of payment. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may require
indemnity reasonably satisfactory to it before it enforces the Indenture
or the Securities. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Securities may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders notice of any continuing default (except a default in
payment of principal or premium, if any, or interest) if it determines
that withholding notice is in their interests. The Company must furnish
an annual compliance certificate to the Trustee.
11. Discharge Prior to Maturity. The Indenture shall be discharged and
canceled upon the payment of all of the Securities and shall be
discharged except for certain obligations upon the irrevocable deposit
with the Trustee of funds or U.S. Government Obligations sufficient for
such payment.
12. Trustee Dealings with Company and Guarantors. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Company, any Guarantors or their
respective Affiliates, and may otherwise deal with the Company, any
Guarantors or their respective Affiliates, as if it were not Trustee.
13. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company or any Guarantor shall not have any
liability for any obligations of the Company or any Guarantor under the
Securities or the Indenture or for any claim based on, in respect of or
by reason of such obligations or their creation. Each Holder by
accepting a Security waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the
Securities.
14. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
15. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities as a convenience to
the Holders of the Securities. No representation is made as to the
accuracy of such numbers as printed on the Securities and reliance may be
placed only on the other identification numbers printed thereon.
16. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
17. Additional Rights of Holders of Transfer Restricted Securities. In
addition to the rights provided to Holders of Securities under the
Indenture, Holders of Transfer Restricted Securities shall have all the
rights set forth in the Registration Rights Agreement, dated as of the
Issue Date (the "Registration Rights Agreement"), among the Company and
the Initial Purchasers.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: Leighton E. Moss
FORM OF NOTATION ON SECURITY
RELATING TO FUTURE GUARANTEES
Each Guarantor (which term includes any successor Person under the
Indenture), has fully, unconditionally and absolutely guaranteed, to the
extent set forth in the Indenture and subject to the provisions in the
Indenture, the due and punctual payment of the principal of, and premium,
if any, and interest on the Securities and all other amounts due and
payable under the Indenture and the Securities by the Company.
The obligations of the Guarantors to the Holders of Securities and to the
Trustee pursuant to the Guarantees and the Indenture are expressly set
forth in Article IX of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Guarantees.
[NAMES OF GUARANTORS]
By:___________________
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to _____________________________________________
_______________________________________________________________________
(Insert assignee's social security or tax I.D. number)
_______________________________________________________________________
_______________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ____________________________________________ as
agent to transfer this Security on the books of the Company. The agent
may substitute another to act for him.
Date: ___________________________
Your Signature:_________________________________________________________
(Sign exactly as your name appears on the face of this Security)
Signature Guarantee:____________________________________________________
(Participant in a Recognized Signature Guaranty Medallion Program)
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to
in Rule 144(k) under the Securities Act after the later of the date of
original issuance of such Securities and the last date, if any, on
which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being
transferred as specified below:
CHECK ONE
(1) [] to the Company or a Subsidiary thereof; or
(2) [] to a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act of 1933, as amended) that purchases for its own
account or for the account of a qualified institutional buyer to
whom notice is given that such transfer is being made in reliance
on Rule 144A, in each case pursuant to and in compliance with Rule
144A under the Securities Act of 1933, as amended;
or
(3) [] outside the United States to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as
amended; or
(4) [] pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(5) [] pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended, provided by Rule 144 thereunder.
and unless the box below is checked, the undersigned confirms that such
Security is not being transferred to an "affiliate" of the Company as
defined in Rule 144 under the Securities Act of 1933, as amended (an
"Affiliate"):
[] The transferee is an Affiliate of the Company.
Unless one of items (1) through (5) above is checked, the Trustee will
refuse to register any of the Securities evidenced by this certificate in
the name of any person other than the registered Holder thereof; provided,
however, that if item (3), or (5) is checked, the Company or the Trustee
may require, prior to registering any such transfer of the Securities, in
their sole discretion, such written legal opinions, certifications
(including an investment letter) and other information as the Trustee or
the Company have reasonably requested to confirm that such transfer is
being made pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act of 1933, as amended.
If none of the foregoing items are checked, the Trustee or Registrar shall
not be obligated to register this Security in the name of any person other
than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.06 of the
Indenture shall have been satisfied.
Signed:_________________________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities
Act of 1933, as amended and is aware that the sale to it is being made
in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Dated:_______________________ ____________________________
Notice: to be executed by an
executive officer]*
SCHEDULE OF EXCHANGES OF SECURITIES*
The following exchanges, redemptions or repurchases of a part of this Global
Security have been made:
Amount of Amount of Principal of Signature of
decrease in increase in Amount Global authorized
Principal Principal Security Officer,
Amount of Amount of following Trustee or
Date of Global Global such decrease Securities
Transaction Security Security (or increase) Custodian
- ----------- -------- -------- ------------- ---------
*This Schedule should be included only if the Security is a Global
Security.
EXHIBIT C
FORM OF SUPPLEMENTAL INDENTURE
Supplemental Indenture (this "Supplemental Indenture"), dated as of
____________ between ____________________, a __________ corporation (the
"New Guarantor"), a subsidiary of R&B Falcon Corporation, a Delaware
corporation (the "Company"), and [____________________], as trustee under
the indenture referred to below (the "Trustee"). Capitalized terms used
herein and not defined herein shall have the meaning ascribed to them in
the Indenture (as defined below).
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (as amended or supplemented from time to time, the
"Indenture"), dated as of December 22, 1998;
WHEREAS, Section 9.05 of the Indenture provides that under certain
circumstances the Company must cause certain of its subsidiaries to
execute and deliver to the Trustee a supplemental indenture pursuant to
which such subsidiaries shall unconditionally guarantee all of the
Company's obligations under the Securities (as defined in the Indenture)
pursuant to a Guarantee on the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.05 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which are hereby acknowledged, the
New Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of the Securities as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings ascribed to them in the Indenture.
2. Agreement to Guarantee. The New Guarantor hereby fully,
unconditionally and absolutely guarantees, jointly and severally with all
other Guarantors, the Company's obligations under the Securities and the
Indenture on the terms and subject to the conditions set forth in
Article IX of the Indenture and agrees to be bound by all other
applicable provisions of the Indenture.
3. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, shareholder or agent of any Guarantor,
as such, shall have any liability for any obligations of the Company or
any Guarantor under the Securities, any Guarantees, the Indenture or this
Supplemental Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting
a Security waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Securities.
4. New York Law to Govern. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
5. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement.
6. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
7. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the correctness of the
recitals of fact contained herein, all of which recitals are made solely
by the New Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first
above written.
Dated: __________________ [Name of New Subsidiary Guarantor]
By:________________________
Name:
Title:
Dated: __________________ [_______________________________ ]
as Trustee
By:________________________
Name:
Title:
_______________________________
Exhibit 10.75
R&B FALCON CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made between
R&B Falcon Corporation, a Delaware corporation ("Company"), and Paul
B. Loyd, Jr. ("Optionee") as of February 11, 1999 (the "Effective
Date").
WITNESSETH:
WHEREAS, the Committee which administers the R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan ("Plan") has
selected the Optionee 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. As used herein, the terms set forth below shall have
the following respective meanings:
(a) "Disability" means Disability as defined in the
Employment Agreement; and
(b) "Employment Agreement" means that certain Employment
Agreement dated March 25, 1998 between the Optionee
and the Company.
2. The option awarded hereunder 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.
3. On the terms and subject to the conditions contained
herein, the Company hereby grants to the Optionee an option (the
"Option") for a term of ten years ending on February 11, 2009
("Option Period") to purchase from the Company 184,121 shares
("Option Shares") of the Company's Common Stock, at a price equal to
$6.25 per share.
4. This Option shall not be exercisable, except upon the
death or Disability of the Optionee, until after 6 months immediately
following the Effective Date and thereafter shall be exercisable for
any number of shares up to and including the aggregate number of
shares subject to this Option, irrespective of whether the Optionee
is an employee of the Company at the time of any such exercise;
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.
5. The Option may be exercised by the Optionee, in whole
or in part, by giving written notice to the Compensation and Benefits
Department 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 (or to the extent
permitted by the Company, the written instructions referred to in the
last sentence of this section). 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, or
cause to be delivered, to the Optionee certificates for the number of
Option Shares with respect to which the Option has been so exercised.
6. 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 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 in accordance with market
practice. The value of the Common Stock so tendered shall be its
Fair Market Value.
7. The Option shall not be transferable by the Optionee
otherwise than as expressly permitted by the Plan. During the
lifetime of the Optionee, the Option shall be exercisable only by her
or him. No transfer of the Option 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.
8. 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.
9. 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) of the Exchange Act and the rules promulgated
thereunder. 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.
10. Upon the acquisition of any shares pursuant to the
exercise of the Option, 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.
11. 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.
12. Unless otherwise provided herein, every notice
hereunder shall be in writing and shall be delivered by hand or by
registered or certified mail. All notices of the exercise by the
Optionee of any option hereunder shall be directed to R&B Falcon
Corporation, Attention: Benefits and Compensation Department, at the
Company's principal office address from time to time. Any notice
given by the Company to the Optionee directed to him or her at his or
her 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.
13. 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 7, 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.
14. Notwithstanding any of the other provisions hereof,
the Optionee agrees that he or she will not exercise the Option, 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.
15. This Agreement is subject to the Plan, a copy of which
will be provided the to Optionee upon written request. 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.
16. 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 number of Option Shares held by the Participant
hereunder, and the exercise price per share set out in Section 3
above shall be likewise adjusted, to reflect substantially the same
economic equivalent value of the Option Shares to the Participant
prior to any such merger or other business combination. In the event
of a split-off, spin-off or creating of a different class of common
stock of the Company (including, without limitation, a tracking
stock), the Participant shall receive an option to purchase an
equivalent number of the shares of common stock or voting interests
of such separate entity being split-off or spun-off or of the shares
of the new class of common stock of the Company, as if Participant
had owned the shares underlying the Option Shares on the record date
for any such split-off, spin-off or creation of a new class of common
stock of the Company, and the exercise price set out in Section 3
hereof and applicable to the options to purchase shares or the voting
interests of the new entity being split-off or spun-off shall be
adjusted to reflect substantially the same economic equivalent value
of the Option Shares to the Optionee prior to any such split-off,
spin-off or creation of a new class of common stock of the Company
IN WITNESS WHEREOF, this Agreement is effective as of the
11th of February, 1999.
R&B FALCON CORPORATION
By:_______________________________
Its:_______________________________
OPTIONEE
___________________________________
Paul B. Loyd, Jr.
Exhibit 10.76
R&B FALCON CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made between
R&B Falcon Corporation, a Delaware corporation ("Company"), and
Steven A. Webster ("Optionee") as of February 11, 1999 (the
"Effective Date").
WITNESSETH:
WHEREAS, the Committee which administers the R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan ("Plan") has
selected the Optionee 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. As used herein, the terms set forth below shall have
the following respective meanings:
(a) "Disability" means Disability as defined in the
Employment Agreement; and
(b) "Employment Agreement" means that certain Employment
Agreement dated March 25, 1998 between the Optionee
and the Company.
2. The option awarded hereunder 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.
3. On the terms and subject to the conditions contained
herein, the Company hereby grants to the Optionee an option (the
"Option") for a term of ten years ending on February 11, 2009
("Option Period") to purchase from the Company 212,447 shares
("Option Shares") of the Company's Common Stock, at a price equal to
$6.25 per share.
4. This Option shall not be exercisable, except upon the
death or Disability of the Optionee, until after 6 months immediately
following the Effective Date and thereafter shall be exercisable for
any number of shares up to and including the aggregate number of
shares subject to this Option, irrespective of whether the Optionee
is an employee of the Company at the time of any such exercise;
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.
5. The Option may be exercised by the Optionee, in whole
or in part, by giving written notice to the Compensation and Benefits
Department 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 (or to the extent
permitted by the Company, the written instructions referred to in the
last sentence of this section). 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, or
cause to be delivered, to the Optionee certificates for the number of
Option Shares with respect to which the Option has been so exercised.
6. 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 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 in accordance with market
practice. The value of the Common Stock so tendered shall be its
Fair Market Value.
7. The Option shall not be transferable by the Optionee
otherwise than as expressly permitted by the Plan. During the
lifetime of the Optionee, the Option shall be exercisable only by her
or him. No transfer of the Option 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.
8. 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.
9. 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) of the Exchange Act and the rules promulgated
thereunder. 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.
10. Upon the acquisition of any shares pursuant to the
exercise of the Option, 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.
11. 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.
12. Unless otherwise provided herein, every notice
hereunder shall be in writing and shall be delivered by hand or by
registered or certified mail. All notices of the exercise by the
Optionee of any option hereunder shall be directed to R&B Falcon
Corporation, Attention: Benefits and Compensation Department, at the
Company's principal office address from time to time. Any notice
given by the Company to the Optionee directed to him or her at his or
her 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.
13. 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 7, 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.
14. Notwithstanding any of the other provisions hereof,
the Optionee agrees that he or she will not exercise the Option, 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.
15. This Agreement is subject to the Plan, a copy of which
will be provided the to Optionee upon written request. 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.
16. 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 number of Option Shares held by the Participant
hereunder, and the exercise price per share set out in Section 3
above shall be likewise adjusted, to reflect substantially the same
economic equivalent value of the Option Shares to the Participant
prior to any such merger or other business combination. In the event
of a split-off, spin-off or creating of a different class of common
stock of the Company (including, without limitation, a tracking
stock), the Participant shall receive an option to purchase an
equivalent number of the shares of common stock or voting interests
of such separate entity being split-off or spun-off or of the shares
of the new class of common stock of the Company, as if Participant
had owned the shares underlying the Option Shares on the record date
for any such split-off, spin-off or creation of a new class of common
stock of the Company, and the exercise price set out in Section 3
hereof and applicable to the options to purchase shares or the voting
interests of the new entity being split-off or spun-off shall be
adjusted to reflect substantially the same economic equivalent value
of the Option Shares to the Optionee prior to any such split-off,
spin-off or creation of a new class of common stock of the Company
IN WITNESS WHEREOF, this Agreement is effective as of the
11th day of February, 1999.
R&B FALCON CORPORATION
By:_______________________________
Its:_______________________________
OPTIONEE
___________________________________
Steven A. Webster
Exhibit 10.77
R&B FALCON CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made between
R&B Falcon Corporation, a Delaware corporation ("Company"), and T. W.
Nagle ("Optionee") as of February 11, 1999 (the "Effective Date").
WITNESSETH:
WHEREAS, the Committee which administers the R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan ("Plan") has
selected the Optionee 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. As used herein, the terms set forth below shall have
the following respective meanings:
(a) "Disability" means Disability as defined in the
Employment Agreement; and
(b) "Employment Agreement" means that certain Employment
Agreement dated March 25, 1998 between the Optionee
and the Company.
2. The option awarded hereunder 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.
3. On the terms and subject to the conditions contained
herein, the Company hereby grants to the Optionee an option (the
"Option") for a term of ten years ending on February 11, 2009
("Option Period") to purchase from the Company 74,339 shares ("Option
Shares") of the Company's Common Stock, at a price equal to $6.25 per
share.
4. This Option shall not be exercisable, except upon the
death or Disability of the Optionee, until after 6 months immediately
following the Effective Date and thereafter shall be exercisable for
any number of shares up to and including the aggregate number of
shares subject to this Option, irrespective of whether the Optionee
is an employee of the Company at the time of any such exercise;
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.
5. The Option may be exercised by the Optionee, in whole
or in part, by giving written notice to the Compensation and Benefits
Department 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 (or to the extent
permitted by the Company, the written instructions referred to in the
last sentence of this section). 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, or
cause to be delivered, to the Optionee certificates for the number of
Option Shares with respect to which the Option has been so exercised.
6. 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 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 in accordance with market
practice. The value of the Common Stock so tendered shall be its
Fair Market Value.
7. The Option shall not be transferable by the Optionee
otherwise than as expressly permitted by the Plan. During the
lifetime of the Optionee, the Option shall be exercisable only by her
or him. No transfer of the Option 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.
8. 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.
9. 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) of the Exchange Act and the rules promulgated
thereunder. 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.
10. Upon the acquisition of any shares pursuant to the
exercise of the Option, 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.
11. 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.
12. Unless otherwise provided herein, every notice
hereunder shall be in writing and shall be delivered by hand or by
registered or certified mail. All notices of the exercise by the
Optionee of any option hereunder shall be directed to R&B Falcon
Corporation, Attention: Benefits and Compensation Department, at the
Company's principal office address from time to time. Any notice
given by the Company to the Optionee directed to him or her at his or
her 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.
13. 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 7, 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.
14. Notwithstanding any of the other provisions hereof,
the Optionee agrees that he or she will not exercise the Option, 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.
15. This Agreement is subject to the Plan, a copy of which
will be provided the to Optionee upon written request. 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.
16. 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 number of Option Shares held by the Participant
hereunder, and the exercise price per share set out in Section 3
above shall be likewise adjusted, to reflect substantially the same
economic equivalent value of the Option Shares to the Participant
prior to any such merger or other business combination. In the event
of a split-off, spin-off or creating of a different class of common
stock of the Company (including, without limitation, a tracking
stock), the Participant shall receive an option to purchase an
equivalent number of the shares of common stock or voting interests
of such separate entity being split-off or spun-off or of the shares
of the new class of common stock of the Company, as if Participant
had owned the shares underlying the Option Shares on the record date
for any such split-off, spin-off or creation of a new class of common
stock of the Company, and the exercise price set out in Section 3
hereof and applicable to the options to purchase shares or the voting
interests of the new entity being split-off or spun-off shall be
adjusted to reflect substantially the same economic equivalent value
of the Option Shares to the Optionee prior to any such split-off,
spin-off or creation of a new class of common stock of the Company
IN WITNESS WHEREOF, this Agreement is effective as of the
11th day of February, 1999.
R&B FALCON CORPORATION
By:_______________________________
Its:_______________________________
OPTIONEE
___________________________________
T. W. Nagle
Exhibit 10.78
R&B FALCON CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made between
R&B Falcon Corporation, a Delaware corporation ("Company"), and
Robert F. Fulton ("Optionee") as of February 11, 1999 (the
"Effective Date").
WITNESSETH:
WHEREAS, the Committee which administers the R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan ("Plan") has
selected the Optionee 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. As used herein, the terms set forth below shall have
the following respective meanings:
(a) "Disability" means Disability as defined in the
Employment Agreement; and
(b) "Employment Agreement" means that certain Employment
Agreement dated March 25, 1998 between the Optionee
and the Company.
2. The option awarded hereunder 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.
3. On the terms and subject to the conditions contained
herein, the Company hereby grants to the Optionee an option (the
"Option") for a term of ten years ending on February 11, 2009
("Option Period") to purchase from the Company 55,514 shares ("Option
Shares") of the Company's Common Stock, at a price equal to $6.25 per
share.
4. This Option shall not be exercisable, except upon the
death or Disability of the Optionee, until after 6 months immediately
following the Effective Date and thereafter shall be exercisable for
any number of shares up to and including the aggregate number of
shares subject to this Option, irrespective of whether the Optionee
is an employee of the Company at the time of any such exercise;
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.
5. The Option may be exercised by the Optionee, in whole
or in part, by giving written notice to the Compensation and Benefits
Department 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 (or to the extent
permitted by the Company, the written instructions referred to in the
last sentence of this section). 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, or
cause to be delivered, to the Optionee certificates for the number of
Option Shares with respect to which the Option has been so exercised.
6. 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 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 in accordance with market
practice. The value of the Common Stock so tendered shall be its
Fair Market Value.
7. The Option shall not be transferable by the Optionee
otherwise than as expressly permitted by the Plan. During the
lifetime of the Optionee, the Option shall be exercisable only by her
or him. No transfer of the Option 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.
8. 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.
9. 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) of the Exchange Act and the rules promulgated
thereunder. 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.
10. Upon the acquisition of any shares pursuant to the
exercise of the Option, 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.
11. 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.
12. Unless otherwise provided herein, every notice
hereunder shall be in writing and shall be delivered by hand or by
registered or certified mail. All notices of the exercise by the
Optionee of any option hereunder shall be directed to R&B Falcon
Corporation, Attention: Benefits and Compensation Department, at the
Company's principal office address from time to time. Any notice
given by the Company to the Optionee directed to him or her at his or
her 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.
13. 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 7, 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.
14. Notwithstanding any of the other provisions hereof,
the Optionee agrees that he or she will not exercise the Option, 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.
15. This Agreement is subject to the Plan, a copy of which
will be provided the to Optionee upon written request. 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.
16. 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 number of Option Shares held by the Participant
hereunder, and the exercise price per share set out in Section 3
above shall be likewise adjusted, to reflect substantially the same
economic equivalent value of the Option Shares to the Participant
prior to any such merger or other business combination. In the event
of a split-off, spin-off or creating of a different class of common
stock of the Company (including, without limitation, a tracking
stock), the Participant shall receive an option to purchase an
equivalent number of the shares of common stock or voting interests
of such separate entity being split-off or spun-off or of the shares
of the new class of common stock of the Company, as if Participant
had owned the shares underlying the Option Shares on the record date
for any such split-off, spin-off or creation of a new class of common
stock of the Company, and the exercise price set out in Section 3
hereof and applicable to the options to purchase shares or the voting
interests of the new entity being split-off or spun-off shall be
adjusted to reflect substantially the same economic equivalent value
of the Option Shares to the Optionee prior to any such split-off,
spin-off or creation of a new class of common stock of the Company
IN WITNESS WHEREOF, this Agreement is effective as of the
11th day of February, 1999.
R&B FALCON CORPORATION
By:_______________________________
Its:_______________________________
OPTIONEE
___________________________________
Robert F. Fulton
Exhibit 10.79
R&B FALCON CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made between
R&B Falcon Corporation, a Delaware corporation ("Company"), and
Andrew Bakonyi ("Optionee") as of February 11, 1999 (the "Effective
Date").
WITNESSETH:
WHEREAS, the Committee which administers the R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan ("Plan") has
selected the Optionee 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. As used herein, the terms set forth below shall have
the following respective meanings:
(a) "Disability" means Disability as defined in the
Employment Agreement; and
(b) "Employment Agreement" means that certain Employment
Agreement dated March 25, 1998 between the Optionee
and the Company.
2. The option awarded hereunder 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.
3. On the terms and subject to the conditions contained
herein, the Company hereby grants to the Optionee an option (the
"Option") for a term of ten years ending on February 11, 2009
("Option Period") to purchase from the Company 90,819 shares ("Option
Shares") of the Company's Common Stock, at a price equal to $6.25 per
share.
4. This Option shall not be exercisable, except upon the
death or Disability of the Optionee, until after 6 months immediately
following the Effective Date and thereafter shall be exercisable for
any number of shares up to and including the aggregate number of
shares subject to this Option, irrespective of whether the Optionee
is an employee of the Company at the time of any such exercise;
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.
5. The Option may be exercised by the Optionee, in whole
or in part, by giving written notice to the Compensation and Benefits
Department 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 (or to the extent
permitted by the Company, the written instructions referred to in the
last sentence of this section). 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, or
cause to be delivered, to the Optionee certificates for the number of
Option Shares with respect to which the Option has been so exercised.
6. 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 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 in accordance with market
practice. The value of the Common Stock so tendered shall be its
Fair Market Value.
7. The Option shall not be transferable by the Optionee
otherwise than as expressly permitted by the Plan. During the
lifetime of the Optionee, the Option shall be exercisable only by her
or him. No transfer of the Option 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.
8. 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.
9. 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) of the Exchange Act and the rules promulgated
thereunder. 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.
10. Upon the acquisition of any shares pursuant to the
exercise of the Option, 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.
11. 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.
12. Unless otherwise provided herein, every notice
hereunder shall be in writing and shall be delivered by hand or by
registered or certified mail. All notices of the exercise by the
Optionee of any option hereunder shall be directed to R&B Falcon
Corporation, Attention: Benefits and Compensation Department, at the
Company's principal office address from time to time. Any notice
given by the Company to the Optionee directed to him or her at his or
her 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.
13. 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 7, 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.
14. Notwithstanding any of the other provisions hereof,
the Optionee agrees that he or she will not exercise the Option, 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.
15. This Agreement is subject to the Plan, a copy of which
will be provided the to Optionee upon written request. 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.
16. 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 number of Option Shares held by the Participant
hereunder, and the exercise price per share set out in Section 3
above shall be likewise adjusted, to reflect substantially the same
economic equivalent value of the Option Shares to the Participant
prior to any such merger or other business combination. In the event
of a split-off, spin-off or creating of a different class of common
stock of the Company (including, without limitation, a tracking
stock), the Participant shall receive an option to purchase an
equivalent number of the shares of common stock or voting interests
of such separate entity being split-off or spun-off or of the shares
of the new class of common stock of the Company, as if Participant
had owned the shares underlying the Option Shares on the record date
for any such split-off, spin-off or creation of a new class of common
stock of the Company, and the exercise price set out in Section 3
hereof and applicable to the options to purchase shares or the voting
interests of the new entity being split-off or spun-off shall be
adjusted to reflect substantially the same economic equivalent value
of the Option Shares to the Optionee prior to any such split-off,
spin-off or creation of a new class of common stock of the Company
IN WITNESS WHEREOF, this Agreement is effective as of the
11th day of February, 1999.
R&B FALCON CORPORATION
By:_______________________________
Its:_______________________________
OPTIONEE
___________________________________
Andrew Bakonyi
Exhibit 10.80
R&B FALCON CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made between
R&B Falcon Corporation, a Delaware corporation ("Company"), and
Bernie Stewart ("Optionee") as of February 11, 1999 (the "Effective
Date").
WITNESSETH:
WHEREAS, the Committee which administers the R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan ("Plan") has
selected the Optionee 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. As used herein, the terms set forth below shall have
the following respective meanings:
(a) "Disability" means Disability as defined in the
Employment Agreement; and
(b) "Employment Agreement" means that certain Employment
Agreement dated March 25, 1998 between the Optionee
and the Company.
2. The option awarded hereunder 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.
3. On the terms and subject to the conditions contained
herein, the Company hereby grants to the Optionee an option (the
"Option") for a term of ten years ending on February 11, 2009
("Option Period") to purchase from the Company 62,251 shares ("Option
Shares") of the Company's Common Stock, at a price equal to $6.25 per
share.
4. This Option shall not be exercisable, except upon the
death or Disability of the Optionee, until after 6 months immediately
following the Effective Date and thereafter shall be exercisable for
any number of shares up to and including the aggregate number of
shares subject to this Option, irrespective of whether the Optionee
is an employee of the Company at the time of any such exercise;
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.
5. The Option may be exercised by the Optionee, in whole
or in part, by giving written notice to the Compensation and Benefits
Department 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 (or to the extent
permitted by the Company, the written instructions referred to in the
last sentence of this section). 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, or
cause to be delivered, to the Optionee certificates for the number of
Option Shares with respect to which the Option has been so exercised.
6. 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 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 in accordance with market
practice. The value of the Common Stock so tendered shall be its
Fair Market Value.
7. The Option shall not be transferable by the Optionee
otherwise than as expressly permitted by the Plan. During the
lifetime of the Optionee, the Option shall be exercisable only by her
or him. No transfer of the Option 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.
8. 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.
9. 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) of the Exchange Act and the rules promulgated
thereunder. 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.
10. Upon the acquisition of any shares pursuant to the
exercise of the Option, 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.
11. 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.
12. Unless otherwise provided herein, every notice
hereunder shall be in writing and shall be delivered by hand or by
registered or certified mail. All notices of the exercise by the
Optionee of any option hereunder shall be directed to R&B Falcon
Corporation, Attention: Benefits and Compensation Department, at the
Company's principal office address from time to time. Any notice
given by the Company to the Optionee directed to him or her at his or
her 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.
13. 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 7, 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.
14. Notwithstanding any of the other provisions hereof,
the Optionee agrees that he or she will not exercise the Option, 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.
15. This Agreement is subject to the Plan, a copy of which
will be provided the to Optionee upon written request. 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.
16. 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 number of Option Shares held by the Participant
hereunder, and the exercise price per share set out in Section 3
above shall be likewise adjusted, to reflect substantially the same
economic equivalent value of the Option Shares to the Participant
prior to any such merger or other business combination. In the event
of a split-off, spin-off or creating of a different class of common
stock of the Company (including, without limitation, a tracking
stock), the Participant shall receive an option to purchase an
equivalent number of the shares of common stock or voting interests
of such separate entity being split-off or spun-off or of the shares
of the new class of common stock of the Company, as if Participant
had owned the shares underlying the Option Shares on the record date
for any such split-off, spin-off or creation of a new class of common
stock of the Company, and the exercise price set out in Section 3
hereof and applicable to the options to purchase shares or the voting
interests of the new entity being split-off or spun-off shall be
adjusted to reflect substantially the same economic equivalent value
of the Option Shares to the Optionee prior to any such split-off,
spin-off or creation of a new class of common stock of the Company
IN WITNESS WHEREOF, this Agreement is effective as of the
11th day of February, 1999.
R&B FALCON CORPORATION
By:_______________________________
Its:_______________________________
OPTIONEE
___________________________________
Bernie Stewart
Exhibit 10.81
R&B FALCON CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made between
R&B Falcon Corporation, a Delaware corporation ("Company"), and W. K.
Hillin ("Optionee") as of February 11, 1999 (the "Effective Date").
WITNESSETH:
WHEREAS, the Committee which administers the R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan ("Plan") has
selected the Optionee 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. As used herein, the terms set forth below shall have
the following respective meanings:
(a) "Disability" means Disability as defined in the
Employment Agreement; and
(b) "Employment Agreement" means that certain Employment
Agreement dated March 25, 1998 between the Optionee
and the Company.
2. The option awarded hereunder 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.
3. On the terms and subject to the conditions contained
herein, the Company hereby grants to the Optionee an option (the
"Option") for a term of ten years ending on February 11, 2009
("Option Period") to purchase from the Company 45,497 shares ("Option
Shares") of the Company's Common Stock, at a price equal to $6.25 per
share.
4. This Option shall not be exercisable, except upon the
death or Disability of the Optionee, until after 6 months immediately
following the Effective Date and thereafter shall be exercisable for
any number of shares up to and including the aggregate number of
shares subject to this Option, irrespective of whether the Optionee
is an employee of the Company at the time of any such exercise;
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.
5. The Option may be exercised by the Optionee, in whole
or in part, by giving written notice to the Compensation and Benefits
Department 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 (or to the extent
permitted by the Company, the written instructions referred to in the
last sentence of this section). 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, or
cause to be delivered, to the Optionee certificates for the number of
Option Shares with respect to which the Option has been so exercised.
6. 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 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 in accordance with market
practice. The value of the Common Stock so tendered shall be its
Fair Market Value.
7. The Option shall not be transferable by the Optionee
otherwise than as expressly permitted by the Plan. During the
lifetime of the Optionee, the Option shall be exercisable only by her
or him. No transfer of the Option 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.
8. 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.
9. 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) of the Exchange Act and the rules promulgated
thereunder. 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.
10. Upon the acquisition of any shares pursuant to the
exercise of the Option, 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.
11. 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.
12. Unless otherwise provided herein, every notice
hereunder shall be in writing and shall be delivered by hand or by
registered or certified mail. All notices of the exercise by the
Optionee of any option hereunder shall be directed to R&B Falcon
Corporation, Attention: Benefits and Compensation Department, at the
Company's principal office address from time to time. Any notice
given by the Company to the Optionee directed to him or her at his or
her 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.
13. 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 7, 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.
14. Notwithstanding any of the other provisions hereof,
the Optionee agrees that he or she will not exercise the Option, 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.
15. This Agreement is subject to the Plan, a copy of which
will be provided the to Optionee upon written request. 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.
16. 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 number of Option Shares held by the Participant
hereunder, and the exercise price per share set out in Section 3
above shall be likewise adjusted, to reflect substantially the same
economic equivalent value of the Option Shares to the Participant
prior to any such merger or other business combination. In the event
of a split-off, spin-off or creating of a different class of common
stock of the Company (including, without limitation, a tracking
stock), the Participant shall receive an option to purchase an
equivalent number of the shares of common stock or voting interests
of such separate entity being split-off or spun-off or of the shares
of the new class of common stock of the Company, as if Participant
had owned the shares underlying the Option Shares on the record date
for any such split-off, spin-off or creation of a new class of common
stock of the Company, and the exercise price set out in Section 3
hereof and applicable to the options to purchase shares or the voting
interests of the new entity being split-off or spun-off shall be
adjusted to reflect substantially the same economic equivalent value
of the Option Shares to the Optionee prior to any such split-off,
spin-off or creation of a new class of common stock of the Company
IN WITNESS WHEREOF, this Agreement is effective as of the
11th day of February, 1999.
R&B FALCON CORPORATION
By:_______________________________
Its:_______________________________
OPTIONEE
___________________________________
W. K. Hillin
Exhibit 10.82
R&B FALCON CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made between
R&B Falcon Corporation, a Delaware corporation ("Company"), and L. E.
Moss ("Optionee") as of February 11, 1999 (the "Effective Date").
WITNESSETH:
WHEREAS, the Committee which administers the R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan ("Plan") has
selected the Optionee 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. As used herein, the terms set forth below shall have
the following respective meanings:
(a) "Disability" means Disability as defined in the
Employment Agreement; and
(b) "Employment Agreement" means that certain Employment
Agreement dated March 25, 1998 between the Optionee
and the Company.
2. The option awarded hereunder 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.
3. On the terms and subject to the conditions contained
herein, the Company hereby grants to the Optionee an option (the
"Option") for a term of ten years ending on February 11, 2009
("Option Period") to purchase from the Company 45,497 shares ("Option
Shares") of the Company's Common Stock, at a price equal to $6.25 per
share.
4. This Option shall not be exercisable, except upon the
death or Disability of the Optionee, until after 6 months immediately
following the Effective Date and thereafter shall be exercisable for
any number of shares up to and including the aggregate number of
shares subject to this Option, irrespective of whether the Optionee
is an employee of the Company at the time of any such exercise;
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.
5. The Option may be exercised by the Optionee, in whole
or in part, by giving written notice to the Compensation and Benefits
Department 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 (or to the extent
permitted by the Company, the written instructions referred to in the
last sentence of this section). 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, or
cause to be delivered, to the Optionee certificates for the number of
Option Shares with respect to which the Option has been so exercised.
6. 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 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 in accordance with market
practice. The value of the Common Stock so tendered shall be its
Fair Market Value.
7. The Option shall not be transferable by the Optionee
otherwise than as expressly permitted by the Plan. During the
lifetime of the Optionee, the Option shall be exercisable only by her
or him. No transfer of the Option 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.
8. 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.
9. 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) of the Exchange Act and the rules promulgated
thereunder. 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.
10. Upon the acquisition of any shares pursuant to the
exercise of the Option, 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.
11. 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.
12. Unless otherwise provided herein, every notice
hereunder shall be in writing and shall be delivered by hand or by
registered or certified mail. All notices of the exercise by the
Optionee of any option hereunder shall be directed to R&B Falcon
Corporation, Attention: Benefits and Compensation Department, at the
Company's principal office address from time to time. Any notice
given by the Company to the Optionee directed to him or her at his or
her 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.
13. 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 7, 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.
14. Notwithstanding any of the other provisions hereof,
the Optionee agrees that he or she will not exercise the Option, 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.
15. This Agreement is subject to the Plan, a copy of which
will be provided the to Optionee upon written request. 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.
16. 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 number of Option Shares held by the Participant
hereunder, and the exercise price per share set out in Section 3
above shall be likewise adjusted, to reflect substantially the same
economic equivalent value of the Option Shares to the Participant
prior to any such merger or other business combination. In the event
of a split-off, spin-off or creating of a different class of common
stock of the Company (including, without limitation, a tracking
stock), the Participant shall receive an option to purchase an
equivalent number of the shares of common stock or voting interests
of such separate entity being split-off or spun-off or of the shares
of the new class of common stock of the Company, as if Participant
had owned the shares underlying the Option Shares on the record date
for any such split-off, spin-off or creation of a new class of common
stock of the Company, and the exercise price set out in Section 3
hereof and applicable to the options to purchase shares or the voting
interests of the new entity being split-off or spun-off shall be
adjusted to reflect substantially the same economic equivalent value
of the Option Shares to the Optionee prior to any such split-off,
spin-off or creation of a new class of common stock of the Company
IN WITNESS WHEREOF, this Agreement is effective as of the
11th day of February, 1999.
R&B FALCON CORPORATION
By:_______________________________
Its:_______________________________
OPTIONEE
___________________________________
L. E. Moss
Exhibit 10.83
R&B FALCON CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made between
R&B Falcon Corporation, a Delaware corporation ("Company"), and C. R.
Ofner ("Optionee") as of February 11, 1999 (the "Effective Date").
WITNESSETH:
WHEREAS, the Committee which administers the R&B Falcon
Corporation 1998 Employee Long-Term Incentive Plan ("Plan") has
selected the Optionee 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. As used herein, the terms set forth below shall have
the following respective meanings:
(a) "Disability" means Disability as defined in the
Employment Agreement; and
(b) "Employment Agreement" means that certain Employment
Agreement dated March 25, 1998 between the Optionee
and the Company.
2. The option awarded hereunder 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.
3. On the terms and subject to the conditions contained
herein, the Company hereby grants to the Optionee an option (the
"Option") for a term of ten years ending on February 11, 2009
("Option Period") to purchase from the Company 32,201 shares ("Option
Shares") of the Company's Common Stock, at a price equal to $6.25 per
share.
4. This Option shall not be exercisable, except upon the
death or Disability of the Optionee, until after 6 months immediately
following the Effective Date and thereafter shall be exercisable for
any number of shares up to and including the aggregate number of
shares subject to this Option, irrespective of whether the Optionee
is an employee of the Company at the time of any such exercise;
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.
5. The Option may be exercised by the Optionee, in whole
or in part, by giving written notice to the Compensation and Benefits
Department 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 (or to the extent
permitted by the Company, the written instructions referred to in the
last sentence of this section). 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, or
cause to be delivered, to the Optionee certificates for the number of
Option Shares with respect to which the Option has been so exercised.
6. 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 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 in accordance with market
practice. The value of the Common Stock so tendered shall be its
Fair Market Value.
7. The Option shall not be transferable by the Optionee
otherwise than as expressly permitted by the Plan. During the
lifetime of the Optionee, the Option shall be exercisable only by her
or him. No transfer of the Option 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.
8. 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.
9. 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) of the Exchange Act and the rules promulgated
thereunder. 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.
10. Upon the acquisition of any shares pursuant to the
exercise of the Option, 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.
11. 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.
12. Unless otherwise provided herein, every notice
hereunder shall be in writing and shall be delivered by hand or by
registered or certified mail. All notices of the exercise by the
Optionee of any option hereunder shall be directed to R&B Falcon
Corporation, Attention: Benefits and Compensation Department, at the
Company's principal office address from time to time. Any notice
given by the Company to the Optionee directed to him or her at his or
her 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.
13. 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 7, 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.
14. Notwithstanding any of the other provisions hereof,
the Optionee agrees that he or she will not exercise the Option, 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.
15. This Agreement is subject to the Plan, a copy of which
will be provided the to Optionee upon written request. 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.
16. 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 number of Option Shares held by the Participant
hereunder, and the exercise price per share set out in Section 3
above shall be likewise adjusted, to reflect substantially the same
economic equivalent value of the Option Shares to the Participant
prior to any such merger or other business combination. In the event
of a split-off, spin-off or creating of a different class of common
stock of the Company (including, without limitation, a tracking
stock), the Participant shall receive an option to purchase an
equivalent number of the shares of common stock or voting interests
of such separate entity being split-off or spun-off or of the shares
of the new class of common stock of the Company, as if Participant
had owned the shares underlying the Option Shares on the record date
for any such split-off, spin-off or creation of a new class of common
stock of the Company, and the exercise price set out in Section 3
hereof and applicable to the options to purchase shares or the voting
interests of the new entity being split-off or spun-off shall be
adjusted to reflect substantially the same economic equivalent value
of the Option Shares to the Optionee prior to any such split-off,
spin-off or creation of a new class of common stock of the Company
IN WITNESS WHEREOF, this Agreement is effective as of the
11th day of February, 1999.
R&B FALCON CORPORATION
By:_______________________________
Its:_______________________________
OPTIONEE
___________________________________
C. R. Ofner
EXHIBIT 10.170
SECOND AMENDMENT TO LETTER OF CREDIT AGREEMENT
SECOND AMENDMENT TO LETTER OF CREDIT AGREEMENT, dated as of
October 22, 1998 (this "Amendment"), among R&B FALCON CORPORATION, a
Delaware corporation (the "Obligor") and CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH (the "Bank"). All capitalized terms used herein and not
otherwise defined shall have the meanings provided such terms in the L/C
Agreement referred to below.
W I T N E S S E T H :
WHEREAS, the Obligor and the Bank are parties to a Letter of
Credit Agreement, dated as of December 30, 1996 (as amended to date, the
"L/C Agreement"); and
WHEREAS, the parties thereto and hereto wish to amend the L/C
Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to L/C Agreement.
1. Section 7.01 of the L/C Agreement is hereby amended by (i)
deleting the word "and" at the end of clause (e) thereof, (ii)
redesignating clause (f) thereof as clause (g) and (iii) inserting the
following new clause (f) immediately following clause (e) thereof:
(f) Indebtedness of Cliffs Drilling acquired pursuant to the
Cliffs Acquisition in an aggregate principal amount not to exceed
$235,000,000, provided that (i) such Indebtedness existed at the
time of the consummation of the Cliffs Acquisition and was not
created in contemplation thereof (and the provisions thereof were
not altered in any material respect in contemplation thereof), (ii)
the Obligor shall have no liability with respect to any such
Indebtedness and (iii) any Liens securing such Indebtedness apply
only to the assets of Cliffs Drilling acquired pursuant to the
Cliffs Acquisition (and no additional assets are granted as security
following, or in contemplation of, the Cliffs Acquisition); and
2. Section 7.04 of the L/C Agreement is hereby amended by (i)
deleting the word "and" at the end of clause (c) thereof, (ii)
redesignating clause (d) thereof as clause (e) and (iii) inserting the
following new clause (d) immediately following clause (c) thereof:
(d) The Obligor and its Subsidiaries may consummate the Cliffs
Acquisition in accordance with the Cliffs Acquisition Documents
delivered to the Administrative Agent prior to the Second Amendment
Effective Date; and
3. Section 7.08 of the L/C Agreement is hereby amended by (i)
deleting the word "and" at the end of clause (iv) thereof and inserting a
comma in lieu thereof and (ii) inserting the following new clause (vi)
immediately following clause (v) thereof:
"and (vi) this Section 7.08 shall not prohibit the restricted
payment provisions contained in the Cliffs Indenture and the Cliffs
Credit Agreement to the extent such restrictions and any exceptions
thereto are not materially altered pursuant to the Cliffs
Acquisition or in anticipation thereof in a manner which would be
adverse to the Bank"
4. Section 7.12 of the L/C Agreement is hereby amended by
inserting the text ",or the Cliffs Indenture or Cliffs Credit Agreement
as in existence on the Second Amendment Effective Date" immediately
following the reference to "Agreement" appearing therein.
5. Section 9 of the L/C Agreement is hereby amended by
inserting the following new definitions in appropriate alphabetical
order:
"Cliffs Acquisition" shall mean the acquisition by a Wholly-
Owned Subsidiary of the Obligor by way of merger of all of the
capital stock of Cliffs Drilling in accordance with the Cliffs
Acquisition Documents.
"Cliffs Acquisition Documents" shall mean the Agreement and
Plan of Merger, dated as of August 21, 1998, among the Obligor, RBF
Cliffs Acquisition Corp. and Cliffs Drilling, and all exhibits,
schedules and ancillary documents thereto.
"Cliffs Credit Agreement" shall mean the Third Restated Credit
Agreement, dated July 29, 1998, among Cliffs Drilling, Cliffs Oil &
Gas Company, Cliffs Drilling International, Inc. and ING (U.S.)
Capital Corporation, as agent for the lenders named therein, as the
same may be amended, modified or supplemented from time to time in
accordance therewith and herewith.
"Cliffs Drilling" shall mean Cliffs Drilling Company, a
Delaware Corporation.
"Cliffs Indenture" shall mean the Indenture, dated as of May
15, 1996, among Cliffs Drilling Company, certain of its
subsidiaries, and Fleet National Bank, as Trustee, governing Cliffs
Drilling's 10.25% Senior Notes due 2003 and each supplemental
indenture executed in connection therewith prior to the date hereof.
"Second Amendment Effective Date" shall mean November 20, 1998.
II Miscellaneous Provisions.
1. In order to induce the Bank to enter into this Amendment,
the Obligor hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Second
Amendment Effective Date both before and after giving effect to this
Amendment; and
(b) all of the representations and warranties contained in the
L/C Agreement and the other Credit Documents are true and correct in
all material respects on the Second Amendment Effective Date both
before and after giving effect to this Amendment, with the same
effect as though such representations and warranties had been made
on and as of the Second Amendment Effective Date (it being
understood that any representation or warranty made as of a specific
date shall be true and correct in all material respects as of such
specific date).
2. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of
the L/C Agreement or any other Credit Document.
3. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered
shall be an original, but all of which shall together constitute one and
the same instrument. A complete set of counterparts shall be lodged with
the Obligor and the Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the
"Second Amendment Effective Date") when each of the Obligor and the Bank
shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Bank at its Notice Office.
6. From and after the Second Amendment Effective Date, all
references in the L/C Agreement and each of the other Credit Documents to
the L/C Agreement shall be deemed to be references to the L/C Agreement
as amended hereby.
* * *
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date
first above written.
R&B FALCON CORPORATION
By:_________________________
Title:
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH
By:_________________________
Title:
By:_________________________
Title:
EXHIBIT 10.171
THIRD AMENDMENT TO LETTER OF CREDIT AGREEMENT
THIRD AMENDMENT TO LETTER OF CREDIT AGREEMENT, dated as of
October 22, 1998 (this "Amendment"), among R&B FALCON CORPORATION, a
Delaware corporation (the "Obligor") and CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH (the "Bank"). All capitalized terms used herein and not
otherwise defined shall have the meanings provided such terms in the L/C
Agreement referred to below.
W I T N E S S E T H :
WHEREAS, the Obligor and the Bank are parties to a Letter of
Credit Agreement, dated as of December 30, 1996 (as amended to date, the
"L/C Agreement"); and
WHEREAS, the parties thereto and hereto wish to amend the L/C
Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to L/C Agreement.
1. Section 1.01(c) of the L/C Agreement is hereby amended by
deleting the reference therein to "$20,000,000" and inserting a reference
to "$10,000,000" in lieu thereof.
2. Section 5.05 of the L/C Agreement is hereby amended by
deleting clause (a) thereof in its entirety and inserting the following
new clause (a) in lieu thereof:
(a) All Letters of Credit issued hereunder shall be used to
provide for the general corporate purposes of the Obligor and its
Subsidiaries; provided that no Letter of Credit shall be issued to
support Indebtedness for borrowed money of the Obligor or any of its
Subsidiaries.
3. Section 7.01 of the L/C Agreement is hereby amended by (i)
deleting the word "and" at the end of clause (f) thereof, (ii)
redesignating clause (g) thereof as clause (h) and (iii) inserting the
following new clause (g) immediately following clause (f) thereof:
(g) Additional senior Indebtedness of the Obligor in an
aggregate principal amount not to exceed $400,000,000 and additional
subordinated Indebtedness of the Obligor in an aggregate principal
amount not to exceed $200,000,000; provided that (i) no respective
issue of Indebtedness incurred pursuant to this clause (g) shall
have any scheduled amortization payments or a final maturity prior
to the fourth anniversary of the initial borrowing of such
respective issue of Indebtedness and (ii) the Obligor shall not make
any optional repayments (whether in cash, securities, or other
property), including any sinking fund or similar deposit, on account
of such Indebtedness; and
4. Section 7.02 of the L/C Agreement is hereby amended by (i)
deleting the word "and" at the end of clause (c) thereof, (ii) deleting
the period at the end of clause (d) thereof and inserting a semi-colon in
lieu thereof and (iii) inserting the following new clauses (e) and (f)
immediately following clause (d) thereof:
(e) the Obligor and its Subsidiaries may pledge assets in
support of Indebtedness permitted by Section 7.01(e), provided that
the aggregate principal amount of Indebtedness secured by Liens
permitted by this clause (e) shall not at any time exceed 15.0% of
the Obligor's Consolidated Net Worth (as defined in the Indenture);
and
(f) the Obligor and its Subsidiaries may pledge the rig RBS8M,
the contract with Shell Deepwater Development Inc. relating to such
rig, the construction contact with respect to such rig and the
insurances maintained on such rig in support of Permitted Project
Debt described in clause (ii) of the definition of Permitted Project
Debt (including any refinancing of such Indebtedness permitted by
clause (iii) of the definition of Permitted Project Debt).
5. Section 7.06 of the L/C Agreement is hereby amended by (i)
deleting the word "and" at the end of clause (b) thereof and inserting a
comma in lieu thereof and (ii) inserting the following new clause (d)
immediately prior to the period at the end of clause (c) thereof:
and (d) Arcade Drilling AS may make share capital distributions to
its shareholders pro rata according to their respective ownership
percentages
6. Section 7.10 of the L/C Agreement is hereby amended by
deleting said section in its entirety and inserting the following new
Section 7.10 in lieu thereof:
7.10. EBITDA Leverage Ratio. The Obligor will not permit its
EBITDA Leverage Ratio as of the end of any fiscal quarter of the
Obligor (calculated quarterly at the end of each fiscal quarter) (x)
ending on or before December 31, 1999, to be greater than 3.75:1.00
and (y) ending thereafter, to be greater than 3.25:1.00. For
purposes of this Section 7.10, "EBITDA Leverage Ratio" shall mean
the ratio of (i) the difference of Funded Debt minus cash and cash
equivalents of the Obligor on a consolidated basis to (ii) EBITDA
for the four fiscal quarters ending on such date; provided that (A)
EBITDA for the period ending on June 30, 1998 shall equal the
product of EBITDA for the six-month period ending on such date times
2 and (B) EBITDA for the period ending on September 30, 1998 shall
equal the product of EBITDA for the nine-month period ending on such
date times 1.33.
7. Section 9 of the L/C Agreement is hereby amended by
deleting the definitions of "Maturity Date" and "Permitted Project Debt"
appearing therein and inserting the following new definitions,
respectively, in lieu thereof:
"Maturity Date" shall mean June 30, 2000.
"Permitted Project Debt" shall mean Indebtedness (including,
without limitation, or duplication, the Guarantee of any such
Indebtedness by the Obligor and, in the case of clause (ii) below,
the issuance by the Obligor or any of its Subsidiaries of a surety
bond in support of any such Indebtedness) incurred in connection
with (i) the construction of Deepwater Pathfinder, Deepwater
Frontier and Drillship III (including, without limitation, the
Loans) by the respective joint venture or Subsidiary owning such
vessel not to exceed $375,000,000 in the aggregate, (ii) the
construction of the rig RBS8M (formerly RBS6) in an aggregate
principal amount not to exceed $250,000,000 and (iii) all
extensions, renewals and replacements of any such Indebtedness
described in clauses (i) and (ii) above by the primary obligor
thereof that do not increase the outstanding principal amount
thereof.
8. Notwithstanding anything to the contrary contained in the
L/C Agreement (including, without limitation, Section 7.08), the
indenture governing the Obligor's $400,000,000 notes offering closing on
or about December 22, 1998 shall be permitted to contain such negative
covenants with respect to Liens and Restricted Payments as the Obligor
deems appropriate to effectuate such notes offering.
II Miscellaneous Provisions.
1. In order to induce the Banks to enter into this Amendment,
the Obligor hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Third
Amendment Effective Date both before and after giving effect to this
Amendment; and
(b) all of the representations and warranties contained in the
L/C Agreement and the other Credit Documents are true and correct in
all material respects on the Third Amendment Effective Date both
before and after giving effect to this Amendment, with the same
effect as though such representations and warranties had been made
on and as of the Third Amendment Effective Date (it being understood
that any representation or warranty made as of a specific date shall
be true and correct in all material respects as of such specific
date).
2. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of
the L/C Agreement or any other Credit Document.
3. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered
shall be an original, but all of which shall together constitute one and
the same instrument. A complete set of counterparts shall be lodged with
the Obligor and the Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the
"Third Amendment Effective Date") when the Obligor and the Bank shall
have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Bank at its Notice Office.
6. From and after the Third Amendment Effective Date, all
references in the L/C Agreement and each of the other Credit Documents to
the L/C Agreement shall be deemed to be references to the L/C Agreement
as amended hereby.
* * * *
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Amendment as of the date first above
written.
R&B FALCON CORPORATION
By:_________________________
Title:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH
By:_________________________
Title:
By:_________________________
Title:
EXHIBIT 10.172
FOURTH AMENDMENT TO LETTER OF CREDIT AGREEMENT
FOURTH AMENDMENT TO LETTER OF CREDIT AGREEMENT, dated as of
January 21, 1999 (this "Amendment"), among R&B FALCON CORPORATION, a
Delaware corporation (the "Obligor") and CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH (the "Bank"). All capitalized terms used herein and not
otherwise defined shall have the meanings provided such terms in the L/C
Agreement.
W I T N E S S E T H :
WHEREAS, the Obligor and the Bank are parties to a Letter of
Credit Agreement, dated as of December 30, 1996 (as amended to date, the
"L/C Agreement"); and
WHEREAS, the parties hereto wish to amend the L/C Agreement as
herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to L/C Agreement.
1. Section 7.01 of the L/C Agreement is hereby amended by (i)
deleting the word "and" at the end of clause (g) thereof, (ii)
redesignating clause (h) thereof as clause (i), (iii) inserting the
following new clause (h) immediately following clause (g) thereof:
(h) Indebtedness of the Obligor (including any extensions or
refinancing thereof, provided that any such refinancing or extension
does not increase the principal amount thereof beyond that
outstanding on the date of such extension or refinancing), the
proceeds of which are used solely to discharge indebtedness of
Cliffs Drilling under the 10.25% senior notes of Cliffs Drilling due
2003, and in an aggregate principal amount not to exceed that
necessary to discharge the portion of such notes required to be
redeemed pursuant to the offer to repurchase made pursuant to the
Cliffs Acquisition; provided that such Indebtedness (or refinancing
thereof, as the case may be) shall (i) be unsecured and subordinate
to the Loans and (ii) shall have a maturity date not earlier than
one year after the Maturity Date (as such term is defined from time
to time), except that such maturity may occur earlier if and to the
extent such maturity results solely in the conversion of such
Indebtedness into, or exchange for, other Indebtedness of the
Obligor, in the same aggregate principal amount, which is unsecured
and subordinated to the Loans and has a maturity date not earlier
than one year after the Maturity Date (as such term is defined from
time to time); and
, and (iv) deleting clause (f) thereof in its entirety and inserting the
following new clause (f) in lieu thereof :
(f) Indebtedness of Cliffs Drilling acquired pursuant to the
Cliffs Acquisition (including any loans made pursuant to unused
revolving commitments) in an aggregate principal amount not to
exceed $235,000,000, provided that (i) such Indebtedness (or
commitments, as the case may be) existed at the time of the
consummation of the Cliffs Acquisition and was not created in
contemplation thereof (and the provisions thereof were not altered
in any material respect in contemplation thereof), (ii) the Obligor
has no liability with respect to any such Indebtedness and (iii) any
Liens securing such Indebtedness apply only to the assets of Cliffs
Drilling acquired pursuant to the Cliffs Acquisition (and no
additional assets are granted as security following, or in
contemplation of, the Cliffs Acquisition), and any extension or
refinancing of such Indebtedness, provided that such extension or
refinancing (x) does not increase the principal amount of such
Indebtedness above the outstanding amount thereof immediately prior
to giving effect to such refinancing, (y) does not have a maturity
date prior to one year after the Maturity Date (as defined from time
to time) and (z) is not secured by any assets not securing the
Indebtedness to be refinanced; and
2. Section 7.06 of the L/C Agreement is hereby amended by (i)
deleting the word "and" appearing at the end of clause (c) thereof and
inserting a comma in lieu thereof and (ii) inserting the following new
clause (e) immediately prior to the period at the end of clause (d)
thereof:
and (e) so long as no Default or Event of Default then exists or
would result immediately after giving effect thereto, the Obligor
may pay dividends on its preferred stock not to exceed a rate
commensurate with a 10% coupon on such preferred stock.
3. Section 7.09 of the L/C Agreement is hereby amended by
deleting said section in its entirety and inserting the following new
Section 7.09 in lieu thereof:
7.09. Tangible Net Worth. The Obligor will not permit at any
time its Tangible Net Worth to be less than $600,000,000 plus (i)
50% of its cumulative Consolidated Net Income, if positive, for the
period from April 1, 1998 through the date of calculation, plus (ii)
100% of any equity issued by the Obligor after the Effective Date;
provided that , for purposes of this Section 7.09, the Cliffs
Acquisition shall be deemed to constitute the issuance by the
Obligor of equity in an amount equal to the increase in the
Obligor's Tangible Net Worth resulting from the Cliffs Acquisition.
4. Section 7 of the L/C Agreement is hereby amended by
inserting the following new Section 7.13:
Section 7.13 Restriction on Certain Debt Payments. The
Obligor shall not repay any indebtedness incurred pursuant to
Section 7.01(h) except out of net proceeds from the issuance by the
Obligor of (i) capital stock permitted to be issued hereunder or
(ii) refinancing Indebtedness permitted pursuant to Section 7.01(h);
provided that, so long as no Default or Event of Default exists or
would result immediately after giving effect to such payment, this
Section 7.13 shall not be deemed to prevent the Obligor from making
regularly scheduled payments of accrued interest on such
Indebtedness.
5. Annex 7.01 of the L/C Agreement is hereby amended by adding
thereto the following item:
"20. Guaranty by R&B dated as of November 28, 1995 in favor of
Deep Sea Investors, L.L.C. with respect to the obligations of
Reading & Bates Drilling Co. under the Memorandum of Agreement
and a charter as of the same date with respect to the
semisubmersible drilling unit M.G Hulme."
6. Annex V of the L/C Agreement is hereby amended by adding
thereto the following item:
"12. Preferred Mortgage on the Jim Cunningham dated November
28, 1995 between Reading & Bates Drilling Co. and Wilmington
Trust Company, as Trustee, for the benefit of Deep Sea
Investors, L.L.C., in connection with item 20 of Schedule
7.01."
II Miscellaneous Provisions.
1. In order to induce the Bank to enter into this Amendment,
the Obligor hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Fourth
Amendment Effective Date both before and after giving effect to this
Amendment; and
(b) all of the representations and warranties contained in the
L/C Agreement and the other Credit Documents are true and correct in
all material respects on the Fourth Amendment Effective Date both
before and after giving effect to this Amendment, with the same
effect as though such representations and warranties had been made
on and as of the Fourth Amendment Effective Date (it being
understood that any representation or warranty made as of a specific
date shall be true and correct in all material respects as of such
specific date).
2. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of
the L/C Agreement or any other Credit Document.
3. This Amendment may be executed in any number of
counterparts and by the parties hereto on separate counterparts, each of
which counterparts when executed and delivered shall be an original, but
all of which shall together constitute one and the same instrument. A
complete set of counterparts shall be lodged with the Obligor and the
Bank.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the
"Fourth Amendment Effective Date") when each of the Obligor and the Bank
shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Bank at its Notice Office.
6. From and after the Fourth Amendment Effective Date, all
references in the L/C Agreement and each of the other Credit Documents to
the L/C Agreement shall be deemed to be references to the L/C Agreement
as amended hereby.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date
first above written.
R&B FALCON CORPORATION
By:_________________________
Title:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH
By:_________________________
Title:
By:_________________________
Title:
EXHIBIT 10.173
FIFTH AMENDMENT TO LETTER OF CREDIT AGREEMENT
FIFTH AMENDMENT TO LETTER OF CREDIT AGREEMENT, dated as of
February 22, 1999 (this "Amendment"), among R&B FALCON CORPORATION, a
Delaware corporation (the "Obligor") and CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH (the "Bank"). All capitalized terms used herein and not
otherwise defined shall have the meanings provided such terms in the L/C
Agreement (as defined below).
W I T N E S S E T H :
WHEREAS, the Bank and the Obligor are parties to a Letter of
Credit Agreement, dated as of December 30, 1996 (as amended to date, the
"L/C Agreement"); and
WHEREAS, the parties thereto and hereto wish to amend the L/C
Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to L/C Agreement and Other Terms.
1. Section 6 of the L/C Agreement is hereby amended by
inserting the following new Section 6.11 immediately following Section
6.10:
6.11 Backstop Letter of Credit. The Obligor agrees that on or
before March 31, 1999, it shall deliver to the Bank, as beneficiary,
an irrevocable sight letter of credit issued by a bank satisfactory
to the Bank and otherwise in form and substance satisfactory to the
Bank, which letter of credit shall support the Obligations of the
Obligor hereunder, with such letter of credit to have an expiry date
not earlier than one month after the Maturity Date.
2. Section 7.01 of the L/C Agreement is hereby amended by (i)
deleting clause (e) thereof in its entirety and inserting the following
new clause (e) in lieu thereof:
(e) Indebtedness of the Obligor created under the R&B Falcon
Credit Agreement in an aggregate principal amount not exceed
$200,000,000.
, (ii) deleting the word "and" at the end of clause (h) thereof, (ii)
redesignating clause (i) thereof as clause (j), and (iii) inserting the
following new clause (i) immediately following clause (h) thereof:
(i) Senior unsecured Indebtedness of the Obligor (including
any refinancing thereof, provided that any such refinancing does not
increase the principal amount thereof beyond that outstanding on the
date of such refinancing) in an aggregate principal amount not to
exceed $350,000,000; provided that such Indebtedness (or refinancing
thereof, as the case may be) shall at all times (i) be unsecured and
(ii) have a maturity date not earlier than one year after the
Maturity Date (as such term is defined from time to time) (except
for any refinancing which results solely in the conversion of such
Indebtedness into, or exchange for, other Indebtedness of the
Obligor, in an aggregate principal amount not to exceed that
outstanding on the date of such refinancing, which is unsecured and
has a maturity date not earlier than one year after the Maturity
Date (as such term is defined from time to time)); and
3. Section 7.11 of the L/C Agreement is hereby amended by (i)
deleting clause (iii) thereof in its entirety and inserting the following
new clause (iii) in lieu thereof:
and (iii) sales of properties and assets which shall not exceed
$50,000,000 in fair market value in the aggregate in any fiscal year
of the Obligor; provided that in addition to the above permitted
asset sales, the Obligor and its Subsidiaries shall be permitted to
sell Non-Core Assets not exceeding $250,000,000 in fair market value
in the aggregate in any fiscal year of the Obligor.
4. Section 7.10 of the L/C Agreement is hereby amended by
deleting said section in its entirety and inserting the following new
Section 7.10 in lieu thereof:
7.10. Interest Coverage Ratio. The Obligor will not permit
its Interest Coverage Ratio at the end of any fiscal quarter of the
Obligor (calculated quarterly at the end of each fiscal quarter of
the Obligor) to be less than (i) at any time prior to January 1,
2000, 1.50:1.00 and (ii) at any time thereafter, 1.75:1.00. For
purposes of this Section 7.10, the "Interest Coverage Ratio" shall
mean the ratio of (x) EBITDA for the four fiscal quarters of the
Obligor ending on such date to (y) Consolidated Interest Expense for
the four fiscal quarters of the Obligor ending on such date.
5. Section 7.13 of the L/C Agreement is hereby amended by
deleting said section in its entirety and inserting the following new
Section 7.13 in lieu thereof:
Section 7.13 Restriction on Certain Debt Payments. The
Obligor shall not (i) repay any indebtedness incurred pursuant to
Section 7.01(h) except out of net proceeds from the issuance by the
Obligor of (x) capital stock permitted to be issued hereunder or (y)
refinancing Indebtedness permitted pursuant to Section 7.01(h);
provided that, so long as no Default or Event of Default exists or
would result immediately after giving effect to such payment, this
Section 7.13(i) shall not be deemed to prevent the Obligor from
making regularly scheduled payments of accrued interest on such
Indebtedness or (ii) make any optional or voluntary payment or
prepayment on or redemption or acquisition for value of, or any
prepayment or redemption as a result of any asset sale, change of
control or similar event of any indebtedness incurred pursuant to
Section 7.01(i).
6. Section 9 of the L/C Agreement is hereby amended by (i)
deleting the definitions of "EBITDA" and "Eurodollar Margin" appearing
therein and (ii) inserting the following new definitions in appropriate
alphabetical order:
"Consolidated Interest Expense" shall mean, for any
period, total interest expense (including that attributable to
Capital Lease Obligations) of the Obligor and its Subsidiaries
in accordance with GAAP (provided that, in any event,
Consolidated Interest Expense shall not include capitalized
interest) on a consolidated basis with respect to all
outstanding Indebtedness of the Obligor 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.
"EBITDA" shall mean, for any period, the sum of
Consolidated Net Income for such period plus the following
expenses or charges to the extent deducted from Consolidated
Net Income in such period: interest, dividends on preferred
stock, taxes, depreciation, depletion and amortization.
Notwithstanding the foregoing, the calculation of EBITDA shall
not take into account any extraordinary gains or losses, any
non-cash items, or any non-recurring gains or charges.
"Non-Core Assets" shall mean (i) the drilling rigs
Seillean, Iolair, Peregrine VI (Hull), Peregrine VIII (Hull)
and Rig 82, (ii) Equipment Packages for Peregrine VI and
Peregrine VIII and (iii) four supply boats located in West
Africa on the Fifth Amendment Effective Date, each as
determined on the Fifth Amendment Effective Date.
"Fifth Amendment" shall mean the Fifth Amendment to this
Agreement, dated as of February 22, 1999.
"Fifth Amendment Effective Date" shall have the meaning
provided in the Fifth Amendment.
7. Notwithstanding anything to the contrary contained in
Section 1.01 of the L/C Agreement or in any other provision thereof, as
of the Fifth Amendment Effective Date, (i) the Bank shall not be required
to issue, nor shall the Obligor be entitled to request, any new Letter of
Credit under the L/C Agreement and (ii) no Letter of Credit outstanding
under the L/C Agreement on the Fifth Amendment Effective Date shall be
extended beyond the then applicable expiry date of such Letter of Credit,
in each case without the express prior written consent of the Bank. In
addition, as of the Fifth Amendment Effective Date, the Unutilized
Commitment shall be deemed to be $0 for all purposes of the L/C Agreement
(including, without limitation, for purposes of Section 2.01(b)).
8. Pursuant to Section 7.12 of the L/C Agreement, the Bank
hereby consents to the Fourth Amendment to the R&B Falcon Credit
Agreement, and the granting of the collateral contemplated therein, in
the form delivered to the Bank prior to the Fifth Amendment Effective
Date.
II Miscellaneous Provisions.
1. In order to induce the Bank to enter into this Amendment,
the Obligor hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Fifth
Amendment Effective Date both before and after giving effect to this
Amendment; and
(b) all of the representations and warranties contained in the
L/C Agreement and the other Credit Documents are true and correct in
all material respects on the Fifth Amendment Effective Date both
before and after giving effect to this Amendment, with the same
effect as though such representations and warranties had been made
on and as of the Fifth Amendment Effective Date (it being understood
that any representation or warranty made as of a specific date shall
be true and correct in all material respects as of such specific
date).
2. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of
the L/C Agreement or any other Credit Document.
3. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered
shall be an original, but all of which shall together constitute one and
the same instrument. A complete set of counterparts shall be lodged with
the Obligor and the Bank.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
5. This Amendment shall become effective as of 12:01 AM (New
York time) on the date (the "Fifth Amendment Effective Date") when (i)
each of the Obligor and the Bank shall have signed a counterpart hereof
(whether the same or different counterparts) and shall have delivered
(including by way of facsimile transmission) the same to the Bank at its
Notice Office, and (ii) the Obligor shall have consummated an issuance of
its convertible preferred stock and received cash proceeds from such
issuance of not less than $250,000,000 less fees and commissions.
6. From and after the Fifth Amendment Effective Date, all
references in the L/C Agreement and each of the other Credit Documents to
the L/C Agreement shall be deemed to be references to the L/C Agreement
as amended hereby.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date
first above written.
R&B FALCON CORPORATION
By:_________________________
Title:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH
By:_________________________
Title:
By:_________________________
Title:
========================================================================
EXHIBIT 10.176
AMENDED AND RESTATED BAREBOAT CHARTER
M. G. HULME, JR.
BETWEEN
DEEP SEA INVESTORS, L.L.C., as OWNER
AND
READING & BATES DRILLING CO., as CHARTERER
========================================================================
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS 1
ARTICLE 2 SCHEDULES AND OBJECTIVES 10
2.1 Schedules 10
2.2 Objectives 11
2.3 Condition of the Property 11
ARTICLE 3 TERM, DELIVERY DATE AND PURCHASE OPTION 12
3.1 Duration 12
3.2 Delivery of the Vessel to the Charterer 13
3.3 Early Termination 13
3.4 Remedies 16
3.5 Redelivery of the Vessel 18
3.6 Survey of the Vessel at End of Charter Period 19
3.7 Purchase Option 20
3.8 Determination of Purchase Option Price 21
ARTICLE 4 NATURE OF COMPENSATION 21
4.1 Absolute Obligation 21
4.2 Net Charter 23
ARTICLE 5 CONDITIONS TO EFFECTIVENESS 23
5.1 Conditions 23
ARTICLE 6 REPRESENTATIONS AND WARRANTIES 25
6.1 Representations and Warranties of the Owner 25
6.2 Representations and Warranties of the Charterer 26
ARTICLE 7 USE AND OPERATION OF THE VESSEL 29
7.1 Use of the Vessel 29
7.2 Manning, etc., of the Vessel 30
7.3 Documentation of the Vessel 30
7.4 General and Particular Average 31
7.5 Site and Access 31
7.6 Owner Liability for Materials Furnished
by the Charterer 31
7.7 Environmental and Related Reporting and Inspection 31
7.8 Notice of Entry 32
ARTICLE 8 MAINTENANCE OF CONDITION AND CLASSIFICATION;
REPAIRS 32
8.1 Maintenance of Classification 32
8.2 Repair 33
8.3 Drydocking or Underwater Survey in Lieu of
Drydocking 33
8.4 Required Survey 33
ARTICLE 9 EQUIPMENT AND STORES 34
9.1 Fuel, etc. 34
9.2 Equipment, etc. 34
9.3 The Charterer's Additional Equipment, etc. 35
9.4 Title to Improvements; Option to Purchase 35
9.5 No Lease of Essential Severables 36
ARTICLE 10 THE CHARTERER'S CHANGES,
ADDITIONS AND REPLACEMENTS 36
10.1 Structural Changes or Alterations;
Installation of Equipment, etc. 36
10.2 Replacement of Parts 37
10.3 Vessel Markings 37
ARTICLE 11 ADDITIONAL COVENANTS 38
11.1 General Covenants 38
11.2 No Impairment 38
11.3 Financial Information 38
11.4 Compliance Certificates 39
11.5 Further Assurances, etc. 40
11.6 Maintenance of Corporate Existence, etc. 40
11.7 Conditions of Consolidation, Merger, etc. 41
11.8 Indemnity of the Owner by Customers for
Oil Pollution and Related Environmental Claims 42
ARTICLE 12 PAYMENTS, INVOICES AND SECURITY 43
12.1 Basic Hire 43
12.2 Supplemental Hire 43
12.3 Payment Terms 44
12.4 Invoices 44
12.5 Security for Obligations 44
ARTICLE 13 GENERAL OBLIGATIONS AND PERFORMANCE 48
13.1 Independent Owner Relationships 48
13.2 Inspection 48
13.3 Performance of the Charterer 48
13.4 Operations Outside of U.S. Waters 49
ARTICLE 14 LIABILITY AND INDEMNITY 49
14.1 Survival of Indemnities 49
14.2 Pollution 49
14.3 The Charterer's Indemnity 50
14.4 Patent Infringement 50
14.5 Both-to-Blame Collision Clause 51
14.6 Liens, Attachments and Encumbrances 51
14.7 Indemnification by the Charterer 52
14.8 The Charterer's Duties to Remove Liens, etc. 52
ARTICLE 15 INSURANCE 53
15.1 The Charterer's Insurance 53
15.2 Nonperformance of Insurance Companies 53
15.3 Subrogation 54
ARTICLE 16 ASSIGNMENT OF CHARTER 54
16.1 Assignment and Subcontract by the Owner 54
16.2 Assignment by the Charterer 54
16.3 Assignment of Subcharter Hire 56
ARTICLE 17 LOSS, TAKING OR SEIZURE 57
17.1 Taking by the U.S. Government 57
17.2 Event of Loss not a Total Loss 57
17.3 Payment of Stipulated Loss Value 58
17.4 Application of Payments 58
17.5 Date of Loss 58
17.6 Effect of Payment of Stipulated Loss Value 59
ARTICLE 18 TAX 59
18.1 Characterization as a Lease 59
18.2 Representations 60
18.3 Tax Indemnity 61
18.4 Payments 63
18.5 Records 63
ARTICLE 19 GENERAL 64
19.1 Notices 64
19.2 Expenses 65
19.3 The Owner's Right to Perform for the Charterer 66
19.4 Waivers 66
19.5 Entire Agreement 66
19.6 Successors and Assigns 66
19.7 Law 66
19.8 Parties' Intention 67
19.9 Counterparts; Uniform Commercial Code 68
19.10 Warranty of Authority 68
19.11 Usage; Headings 68
19.12 Waiver of Jury Trial 68
19.13 Venue; Service of Process 69
19.14 Agent for Service of Process 69
SIGNATURES 70
Schedule A Description of Vessel M. G. Hulme, Jr., Including
Specifications
Schedule B-1 First Upgrade Program
Schedule B-2 Second Upgrade Program
Schedule C Charterer's Insurance
Schedule D Stipulated Loss Value
Schedule E Pending Litigation
Schedule F Computation of Basic Hire Upgrade Adjustment
===========================================================================
AMENDED AND RESTATED BAREBOAT CHARTER
"M.G. HULME, JR."
This Amended and Restated Bareboat Charter dated as of July 23,
1997 is between Deep Sea Investors, L.L.C., a Delaware limited liability
company (the "Owner"), and Reading & Bates Drilling Co., an Oklahoma
corporation, as the Charterer (the "Charterer");
W I T N E S S E T H:
WHEREAS, the Charterer and the Owner have entered into the
Bareboat Charter dated as of November 28, 1995 (the "Original Agreement")
under which the Owner as the owner of the Vessel M.G. HULME, JR. (as
described hereunder at Schedule A (the "Vessel") chartered such Vessel to
the Charterer on a bareboat basis to conduct drilling activities;
WHEREAS, with the concurrence of the Owner and the Charterer,
the Vessel is undergoing an upgrade;
WHEREAS, the Charterer desires to continue to charter the
Vessel as upgraded, and the Charterer and the Owner have agreed to amend
and restate the Original Agreement in accordance with the terms and
conditions set forth herein;
NOW, THEREFORE, the parties hereto, each in consideration of
the promises and agreements of the other, hereby amend and restate the
Original Agreement in its entirety as follows:
ARTICLE 1
DEFINITIONS
When used in this Charter (in addition to the terms defined elsewhere in
this Charter), the following terms shall have the following meanings:
"Additional Collateral" has the meaning assigned to such term in
Section 12.5(a).
"Adequate Provision" means, with respect to any Lien, claim,
liability or other obligation, the posting with or for the benefit
of the Owner Group, of a bond or letter of credit issued by a bank,
surety or other similar institution acceptable to the Owner or other
collateral acceptable to the Owner, in each case, pursuant to
documentation in form and substance acceptable to the Owner, having
a face amount or fair market value no less than the amount owed
under such Lien, claim, liability or other obligation.
"Affiliate(s)" in relation to a party hereto, means any person
controlling, controlled by or under common control with such party,
with the concept of control in such context meaning the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of another, whether through
the ownership of voting securities, by contract or otherwise.
"Appraisal Procedure" means the procedure specified in the
succeeding sentences for determining an amount or value. If either
the Owner or the Charterer shall give written notice to the other
requesting determination of such amount or value by appraisal, the
Owner and the Charterer shall consult for the purpose of appointing
a mutually acceptable qualified independent appraiser. If such
parties shall be unable to agree on an appraiser within 20 days of
the giving of such notice, such amount or value shall be determined
by a panel of three independent appraisers, one of whom shall be
selected by the Charterer, another of whom shall be selected by the
Owner and the third of whom shall be selected by the American
Arbitration Association (or its successor) if such other two
appraisers shall be unable to agree upon a third appraiser within 10
days of the selection date of the second of such two appraisers;
provided, that if (a) either party shall not select its appraiser
within 35 days after giving of such notice, such amount or value
shall be determined solely by the appraiser selected by the other
party, and (b) if both parties shall not select their respective
appraisers within such period, such amount or value shall be
determined solely by an appraiser selected by the American
Arbitration Association (or its successor). The appraiser or
appraisers appointed pursuant to the foregoing procedure shall be
instructed to determine such amount or value within the lesser of:
(i) 45 days after such appointment and (ii) the applicable period
remaining until delivery of such appraisal is required under this
Charter and the Charter Documents; and such determination shall be
final and binding upon the parties. If three appraisers shall be
appointed, the determination of the appraiser that shall differ most
from the other two appraisers shall be excluded, the remaining two
determinations shall be averaged and such average shall constitute
the determination of the appraisers. The Charterer shall pay all
fees and expenses relating to an appraisal for any purpose under
this Charter.
"Basic Hire" means the charter hire amount payable on the Payment
Dates as set forth in Section 12.1.
"Business Day" means any day on which commercial banks are open for
business in New York City, New York.
"Charter" means this Bareboat Charter as it may from time to time be
supplemented, amended, waived or modified in accordance with the
terms hereof.
"Charter Documents" means this Charter, the Guaranty, the Security
Documents, the Upgrade Documents and any other document, instrument
or agreement executed in connection herewith or therewith.
"Charter Period" means, collectively, the Primary Term and, if any,
the Extended Term.
"Charterer" means Reading & Bates Drilling Co., an Oklahoma
corporation, and its successors and assigns to the extent permitted
by the terms hereof.
"Charterer Group" means, individually and collectively, the
Charterer and its subsidiaries, its and their co-venturers,
contractors and subcontractors and its and their Affiliates, and the
employees, invitees and insurers of all of those entities, but shall
expressly exclude the Owner Group.
"Code" means the United States Internal Revenue Code of 1986, as
amended, and any amending or superseding tax laws of the United
States of America.
"Contractor" means Ham Marine, Inc., a Mississippi corporation, and
any other Person performing all or any part of the Second Upgrade
Program.
"Cunningham Mortgage" means the Preferred Ship Mortgage dated as of
November 28, 1995 made by the Charterer in favor of the Trustee
covering the Jim Cunningham, as amended by the First Supplement to
Preferred Ship Mortgage dated as of July ___, 1997, and any other
amendment, supplement or modification thereof entered into in
accordance with the term thereof or hereof.
"Crude Oil" means any hydrocarbon product that is in liquid form at
surface temperature and pressure, including condensate.
"Debt" means, for any Person (without duplication), whether recourse
is to all or a portion of the assets of such Person and whether or
not contingent, (a) every obligation of such Person for money
borrowed, (b) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) every
reimbursement obligation of such Person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the
account of such Person, (d) every obligation of such Person issued
or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business), (e) every obligation of such
Person under a lease that under generally accepted accounting
principles is required to be capitalized on the balance sheet of
such Person, (f) every obligation under any charter, operating lease
or title retention arrangement with an original term in excess of
one year or which is renewable at the option of the tenant for a
total term of one year or more, (g) the maximum fixed redemption or
repurchase price of redeemable stock of such Person that by its
terms or otherwise is required to be redeemed, if any, at the time
of determination plus accrued but unpaid dividends, and (h) every
obligation of the type referred to in clauses (a) through (g) of
another Person and all dividends of another Person the payment of
which, in either case, such Person has guaranteed or is responsible
or liable for, directly or indirectly, as obligor, guarantor or
otherwise.
"Default" means any event or condition which after notice or lapse
of time or both would become an Event of Default.
"Delivery Date" means November 29, 1995.
"Drilling Contracts" means any contractual arrangement with respect
to the Vessel providing for the use or employment of the Vessel for
the locating of, drilling for, development of, extraction of or
processing of Crude Oil, Natural Gas or mineral deposits found in
underwater locations, and activities ancillary thereto.
"Escalated" means, with respect to any amount and as at any date of
determination, such amount as multiplied by a fraction (a) the
numerator of which is the Consumer Price Index - U.S. Average as
published by the Bureau of Statistics of the Department of Labor (or
if the publication of the Consumer Price Index is discontinued, a
comparable index similar in nature to the discontinued index which
clearly reflects the change in the real value of the purchasing
power of the Dollar as reasonably selected by the Owner (hereafter
in this definition referred to as the "index")) reported for the
calendar year immediately preceding such date and (b) the
denominator of which is equal to the index reported for 1995.
"Event of Default" means any of the events defined as such in
Section 3.3(b).
"Event of Loss" means any of the following events: (a) the actual
or constructive loss of the Vessel for the lesser of (i) six (6)
months (or such longer period of up to 12 months from the date of
such loss so long as the Charterer shall have made arrangements
within such six (6) month period for the repair and restoration of
the Vessel satisfactory to the Owner and the Independent Engineer
and is diligently proceeding with such repair and restoration) or
(ii) the remainder of the Charter Period, (b) the loss, theft or
destruction of the Vessel, (c) damage or destruction of the Vessel
or damage to the Vessel to such extent as shall make repair thereof
uneconomical or other event resulting in the Vessel's being
permanently rendered unfit for normal use for any reason whatsoever,
other than obsolescence, or (d) the condemnation, confiscation,
requisition, seizure, forfeiture or other taking of title to or use
of the Vessel (except that, in the case of a taking of title, or
taking of use by the United States Government, a period equal to the
lesser of (i) six (6) months and (ii) the then remaining term of the
Charter Period shall have elapsed from the date of such taking), in
each case as determined by the Owner.
"Expiration Date" means the last day of the Primary Term.
"Extended Term" has the meaning assigned to such term in Section
3.1(b).
"Fair Market Sale Value" means, for any property, the cash sale
value of such property that would be obtained in an arm's-length
transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer-user (other
than a person currently in possession or a used equipment dealer),
which determination shall be made (a), in the case of the Vessel,
without deduction for any costs of removal of the Vessel from the
location of current use and in the case of the First Upgrade
Severables without deduction for the cost of removal or delivery,
and (b) on the assumption that such property is free and clear of
all liens, charges and encumbrances and, in the case of the Vessel
is in the condition and repair in which it is required to be
returned pursuant to Section 3.5 hereof (but otherwise on an "as-is"
basis).
"First Upgrade Maintenance" means that portion of the improvements
contemplated by the First Upgrade Program that constitutes ordinary
and usual maintenance as more fully described on Schedule B-1.
"First Upgrade Nonseverables" means that portion of the improvements
contemplated by the First Upgrade Program that is not readily
removable without causing material damage to the Vessel as more
fully described on Schedule B-1.
"First Upgrade Program" means the upgrade of the Vessel from its 850
meter water capacity to 1,000 meters as more fully described in the
First Upgrade Contract, any other Upgrade Documents related thereto
and the plans, specifications and schedules set forth on Schedule B-
1.
"First Upgrade Severables" means that portion of the improvements
contemplated by the First Upgrade Program that is readily removable
from the Vessel without causing material damage to the Vessel as
more fully described on Schedule B-1.
"Guarantor" means Reading & Bates Corporation, a Delaware
corporation, or any other Person that guarantees or provides
collateral or other credit support for the obligations of the
Charterer hereunder.
"Guaranty" shall mean the Guaranty entered into by any Guarantor for
the benefit of the Owner, as the same may from time to time be
supplemented, amended, waived or modified in accordance with the
terms thereof.
"Highest Lawful Rate" means the maximum nonusurious contract rate of
interest permitted by applicable law.
"Hire" means Basic Hire and Supplemental Hire, collectively.
"Income Taxes" means all income, franchise or similar Taxes which
are based on, or measured by or with respect to, net income.
"Indemnitee" has the meaning assigned to such term in Section 14.3.
"Independent Engineer" means Barnett & Casbarian, or any other
Person selected by the Owner and approved by the Charterer, which
approval shall not be unreasonably withheld or delayed.
"Investor" means each of GATX Marine Investors Corporation, MDFC
Equipment Leasing Corporation, Heller Financial Leasing, Inc. and
their respective successors and assigns.
"Jim Cunningham" means the drilling rig Jim Cunningham, official
number 651643.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease,
right, security interest or claim of any nature.
"Limited Liability Company Agreement" means the Amended and Restated
Limited Liability Company Agreement dated as of July ___, 1997 among
GATX Marine Investors Corporation, MDFC Equipment Leasing
Corporation, and Heller Financial Leasing, Inc. creating the Owner.
"MOA" means the Memorandum of Agreement dated as of November 28,
1995 between Reading and Bates, Inc. and the Owner.
"Moody's" means Moody's Investor Service, Inc., a New York
corporation, and its successors and assigns.
"Mortgages" means the Cunningham Mortgage and any other mortgage
that may from time to time secure the Obligations.
"Natural Gas" means any mixture of hydrocarbons or of hydrocarbons
and noncombustible gases, in a gaseous form at surface temperature
and pressure, which consists essentially of methane, but includes
ethane, propane, butanes, and other liquefiable hydrocarbons.
"1954 Code" means the United States Internal Revenue Code of 1954,
as amended and in effect prior to the enactment of the Tax Reform
Act of 1986 (Pub. L. No. 99-514).
"Nonseverables" means improvements, modifications and additions to
the Vessel that are not readily removable without causing damage to
the Vessel or that in accordance with applicable statutes, orders,
cases, rules, regulations and other laws may not be removed from the
Vessel.
"Obligations" means the obligations of the Obligors under the
Charter Documents.
"Obligors" means, collectively, the Charterer and each Guarantor.
"Operating Area" means any area in which the Charterer shall operate
the Vessel with notice to the Owner pursuant to Section 13.4.
"Overdue Rate" means an interest rate per annum equal to the lesser
of (a) the Prime Rate plus four percent (4%) per annum and (b) the
Highest Lawful Rate.
"Owner" means Deep Sea Investors, L.L.C., a limited liability
company organized under the laws of the State of Delaware.
"Owner Group" means, individually and collectively, the Owner and
its subsidiaries, its and their co-venturers and contractors and
subcontractors and the Investors, its and their respective
Affiliates (other than the Charterer), and its and their
shareholders, directors, officers, attorneys, accountants,
consultants and representatives, the employees, insurers and
invitees of all of those entities, the Trustee and the Vessel, but
shall expressly exclude Charterer Group.
"Owner Liens" means Liens described in clause (b) of the definition
of Permitted Liens.
"Owner's Cost" means, as of any date, the sum of (a) the purchase
price of the Vessel, (b) the First Upgrade Nonseverable Cost and (c)
the Second Upgrade Cost.
"Payment Date" means each date that is a monthly anniversary date of
the calendar day immediately before the Delivery Date (such monthly
date being deemed for this purpose to be the day of each succeeding
month corresponding to such date immediately before the Delivery
Date or, if such month does not have a corresponding day, the last
day of such month), up to and including the end of the Charter
Period.
"Permitted Liens" means, as of any date, (a) any lien arising out of
a claim for crew's wages, supplies or the like, or salvage not
covered by insurance, or for taxes, assessments or other
governmental charges, in each case, incurred in the ordinary course
of business, and in existence as of the date of determination for
not more than 30 days and, as of the date of determination, neither
overdue nor in the aggregate in excess of $1,000,000 unless such are
being contested in good faith and by appropriate Persons and
proceedings, in each case, in the Owner's judgment and unless
Adequate Provision has been provided by the Charterer for payment of
such amounts that may become due and payable and such Lien attaches
only to such Adequate Provision and not to the Vessel, any part
thereof or any Drilling Contract and, in the Owner's judgment, no
risk of forfeiture or other loss of the Vessel, any part thereof, or
any right of the Charterer or the Owner under any Drilling Contract,
exists, or is threatened or imminent; (b) any lien created by,
through or under the Owner as a result of claims against the Owner
for which the Owner is not entitled to indemnification from the
Charterer or any Guarantor, or discharge of which is not the
obligation of the Charterer or any Guarantor, whether at law, by
contract, in equity or under admiralty principles; and (c) Drilling
Contracts complying with the provisions of this Charter and the
other Charter Documents and the rights of the Charterer under this
Charter, including subcharters of the Vessel in accordance with the
terms of this Charter, provided that no such contracts, rights or
subcharters shall suffer or permit to be continued any Lien or
encumbrance incurred by Charterer or any subcharterer or any of
their agents which might have priority over the title and interest
of the Owner in the Vessel or any part thereof or equipment or other
property used in connection with the Vessel.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock
company, trust or unincorporated organization or any government or
any agency or any political subdivision thereof.
"Primary Term" has the meaning assigned to such term in Section
3.1(a).
"Prime Rate" means the per annum rate of interest published from
time to time in the Eastern edition of The Wall Street Journal,
which rate shall change with each published change in such rate,
effective as of the date of such publication.
"Purchase Option Price" means the Fair Market Sale Value of the
Vessel determined in accordance with Section 3.8, not to exceed 40%
of Owner's Cost.
"Randolph Yost" means the Randolph Yost, Official Number 601699, and
all fixtures, equipment and improvements of any kind whatsoever
installed or located thereon and owned by the Charterer.
"Rated Securities" means the implied long-term senior unsecured debt
of Reading & Bates.
"Reading & Bates" means Reading & Bates Corporation, a Delaware
corporation.
"Rights Assignment" has the meaning assigned to such term in Section
16.3.
"Sale Date" means the date, if any, on which the Charterer acquires
the Vessel by exercise of its purchase option granted pursuant to
Section 3.7.
"Second Upgrade Agreement" means the Upgrade Agreement dated July __
and effective as of April 22, 1997 between the Owner and R&B
Drilling, individually and as agent.
"Second Upgrade Contract" means the Ship Repair Agreement dated as
of April 22, 1997 between Ham Marine, Inc., a Mississippi
corporation, and the Charterer.
"Second Upgrade Cost" means an amount not to exceed (i)
$25,346,756.15 to be paid under the Second Upgrade Agreement plus
(ii) any amounts authorized by the Owner to be paid to construct the
Second Upgrade Program.
"Second Upgrade Default" means the occurrence of an Upgrade Event of
Default (as defined in the Second Upgrade Agreement).
"Second Upgrade Program" means the upgrade of the Vessel from its
current 1,000 meter water capacity to 4,000 feet as more fully
described in the Second Upgrade Agreement, any other Upgrade
Documents (as defined in the Second Upgrade Agreement) and the
plans, specifications and schedules set forth on Schedule B-2.
"Second Upgrade Severables" means the severables acquired in
connection with the Second Upgrade Program.
"Security Agreement" means the Security Agreement dated November 28,
1995 between the Owner and the Trustee, as amended by the First
Amendment to Security Agreement dated as of July ___, 1997 between
the Owner and the Trustee, as such agreement may be further amended,
supplemented or modified in accordance with the terms thereof and
hereof.
"Security Documents" means the Mortgages, the Security Agreement,
and any other agreement, instrument or document executed and
delivered for the purpose of supporting or securing the Obligations.
"Severables" means improvements, modifications or additions to the
Vessel that are readily removable without causing damage to the
Vessel and may, in accordance with all applicable statutes, orders,
cases, rules, regulations and other laws, be removed from the
Vessel.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-
Hill Companies, Inc., a New York corporation, and its successors and
assigns.
"Shipping Act, 1916" shall mean the United States Shipping Act,
1916, as amended.
"Shipyard" means Ham Marine, Inc.'s shipyard in Pascagoula,
Mississippi.
"Stipulated Loss Value" as of any Payment Date listed by number in
Schedule D hereto means an amount determined by multiplying Owner's
Cost by the percentage set forth in Schedule D opposite such Payment
Date number.
"Subsidiary" means for any Person, any other corporation,
partnership, joint venture, limited liability company or other
entity at least a majority of the voting stock of which is
beneficially owned, directly or indirectly by such Person or its
Subsidiaries.
"Substitute Collateral" has the meaning assigned to such term in
Section 12.5(d).
"Supplemental Hire" shall mean any and all amounts, liabilities and
obligations other than Basic Hire that the Charterer assumes or
agrees to pay hereunder to the Owner, including, without limitation,
Stipulated Loss Value and indemnity payments.
"Taxes" means all federal, foreign, state, local or other net or
gross income, gross receipts, sales, use, stamp, documentary,
transfer, general consumption, ad valorem, property, value added,
franchise, production, import, export, withholding, payroll,
employment, excise or similar taxes, assessments, duties, fees,
levies or other governmental charges, including without limitation,
license, recording, documentation and registration fees, together
with any interest thereon, any penalties, additions to tax or
additional amounts with respect thereto and any interest in respect
of such penalties, additions or additional amounts.
"Third Parties" means all persons and entities that are not
Charterer Group or Owner Group.
"Timely Liquidation Value" means, for any property, the cash sale
value of such property that would be obtained in an arm's-length
transaction between a seller that must sell such property in no more
than 90 days and an informed and willing buyer-user, which
determination shall be made with a deduction for the removal of the
property from its location and on the assumption that such property
is in its current actual condition, which condition shall reflect
its current physical condition and location and any applicable
legal, governmental, physical, contractual and other impediments to
sale or use.
"Trustee" means Wilmington Trust Company not in its individual
capacity but solely as trustee for the benefit of the Owner under
the Mortgages and any of its successors or assigns in such capacity.
"UCC" means the Uniform Commercial Code as enacted in the State of
New York.
"Upgrade Documents" has the meaning assigned to such term in the
Second Upgrade Agreement.
"Upgrade Programs" means, collectively, the First Upgrade Program
and the Second Upgrade Program.
"Vessel" means the M. G. HULME, JR., as described on Schedule A, as
upgraded pursuant to the Upgrade Programs, and all fixtures,
equipment and improvements of any kind whatsoever installed or
located thereon pursuant to this Charter (including, without
limitation, the First Upgrade Severables and the Second Upgrade
Severables) or as otherwise agreed to by the Charterer and the
Owner.
ARTICLE 2
SCHEDULES AND OBJECTIVES
2.1 Schedules
The following schedules are attached hereto and made a part hereof
for all purposes. In the event there are any conflicts between the
body of this Charter and the schedules attached hereto, the
provisions in the body of this Charter will prevail.
(a) Schedules
Schedule A - Description of the Vessel, including
specifications.
Schedule B-1 - First Upgrade Program
Schedule B-2 - Second Upgrade Program
Schedule C - Charterer's Insurance
Schedule D - Stipulated Loss Value
Schedule E - Pending Litigation
Schedule F - Computation of Basic Hire Adjustment for Second
Upgrade
2.2 Objectives
The Owner shall provide the Vessel to the Charterer on a bareboat or
demise charter basis. The Owner shall not be responsible for any
other service, manning, operations or equipment whatsoever. By the
Owner providing the Vessel to the Charterer in accordance with this
Charter, upon the terms and subject to the conditions hereof, the
Charterer shall take and have command, possession and control of the
Vessel during the term of this Charter; as a part hereof, and
without limit to the foregoing, the Charterer's command, possession
and control of the Vessel shall specifically include the obligation
to have the Vessel under the command of an Offshore Installation
Manager certified by and for the area in which the Vessel is
operating from time to time.
2.3 CONDITION OF THE PROPERTY. THE CHARTERER ACKNOWLEDGES AND AGREES
THAT IT IS CHARTERING THE VESSEL AND OTHER PROPERTY HEREUNDER "AS
IS", "WHERE IS", AND "WITH ALL FAULTS, WHETHER LATENT OR
DISCERNIBLE", WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS
OR IMPLIED) BY THE OWNER, OWNER GROUP OR ANY INVESTOR AND IN EACH
CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF
ANY PARTIES IN POSSESSION THEREOF, (C) ALL APPLICABLE LEGAL
REQUIREMENTS AND (D) VIOLATIONS OF LEGAL REQUIREMENTS WHICH MAY
EXIST ON THE DATE HEREOF. NONE OF OWNER, ANY MEMBER, OWNER GROUP,
OR ANY INVESTOR HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY
REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) OR SHALL
BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE, VALUE,
HABITABILITY, USE, SEAWORTHINESS, CONDITION, STABILITY, SUITABILITY,
DESIGN, OPERATION, CLASS, COMPLIANCE WITH LAWS, CONFORMANCE TO
SPECIFICATIONS, MERCHANTABILITY OR FITNESS FOR USE OF ANY PROPERTY
(OR ANY PART THEREOF FOR A PARTICULAR PURPOSE OR WITH RESPECT TO
PATENT INFRINGEMENT), OR ANY OTHER REPRESENTATION, WARRANTY OR
COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY
PROPERTY (OR ANY PART THEREOF), AND NONE OF OWNER, OWNER GROUP OR
ANY INVESTOR SHALL BE LIABLE FOR ANY LATENT, HIDDEN OR PATENT DEFECT
THEREIN, ANY REPRESENTATION, WARRANTY OR PROMISE, EXPRESS OR
IMPLIED, WHICH ANY MANUFACTURER OR BUILDER OF THE VESSEL OR ANY
PROPERTY (OR ANY PART THEREOF) MAY HAVE MADE OR MAY BE DEEMED TO
HAVE MADE OR THE FAILURE OF ANY PROPERTY, OR ANY PART THEREOF, TO
COMPLY WITH ANY LEGAL REQUIREMENT OR ANY DAMAGES, WHETHER ACTUAL,
SPECIAL, CONSEQUENTIAL OR INCIDENTAL, ARISING HEREFROM OR THEREFROM.
THE CHARTERER HAS BEEN AFFORDED FULL OPPORTUNITY TO INSPECT THE
VESSEL, IS (INSOFAR AS THE OWNER IS CONCERNED) SATISFIED WITH THE
RESULTS OF ITS INSPECTIONS AND IS ENTERING INTO THIS CHARTER SOLELY
ON THE BASIS OF THE RESULTS OF ITS OWN INSPECTIONS, AND ALL RISKS
INCIDENT TO THE MATTERS DESCRIBED IN THE PRECEDING SENTENCE, AS
BETWEEN OWNER, THE OWNER GROUP AND THE INVESTORS, ON THE ONE HAND,
AND THE CHARTERER, ON THE OTHER HAND, ARE TO BE BORNE BY THE
CHARTERER. NOTHING IN THIS SECTION 2.3 OR THE CHARTER SHALL OPERATE
TO NEGATE OR DIMINISH ANY CLAIM FOR BREACH OF ANY REPRESENTATION,
WARRANTY OR COVENANT THAT THE OWNER MAY NOW OR HEREAFTER HAVE UNDER
ANY CHARTER DOCUMENT OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED
THEREBY.
ARTICLE 3
TERM, DELIVERY DATE AND PURCHASE OPTION
3.1 Duration
(a) Subject to the terms and conditions of this Charter, the Owner
bareboat (demise) charters to the Charterer, and the Charterer
bareboat (demise) charters from the Owner, the Vessel for a
period beginning on the Delivery Date and ending on the 10th
anniversary of the Delivery Date (the "Primary Term"), with the
option to extend this Charter pursuant to Section 3.1(b).
(b) At the end of the Primary Term, and subject to the terms and
conditions of this Charter, the term of this Charter may be
extended for a period of 90 days (the "Extended Term") by the
Charterer providing 180 days' written notice to the Owner prior
to the end of the Primary Term if, and only if, such extension
is necessary to complete a Drilling Contract in progress that
is in full force and effect on the date such extension notice
is delivered and no Default or Event of Default has occurred
and is continuing. The Charterer, at its sole cost and
expense, shall provide the Owner with independent verification
of the necessity of any such extension in form and substance
satisfactory to the Owner. During such Extended Term, if any,
all of the obligations of the Charterer under this Charter
during the Charter Period shall continue for the Extended Term,
including, without limitation, the obligation to pay Basic Hire
under Section 12.1. Prior to any extension of the Primary
Period for the Vessel, the Charterer shall give the Owner its
good faith estimate of the date on which the existing Drilling
Contract will be completed.
(c) The Charterer shall, at all reasonable times during the last
180 days of the Charter Period, permit access to the Vessel to
the Owner and to Persons designated by the Owner in connection
with any prospective sale or prospective rechartering of the
Vessel by the Owner, and shall permit the inspection of the
Vessel by such Persons; provided, however, that the exercise of
such rights shall in no way unreasonably interfere with the use
of the Vessel by the Charterer.
3.2 Delivery of the Vessel to the Charterer
The Vessel was delivered by the Owner to the Charterer at Garden
Banks Block 387, Outer Continental Shelf, Gulf of Mexico on November
29, 1995, pursuant to the MOA. Upon such delivery, the Vessel
became subject to all the terms and conditions of this Charter.
Such delivery of the Vessel by the Owner to the Charterer, without
further action, irrevocably constituted acceptance by the Charterer
of the Vessel for all purposes of this Charter, and shall be
conclusive proof that the Vessel was at such time in compliance with
all requirements of this Charter and that the Vessel was at such
time seaworthy, in accordance with specifications, in good working
order, condition and repair and without defect or inherent vice in
title, condition, design, operation or fitness for use, whether or
not discoverable by the Charterer as of the date hereof, and free
and clear of all Liens, other than Permitted Liens; provided,
however, that nothing contained herein shall in any way diminish or
otherwise affect any right the Charterer, the Owner or any of their
respective Affiliates may have against any shipyard, manufacturer,
supplier, vendor or any other Person in respect of the Vessel. FROM
AND AFTER THE DELIVERY DATE, THE CHARTERER SHALL NOT BE ENTITLED TO
MAKE OR ASSERT ANY CLAIM AGAINST OWNER, THE OWNER GROUP OR ANY
INVESTOR ON ACCOUNT OF ANY REPRESENTATION OR WARRANTY WITH RESPECT
TO THE VESSEL, THE CONSUMABLE STORES ON BOARD OR WITH RESPECT TO ITS
TITLE, SEAWORTHINESS, MERCHANTABILITY, FITNESS, HABITABILITY, VALUE,
USE, CONDITION, SUITABILITY, CLASS, COMPLIANCE WITH LAWS, DESIGN,
OPERATION, CONFORMANCE TO SPECIFICATIONS NOR ABSENCE OF DEFECTS,
LATENT, HIDDEN, PATENT OR OTHER, NOR WITH RESPECT TO PATENT
INFRINGEMENT. FROM AND AFTER THE DELIVERY DATE, THE CHARTERER
WAIVES ANY CLAIM IT MIGHT HAVE AGAINST OWNER, THE OWNER GROUP OR ANY
INVESTOR FOR ANY LIABILITY, CLAIM, LOSS, DAMAGE OR EXPENSE OF ANY
KIND OR NATURE BY OR WITH RESPECT TO THE VESSEL OR ANY DEFICIENCY OR
DEFECT THEREIN OR INADEQUACY THEREOF, THE USE OR MAINTENANCE
THEREOF, ANY INTERRUPTION OR LOSS OF SERVICE OR USE THEREOF, WHETHER
IN CONTRACT, TORT OR ANY THEORY OF PRODUCT OR STRICT LIABILITY.
3.3 Early Termination
This Charter shall terminate in accordance with any notice of
termination given in accordance with this Section 3.3. This Charter
shall also terminate at the time stipulated below for any of the
following reasons:
(a) At the option of the Owner, this Charter shall terminate
immediately and upon written notice to the Charterer if any
Event of Loss occurs and upon such termination the Charterer
shall pay the Owner on the earlier of (i) the receipt of any
insurance payable in respect of such Event of Loss and (ii) 60
days after the occurrence of such Event of Loss, the Stipulated
Loss Value of the Vessel set forth on Schedule D as of the
Payment Date preceding the occurrence of such Event of Loss
plus any past due Hire, plus the sum of the per diem of the
Basic Hire due on the next Payment Date, for each day during
the period from the next preceding Payment Date to the date of
such Event of Loss (unless the Event of Loss shall occur on a
Payment Date, in which case, such payment shall be equal to the
Stipulated Loss Value on such Payment Date plus any Hire due on
such Payment Date), in each case, together with interest
thereon computed from the date of such Event of Loss to the
date of actual payment at a rate per annum equal to the Overdue
Rate. If the time of such loss be uncertain, the loss shall be
deemed to have occurred as of the time at which communication
from the Vessel was last heard. It is expressly understood
that the Charterer shall bear all risk of any such loss.
(b) Each of the following events shall be an "Event of Default":
(i) the Charterer shall fail to pay the Owner any amounts due
and payable hereunder when due; or
(ii) the Charterer shall fail to perform any of its obligations
under Article 5, Sections 7.3, 10.1, 11.1(a), 11.6, 11.7,
11.8, 12.5, 13.4, or 14.6, Article 15, Section 17.3 or
Article 18 hereof or any other obligation as to which the
Charterer is specifically accorded elsewhere herein or
otherwise any notice and/or grace period in which to
perform such obligation or to cure such breach thereof or
default therein and such notice shall have been given
and/or such grace period shall have expired without cure
of such failure; or
(iii) any Obligor shall fail to perform any of its
obligations hereunder or under any Charter Document (other
than those specified in Section 3.3(a) or (b)(i)) which is
not cured within the lesser of (A) 10 days or (B) the then
remaining term of the Charter Period of the occurrence
thereof; or
(iv) any representation, warranty or statement made or deemed
made by any Obligor in any Charter Document or information
furnished by or on behalf of any Obligor in any
instrument, certificate or other document delivered by or
on behalf of any Obligor shall be untrue in any material
respect on the date made or deemed made; or
(v) (i) any Obligor shall fail to pay any principal of or
premium or interest on any Debt (excluding Debt under this
Charter) of such Obligor under which any aggregate amount
of at least $1,000,000 is outstanding or committed, when
the same becomes due and payable, and such failure shall
continue after any applicable grace period; or (ii) any
other event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and
shall continue after any applicable grace period, if the
effect of such event or condition results in the
acceleration of, the maturity of such Debt; or any such
Debt shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled
required prepayment), redeemed, purchased or defeased, or
an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case, prior to the
stated maturity thereof; or legal action shall be taken
with respect to such other event (including, but not
limited to, the commencement of proceedings seeking
specific performance or injunctive or other equitable
relief); or
(vi) any Obligor shall generally not pay its debts as such
debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or voluntarily or
involuntarily dissolves or is dissolved, or terminates or
is terminated; or any proceeding shall be instituted by or
against such Person or any of its subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or
its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for
it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain
undismissed or unstayed for a period of 30 days, or any of
the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or
the appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of
its property) shall occur; or any such Person or any of
its subsidiaries shall take any corporate or other
organizational action to authorize any of the actions set
forth above in this subsection (vi); provided, however,
that nothing contained in this Section 3.3(b)(vi) or
otherwise shall be deemed to limit, restrict or prohibit
Owner in any manner from intervening in any such
proceeding described above and enforcing any of its rights
and remedies whether under this Charter or any of the
Charter Documents, at law, in admiralty or equity or
otherwise; or
(vii) a judgment or order for the payment of money in the
amount of at least $1,000,000 or more shall be rendered
against any Obligor and either (i) enforcement proceedings
shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 10
consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(viii) any provision of this Charter or any Charter Document
shall at any time for any reason cease to be valid and
binding on any Obligor, or shall be declared to be null
and void, or the validity or enforceability thereof shall
be contested by any Obligor, or any Obligor shall deny
that it has any or further liability or obligation under
this Charter or any Charter Document; or
(ix) failure of any Obligor to comply with, or to incur any
liability, whether fixed or contingent, under or pursuant
to, any statute, law, regulation or other governmental
requirement to which such Obligor is subject, including
but not limited to ERISA, the Oil Pollution Act of 1990
("OPA") and any other environmental, health or safety law
or regulation, in each case, which might reasonably be
expected to have a material adverse effect on the
condition (financial and otherwise), business prospects or
the ability of such Obligor to perform its obligations
under the Charter Documents; or
(x) any Lien securing the Obligations shall fail to be
perfected, valid or enforceable, or any material adverse
effect shall occur respecting the value or suitability as
collateral of any property encumbered by such Lien (unless
the Charterer shall have provided Substitute Collateral in
accordance with Section 12.5(c)), including, without
limitation, any levy, attachment or seizure thereof or,
subject to Section 12.5, the Lien securing the Obligations
under the Cunningham Mortgage shall fail to be a first
priority preferred ship mortgage at any time after
December 31, 1997; or
(xi) the Completion (as defined in the Second Upgrade
Agreement) shall not occur on or before September 30,
1997; or
(xii) a Second Upgrade Default shall occur and be continuing.
3.4 Remedies
Upon the occurrence and during the continuation of any Event of
Default, the Owner may, at its option, declare this Charter to be in
default; and at any time thereafter, the Owner may do, and the
Charterer shall comply with, one or more of the following, as the
Owner in its sole discretion shall elect:
(a) Upon written demand (which demand shall have the effect of
terminating all of the Charterer's rights to use or possess the
Vessel or act as agent under the Upgrade Programs), the Owner
may cause the Charterer to, and the Charterer hereby agrees
that it will, at the Charterer's sole cost and expense,
promptly redeliver the Vessel, or cause the Vessel to be
redelivered, to the Owner with all reasonable dispatch and in
the same manner and in the same condition as if the Vessel were
being redelivered at the expiration of the Charter Period in
accordance with all of the provisions of Section 3.5, and all
obligations of the Charterer under said Section shall apply to
such redelivery; or the Owner or its agent, at the Owner's
option, without further notice, may, but shall be under no
obligation to, retake the Vessel wherever found, whether upon
the high seas or at any port, harbor or other place and
irrespective of whether the Charterer, any subcharterer or any
other person may be in possession of the Vessel, all without
prior demand and without legal process, and for that purpose
the Owner or its agent may enter upon any dock, pier or other
premises where the Vessel may be and may take possession
thereof, without the Owner or its agent incurring any liability
by reason of such retaking, whether for the restoration of
damage to property caused by such retaking or for damages of
any kind to any Person for or with respect to any cargo carried
or to be carried by the Vessel or for any other reason.
Henceforth, the Owner shall hold, possess and enjoy the Vessel,
free and clear of any right of the Charterer or its successors
or assigns to possess or use the Vessel for any reason
whatsoever. The exercise by the Owner of its remedies under
this paragraph (a) shall be without prejudice, and in addition,
to any of the Owner's other remedies referred to in this
Charter or any of the other Charter Documents or at law, in
admiralty or equity.
(b) The Owner, by written notice to the Charterer specifying a
payment date not less than 10 days, nor more than 30 days,
after the date of such notice, may require the Charterer to pay
to the Owner, and the Charterer hereby agrees that it will pay
to the Owner, on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a penalty
and in lieu of any further Basic Hire payments hereunder, an
amount equal to all unpaid Basic Hire payable on each Payment
Date occurring on or before the payment date specified in such
notice, plus the Stipulated Loss Value computed as of the
Payment Date preceding the payment date specified in such
notice plus the sum of the per diem of the Basic Hire due on
the next Payment Date for each day during the period from the
next preceding Payment Date to the date of such Event of Loss
(or as of such payment date specified in such notice if such
payment date specified in such notice is a Payment Date),
together with interest on such amounts at the Overdue Rate for
the period, if any, from the Payment Date as of which such
Stipulated Loss Value is calculated to and including the date
of actual payment. Upon such payment of liquidated damages,
the Owner shall pay over to the Charterer the net proceeds of
any sale, charter or other disposition of the Vessel as and
when received but only after deducting all costs and expenses
whatsoever incurred by the Owner in connection therewith, to
the extent such net proceeds do not exceed the amount of such
Stipulated Loss Value actually so paid. Nothing contained in
the preceding sentence or otherwise shall require the Owner to
sell, charter or otherwise dispose of the Vessel at any time.
(c) The Owner may exercise any other right or remedy that may be
available to it under applicable law, in equity or admiralty or
proceed by appropriate court action to enforce the terms of
this Charter or to recover damages for the breach hereof or to
terminate this Charter.
(d) The Owner or its agent may sell the Vessel at public or private
sale, with or without notice to the Charterer, advertisement or
publication, as the Owner may determine, or otherwise may
dispose of, hold, possess, use, operate, charter (whether for a
period greater or less than the balance of what would have been
the Charter Period in the absence of the termination of the
Charterer's rights to the Vessel) to others or keep idle the
Vessel, all on such terms and conditions and at such place or
places as the Owner may determine and all free and clear of any
rights of the Charterer and of any claim of the Charterer in
admiralty, in equity, at law or by statute, whether for loss or
damage or otherwise, and without any duty to the Charterer
except to the extent provided in paragraph (b) above. The
Charterer and the Owner agree that 10 days' written notice of
the sale to be made by the Owner or its designee or after the
time in which a private sale shall occur is commercially
reasonable notice for all purposes.
In addition, the Charterer shall be liable for any and all
Supplemental Hire payable hereunder before, during or after the
exercise of any of the foregoing remedies and for all insurance
premiums and all demurrage, docking and anchorage charges and all
legal fees and any other costs and expenses whatsoever incurred by
the Owner or any Investor by reason of the occurrence of any Event
of Default or by reason of the exercise by the Owner of any right or
remedy hereunder, including, without limitation, any costs and
expenses incurred by the Owner in connection with any retaking of
the Vessel or, upon the redelivery or retaking of the Vessel in
accordance with this Section 3.4, the placing of the Vessel in the
condition required by and otherwise complying with the terms of
Section 3.5 hereof. No right or remedy referred to in this Section
3.4 is intended to be exclusive, but each shall be cumulative and is
in addition to, and may be exercised concurrently with, any other
right or remedy which is referred to in this Section 3.4 or which
may otherwise be available to the Owner at law, in equity or in
admiralty, including without limitation the right to terminate this
Charter. There shall be deducted from the aggregate amount so
recoverable by the Owner, the net balance, if any, remaining of any
monies held by the Owner which would have been required by the terms
hereof to have been paid to the Charterer but for the occurrence of
an Event of Default. The rights of the Owner and the obligations of
the Charterer under this Section 3.4 shall be effective and
enforceable regardless of the pendency of any proceeding which has
or might have the effect of preventing the Owner or the Charterer
from complying with the terms of this Charter. No express or
implied waiver by the Owner of any Event of Default shall in any way
be, or be construed to be, a waiver of any further or subsequent
Event of Default. To the extent permitted by applicable law, the
Charterer hereby waives any rights now or hereafter conferred by
statute or otherwise which may require the Owner to sell, charter or
otherwise use the Vessel in mitigation of the Owner's damages.
3.5 Redelivery of the Vessel
Upon termination of this Charter, the Charterer shall, at its sole
cost and expense not to exceed $2,500,000 as Escalated, redeliver
the Vessel to the Owner at an anchorage of the Owner's choice. The
Charterer shall notify the Owner in writing at least 360 days prior
to the expiration of the Charter Period of the location in which the
Vessel will be operating at the expiration of the Charter Period.
The Charterer agrees that at the time of such redelivery the Vessel
shall be free and clear of all Liens (other than Owner Liens), shall
be entitled to and shall have the classification and rating required
by Section 8.1, with no requirements, specifications or
recommendations of the American Bureau of Shipping or of any
governmental agency or department unfulfilled and with all required
certificates in effect, shall be in compliance with all laws,
conventions, treaties and customs and rules and regulations issued
thereunder or applicable in any way to the Vessel or any use or
operation thereof, shall be free of any insignia of the Charterer or
others, shall be charter free, cargo free, safely afloat, securely
moored, free of charge and be in the same good order and condition
as described in the third sentence of Section 3.2, but with the
Upgrade Programs completed and as required by Section 8.1, ordinary
wear and tear excepted; provided however, that in the event that the
Owner elects not to exercise its option to purchase Severables
(other than Second Upgrade Severables) acquired after the Delivery
Date pursuant to Section 9.4, the Charterer shall redeliver the
Vessel to the Owner with Severables comparable to the Severables
aboard the Vessel when the Vessel was delivered to the Charterer
pursuant to Section 3.2 and Severables comparable to the Second
Upgrade Severables. Any Coast Guard certificates required to be
issued annually with respect to the Vessel shall have been issued
within 12 months of the date of redelivery of the Vessel. At the
time and place of redelivery of the Vessel, the Charterer shall also
deliver to the Owner all documentation, plans, drawings,
specifications, logbooks, classification and inspection, records,
operating manuals, records of modification, overhaul, use and/or
maintenance and other warranties and documents then in its
possession or control which were furnished by the manufacturers or
builders of the Vessel, the Upgrade Programs or any other upgrade of
the Vessel or any supplier of equipment on the Vessel or otherwise
maintained by the Charterer. Upon redelivery of the Vessel
hereunder, the Charterer, if requested in writing by the Owner, will
arrange for, at the Charterer's cost and expense, docking or
appropriate anchorage or storage facilities for the Vessel for a
period not exceeding 150 days, including, but not limited to, any
crew, staffing, materials, fuel or other costs or expenses incurred
to stack the Vessel with full marine and maintenance crews.
3.6 Survey of the Vessel at End of Charter Period
At least 120 days before redelivery of the Vessel pursuant to
Section 3.5, but sufficiently in advance of such redelivery date to
permit any needed repairs to be completed by such redelivery date, a
joint survey shall be made by the Charterer and the Owner (with
drydocking or underwater survey in lieu of drydocking and bottom
painting, unless the Owner shall otherwise agree in writing) to
determine the condition and fitness of the Vessel, during which
survey the Vessel's tanks shall be gas-freed and the Vessel's
engines and boilers opened for inspection; the redelivery survey
shall meet all requirements of the next special survey of the
Vessel, provided that if a special survey of the Vessel has been
made, pursuant to the provisions of Article 8, within 30 months
prior to such redelivery, the records of such special survey shall
be taken into account in determining the scope of the joint survey
required pursuant to this Section 3.6. If requested by the Owner, a
surveyor from the American Bureau of Shipping shall be present and
the Charterer shall permit such surveyor to examine all areas of
hull and items of machinery and other parts of the Vessel. The
Charterer will pay for the costs of such survey, drydocking or
underwater survey in lieu of drydocking and bottom painting and the
Charterer shall notify the Owner at least 10 days in advance of the
time and place of such drydocking or underwater survey in lieu of
drydocking, bottom painting and survey. The Charterer, at its sole
cost and expense, will fully correct and repair any condition
disclosed by such survey to the extent necessary to cause the
Vessel, on or before the date specified for redelivery, to comply
with all of the terms of Section 8.1. The term of the Charter
Period shall be extended for any period necessary (a) so as to
permit the survey described in this Section 3.6 to occur at least
120 days before redelivery of the Vessel pursuant to Section 3.5
whether as a result of this Vessel's use in completing a Drilling
Contract in progress under Section 3.1(b) or otherwise; and (b) to
make such repairs. During such extension period, if any, all of the
obligations of the Charterer under this Charter applicable during
the Charter Period shall continue in respect of such extension
period. Upon redelivery of the Vessel under this or the preceding
paragraph, the Charterer, if requested in writing by the Owner, will
provide docking or appropriate anchorage or storage facilities for
the Vessel (if available at the designated port) for a period not
exceeding 150 days at the Charterer's cost and expense, including,
but not limited to, any crew, staffing, materials, fuels or other
cost or expense to stack the Vessel with full marine and maintenance
crews.
3.7 Purchase Option.
No more than 540, but no less than 360 days prior to the Expiration
Date, the Charterer may, so long as no Default or Event of Default
has occurred and is continuing, give the Owner irrevocable written
notice (the "Expiration Date Election Notice") that the Charterer
elects to exercise its option to purchase the Vessel (except for the
First Upgrade Severables). If the Charterer elects to exercise such
option, then the Charterer shall pay to the Owner on the Expiration
Date an amount in immediately available funds equal to the Purchase
Option Price and, upon receipt of such amount plus all other amounts
payable under this Charter and the other Charter Documents, the
Owner shall transfer all of the Owner's right, title and interest in
the Vessel (except for the First Upgrade Severables), such transfer
shall be "AS IS", "WHERE IS", without recourse and without any
representation or warranty of any kind or nature whatsoever, either
express or implied (except for the absence of Liens arising as a
result of claims against the Owner for which the Owner is not
entitled to indemnification from the Charterer or any Guarantor or
the payment or discharge of which is not the obligation of the
Charterer or any Guarantor), in the then-current physical condition
of the Vessel and without any other representation or warranty on
the part of, or recourse to, the Owner.
3.8 Determination of Purchase Option Price
During the period from the delivery of the Expiration Date Election
Notice to the Owner until 210 days prior to the Sale Date, the
Charterer and the Owner may mutually agree on the Fair Market Sale
Value of the Vessel as of the Sale Date, and if the Charterer and
the Owner fail to so agree, such Fair Market Sale Value shall be
determined not less than 90 days before the Sale Date by application
of the Appraisal Procedure.
ARTICLE 4
NATURE OF COMPENSATION
4.1 Absolute Obligation
The obligation of the Charterer to pay to the Owner the fees, rates,
hires, indemnities and reimbursements specified in this Charter
shall be absolute and unconditional and shall not be affected by any
circumstance whatsoever, and the Charterer waives (and agrees not to
allege or pursue) any right to any such defense, including without
limitation, (a) any setoff, counterclaim, abatement, reduction,
recoupment, defense, or other right that the Charterer may have
against the Owner or any other Person, firm, company, or entity for
any reason whatsoever; (b) any unavailability of the Vessel after
its delivery to the Charterer for any reason; (c) any damage, loss
or destruction of or damage to the Vessel or interruption,
restriction, interference, or cessation in the use or possession
thereof by the Charterer for any reason whatsoever, at whatever time
and of whatever duration; (d) any confiscation, expropriation,
nationalization, requisition, seizure, inability to export,
deprivation, or other taking of title to or possession or use of the
Vessel or any part thereof by any government or governmental
authority or otherwise; (e) any restriction on possession or use of
the Vessel; (f) the interference with or prohibition of the
Charterer's possession or use of the Vessel; (g) any invalidity or
unenforceability or lack of due authorization or other infirmity of
this Charter or the lack of right, power or authority of any Obligor
or the Owner to enter into this Charter or any Charter Document;
(h) any default by the Owner; (i) any defect in the title,
condition, quality or fitness for a particular purpose of the Vessel
or other property or service provided hereunder; (j) any amendment
or modification of or supplement to the Charter Documents, any
agreements relating to any thereof or any other instrument or
agreement applicable to the Vessel or any part thereof, or any
assignment or transfer of any thereof, or any furnishing or
acceptance of additional security, or any release of any security,
or any failure or inability to perfect any security; (k) any failure
on the part of the Owner, the Owner Group or any Investor or any
other Person to perform or comply with any term of any instrument or
agreement; (l) any waiver, consent, change, extension, indulgence or
other action or inaction under or in respect of any such instrument
or agreement or any exercise or nonexercise of any right, remedy,
power or privilege under or in respect of any such instrument or
agreement or this Charter; (m) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation,
or similar proceeding with respect to any Obligor, the Owner, the
Owner Group or any Investor, or their respective properties or
creditors, or any action taken by any trustee or receiver or by any
court in any such proceeding, including, without limitation, any
termination or rejection of this Charter by any court or any
trustee, receiver or liquidating agent of any Obligor, the Owner
Group, any Investor, or the Owner or of any of their respective
properties in connection with any such proceeding; (n) any
assignment or other transfer of this Charter by the Charterer or the
Owner or any lien, charge or encumbrance on or affecting the
Charterer's estate in, or any subchartering of, all or any part of
the Vessel; (o) any libel, attachment, levy, detention,
sequestration or taking into custody of the Vessel, or any
interruption or prevention of or restriction on or interference with
the use or possession of the Vessel; (p) any act, omission or breach
on the part of the Owner under this Charter or under any other
agreement at any time existing among the Owner or any Obligor or
under any other law, governmental regulation or other agreement
applicable to such Persons or the Vessel; (q) any claim as a result
of any other dealing between the Owner and any Obligor; (r) any
ineligibility of the Vessel, or any denial of the Vessel's right, to
engage in any trade or activity; (s) any failure to obtain any
required governmental consent for any transfer of rights or title
required to be made by the Owner under this Charter; (t) any
ineligibility of the Vessel for documentation under the laws of any
jurisdiction; (u) the recovery of any judgment against any Person or
any action to enforce the same; (v) any defect in the seaworthiness,
condition, design, operation or fitness for use or other
characteristics of the Vessel; (w) any change in the ownership,
direct or indirect, of the capital stock of the Owner or any of the
Obligors; or (x) any other cause, circumstance, or happening,
whether similar or dissimilar to the foregoing, any present or
future law to the contrary notwithstanding and whether or not any
Obligor could have foreseen or shall have notice or knowledge of any
of the foregoing. Except as specifically provided herein, the
Charterer hereby waives any and all rights that it may now have or
which at any time hereafter may be conferred upon it, by statute, at
law, in admiralty or equity or otherwise, to terminate, cancel, quit
or surrender this Charter.
All payments hereunder shall be final and, once paid, be fully and
finally earned and nonrefundable, and the Charterer shall not seek
to recover all or any part of such payment from the Owner for any
reason whatsoever.
The Charterer shall remain obligated under this Charter in
accordance with its terms and shall not take any action to
terminate, rescind or avoid this Charter, notwithstanding any action
for bankruptcy, insolvency, reorganization, liquidation,
dissolution, or other proceeding affecting the Owner, any
governmental authority or any other Person, or any action with
respect to this Charter or any Charter Document which may be taken
by any trustee, receiver or liquidator of the Owner, any
governmental authority or any other Person or by any court with
respect to the Owner or any governmental authority. The Charterer
hereby waives all right (i) to terminate or surrender this Charter
or (ii) to avail itself of any abatement, suspension, deferment,
reduction, setoff, counterclaim or defense with respect to any
amount payable hereunder. The Charterer shall remain obligated
under this Charter in accordance with its terms and the Charterer
hereby waives any and all rights now or hereafter conferred by
statute, at law, in admiralty or equity or otherwise to limit or
modify any of the Owner's rights or remedies or any of the
Charterer's rights, remedies, obligations or liabilities as
described in this Charter or any Charter Document (such waiver to
include, without limitation, any and all rights and remedies against
a lessor under Article 2A of the UCC or to avoid strict compliance
with its obligations under this Charter).
4.2 Net Charter
This Charter is a net Charter and it is intended that the Charterer
shall pay all costs, charges, fees, assessments, expenses, duties
and taxes of every character incurred in connection with the
delivery, storage, use, possession, operation, maintenance, repair,
chartering, recovery, retaking, and return of the Vessel, including
without limitation those described elsewhere in this Charter. The
parties intend that the obligations of the Charterer hereunder shall
be covenants and agreements that are separate and independent of the
Owner's obligations hereunder or hereafter arising or existing and
shall continue unaffected.
ARTICLE 5
CONDITIONS TO EFFECTIVENESS
5.1 Conditions
This Charter shall become effective upon (i) receipt by the Owner of
each of the documents described in subsections (a) through (k)
below, in form and substance satisfactory to the Owner and each
Investor, and (ii) satisfaction of each of the other conditions set
forth in subsections (l) through (p) below in a manner satisfactory
to the Owner and each Investor in all respects.
(a) This Charter duly executed by Charterer.
(b) A confirmation of Guaranty duly executed by Reading & Bates in
form and substance satisfactory to the Owner.
(c) A First Supplement to Preferred Mortgage, duly executed by
Charterer, mortgaging the Jim Cunningham in form and substance
satisfactory to the Owner.
(d) A First Supplement to Security Agreement duly executed by
Charterer in form and substance satisfactory to the Owner.
(e) Duly executed Officers' Certificates, dated as of the Closing
Date, from an executive officer and the Secretary or Assistant
Secretary of each of the Charterer and Reading & Bates
(collectively, the "R&B Companies") certifying copies of
resolutions of each of the R&B Companies approving this Charter
and the other Charter Documents to which each is a party and
authorizing the transactions contemplated herein and therein,
duly adopted at a meeting of, or by the unanimous written
consent of, the Board of Directors of each corporation, and the
articles or certificates of incorporation and by-laws of the
R&B Companies, as in effect at such time.
(f) An original executed opinion dated the Closing Date from Wayne
K. Hillin, General Counsel to the R&B Companies, setting forth
customary opinions regarding (i) the R&B Companies' due
organization, valid existence, good standing, corporate power
and authority, (ii) the legal, valid and binding nature of this
Charter and the other Charter Documents, (iii) the absence of
violations of, or conflicts with, laws, corporate
organizational and governance documents or other agreements,
(iv) the absence of any required consents, and (v) such other
matters as the Owner may reasonably require be addressed. In
addition, such opinion shall also opine that no consent or
approval of the U.S. Department of Transportation Maritime
Administration, the United States Coast Guard or any other
entity having jurisdiction over the Vessel, the Collateral
Vessels or any of the R&B Companies is required in order to
consummate the transactions contemplated hereby or by any of
the other Charter Documents.
(g) An original executed opinion from Baker & Botts, L.L.P.,
counsel to the Owner, regarding (i) the legal, valid and
binding nature of this Charter and certain other Charter
Documents and (ii) certain tax matters.
(h) UCC financing statements, duly executed by Charterer, as
required by the Owner to perfect the security interest granted
under the Security Agreement, to be filed with the appropriate
filing offices.
(i) An appraisal report for the Vessel in form and substance
satisfactory to the Owner.
(j) A certificate of insurance for the Vessel and a detailed
written report signed by an independent marine insurance
broker, evidencing compliance with the insurance requirements
set forth in the Charter.
(k) A duly executed Second Upgrade Agreement.
(l) No loss, constructive loss or requisitioning for use by any
governmental authority of the Vessel shall have occurred.
(m) No change shall have occurred in applicable law or regulations
thereunder or in interpretations thereof by any regulatory
authority which would make it illegal for the Charterer, the
Owner or any Investor to enter into any of the transactions
contemplated in the Charter Documents or which would subject
the Charterer, the owner or any Investor to any penalty or
other liability as a result of any transaction contemplated in
any of the Charter Documents.
(n) No material adverse change shall have occurred in the physical
condition of the Vessel since December 31, 1995.
(o) All governmental and regulatory approvals, licenses and
authorizations necessary or, in the opinion of the Owner, the
Investors or their respective counsel, advisable in connection
with the transactions contemplated in the Charter Documents
shall have been duly received or obtained.
(p) The Owner's determination that, since December 31, 1996, no
material adverse change has occurred with respect to the
financial or other condition of Charterer or Reading & Bates.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of the Owner.
To induce the Charterer to enter into this Charter and to consummate
the transactions contemplated hereby, the Owner represents and
warrants to the Charterer that as of the date of execution of this
Charter:
(a) Organization and Good Standing. The Owner is a limited
liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) Authority. The Owner has taken all action required by Delaware
law, and by the Limited Liability Company Agreement to
authorize the execution and delivery of this Charter. This
Charter constitutes the legal, valid and binding obligation of
the Owner, enforceable against the Owner in accordance with its
terms, subject to bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors'
rights and by general principles of equity. Neither the
execution and delivery of this Charter nor will the
consummation of the transactions by it in accordance with the
terms hereof: (i) violate or conflict with any provision of
the Limited Liability Company Agreement of the Owner, or (ii)
violate or conflict with any provision of any law, rule,
regulation, order, permit, certificate, writ, judgment,
injunction, decree, determination, award or other decision of
any court, government, government agency or instrumentality,
domestic or foreign, or arbitrator binding upon the Owner,
which violation or conflict is reasonably likely to prevent the
Owner's performance of its obligations hereunder.
Neither the execution and delivery of this Charter nor the
consummation of the transactions contemplated hereby will
result in a breach of, or constitute a default (or with notice
or lapse of time or both result in a breach of or constitute a
default) under or otherwise give any person the right to
terminate any mortgage, indenture, loan or credit agreement,
lease, license, contract or any other agreement or instrument
to which the Owner is a party or by which it or any of its
properties is bound or affected.
(c) EXCEPT AS EXPRESSLY SET OUT IN THIS SECTION 6.1, OWNER
EXPRESSLY DISCLAIMS ANY EXPRESS OR IMPLIED REPRESENTATIONS OR
WARRANTIES, INCLUDING WITHOUT LIMITATION, SEAWORTHINESS,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR WITH
RESPECT TO PATENT INFRINGEMENT, VALUE, USE, CONDITION,
SUITABILITY, CLASS, OPERATION, COMPLIANCE WITH LAWS, DESIGN,
CONFORMANCE WITH SPECIFICATIONS, OR ABSENCE OF DEFECTS, HIDDEN,
PATENT, LATENT OR OTHER.
6.2 Representations and Warranties of the Charterer.
To induce the Owner to enter into this Charter and to consummate the
transactions contemplated hereby, the Charterer represents and
warrants to the Owner that as of the date of execution of this
Charter:
(a) Organization and Good Standing. The Charterer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Oklahoma and is duly qualified or licensed
and in good standing as a foreign corporation in each other
jurisdiction in which it owns or leases any facility or
property or has any office, or in which the character of its
business or operations requires such qualification or
licensing, in each case related to the subject matter of this
Charter or any of the Charter Documents.
(b) Authority. The Charterer has taken all action required by law,
its Certificate of Incorporation, as amended, and its By-Laws
to authorize the execution and delivery of this Charter and
each of the Charter Documents to which it is a party. This
Charter and each of the Charter Documents to which it is a
party constitute the legal, valid and binding obligations of
the Charterer, enforceable against the Charterer in accordance
with their respective terms, subject to bankruptcy, insolvency
or similar laws of general application relating to the
enforcement of creditors' rights and by general principles of
equity. Neither the execution and delivery of this Charter or
any of the Charter Documents, nor will the consummation of the
transactions by it in accordance with the terms hereof or
thereof: (i) violate or conflict with any provision of its
Certificate of Incorporation or By-Laws, (ii) violate or
conflict with any provision of any law, rule, regulation,
order, permit, certificate, writ, judgment, injunction, decree,
determination, award or other decision of any court,
government, government agency or instrumentality, domestic or
foreign, or arbitrator binding upon it, or (iii) create any
conflicts or resulting liens or require any consents that the
Charterer has not obtained.
Neither the execution and delivery of this Charter and each of
the Charter Documents to which it is a party nor the
consummation of the transactions contemplated hereby or thereby
will result in a breach of, or constitute a default (or with
notice or lapse of time or both result in a breach of or
constitute a default) under or otherwise give any person the
right to terminate any mortgage, indenture, loan or credit
agreement, lease, license, contract or any agreement or
instrument to which the Charterer is a party or by which it or
any of its properties is bound or affected.
(c) Litigation. There is no action, suit, proceeding, claim or
investigation pending or, to the best of the Charterer's
knowledge after due and reasonable inquiry, threatened against
or affecting the Charterer or any of its properties or related
to the subject matter of this Charter or any of the Charter
Documents before any court, government agency or regulatory
authority (federal, state, local or foreign) that questions the
validity or enforceability of this Charter or any Charter
Document or is reasonably likely to impair its ability to
perform its obligations under this Charter or any of the
Charter Documents or to cause a material adverse effect on the
business, financial condition or prospects of the Charterer.
There are no orders, writs, judgments, stipulations,
injunctions, decrees, determinations, awards or other decisions
of any court, government or governmental agency or
instrumentality, domestic or foreign, or any arbitrator
outstanding against the Charterer having or likely to have any
such effect.
(d) No Defaults. No event or condition has occurred and is
continuing that constitutes, or with the lapse of time or the
giving of notice or both, would constitute, an Event of Default
by the Charterer or any other Member of the Charterer Group, as
the case may be, under this Charter or any of the Charter
Documents or a default or by the Charterer or any other Member
of the Charterer Group under any indenture, trust, deed, loan
agreement, lease other instrument or contract, agreement,
instrument or obligation (i) under which any such Person pays,
receives, borrows, lends, or is obligated or entitled to pay,
receive, borrow or lend, consideration in excess of $1,000,000
to which it is a party or by which it is bound or affected, or
(ii) which is reasonably likely to have a material adverse
effect on the business, financial condition or prospects of the
Charterer or its ability to perform its obligations under the
Charter.
(e) Obligations and Liens. Except as disclosed in writing to, and
specifically consented to in writing by, the Owner, the
Charterer has no outstanding obligations, or Liens on its
properties, for unpaid Taxes other than Taxes incurred in the
ordinary course of business, and in existence for not more than
30 days and which are not overdue unless such Taxes are, in the
Owner's reasonable judgment, being contested in good faith and
by appropriate Persons and proceedings.
(f) Government Regulations. The Charterer is not in violation of
and is not alleged to be in violation of any law, rule,
regulation, order, permit, certificate, writ, judgment,
stipulation, injunction, decree, determination, award or
decision of any court, government, or governmental agency or
instrumentality, domestic or foreign, or arbitrator binding
upon it, which violation or alleged violation is reasonably
likely to have a material adverse effect on the business,
financial condition or prospects of the Charterer or its
ability to perform its obligations under this Charter or any of
the Charter Documents.
(g) No Labor Unrest. There are no strikes or other significant
labor disputes in progress or pending or, to the best of the
Charterer's knowledge after due and reasonable inquiry,
threatened against or affecting the Charterer.
(h) Pollution Regulations. Neither the Charterer nor any member of
the Charterer Group is the subject of any actual or threatened
environmental, health or safety investigation or enforcement
proceeding related to its operations or business or the subject
matter of this Charter or any of the Charter Documents. To the
best of the Charterer's knowledge after due and reasonable
inquiry, the Charterer is in compliance with all applicable
laws and regulations relating to pollution control and
environmental, health and safety matters in all jurisdictions
in which the Charterer is doing business.
(i) Providing of Information. All information that the Charterer
at any time has furnished or will furnish the Owner for use in
any statement, application or other filing provided for in this
Charter or any of the Charter Documents, does or shall (as the
case may be) meet all requirements of applicable laws, rules
and regulations and does not or shall not (as the case may be)
as of the date prepared or delivered to the Owner contain any
statement which is false or misleading with respect to any
material fact and does not or shall not (as the case may be) as
of the date prepared or delivered to the Owner omit any
material fact required to be stated therein or necessary in
order to make such information not false or misleading for the
purpose for which such information was furnished and no
correction of any information or omission that is no longer
true and correct in all material respects that has not been
made need be made or updated in order to make such information,
taken as a whole, not false or misleading in any material
respect. For purposes of this Section 6.2(i), "information"
includes, without limitation, all information contained in the
data sheets, projections, pro forma sources and uses, the
Drilling Contracts, the "M.G. Hulme, Jr." 1,000 Meter Water
Depth Upgrade Shipyard Specification, Rev. 5, dated October 21,
1995 by D.N. Edelson, Project Engineer, the Enserch-Green
Canyon Analysis, dated September 11, 1995 and the Reading &
Bates Corporation/GATX Due Diligence Confidential Binder, dated
July 20, 1995, in each case as provided to the Investors prior
to the date hereof.
Each audited income statement, balance sheet and statement of
operation and cash flows dated as of December 31, 1996 and for
the fiscal year then ended and the unaudited income statement,
balance sheet and statement of operation and cash flows dated
as of March 31, 1997 and for the three months then ended were
prepared in accordance with generally accepted accounting
principles, consistently applied, are true, complete and
correct, and fairly present the financial condition, the
results of operations and cash flows for Reading & Bates and
its consolidated subsidiaries, including the Charterer, for the
dates and periods stated; and there is no outstanding Debt,
lien or liability, whether direct or contingent, that is
material to the Charterer and not shown in such financial
statements.
(j Insurance. The Charterer maintains insurance listed on
Schedule C and other insurance in a manner consistent with
persons engaged in the same or similar business and in
compliance with this Charter.
(k Certain Federal Laws and Requirements.
(i) The Charterer and its affiliates are exempt from the
Public Utility Holding Company Act of 1935.
(ii) None of the Charterer and its subsidiaries, whether
separately or together, is an investment company under the
Investment Company Act of 1940.
(iii) Except as expressly identified in this Charter,
neither the Charterer nor any affiliate of the Charterer,
as that term is defined in the Employee Retirement Income
Security Act of 1974, as amended, and the rules and
regulations thereunder ("ERISA"), has any material
unfunded ERISA liabilities.
(l Permits and Authorizations. The Charterer has obtained all
governmental permits, authorizations, certificates and
approvals and given or made all notices and filings required
under applicable law for the execution, delivery and
performance of this Charter and the other Charter Documents and
its possession, use and operation of the Vessel. Without
limiting the generality of the foregoing, and more
specifically, the Charterer has and maintains all
environmental, health and safety permits necessary or
appropriate for its operations and all such permits are in good
standing and the Charterer is in compliance with all terms and
conditions of such permits and all applicable environmental,
health or safety requirements of law.
ARTICLE 7
USE AND OPERATION OF THE VESSEL
7.1 Use of the Vessel
The Charterer shall have the full use of the Vessel and may, subject
to the terms and conditions of this Charter, employ the Vessel as a
semisubmersible drilling unit throughout the world consistent with
its design capability, except that the Vessel shall not be used
contrary to and shall comply with (a) all applicable laws or
regulations of any governmental authority, treaties or conventions
(including, but not limited to, all environmental, health and safety
laws) and (b) the terms or policies of any insurance then required
hereunder; and provided that, with respect to the use or possession
of the Vessel outside of the territorial waters and/or the Outer
Continental Shelf of the United States, the Charterer shall give
such indemnities suitable to the Owner in an amount and form, and
obtain and continue such additional insurance coverage, in such
amounts, having such terms and conditions and with such carriers, as
the Owner may reasonably require at any time or from time to time in
connection with the use or possession of the Vessel in any given
area outside the territorial waters and/or the Outer Continental
Shelf of the United States. The Charterer, in respect of the
Vessel, shall at all times comply with all applicable laws and
regulations (including, but not limited to, all environmental,
health and safety laws), and with the applicable provisions and
conditions of all licenses, permits, consents and approvals of any
governmental authority.
7.2 Manning, etc., of the Vessel
During the Charter Period, the Charterer shall have the exclusive
possession and control of the Vessel and shall man, victual,
navigate and operate, supply, fuel, maintain and repair the Vessel
at its own expense or by its own measurement and shall pay all other
charges and expenses of every kind and nature whatsoever incidental
to the possession, use and operation of the Vessel. During the
Charter Period, the possession, use, operation and maintenance of
the Vessel shall be at the sole risk, cost and expense of the
Charterer until redelivery pursuant to the terms hereof upon the
termination or expiration of this Charter. As between the Owner and
the Charterer, the Offshore Installation Manager, officers and crew
of the Vessel and all other persons at any time on board the Vessel
shall be deemed to be engaged and employed exclusively by the
Charterer and shall be deemed to be and remain the Charterer's
servants, navigating and working the Vessel solely on behalf of and
at the risk of the Charterer and the Charterer shall hold each
Indemnitee harmless from any and all claims against it by, or as the
result of any act or omission of, any such Offshore Installation
Manager, officer, member of the crew or other person. The Charterer
assumes and shall satisfy all costs and liabilities incurred in
connection with all salvage services received by the Vessel.
7.3 Documentation of the Vessel
Neither the Owner nor the Charterer (without the prior written
consent of the other) will do or suffer or permit to be done
anything which can or might change or injuriously affect the
documentation of the Vessel for foreign trade under the laws and
flag of the United States of America. The Charterer covenants and
agrees that it will not (a) cause or permit the Vessel to be
operated in any manner which could subject the Owner to any criminal
penalty, or (b) operate or locate the Vessel, or permit the Vessel
to be operated or located, in any area excluded from coverage from
any insurance required by the provisions of Article 15 or (c) unless
there shall have been an actual or total loss or agreed or
compromised total loss of the Vessel, abandon the Vessel in any
foreign port. The Owner and the Charterer hereby respectively
represent that they are as of the date of execution of this Charter,
and covenant that they shall remain during the Charter Period,
"citizens of the United States" within the meaning of Section 2 of
the Shipping Act, 1916, as amended. The Charterer agrees that the
Vessel will be operated solely in the domestic or foreign commerce
of the United States. The Charterer shall throughout the Charter
Period maintain to the satisfaction of the Owner at the Charterer's
sole cost and expense such documentation of the Vessel, and shall
not do or suffer or permit to be done anything which can or might
change or injuriously affect the documentation of the Vessel for
foreign trade under the laws and the flag of the United States or
which would result in a violation of any law or regulation of the
United States applicable to a vessel owned by a citizen of the
United States, as defined in the Shipping Act, 1916.
7.4 General and Particular Average
Whenever necessary, average adjusters shall be appointed by the
Charterer, who shall, at the Charterer's sole cost and expense,
attend to the settlement and collection of both general and
particular average losses.
7.5 Site and Access
The Charterer will be responsible for selecting and mooring the
Vessel in a safe and prudent manner at a location in the Operating
Area. The Charterer will conduct sea bottom condition surveys
acceptable to the Owner where required by the Vessel's hull
underwater surveyor at the Charterer's sole cost and expense and
will be responsible for identifying, marking and clearing the
location of all major impediments or hazards to operations or
causing same to be done. Removal of all impediments or hazards
shall be, as between Owner and the Charterer, at the Charterer's
sole cost and expense.
7.6 Owner Liability for Materials Furnished by the Charterer
Without limiting any indemnity provided by the Charterer, the Owner
shall not be liable for any loss or damage resulting from the use or
possession of equipment, materials, supplies or other items
furnished by the Charterer.
7.7 Environmental and Related Reporting and Inspection
The Charterer shall notify the Owner in writing within five days of
the Charterer's obtaining notice or knowledge thereof of any
(a) notice of claim that there has been a release or threatened
release of any contaminant into the environment from the Vessel or
any equipment, machinery or property related thereto; (b) notice of
any investigation by any governmental authority evaluating whether
any remedial action is necessary or appropriate to respond to any
release or threatened release of any contaminant into the
environment from the Vessel or any equipment, machinery or property
related thereto; (c) notice that the Vessel or any equipment,
machinery or property related thereto is subject to an environmental
Lien; (d) the commencement or threat of any judicial, administrative
or other proceeding alleging a violation of any environmental,
health or safety requirements of law; or (e) any new or proposed
changes to any existing environmental, health or safety requirement
of law that could have a material adverse effect upon the use or
operations of the Vessel or the Charterer. The Charterer shall
provide from time to time documentation deemed adequate by the Owner
showing the Charterer's compliance with financial responsibility
requirements of all applicable environmental, health and safety
laws.
7.8 Notice of Entry
The Charterer will provide written notice within ten (10) days of
entry of the Vessel into the jurisdictional waters of any foreign
country or of any state or territory of the United States other than
Louisiana, Texas and any other state in which the Owner has filed
financing statements or taken other action to perfect its Lien upon
the equipment owned by the Charterer and its Affiliates and used in
connection with the Vessel.
ARTICLE 8
MAINTENANCE OF CONDITION AND CLASSIFICATION; REPAIRS
8.1 Maintenance of Classification
The Charterer shall at all times and, at its sole cost and expense,
procurement and risk (a) have exclusive control of the Vessel, (b)
maintain and preserve the Vessel in accordance with good commercial
maintenance practices, and keep the Vessel and her drilling and
other equipment in good running order, condition and repair, so that
the Vessel shall be tight, staunch, strong and well and sufficiently
tackled, appareled, furnished, equipped and in every respect
seaworthy and in good operating condition, and (to the extent that
such prescribes a standard of maintenance that exceeds the foregoing
standard in any respect) in the condition, running order and repair
which equals or exceeds industry standards and the condition,
running order and repair of vessels and their equipment owned by the
Charterer of like kind and age, and, in addition, shall
(i) cause the Vessel to be a semi-submersible drilling unit capable
of operating in water depths of up to 3,280 feet before
completion of the Second Upgrade Program and 4,000 feet after
completion of the Second Upgrade Program and to have technical
specifications, characteristics and capabilities at least the
substantial equivalent of those set forth in Schedule A hereto
as upgraded in accordance with the First Upgrade Program and
after completion of the Second Upgrade Program as set forth in
Schedule B-2; and
(ii) keep the Vessel in such condition as will entitle her, during
the Charter Period and at the date of redelivery to the Owner,
to the highest applicable classification and rating to which an
existing vessel of the same age and type can qualify under the
then existing rules and standards of the American Bureau of
Shipping and shall furnish to the Owner within 90 days after
each anniversary of the Delivery Date and at any other time
upon the request of the Owner true and correct photostatic
copies of all certificates issued by the American Bureau of
Shipping evidencing the maintenance of such classification.
(iii) The Vessel shall, and the Charterer covenants that it will,
at all times comply with all applicable safety, operational and
maintenance requirements of the United States Coast Guard and
any other United States, international or other authority and
all laws, treaties and conventions, and rules and regulations
(including, but not limited to, all environmental, health and
safety laws) issued thereby or applicable in any way to
the Vessel or any use, possession or operation thereof and
shall have on board, when required thereby, valid certificates
and appropriate environmental, health and safety permits
showing compliance therewith. The Charterer shall, at its
expense, make all modifications and alterations to the Vessel
which may be necessary to comply with the provisions of this
Section 8.1.
8.2 Repair
The Vessel shall be repaired and overhauled by the Charterer and the
Charterer shall install, affix and attach replacement parts thereon,
at its sole cost and expense, in each case, whenever necessary to
keep the same in good condition, repair and working order in
accordance with Section 8.1 or as a result of any requirement
hereof. The Vessel shall likewise be drydocked or undergo an
underwater survey in lieu of drydocking, cleaned and bottom painted
by the Charterer, at its expense, whenever necessary, but in any
event at least as often as necessary in order to maintain the
classification referred to in Section 8.1. The Charterer shall, at
its expense, promptly and duly comply with all requirements of the
applicable classification society including those resulting from
each special survey of the Vessel. The Charterer shall, at its
expense, promptly furnish the Owner with written information as to
any casualty involving any loss or damage to the Vessel in excess of
$500,000 and, upon request, all survey reports in connection
therewith.
8.3 Drydocking or Underwater Survey in Lieu of Drydocking
The Charterer shall give the Owner notice of each proposed
drydocking or underwater survey in lieu of drydocking 20 days in
advance if practicable, otherwise as long in advance as may be
practicable under the circumstances. The Owner, any Investor or any
authorized representative of any thereof may at any time, upon
reasonable notice at its own expense (but after the occurrence of an
Event of Default, at the Charterer's sole cost and expense), inspect
the Vessel at drydocking or underwater survey in lieu of drydocking
or otherwise, at any time or from time to time, and inspect the
Vessel's logs, but neither the Owner nor any Investor shall have any
duty to do so.
8.4 Required Survey
At the request of the Owner following any explosion, release
accident, storm, act of God or other event or incident that gives
the Owner reasonable concern for the physical condition and
operating ability of the Vessel and at the Charterer's expense, a
qualified independent marine surveyor or surveyors of recognized
standing, acceptable to the Owner, shall conduct a survey of the
Vessel. For purpose of such surveys, the Vessel need not be
drydocked (or subjected to an underwater survey in lieu of
drydocking) unless required by customary survey practices for
drilling vessels of similar age, type and service. The Charterer
shall submit a detailed report of the independent marine surveyor to
the Owner promptly upon the completion of such survey, containing:
(a) the location of the Vessel at the time of inspection;
(b) the findings and recommendations of the independent marine
surveyor with respect to the condition of the Vessel; and
(c) the opinion of the independent marine surveyor as to whether
the Vessel has been maintained in accordance with the terms of
this Article 8.
ARTICLE 9
EQUIPMENT AND STORES
9.1 Fuel, etc.
The Owner acknowledges that such fuel, lubricating oil and
unbroached consumable stores as may be aboard the Vessel at the time
of its delivery to the Charterer will be the property of the
Charterer.
9.2 Equipment, etc.
The Charterer shall have the use, without additional payment to the
Owner, of such equipment, outfit, furniture, furnishings,
appliances, spare or replacement parts and nonconsumable stores as
shall have been on board the Vessel on the Delivery Date. The same
or their substantial equivalent shall be returned to the Owner on
redelivery or retaking of the Vessel in the same good order and
condition as received by the Charterer on the Delivery Date,
ordinary wear and tear excepted, and any such items damaged or so
worn in service as to be unfit for use, or used as a spare part for
replacement purposes, or lost or destroyed shall be replaced by the
Charterer with an identical or substantially equivalent replacement
item in at least as good working order and condition as those of the
replaced item when received by the Charterer on the Delivery Date at
or before redelivery of the Vessel. Such replacement, whenever
made, shall be deemed part of the "Vessel" for all purposes of, and
its use or possession shall be subject to the terms and conditions
of, this Charter.
9.3 The Charterer's Additional Equipment, etc.
The Charterer shall at its own expense provide such additional
equipment, outfit, tools, replacement parts, crockery, linen, and
other items not included in inventories as provided in this
Article 9 as may be required in the operation of the Vessel, and
such equipment, and other items, shall become, on being placed on
board the Vessel and without further act, part of the Vessel and the
property of the Owner for all purposes of this Charter, provided
that so long as no Default or Event of Default shall have occurred
and be continuing, any such equipment and other items, so provided
by the Charterer (and not required to be provided or to have been
provided by Section 9.2 or any other provision of this Charter other
than this Section 9.3) and capable of being removed without causing
damage to the Vessel may be removed by the Charterer at the
expiration of the Charter Period, and such equipment, and other
items, shall become, without further act, the property of the
Charterer. At least 90 days prior to delivery or retaking of the
Vessel (or such lesser time as may be available in connection with
any retaking), the Charterer shall give notice to the Owner of any
such equipment or other items leased from third parties, which the
Charterer has elected not to remove, and will furnish the Owner with
copies of all leases and contracts relating thereto, and the Owner
may, within 30 days thereafter (or such lesser time as may be
applicable in connection with any retaking), elect to retain all or
any part of such equipment on board the Vessel subject to any
required approval of the lessors of such equipment. Upon redelivery
or retaking the Owner shall assume the rights, obligations and
liabilities of the lessee under such leases arising subsequent to
delivery or retaking in connection with any equipment that the Owner
elects to so retain. The Charterer shall at its sole cost and
expense remove from the Vessel any such leased equipment which the
Owner does not so elect to retain and shall cause to be repaired at
its sole cost and expense any damage to the Vessel or any part or
property thereof resulting in any manner from the Charterer's
removal of any equipment.
By its acceptance of the Vessel upon delivery, the Charterer
represents and warrants to the Owner that there is on board the
Vessel an inventory of equipment, outfit, appliances, tools,
replacement parts, nonconsumable stores, crockery, linen, and other
items, as in the reasonable judgment and experience of the Charterer
are necessary or appropriate to the possession, use and operation of
the Vessel and the Charterer hereby covenants that, subject to
Section 9.3, upon redelivery or retaking of the Vessel by the Owner,
such inventory, which may include replacement items of equivalent
value, shall be on board the Vessel.
9.4 Title to Improvements; Option to Purchase
Title to Nonseverables of the Vessel acquired after the Delivery
Date shall without further act vest in the Owner and shall be deemed
to constitute a part of the Vessel and be subject to this Charter.
Title to all Severables of the Vessel acquired after the Delivery
Date (other than Severables that replace or substitute for
Severables that have been provided by the Owner and Severables
provided in connection with the Second Upgrade Program, the title to
which shall vest in the Owner) shall vest in the Charterer;
provided, however, that the Charterer may not remove any thereof
from the Vessel (except to the extent subsequently replaced or worn
out) prior to the end of the Charter Period except that the
Charterer may, so long as no Default or Event of Default shall have
occurred and be continuing, remove at the Charterer's expense and
risk any such Severables, provided, further, that the Owner may
elect to purchase for cash any such Severables at the time of
redelivery of the Vessel to the Owner in accordance with any of the
provisions of this Charter. Contemporaneously with its delivery of
the Expiration Date Election Notice, the Charterer shall notify the
Owner of the Severables described above that it intends to remove.
To exercise the election referred to in the second proviso to the
second preceding sentence of this Section 9.4, the Owner shall give
to the Charterer written notice of its election to purchase on or
prior to such redelivery. The purchase price of such Severables
shall be equal to the Fair Market Sale Value thereof, as of the date
of purchase as determined by mutual agreement or, in the absence of
such agreement, by the Appraisal Procedure. The Charterer shall
repair any damage caused by the removal of any Severables to the
Owner's reasonable satisfaction.
9.5 No Lease of Essential Severables
The Charterer shall not lease any Severables that are necessary or
appropriate for the use, possession or operation of the Vessel in
accordance with the terms and conditions of this Charter and the
Charter Documents but shall hold good and marketable title to all
such Severables that are, in accordance with industry practice,
customarily owned by drilling contractors engaged in businesses
similar to the Charterer's business, free and clear of all Liens
other than Permitted Liens.
ARTICLE 10
THE CHARTERER'S CHANGES, ADDITIONS AND REPLACEMENTS
10.1 Structural Changes or Alterations; Installation of Equipment, etc.
Except as may be required by Article 8 or 9 or the Upgrade Programs,
the Charterer shall not make any structural changes or alterations
in the Vessel, or any change, alteration, addition or improvement to
the Vessel that is Nonseverable (except for changes, alterations,
additions or improvements required to be made pursuant to applicable
law), and shall make no material changes or alterations in the
Vessel's machinery or boilers, unless and to the extent that, in
each instance, (a) it first secures written approval of the Owner
(which may be withheld in the Owner's sole discretion if such change
or alteration would materially change the type or character of the
Vessel or would adversely affect Owner's status as a lessor for
federal income tax purposes, but otherwise such approval shall not
be unreasonably withheld) and (b) any such change or alteration is
made at the Charterer's expense and risk and does not diminish the
value, utility, useful life or seaworthiness of the Vessel below the
value, utility, useful life and seaworthiness of the Vessel
immediately prior to such change if the Vessel were then in the
condition and state of seaworthiness required to be maintained by
the terms of this Charter. Subject to the foregoing provision, the
Charterer may install any pumps, gear or equipment it may require in
addition to that on board the Vessel on delivery, provided that such
installations are accomplished at the Charterer's sole cost, expense
and risk. Pumps, gear and equipment so installed shall, without
necessity of further act, become part of the Vessel and the property
of the Owner; provided that so long as no Default or Event of
Default shall have occurred and be continuing, any such pumps, gear
or equipment not required to be installed in order to meet the
requirements of Articles 8 and 9 and not installed as replacements
for property included in the Vessel on the date hereof are subject
to the Owner's option to purchase set forth in Section 9.4, and, if
not purchased by the Owner, may be removed (so long as such removal
can be accomplished without damage to the Vessel) by the Charterer,
at its own expense and risk, at any time during, or at the
expiration of, the Charter Period, whereupon such pumps, gear or
equipment shall, without necessity of further act, become the
property of the Charterer.
10.2 Replacement of Parts
In addition to the permitted structural changes or alterations and
the addition of pumps, gear and equipment referred to in
Section 10.1, the Charterer may, in the ordinary course of
maintenance, repair or overhaul of the Vessel, remove any item of
property (including any item referred to in Section 9.2 or 9.3
constituting a part of the Vessel), provided such item is replaced
as promptly as possible by an item of property which is free and
clear of all Liens and is in as good operating condition, working
order and repair, and is as seaworthy as, and has a value, useful
life and utility at least equal to that of, the item of property
being replaced (including each item of equipment) and assuming the
Vessel is in the working order, condition and repair and state of
seaworthiness required by the terms of this Charter. Any item of
property so removed from the Vessel shall remain the property of the
Owner until replaced in accordance with the terms of the preceding
sentence, but shall then, without further act, become the property
of the Charterer but shall remain subject to the Owner's option to
purchase set forth in Section 9.4. Any such replacement item of
property shall, without further act, become the property of the
Owner, deemed part of the "Vessel" as defined herein for all
purposes, and its use and possession shall be subject to the terms
and conditions hereof.
10.3 Vessel Markings
The Charterer shall not allow the name of any person, association or
corporation, other than as required hereby, to be placed on the
Vessel (other than the current name of "M. G. Hulme, Jr.") as a
designation which might be interpreted as indicating a claim of
ownership thereof by any person, association or corporation other
than the Owner, but, for purposes of identification, the Charterer
shall have the right at its sole cost and expense to paint the
Vessel in its own colors, to install and display its stack insignia
or name, and to fly its own house flag, or to utilize the colors,
insignia, name or flag of any Affiliate of the Charterer. The
Charterer shall notify the Owner of each such choice of colors,
name, insignia or flag before making any such change.
ARTICLE 11
ADDITIONAL COVENANTS
11.1 General Covenants
From and after the date of execution of this Charter and until the
termination or expiration of this Charter, the Charterer shall:
(a continue its business as presently conducted and maintain its
existence, rights and privileges;
(b comply with its obligations set forth in this Charter and all
applicable laws (including, without limitation, all
environmental, health and safety laws); and
(c maintain its books and records in compliance with generally
accepted accounting principles, consistently applied with such
adjustments or changes as to which the independent public
accountants referred to in Section 11.3 concur.
11.2 No Impairment
Notwithstanding any other contract or other claim of right, from and
after the date of execution of this Charter and until the
termination or expiration of this Charter, the Charterer Group shall
not enter any contract or agreement or perform or omit any act that
in any way materially limits or impairs, or the effect of which
would be to materially limit or impair, the ability of any member of
the Charterer Group to comply with and fulfill its obligations set
forth in the Charter Documents.
11.3 Financial Information
The Charterer will furnish, or cause to be furnished, to the Owner
and each Investor:
(a) within 45 days after the end of each of the first three fiscal
quarters during each fiscal year of Reading & Bates, a
consolidated balance sheet of Reading & Bates and its
consolidated Subsidiaries as of the close of each such fiscal
quarter, together with a consolidated income statement and
consolidated statement of cash flows of Reading & Bates and
such Subsidiaries for such fiscal quarter, in each case setting
forth in comparative form the corresponding consolidated
figures for the same period of the next preceding fiscal year,
all in reasonable detail and certified by the chief financial
officer of Reading & Bates as being true, complete and correct
and as fairly presenting the financial condition and the
results of operations of the respective corporations covered
thereby, subject to year-end adjustments;
(b) within 90 days after the close of each fiscal year of Reading &
Bates, (i) audited consolidated balance sheets of Reading &
Bates and its consolidated Subsidiaries as of the close of such
fiscal year, together with consolidated profit and loss
statements and consolidated statements of cash flows of
Reading & Bates and such Subsidiaries for such fiscal year,
certified as being true, complete and correct by Arthur
Andersen & Co. or independent public accountants of comparable
national standing and reputation as fairly presenting the
consolidated financial position, results of operations and cash
flow of Reading & Bates and such Subsidiaries as of the end of
such fiscal year and the consolidated results of their
operations for such fiscal year, and as fairly presenting in
all material respects in conformity with generally accepted
accounting principles applied on a basis consistent with prior
fiscal years with such adjustments or changes as to which such
independent public accountants concur; and (ii) an update of
the Contract Data Sheet previously submitted to the Investors
(including, but not limited to, rig and contract status and
updated annual budget) true, complete and correct and fairly
presenting the information contained therein as of the date and
of its submission to the Owner and the Investors);
(c) within 30 days after the filing thereof with the Securities and
Exchange Commission, a copy of each report, form or prospectus
filed by Reading & Bates or any of its Subsidiaries with the
Securities and Exchange Commission, within three days of the
issuance of any press release or similar materials issued by
Reading & Bates or any of its Subsidiaries; and
(d) such other financial or other information relating to the
affairs of Reading & Bates and its consolidated Subsidiaries as
the Owner or any Investor may from time to time reasonably
request.
11.4 Compliance Certificates
The Charterer shall furnish or cause to be furnished, to the Owner
and the Investors:
(a) within 45 days after the end of the first, second and third
quarterly accounting period in each fiscal year of Reading &
Bates, and within 90 days after the end of each fiscal year of
Reading & Bates, a certificate of the Chairman, the President
or a Vice President and the Chief Financial Officer of
Reading & Bates stating that each of the Charterer and each
Guarantor has performed and complied with all the terms and
provisions of this Charter or the Guaranty and/or the other
Charter Documents, as the case may be, or, if there shall have
been an Event of Default hereunder or if any Guarantor shall be
in default under the Guaranty, specifying all such defaults and
the nature thereof of which the signer of such certificate may
have notice or knowledge;
(b) within 90 days after the end of each fiscal year of Reading &
Bates, a certificate of the independent public accountants
reporting on the financial statements for such year (i) stating
that their examination in connection with such financial
statements has been made in accordance with generally accepted
auditing standards and has included a review of the relevant
terms of the Guaranty, the Charter and the other Charter
Documents, (ii) stating whether or not such examination has
disclosed the existence, during or at the end of such year, of
any default by the Charterer or any Guarantor in the observance
of any of the terms of the Guaranty, this Charter or the other
Charter Documents, insofar as they relate to accounting
matters, and, if such examination has disclosed any such
default, specifying all such defaults and the nature thereof
(it being understood that such accountants shall not be liable
for any failure to obtain knowledge of any such default which
would not be disclosed in the course of such examination), and
(iii) stating that they have reviewed the certificate of the
officers of Reading & Bates, delivered with respect to such
year pursuant to paragraph (a) of this Section 11.4, and
confirming the matters set forth in such certificate;
(c) promptly after Reading & Bates' receipt thereof, any audit
management letter or similar document submitted after the date
hereof by independent accountants in connection with each
annual or interim audit made by such accountants with respect
to the financial condition or affairs of Readings and Bates or
any Guarantor; and
(d) as promptly as practicable (but in any event not later than 15
days) after any officer of the Charterer or any Guarantor
obtains notice or knowledge of the occurrence of any default
(which has not been remedied or waived) in the performance or
observance of any of the terms or provisions of the Guaranty or
any of the other Charter Documents or any Event of Default
under the Charter, a certificate of either the Chairman, the
President or a Vice President and the Chief Financial Officer
of the Charterer or Guarantor (as the case may be) describing
the default or Event of Default and stating the date of
commencement thereof, what action the Charterer proposes to
take with respect thereto and the estimated date when it will
be remedied.
11.5 Further Assurances, etc.
The Charterer shall, at its sole cost and expense, promptly and duly
execute, acknowledge and deliver to the Owner such further
documents, instruments, financing and similar statements and
assurances and take such further action as the Owner may from time
to time reasonably request in order more effectively to carry out
the intent and purpose of this Charter or the Charter Documents, to
establish and protect the rights and remedies created or intended to
be created in favor of the Owner hereunder or under the Charter
Documents, and to protect the title of the Owner in and to the
Vessel. The Charterer shall also promptly furnish to the Owner such
information as may be required to enable the Owner timely to file
any reports required to be filed by it as the owner under the
Charter or as the owner of the Vessel with any governmental
authority.
11.6 Maintenance of Corporate Existence, etc.
The Charterer shall at all times maintain its corporate existence
except as permitted by Section 11.7 and will do or cause to be done
all things necessary to preserve and keep in full force and effect
its rights (charter and statutory) and franchises; provided that
(a) it shall not be required to preserve any right or franchise if
its Board of Directors shall determine that the preservation thereof
is no longer desirable in the conduct of its business and (b) the
loss thereof does not materially adversely affect or diminish the
rights of the Owner or any Investor.
11.7 Conditions of Consolidation, Merger, etc.
The Charterer shall not consolidate with or merge into any other
corporation or convey, transfer, or lease, all or substantially all
of its assets as an entirety to any Person, unless each of the
following conditions is satisfied:
(a) The Person formed by such consolidation, merger or acquisition
by conveyance, transfer or lease all or substantially all the
assets of the Charterer as an entirety (the "Resulting
Entity"), shall, at the same time, by consolidation, merger,
conveyance, transfer or lease, acquire all or substantially all
of the assets of the Guarantor as entireties, shall be a
citizen of the United States within the meaning of the Shipping
Act, 1916 or shall have obtained the approval of the U.S.
Maritime Administration for any such consolidation, merger (and
the Owner and the Investors, without any expense to any of the
foregoing, shall have received an opinion of counsel selected
by the Owner as to such citizenship of the United States of
such Person, in form and substance satisfactory in all respects
to the Owner), and shall be a corporation organized and
existing under the laws of one of the several states of the
United States of America or the District of Columbia. Such
Person, prior to or upon the occurrence of any such
transaction, shall execute and deliver to the Owner an
agreement in form and substance satisfactory to the Owner,
containing an assumption by such Person of the due and punctual
performance and observance of each covenant and condition of
the Charter and the Charter Documents to be performed or
observed by the Charterer.
(b) Before and immediately after giving effect to such transaction,
no Default, or Event of Default shall have occurred and be
continuing.
(c) After giving effect to such transaction, the rating of the long-
term unsecured senior debt or implied long-term unsecured
senior debt rating of the Resulting Entity shall be and shall
be maintained for six months thereafter at least "B+" by S&P
and, if rated by Moody's, at least "B1".
(d) The Charterer shall have delivered to the Owner and each
Investor, prior to or upon the occurrence of such transaction,
a Certificate of either the Chairman or the President and the
Chief Financial Officer of the Charterer, and an opinion of
counsel satisfactory to the Owner, each stating that such
consolidation, merger, conveyance, transfer or lease and the
assumption agreement described in Section 11.7(a) comply with
this Section 11.7 and that all conditions precedent relating to
such transaction herein provided for have been fully complied
with.
Upon any consolidation or merger, or any conveyance, transfer or
lease of all or substantially all of the assets of the Charterer as
an entirety in accordance with this Section 11.7, the Resulting
Entity shall succeed to, and be substituted for, and any exercise of
every right and power, obligation and liability of, the Charterer
under this Charter and the Charter Documents with the same effect as
if such Resulting Entity had been named as the Charterer herein and
therein. No such conveyance, transfer or lease of all or
substantially all of the assets of the Charterer, as an entirety
shall have the effect of releasing the Charterer or any Guarantor,
as the case may be, or any Resulting Entity which shall theretofore
have become such in the manner prescribed in this Section 11.7 from
its liability under this Charter, the Guaranty or the Charter
Documents. Nothing contained herein shall permit any charter,
subcharter or other arrangement for the use, operation or possession
of the Vessel except in compliance with the applicable provisions of
this Charter.
11.8 Indemnity of the Owner by Customers for Oil Pollution and Related
Environmental Claims
The Charterer shall cause each of its customers or operators under
any Drilling Contract to (a) indemnify, defend and hold harmless the
Owner, the Investors and their Affiliates from any and all claims,
demands, liabilities, losses, damages, lawsuits and expenses
respecting pollution claims resulting from the release of Crude Oil
as a consequence of a blowout, crater or other cause arising out of
or in connection with operations under such Drilling Contract, in
accordance with normal industry practice, and any and all related
environmental, health or safety matters (including, but not limited
to, all cost and expense of controlling clean-up of pollution and
all penalties imposed by any Person) irrespective of whether the
Charterer, the Owner or any of their Affiliates may have been or may
be alleged to have been negligent or otherwise legally at fault; and
(b) if any customer under such Drilling Contract does not maintain
(i) a consolidated tangible net worth as determined in accordance
with generally accepted accounting principles of at least
$500,000,000 (or be a consolidated Subsidiary of a parent entity
having such consolidated tangible net worth) or (ii) a senior
unsecured debt rating by S&P of "BBB-" or by Moody's of "Baa3" (or
be a consolidated direct or indirect Subsidiary of a parent entity
having a senior unsecured debt rating meeting such criteria), such
customer shall provide (or the Charterer shall provide) operators
extra expense or energy exploration and development insurance
coverage in an amount of at least the difference between
$150,000,000 (or such greater amount, as may be necessary to meet
the applicable financial responsibility requirements under the Oil
Pollution Act of 1990, or any other applicable laws, as amended from
time to time) and the amount of the Charterer's contingent operators
extra expense or energy exploration and development insurance or
other coverage in effect at such time, with such underwriters or
carriers and containing such terms and conditions as the Owner may
require, in the form normally and customarily carried by oil and gas
operators engaged in offshore drilling operations, for oil pollution
liability and expense, with the Owner, Investors, the Owner Group
and the Charterer named as additional insureds and having the
benefit of waivers of subrogation.
ARTICLE 12
PAYMENTS, INVOICES AND SECURITY
12.1 Basic Hire
The Charterer shall pay to the Owner, in arrears on each Payment
Date through the Primary Term, an amount equal to 1.17860% of
Owner's Cost (the "Primary Term Basic Hire") as adjusted on the date
of each disbursement to the Charterer as agent under the Second
Upgrade Agreement according to the methodology outlined on
Schedule F attached hereto, and during any Extended Term, 125% of
the Primary Term Basic Hire payable on each Payment Date during such
Extended Term. The payment each month of the Basic Hire shall be a
continuing obligation for each month during which this Charter is in
effect, and no invoice for such amount need be issued to the
Charterer by the Owner. The Charterer's obligation to make such
payment is unconditional and absolute during the term hereof and
shall not be affected by any event of force majeure or otherwise.
12.2 Supplemental Hire
In addition to its obligation to pay Basic Hire hereunder, the
Charterer shall pay to the Owner any and all Supplemental Hire as
and when the same shall become due and owing, and in the event of
any failure on the part of the Charterer to pay any Supplemental
Hire, the Owner shall have all rights, powers and remedies provided
for herein or at law or in equity or admiralty or otherwise in the
case of nonpayment of Basic Hire.
The Charterer shall pay to the Owner, as Supplemental Hire, all
costs incurred by the Owner in performing or complying with the
Charter Documents if the Charterer fails to perform or comply with
any of its agreements contained in this Charter, or any Charter
Document including, but not limited to:
(a Direct and indirect cost of permits, licenses and the like
required of the Owner as owner of the Vessel. Owner shall use
reasonable efforts, without filing suit or incurring out-of-
pocket or other additional cost or expense, to avail itself of
applicable exemptions and/or reductions of such costs.
(b All premiums and other costs to the Owner for insurance as
specified in Articles 11.8 and 15.
(c Unless otherwise expressly set forth herein in Section 19.2,
the Charterer shall bear directly or reimburse the Owner, upon
proof of payment by the Owner, all fees and expenses (including
fees and expenses of the Owner's counsel) incurred by the Owner
in the performance of or related to this Charter or any Charter
Documents.
12.3 Payment Terms
The Charterer shall pay all amounts for Supplemental Hire invoiced
by the Owner within 10 days after receipt of such invoice. Any
Basic Hire not paid when due and any invoices not paid in
immediately available funds within 10 days after receipt by the
Charterer shall accrue interest from the due date until paid at a
per annum rate of interest equal to the Overdue Rate, computed on a
basis of 360 days, for actual days elapsed. Payments shall be made
by wire transfer in immediately available funds prior to 12:00 noon,
New York City time, on the day when each such payment shall be due
to the Owner's account at a financial institution located in the
State of New York or at such other office as the Owner may from time
to time designate in writing to the Charterer. All payments to the
Owner hereunder shall be without any offset, counterclaim, discount
or deduction and shall be made in United States Dollars. All
payments to the Owner stated in this Charter are exclusive of any
Taxes, including, without limitation, sales, excise, value added,
stamp, documentary, transfer, ad valorem, general consumption,
property, use, export, import, employment, payroll, withholding or
other similar Taxes, which may be imposed on or incurred by the
Owner, its employees or the Investors (other than, except as
otherwise provided herein, Taxes on the net income or franchise of
the Owner, its employees or the Investors), and all costs associated
therewith, in connection with performance by the Owner of, or the
Owner's rights under, this Charter, including the costs associated
with bonds or letters of credit that are not otherwise the
responsibility of the Charterer under this Charter. The Charterer
shall pay the Owner the amount of all such charges, Taxes and costs
upon receipt of an invoice, subject to the Charterer's right to
reasonably verify the Owner's payment of such amounts. The Owner
shall use reasonable efforts, without filing suit or incurring any
out-of-pocket or other additional costs, to avail itself of any and
all applicable exemptions and/or reductions of such taxes. The
Charterer shall, at the Owner's request, pay such sums directly or
post any required bonds or letter of credit required on any such
items.
12.4 Invoices
The Owner shall render to the Charterer a monthly invoice on or
before the 15th day of each month showing all Supplemental Hire
payable to the Owner for the preceding month.
12.5 Security for Obligations
(a To secure the Obligations, the Obligors have executed and
delivered the Security Documents. Subject to Section 12.5(b),
(c), (d) and (e), the Charterer shall maintain (i) the
Cunningham Mortgage or (ii) any Substitute Collateral that has
a fair market value at least equal to the Stipulated Loss Value
at the time of any delivery of such Substitute Collateral
(collectively, the "Additional Collateral") to secure the
Obligations.
(b In the event that, at any time during the periods set forth
below, the Timely Liquidation Value of the Vessel as determined
in accordance with the Appraisal Procedure at such time is at
least the Stipulated Loss Value at such time, neither S&P nor
Moody's has a negative outlook for Reading & Bates at such time
and a Drilling Contract is in full force and effect at such
time that provides adequate cash flow to service the
Obligations for the term of such Drilling Contract, the
Charterer may request a reduction in the amount of Additional
Collateral as follows:
(i) after the fourth anniversary of the Delivery Date and so
long as (A) the rating of S&P of the Rated Securities is
at least "BB+" and the rating, if any, of Moody's of the
Rated Securities is at least "Ba1", and (B) no Default has
occurred, the Timely Liquidation Value of the Jim
Cunningham or the Timely Liquidation Value of Substitute
Collateral (as determined by the Appraisal Procedure)
required to be maintained shall be reduced to 50% of the
Stipulated Loss Value;
(ii) after the seventh anniversary of the Delivery Date and so
long as (A) the rating of S&P of the Rated Securities is
at least "BBB-" or higher by S&P and the rating, if any,
of Moody's of the Rated Securities is at least "Baa3", and
(B) no Default has occurred, no Additional Collateral
shall be required to be maintained; or
(iii) at any time, and so long as (A) the rating of S&P of
the Rated Securities is at least "BBB+" or higher by S&P
and the rating, if any, of Moody's of the Rated Securities
is at least "Baa1", and (B) no Default has occurred, no
Additional Collateral shall be required to be maintained.
(c The Owner shall release its lien and security interest in that
portion of the Additional Collateral that is in excess of the
Additional Collateral (the "Released Collateral") the Charterer
is required to maintain pursuant to Section 12.5(b). From and
after such release the Charterer shall maintain such Released
Collateral or other property (the "Negative Pledge Property")
mutually agreed upon by the Owner and the Charterer that has a
Timely Liquidation Value equal to the Stipulated Loss Value at
the time of such release, free and clear of all Liens (other
than Permitted Liens as defined in the Cunningham Mortgage).
The Charterer shall immediately notify the Owner and each of
the Investors of the occurrence of any event that would not
entitle the Charterer to maintain reduced Additional Collateral
pursuant to Section 12.5(b) and shall promptly reinstate or
grant, as the case may be, Liens upon the Negative Pledge
Property or, with the approval of the Owner, provide other
Substitute Collateral in accordance with Section 12.5(d) as
required under Section 12.5(b).
(d The Charterer shall be entitled to exchange collateral for the
Obligations or discharge its obligation to reinstate Additional
Collateral or Substitute Collateral by providing substitute
property as collateral securing the Obligations (the
"Substitute Collateral") if each of the following conditions
precedent shall have been satisfied:
(i) The Charterer shall have notified the Owner of its
intention to provide Substitute Collateral, which
Substitute Collateral shall be cash, cash equivalents, or
a mobile offshore drilling unit and otherwise in all
respects satisfactory in form and substance to the Owner.
(ii) All instruments conveying or granting to the Charterer
such Substitute Collateral and any related agreements or
instruments shall in all respects be satisfactory in form
and substance to the Owner.
(iii) The Owner and each of the Investors shall have
received with respect to such Substitute Collateral a
report at the sole cost and expense of the Charterer
prepared in accordance with the Appraisal Procedure, in
form and substance reasonably satisfactory to the Owner,
that the fair market value of such Substitute Collateral
when added to the fair market value of other Additional
Collateral for the Obligations shall, after giving effect
to any release, be in compliance with Section 12.5 (a) or
(b), as applicable.
(iv) The Charterer shall at its sole cost and expense have
obtained (to the satisfaction of the Owner) all government
approvals required in connection with the ownership, use,
occupancy, possession, operation or ordinary maintenance
of such Substitute Collateral, compliance with applicable
environmental, health and safety laws and regulations and
the mortgaging of such Substitute Collateral to the Owner.
Each such governmental approval shall be in full force and
effect.
(v) The Charterer shall at its sole cost and expense have
conducted or caused to be conducted such title examination
or title review with respect to such Substitute Collateral
as a reasonably prudent operator would conduct under the
circumstances, and the Owner shall have approved the
status of title of such Substitute Collateral. The
Charterer shall have furnished to the Owner such title
policy or other title assurances as it receives in
connection with the acquisition of such Substitute
Collateral.
(vi) The Charterer shall at its sole cost and expense have
obtained such casualty, liability and other insurance with
respect to such Substitute Collateral as shall be
requested by the Owner, which insurance shall in all
respects comply with, and shall be in all respects subject
to, Article 15. The Owner and each of the Investors shall
have received a certificate of an independent insurance
broker setting forth the insurance obtained in accordance
with this paragraph (vi) and certifying that such
insurance is in full force and effect and that all
premiums then due thereon have been paid.
(vii) The Charterer shall at its sole cost and expense have
executed and delivered to the Owner or to a trustee or
collateral agent designated by them and acting on their
behalf, a mortgage and security agreement or other
instrument or other document granting to the Owner or such
trustee or collateral agent a mortgage Lien and security
interest, subject to no other Liens (other than Permitted
Liens as defined in the Cunningham Mortgage), in and to
such Substitute Collateral, each deed, lease, assignment
or other instrument of conveyance referred to in
paragraph (ii) above, each government action as referred
to in paragraph (iv) above, each ancillary contract and
any agreement providing for the operation of such
Substitute Collateral (which assignment shall be consented
to by the operator, on terms satisfactory to the Owner),
subject to no Liens (other than Permitted Liens as defined
in the Cunningham Mortgage). Such mortgage and security
agreement or such other instrument shall be in full force
and effect and shall be in all respects satisfactory in
form and substance to the Owner. Each of the foregoing
instruments and any necessary documents relating thereto,
including, without limitation, financing statements under
the applicable Uniform Commercial Code or other
instruments for filing or recordation, shall have been
duly recorded and filed in all public offices in which
such recordation or filing is necessary in order to
provide constructive notice to third parties of the
interests and Liens created thereby and in order to
establish, perfect, preserve and protect the validity and
effectiveness thereof and the mortgage Lien and security
interest created by such mortgage and security agreement
or other instrument on all property purported to be
subject thereto; and all taxes, fees and other charges
payable in connection with any and all of the foregoing
shall have been paid in full by the Charterer.
(viii) The Owner and the Investors shall have received such
environmental reports with respect to such Substitute
Collateral (in form and substance satisfactory to the
Owner) as they may request.
(ix) The Owner and each of the Investors shall have received
such opinions of counsel satisfactory to the Owner as to
such matters relating to the acquisition of such
Substitute Collateral, including the validity and
enforceability of all documents and instruments referred
to in this Section 12.5(d) and the validity, extent and
priority of the Owner's Lien, as the Owner shall
reasonably request, which opinions shall be in form and
substance satisfactory to the Owner and from counsel
acceptable to the Owner.
(x) The Charterer shall have paid all costs and expenses
incurred by the Owner and each of the Investors in respect
of obtaining any release of Additional Collateral, the
Mortgages or the Substitute Collateral, regardless of
whether such release, Collateral, the Mortgages,
Substitute Collateral or Additional Collateral is
delivered.
(xi) The Owner shall have received an Officer's Certificate,
containing such representations and warranties with
respect to such Substitute Collateral and the matters set
forth in this Section 12.5(d) and any other matters as
shall be reasonably requested by the Owner, and such other
documents or evidence as to the satisfaction of the
conditions set forth in this Section 12.5(d), as the Owner
shall reasonably request.
ARTICLE 13
GENERAL OBLIGATIONS AND PERFORMANCE
13.1 Independent Owner Relationships
In the performance of this Charter, the Owner is an independent
contractor. In the performance of this Charter, the Charterer is an
independent contractor and shall control and direct the operation of
the Vessel and the performance of the details of the work to be
performed by the Charterer's personnel and shall be responsible for
the results of such work, all in accordance with the obligations
imposed upon the Charterer hereunder and under the Charter
Documents. The presence of and the observation by the Owner's
representative(s) at the site of any work shall not relieve the
Charterer from the Charterer's obligations and responsibilities
hereunder.
13.2 Inspection
The Owner shall have the right, at the Charterer's sole cost and
expense, to inspect the Vessel and its book and records at all
reasonable times if the exercise of such inspection right would not
unreasonably interfere with the operator's operations on the Vessel
at the time or any applicable governmental approval, which approvals
the Charterer shall endeavor to obtain in good faith, and shall have
the right to confer with and have access to the officers and
employees of the Charterer and any Guarantor in connection with any
such inspection. The Owner shall have the right annually to cause
the Vessel to be surveyed by a marine surveyor at the Owner's (but,
after the occurrence and during the continuance of any Default, the
Charterer's) expense. The Charterer shall correct at its sole cost
expense all material deficiencies discovered during any such survey
or inspection.
13.3 Performance of the Charterer
The Charterer shall exercise due diligence to carry out any and all
operations with respect to the Vessel in a safe, workmanlike manner
in accordance with good offshore industry practice, which
requirement shall specifically include, not by way of limitation in
any manner whatsoever, the obligations to have the Vessel under the
command of an offshore instillation manager certified by and for the
area in which the Vessel is operating.
13.4 Operations Outside of U.S. Waters
In the event that the Charterer intends to operate the Vessel
outside of U.S. territorial waters and/or the Outer Continental
Shelf, the Charterer shall submit at least 15 days before movement
of the Vessel to the intended area of operation such documentation
demonstrating to the Owner's reasonable satisfaction (a) that
operation of the Vessel within the intended area of operation
complies with all applicable laws and regulations of the United
States and of the intended area of operation; (b) that the Vessel
can be removed from such intended area of operation upon either
cessation of the Vessel's operation in the area or termination of
this Charter; (c) that the Charterer provides all additional
indemnities and has secured political risk insurance for such area
additive to the insurances provided for herein and (d) the Vessel is
not subject to any lien or interest that might have priority over
the title and interest of the Owner. Each move to a new area
outside U.S. territorial waters, whether or not subject to the
jurisdiction of a different foreign country, shall meet the
foregoing requirements and those of Section 7.1.
ARTICLE 14
LIABILITY AND INDEMNITY
14.1 Survival of Indemnities
The indemnities set forth in this Charter shall survive the
termination of this Charter, and shall remain enforceable (subject
only to debtor relief laws and general equitable principles) as to
any claim, demand, liability, damage and expense arising out of or
incidental to this Charter, without regard to the termination of
this Charter.
14.2 Pollution
The Charterer shall assume all responsibility for the control and
removal of, and hold Owner Group harmless from loss, liabilities or
damage or claims arising from, directly or indirectly, pollution or
contamination by any liquid or nonliquid or waste material
wheresoever found that is discharged, spilled or leaked from the
Vessel or noncompliance with environmental, health and safety laws
(including but not limited to, those stemming from release of
pollutants, private toxic tort claims, off-site disposal of waste or
other pollutants, PCB's, and asbestos-containing materials on or in
the Vessel (irrespective of whether any of the foregoing occurred,
existed or arose before or after the date hereof)). To the extent
that any law, regulation or governmental entity acting within its
jurisdiction imposes on Owner Group liability for any such
pollution, notwithstanding such imposition of direct liability, the
Charterer shall have designated Owner Group as an additional insured
under its insurance policies and the Charterer shall hold the Owner
harmless from such loss, liabilities, damage or claims and reimburse
Owner Group for any amounts that Owner Group may be required to pay.
This indemnity is valid irrespective of the negligence or fault,
whether sole, joint, active or passive of the indemnified party and
whether predicated on strict liability, statutory duty, contractual
indemnity or any other theory of liability of the indemnified party.
14.3 The Charterer's Indemnity
(a) The Charterer shall defend, indemnify and hold Owner Group, its
officers, directors, employees, agents and Affiliates
(collectively, the "Indemnitees") harmless from and against all
claims, liabilities, damages, Taxes and expenses (including,
without limitation, attorneys' fees and other costs of
defense), including all claims of any type whatsoever,
irrespective of insurance coverage, arising out of, incidental
to, or related to this Charter, any of the Charter Documents,
any of the transactions contemplated hereby or thereby, the
Vessel, the Jim Cunningham, the Randolph Yost or any Additional
Collateral or Substitute Collateral, except, unless otherwise
specifically provided herein, any claims directly arising out
of the Owner's gross negligence or willful misconduct.
(b) If it is judicially determined that the monetary limits of
insurance required under this Charter or of the indemnities
voluntarily and mutually assumed in this Charter (which the
Owner and the Charterer hereby agree will be supported either
by available liability insurance, under which the insurer has
no right of subrogation against the indemnitee, or voluntarily
self-insured in respect of permitted deductibles) exceed the
maximum limits permitted under applicable law, it is agreed
that such insurance requirements or indemnities shall
automatically be amended to conform to the maximum monetary
limits permitted under such law.
(c) The Charterer shall indemnify, pay and hold harmless Owner
Group against any loss, liability, cost or expense incurred in
respect of the Vessel, including actual or constructive loss of
the Vessel, or any effort to interdict the payment to the Owner
of proceeds arising out of or related to this Charter.
(d) The indemnities in this Charter apply without regard to any
conflicting rules of liability under any applicable law or
regulation and shall include indemnification for any and all
claims in which recovery, indemnification or contribution is
sought directly or indirectly by any person or entity against
Owner Group whether predicated on negligence, strict liability,
statutory duty or contractual indemnity, except any such
liability directly arising out of the gross negligence or
willful misconduct of the Owner unless otherwise expressly
specified herein.
14.4 Patent Infringement
(a) The Charterer shall assume liability for, and shall defend,
indemnify and hold the Owner harmless from and against, all
suits and actions alleging that the Vessel, any equipment or
part thereof, or any operation of the Vessel, any such
equipment or part thereof constitutes an infringement of any
letters patent.
(b) If, as a result of any changes required by the Charterer in
equipment furnished by the Owner, or any changes required by
the Charterer in operation of such equipment or part thereof, a
claim is filed against the Owner alleging that such equipment
or any such operation conducted infringes any letters patent,
then the Charterer shall be liable for all such claims and
indemnify and hold the Owner harmless from all such claims.
14.5 Both-to-Blame Collision Clause
Without limitation on any other indemnity of the Charterer contained
herein, if the liability for any collision in which the Vessel is
involved while performing this Charter should be determined in
accordance with the laws of the United States of America, the
following clauses shall apply:
(a) If the Vessel comes into collision with another ship as a
result of the negligence of the other ship and any act, neglect
or default of the Master, mariner, pilot or the servants of the
Charterer in the navigation or in the management of the Vessel,
the Charterer shall indemnify the Owner against all direct,
consequential or special loss or liability to the other ship or
her owner.
(b) The foregoing provisions shall also apply where the owners,
operators or those in charge of any ship or ships or objects
other than, or in addition to, the colliding ships or objects
are at fault in respect of a collision or contact.
14.6 Liens, Attachments and Encumbrances
None of the Charterer, any subcharterer or party to a Drilling
Contract shall have the right, power or authority to create, incur
or permit to exist any Lien upon the Vessel, except for Permitted
Liens. The Charterer further agrees to carry a true copy of this
Charter with the ship's papers on board the Vessel, and to exhibit
the same to any person having business with the Vessel which may
give rise to any lien or claim upon the Vessel other than a
Permitted Lien or to the sale, conveyance or mortgage of the Vessel,
and on demand, to any person having business with the Vessel or to
any representative of the Owner, the Owner Group or any Investor.
The Charterer shall also place and keep prominently displayed on
board the Vessel a notice, framed under glass, printed in plain type
of such size that the paragraph of reading matter shall cover a
space not less than six inches wide by nine inches high, reading as
follows:
NOTICE OF CHARTER
This Vessel is owned by Deep Sea Investors, L.L.C. It is
under bareboat demise charter to Reading & Bates Drilling
Co. Under the terms of this Charter none of the
Charterer, any subcharterer, the Master nor any other
person has any right, power or authority to create, incur
or permit to be imposed on the Vessel (a) any lien
whatsoever other than liens for current crew's wages,
general average and salvage, in each case, incurred in the
ordinary course of business and that are not yet overdue
complying with the provisions of such charter and (b) any
claims whatsoever under any drilling contracts in respect
of the Vessel other than claims complying with the
provisions of such charter.
Such notice shall be promptly changed from time to time to reflect
the identity of the successors or assigns of the Owner.
14.7 Indemnification by the Charterer
The Charterer shall indemnify and hold harmless the Owner against
any Liens, claims or liabilities of whatsoever nature, other than
Permitted Liens (but if the Vessel is being redelivered to, or
otherwise coming into the possession of, the Owner pursuant to the
terms and conditions of this Charter, other than Permitted Liens
arising as the result of claims against the Owner for which the
Owner is not entitled to indemnification hereunder only), whether
such Liens, claims or liabilities now exist or are created hereafter
or are founded or unfounded, upon or relating to the Vessel, its
possession, management, maintenance, repair, use, employment,
chartering or subchartering or operation or any act or omission of
the Charterer.
14.8 The Charterer's Duties to Remove Liens, etc.
Without limitation of the generality of the Charterer's indemnities
provided for in Section 8.2 and Article 14, the Charterer agrees
that if a libel or a complaint in admiralty or any other legal
proceeding shall be filed against the Vessel, or if the Vessel shall
be otherwise levied upon or taken into custody or detained or
sequestered by virtue of proceedings in any court or tribunal or by
any government or other authority because of any Liens, claims or
liabilities arising from any claims, other than claims against the
Owner the payment or discharge of which is not the obligation of the
Charterer or any Guarantor or with respect to which the Owner is not
entitled to indemnification from the Charterer or any Guarantor.
The Charterer shall at its own expense within 15 days thereafter
cause the Vessel to be released and all such Liens and (except to
the extent that the same shall currently be contested by the
Charterer in good faith by appropriate persons and appropriate
proceedings in the Owner's sole judgment and shall not affect the
continued release, or until any risk of forfeiture or other loss of
or to the Vessel, or in any manner whatsoever interfere with the use
and operation of the Vessel) claims and liabilities to be
discharged. The Charterer shall forthwith notify the Owner by
telecopy, telex or telegram, confirmed by letter, of each such event
and of each such release and discharge. The Charterer shall advise
the Owner in writing at least once in each three-month period as to
the status and merits of all such excepted claims and liabilities
being so contested by the Charterer and not discharged within
fifteen days as provided above, which are either not bonded or
affect the ability of the Charterer to use any Vessel in the
ordinary course of its business. The Charterer will pay and
discharge when due all claims for repairs and other charges incident
to current operations of the Vessel or with respect to any change,
alteration or addition made pursuant to this Charter and will not
permit any lien referred to in clause (b) or (c) of the definition
of "Permitted Liens" which has ripened into a cause of action to be
in effect for more than 30 days unless it is fully bonded or covered
by insurance or Adequate Provision.
ARTICLE 15
INSURANCE
15.1 The Charterer's Insurance
The Charterer shall, at its own expense, procure and maintain in
effect with respect to and for the duration of this Charter the
insurance policies with limits of at least, and with deductibles, if
any, of no more than, those as set forth in Schedule C approved by
the Owner and having such terms and conditions, and with carriers
and/or underwriters approved by the Owner (such approval not to be
unreasonably withheld). Any policies of insurance carried by the
Charterer in accordance with this Article 15 shall (a) provide that
the interests of Owner Group in such policies shall not be
invalidated by any action, inaction, neglect, breach of warranty or
misrepresentation of the Charterer or change in ownership of the
Vessel and shall insure Owner Group's interests as they appear,
regardless of any breach or violation by the Charterer of any
warranty, declaration or condition contained in such policies, and
(b) be primary without right of contribution from any other
insurance which may be carried by Owner Group with respect to its
interests in the Vessel. The Charterer shall immediately notify
underwriters of and shall furnish all necessary information
concerning any occurrence which may give rise to a claim under any
of said insurance policies. Prior to commencement of any operations
under this Charter and any renewal of the insurance policies
required to be maintained hereunder, the Charterer shall provide the
Owner with insurance certificates evidencing the Charterer's
insurance coverage; such certificates shall provide for at least 30
days' (seven days, in the case of war risk) prior written notice to
the Owner and each of the Investors of any material change in,
reduction or cancellation of any of said insurance policies and
shall show the Charterer, the Owner, the Owner Group and the
Investors as sole loss payees and additional insureds thereunder as
their interests appear. If requested, copies of all correspondence
and documents sent to underwriters, related to any accident or claim
arising out of or in connection with the performance of the work
hereunder, shall be provided to the Owner.
15.2 Nonperformance of Insurance Companies
The insolvency, liquidation, bankruptcy, or failure of any insurance
company providing insurance for the Charterer or the Owner or their
respective subcontractors, or failure of any such insurance company
to pay claims accruing, shall not be considered a waiver of, nor
shall it excuse the Charterer from complying with, any of the
provisions of this Charter or any of the Charter Documents, except
that any such act or omission by an insurance company shall not be
deemed a breach of this Charter by the Charterer.
15.3 Subrogation
The Charterer agrees to endorse each such insurance policy to waive
the underwriters' and insurance providers' right of subrogation with
respect to Owner Group; and the Charterer agrees to indemnify and
hold Owner Group harmless with respect to any rights of subrogation
pursued by the Charterer's underwriters or insurance providers
against Owner Group.
ARTICLE 16
ASSIGNMENT OF CHARTER
16.1 Assignment and Subcontract by the Owner
The Owner shall have the right, at any time, to assign all or part
of this Charter to any Person, so long as such Person agrees to be
bound by this Charter and, at the time of such assignment, has, or
is a consolidated Subsidiary of a parent entity having, a
consolidated net worth of at least $50,000,000 as determined in
accordance with generally accepted accounting principles and is not
primarily engaged in the offshore drilling business, other than as a
financier or lessor of offshore drilling equipment or operations.
16.2 Assignment by the Charterer
The Charterer shall not have the right to assign this Charter or to
subcharter the Vessel without the prior written consent of the
Owner. Subject to the terms of applicable law, the Charterer shall
have the right, without the consent of the Owner, so long as no
Default or Event of Default shall have occurred and be continuing,
to subcharter the Vessel on a bareboat or time basis to any
Subsidiary of Reading & Bates that is and remains throughout the
term of such subcharter a Subsidiary of Reading & Bates and a
citizen of the United States within the meaning of the Shipping Act,
1916, and to enter into, and to permit the Vessel to serve under,
Drilling Contracts that comply with the terms hereof and the other
Charter Documents (provided no such Drilling Contract constitutes a
demise or a bareboat charter or any grant of any property right or
other interest in the Vessel between the Charterer and others)
provided that:
(a) each such subcharter and Drilling Contract shall be consistent
with the terms of this Charter and the subcharterer shall have
agreed not further to subcharter the Vessel without complying
with this Section 16.2 with respect to such further subcharter;
(b) either (i) the subcharterer under such subcharter or the
customer under a Drilling Contract is a citizen of the United
States within the meaning of the Shipping Act, 1916 and
evidence thereof satisfactory to the Owner in its sole judgment
shall be submitted to the Owner within 30 days of entering into
such subcharter, (ii) the prior approval of the U.S. Maritime
Administration under the Shipping Act, 1916 of such subcharter,
in form satisfactory to the Owner in its sole judgment, shall
have been obtained and, within 30 days of entering into such
subcharter or Drilling Contract, evidence thereof satisfactory
to the Owner in its sole judgment, shall have been submitted to
the Owner or (iii) such subcharter or Drilling Contract shall
be covered by a general approval of the U.S. Maritime
Administration under sections 9 and 37 or any other applicable
sections of the Shipping Act, 1916 and the Charterer shall have
given written notice to the Owner to that effect, which notice
shall set forth in reasonable detail the facts which establish
such coverage with respect to such subcharter or Drilling
Contract;
(c) such subcharter or Drilling Contract shall not violate any laws
of the United States of America or any regulations, rules,
interpretations or orders thereunder;
(d) irrespective of any such subcharter, the Charterer shall remain
liable for all of its obligations under this Charter and the
Charter Documents to the same extent as if such subcharter or
Drilling Contract were not in effect;
(e) the subcharterer under each such subcharter shall comply with
all applicable laws and regulations, provided that violations
of laws or regulations by any such subcharterer that (i) will
not result in the Owner, the Owner Group or the Vessel being in
violation of, or subject to any fine, penalty or other sanction
under any applicable law or regulation or any risk of
forfeiture or other loss of or to the Vessel, (ii) do not
otherwise adversely affect the interests of the Owner or the
Owner Group or the Investors hereunder, and (iii) are not
consented to by the Charterer shall not, by reason of this
clause (e), constitute a breach, or cause such subcharter to be
in violation of the terms of this Charter so long as the
Charterer is taking appropriate action to terminate such
violation or to terminate such subcharter;
(f) such subcharter or Drilling Contract shall, by its terms,
expire no later than the end of the Charter Period, or any
extension thereof, and Charterer shall not suffer or permit to
be continued under any such subcharter or Drilling Contract any
lien or encumbrance incurred by it or its agents, which might
have priority over the title and interest of the Owner in the
Vessel and any part thereof, or equipment or other property
used in connection with the Vessel; and
(g) any Drilling Contract shall be on terms and conditions in
substantially the form generally used in offshore drilling and
with an operator and having (i) a consolidated tangible net
worth as determined in accordance with generally accepted
accounting principles of at least $500,000,000 (or be a
consolidated Subsidiary of a parent entity having such a
consolidated tangible net worth), or (ii) a senior unsecured
debt rating by S&P of "BBB-" or by Moody's of "Baa3" (or be a
consolidated direct or indirect Subsidiary of a parent entity
having a senior unsecured debt rating meeting such criteria) or
(iii) maintaining (or the Charterer providing) operators extra
expense or energy exploration and development insurance
coverage in an amount of at least the difference between
$150,000,000 (or such greater amount, as may be necessary to
meet the applicable financial responsibility requirements under
the Oil Pollution Act of 1990, or any other applicable laws, as
amended from time to time) and the amount of the Charterer's
contingent operators extra expense or energy exploration and
development insurance or other coverage in effect at such time,
with such underwriters or carriers and containing such terms
and conditions as the Owner may require, in the form normally
and customarily maintained by oil and gas operators engaged in
offshore drilling operations, for oil pollution liability and
expense, with the Owner, Investors, the Owner Group and the
Charterer named as additional insureds and having the benefit
of waivers of subrogation and with carriers or underwriters
reasonably acceptable to the Owner.
The Charterer shall within 30 days after entering into each Drilling
Contract notify the Owner of the period thereof and of the identity
of the other party and its relationship with the Charterer, if any.
16.3 Assignment of Subcharter Hire.
The Charterer hereby sells, assigns, transfers, creates a security
interest in and sets over unto the Owner all of the Charterer's
right, title and interest in and to all accounts, chattel paper,
contract rights and general intangibles, and all monies and claims
for monies due and to become due under, or arising out of, and all
claims for damages arising out of the breach of, any subcharter or
Drilling Contract (Drilling Contracts being considered, for purposes
of this Section 16.3, subcharters) relating to the Vessel, whether
now existing or hereafter entered into. It is expressly agreed
that, anything herein contained to the contrary notwithstanding, the
Charterer shall remain liable under each such subcharter to perform
all of its obligations thereunder, and the Owner shall have no
obligations or liabilities thereunder by reason of or arising out of
the foregoing assignment (herein, the "Rights Assignment").
Upon the demand of the Owner after the occurrence and during the
continuation of an Event of Default, the Charterer will specifically
authorize and direct each person liable therefor to make payment of
all monies due and to become due under or arising out of each such
subcharter to the Owner or as the Owner shall direct, and upon such
demand irrevocably authorizes and empowers the Owner to ask, demand,
receive, receipt and give acquittance for any and all such amounts
which may be or become due or payable or remain unpaid at any time
or times to the Charterer by each such person under or arising out
of such subcharters; to endorse any checks, drafts or other orders
for the payment of money payable to the Charterer in payment
therefor; and in its discretion to file any claims or take any
action or proceeding either in its own name or in the name of the
Charterer or otherwise which the Owner may deem to be necessary or
advisable in the premises.
The Charterer hereby irrevocably authorizes the Owner after any such
demand has been made, in its own name or in the name and on behalf
of the Charterer, to give notification to persons obligated under
such subcharters that payment is to be made to the Owner or as the
Owner directs and hereby agrees to cause to be delivered to the
Owner consents of such persons to the Rights Assignment, in form and
substance satisfactory to the Owner.
The Charterer agrees that at any time and from time to time, upon
the Owner's written request, the Charterer will execute and deliver
such further documents and do such further acts and things as the
Owner may request in order to effect further the purposes of the
Rights Assignment, provided that no such consent referred to in the
preceding paragraph may be required under this sentence.
The Charterer hereby irrevocably authorizes the Owner, at the
Charterer's expense, to file such financing statements relating to
the Rights Assignment, without the Charterer's signature, as the
Owner at its option may deem appropriate, and appoints the Owner as
the Charterer's attorney-in-fact to execute any such financing
statements in the Charterer's name and to perform all other acts
which the Owner deems appropriate to perfect and continue the
security interest created hereby.
The Charterer covenants and agrees with the Owner that the Charterer
will (a) duly perform and observe all of the terms and provisions of
such subcharters on the part of the Charterer to be performed or
observed, (b) clearly record in the books and records of the
Charterer notations of the Rights Assignment and (c) in the event
that the Charterer shall receive payment of any money which should
have been paid directly to the Owner pursuant to a demand made or
notice given under this Section 16.3 forthwith turn over the same to
the Owner or as the Owner may direct, in the identical form in which
received (except for such endorsements as may be required thereon).
ARTICLE 17
LOSS, TAKING OR SEIZURE.
17.1 Taking by the U.S. Government
A taking of the Vessel for use by the United States Government shall
not terminate this Charter, but the Charterer shall remain liable
for all its obligations hereunder, including its liability for
payment of Hire, until the expiration of the Charter Period. If, at
the expiration of the lesser of the then remaining term of the
Charter Period or 180 days after the taking of the Vessel for use by
the United States Government Charter Period, the Vessel shall still
be subject to such taking for use by the United States Government,
an Event of Loss shall be deemed to have occurred on the last day of
such 180-day period or the Charter Period, whichever occurs first.
17.2 Event of Loss not a Total Loss
In the case of any Event of Loss arising out of damage to the Vessel
other than actual total loss, the Charterer shall notify the Owner
that the Vessel is deemed to be subject to an Event of Loss and
shall not consent to a compromise or arranged total loss without the
prior written agreement of its insurance underwriters that the
Vessel is a constructive or compromised total loss and that such
underwriters agree to pay an amount at least equal to the amount
payable by the Charterer under Section 17.3.
17.3 Payment of Stipulated Loss Value
Upon the occurrence of an Event of Loss, the Charterer shall
forthwith give the Owner written notice of such Event of Loss and
shall pay to the Owner within 60 days following the date of the
occurrence of such Event of Loss the Stipulated Loss Value of the
Vessel calculated as of such Basic Hire Payment Date occurring after
the occurrence of the Event of Loss plus interest at a rate per
annum equal to the Overdue Rate. The Charterer shall also pay to
the Owner all Basic Hire due on the Payment Dates next occurring
after the date of occurrence of such Event of Loss and, if the date
on which such Stipulated Loss Value actually is paid in full is not
such a Payment Date, an amount equal to the Overdue Rate (computed
on the basis of a 360-day year for actual days elapsed) on the
amount of such Stipulated Loss Value for the period from such
Payment Date to the date such Stipulated Loss Value is paid in full.
17.4 Application of Payments
In the case of all payments (other than insurance proceeds) received
by the Owner or the Charterer from any governmental authority or
otherwise as compensation for an Event of Loss, so much of such
payments as shall not exceed the sum of the Stipulated Loss Value
and an amount equal to interest hereon required to be paid by the
Charterer as above provided and any Hire then due and owing by the
Charterer hereunder shall be applied, provided no Default or Event
of Default shall have occurred and be continuing, first, in
reduction of the Charterer's obligation to pay such Hire, if any,
then due and owing; and second, in reduction of the Charterer's
obligation to pay such Stipulated Loss Value and such amount equal
to interest thereon as provided above if not already paid by the
Charterer or, if already paid by the Charterer, to reimburse the
Charterer for its payment of such Stipulated Loss Value and the
balance, if any, of such payments remaining thereafter shall be paid
over to, or retained by, the Owner.
17.5 Date of Loss
For the purpose of this Charter, the date of the occurrence of an
Event of Loss shall be the date of the casualty or other occurrence
giving rise to such Event of Loss (or the earlier of the expiration
of the remaining term of the Charter Period or the date 180 days
after such taking thereafter, in the case of a taking of title or
use or possession of the government of the United States of America,
as provided in the definition of Event of Loss set forth in
Section 1 hereof), and if the date of such casualty or other
occurrence shall be uncertain, such date shall be deemed the date
the Vessel was last heard from.
17.6 Effect of Payment of Stipulated Loss Value
In the event that the Charterer shall make payment in full of any
overdue payments of Basic Hire, and of such Stipulated Loss Value
and an amount equal to interest thereon as provided above, the
Charterer shall have no further obligation to make any payment of
Basic Hire payable after the Payment Date as of which such
Stipulated Loss Value was calculated, and the Charterer, subject to
the Charterer's obtaining any governmental consent required,
(a) shall be subrogated to all rights which the Owner shall have
with respect to the Vessel, (b) shall receive assignments and bills
of sale from the Owner (in such form described in Section 3.7
hereof, but without any representation or warranty of any character
on the part of the Owner) of any or all such rights, together with
all of the Owner's right, title and interest in and to the Vessel
and all machinery and equipment pertaining thereto, and (c) shall
have the right to abandon the Vessel to underwriters on behalf of
the Owner as well as itself. In such case, the Owner shall execute
such documents and take such other action as the Charterer may
reasonably require to effect the surrender of the Vessel to the
insurance underwriters. Nothing herein contained shall relieve the
Charterer or the Owner of any of its obligations under Article 18
incurred up to and including the date of the Event of Loss. After
the payment in full of the Stipulated Loss Value of the Vessel and
such other amounts, the Charterer's obligation to pay further Basic
Hire with respect to such Vessel shall terminate. All insurance
proceeds received as the result of an Event of Loss with respect to
the Vessel, and all payments (other than insurance proceeds)
received by the Owner or the Charterer from any governmental
authority or otherwise as compensation for an Event of Loss with
respect to the Vessel, shall be applied in reduction of the
Charterer's obligation to pay Stipulated Loss Value with respect to
the Vessel (plus any other amounts of Basic Hire and Supplemental
Hire then due and payable with respect to the Vessel), if not
already paid by the Charterer, or, if already paid by the Charterer,
shall be applied to reimburse the Charterer for its payment of the
Stipulated Loss Value with respect to the Vessel and the balance, if
any, of such proceeds or payments remaining thereafter shall be paid
over to, or retained by, the Charterer.
ARTICLE 18
TAX
18.1 Characterization as a Lease
Each of the parties hereto intends that, for Income Tax purposes,
this Charter will be treated as a lease of the Vessel (except for
the Severables to which Charterer has title pursuant to Section 9.4)
from the Owner to the Charterer, the Owner will be treated as the
sole owner of the Vessel (except for the Severables to which
Charterer has title pursuant to Section 9.4) and the Charterer will
be treated as not having any ownership interest in the Vessel
(except for the Severables to which Charterer has title pursuant to
Section 9.4), the Owner or any partnership or joint venture with the
Owner. The Charterer, the Owner, each of the Investors and any
Affiliate thereof will not take any action or file any return or
other document which is inconsistent with such characterization.
18.2 Representations
The Charterer represents, warrants and covenants to the Owner, each
of the Investors and any Affiliate thereof as follows:
(a) All information provided by the Charterer and its Affiliates to
any independent appraiser or engineer with respect to the
Vessel and the Upgrade Programs was and is true, complete and
accurate, and the Charterer and its Affiliates did not omit any
factual information necessary to make such first-mentioned
information not misleading or omit any factual information
required to permit any such independent appraiser or engineer
to perform the duties for which he was retained;
(b) Reading and Bates, Inc. was the original owner of the Vessel
and initially placed the Vessel in service during its taxable
year ended December 31, 1983;
(c) The Charterer is not, and will not become at any time during
any period in which the Owner is claiming federal income tax
depreciation deductions, a "tax-exempt entity" (within the
meaning of Section 168(h)(1)(A) of the Code and Section
168(j)(3)(A) of the 1954 Code);
(d) During any period during which the Owner is claiming federal
income tax depreciation deductions, the Charterer will take no
action and will not suffer any action to be taken by any Person
(other than the Owner) which would cause the Vessel to
constitute "tax-exempt use property" within the meaning of
Section 168(h)(1) of the Code (or Section 168(j)(3) of the
1954 Code), or property used "predominantly outside the United
States" within the meaning of Section 168(g)(1)(A) of the Code
(or Section 168(f)(2) of the 1954 Code);
(e) Immediately prior to the Delivery Date, Reading and Bates, Inc.
was entitled to accelerated cost recovery deductions with
respect to the Vessel, computed on the basis that (i) the
Vessel is "5-year property" (within the meaning of Section
168(c)(2)(B) of the 1954 Code) and (ii) recovery percentages
applicable to the Vessel are those set forth for 5-year
property pursuant to Section 168(b)(1) of the 1954 Code;
(f) Neither the Charterer nor any of its Affiliates bore any of the
cost of the First Upgrade Nonseverables. Neither the Charterer
nor any of its Affiliates will bear any of the cost of the
Second Upgrade Program;
(g) The total cost of the First Upgrade Program was reasonable and
based on arm's-length negotiations;
(h) All of the First Upgrade Severables will be readily removable
from the Vessel without causing material damage to the Vessel;
(i) The allocation of the total cost of the First Upgrade Program
among the First Upgrade Nonseverables, the First Upgrade
Severables, and the First Upgrade Maintenance as set forth on
Schedule B-1 is reasonable;
(j) The First Upgrade Maintenance consisted solely of ordinary and
routine maintenance and repairs that did not materially add to
the Vessel's value or appreciably prolong the Vessel's useful
life;
(k) The Charterer has not made and will not make, with respect to
the period beginning with the Delivery Date and ending with the
date (if any) on which the Charterer acquires title to the
Vessel from the Owner, any claim predicated on tax or legal
ownership of such Vessel;
(l) Immediately after the First Upgrade Completion, the basis for
Income Tax purposes of the Vessel in the hands of the Owner
took into account (a) the purchase price of the Vessel,
including all related costs, expenses, commissions, taxes, etc.
incurred by the Owner in connection with the acquisition of the
Vessel, and (b) all costs incurred by the Owner pursuant to the
First Upgrade Program;
(m) The Vessel does not require any improvements, modifications,
upgrades or additions in order to be rendered complete or
suitable for its intended use, and the Vessel is ready and
available for the Charterer's intended use; and
(n) No member of the "Lessee Group" (as such term is defined in
Revenue Procedure 75-21, 1975-1 C.B. 715, as modified by
Revenue Procedure 79-48, 1979-2 C.B. 529) of which the
Charterer is a member has, nor will it acquire at any time
during the Charter Period, any investment in the Vessel within
the meaning of Section 4(4) of said Revenue Procedures that is
not permitted thereunder.
18.3 Tax Indemnity
The Charterer shall indemnify and hold the Owner, each of the
Investors and any Affiliate thereof harmless from:
(a) Any Taxes (other than Income Taxes) imposed on or incurred by
the Owner, such Investor or any Affiliate, employee, agent or
representative thereof with respect to this Charter or any of
the Charter Documents, the Vessel, any direct or indirect
interest therein or any amounts paid or payable in connection
therewith;
(b) Any Income Taxes (other than U.S. federal Income Taxes) imposed
on or incurred by the Owner, such Investor or any Affiliate
thereof (i) caused by or arising from the location or operation
of the Vessel in any particular waters or (ii) imposed by any
jurisdiction, other than the jurisdiction of incorporation of
such Investor or the jurisdiction of a place of business of
such Investor (unless such place of business is determined on
the basis of the location of the Vessel or the operation of the
Vessel or this Charter or any of the Charter Documents), in
respect of the Vessel or by reason of the transactions
contemplated by the Charter or any of the Charter Documents;
(c) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from the
Vessel's failing to qualify for accelerated cost recovery
deductions, computed on the basis that (i) the Vessel is
"5-year property" (within the meaning of Section 168(c)(2)(B)
of the 1954 Code) and (ii) recovery percentages applicable to
the Vessel are those set forth for 5-year property pursuant to
Section 168(b)(1) of the 1954 Code, by reason of any act of
commission or omission, misrepresentation or breach of any
agreement, covenant or warranty contained in the Charter or any
of the Charter Documents on the part of the Charterer, any
subcharterer, assignee or user of the Vessel or any Affiliate
thereof;
(d) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from the
charter, subcharter or use of the Vessel to or by a "tax-exempt
entity" (within the meaning of Section 168(h)(1)(A) of the Code
or Section 168(j)(3)(A) of the 1954 Code);
(e) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from the
Vessel's becoming limited use property;
(f) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from any
item of loss or deduction attributable to the Vessel, this
Charter or any of the Charter Documents or the transactions
contemplated by the Charter or any of the Charter Documents not
being treated as derived from, or allocable to, sources within
the United States;
(g) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from any
replacement, improvement, modification, upgrade, addition or
capital expenditure made or to be made to or in connection with
the Vessel or pursuant to this Charter, any of the Charter
Documents or the transactions contemplated by the Charter or
any of the Charter Documents or otherwise;
(h) Any Taxes payable as a result of any inaccuracy or breach of
any representation, warranty or covenant of the Charterer under
this Charter or any of the Charter Documents;
(i) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from the
inclusion in income of any amount paid or payable by the
Charterer under this Section 18.3; and
(j) Any attorneys' fees or other costs incurred by the Owner, such
Investor or any Affiliate thereof in connection with any
payment from the Charterer under this Section 18.3.
18.4 Payments
Any amount to which the Owner, any of the Investors or any Affiliate
thereof is entitled under Section 18.3 shall be paid in a lump sum
equal to the present value of the amounts of the existing and
anticipated Taxes described in Section 18.3 payable by such
indemnitee for all affected taxable periods. In the case of any
such amount caused by a loss of Income Tax deductions, such amount
shall be reduced (but not below zero) by an amount equal to the
present value of the amounts of existing and anticipated reductions
in Income Taxes payable by such indemnitee for all affected taxable
periods that would not be realized but for the loss of such
deductions. Any amount to which such an indemnitee is entitled
under Section 18.3 shall be calculated on the basis of (i) a
conclusive presumption that such indemnitee has and will have
sufficient amounts of taxable income, foreign-source income, and
foreign income tax liability so as to be able to fully utilize on a
current basis any Income Tax benefits which could be derived from
the Owner's ownership of the Vessel, (ii) a conclusive presumption
that such indemnitee is and will be liable for Taxes at the highest
marginal rates in effect for the relevant taxable period, (iii) the
date or dates on which any payment of Taxes (including estimated
Taxes) shall be due or would be due for the relevant taxable period
if such indemnitee was actually liable for Taxes for such relevant
period, and (iv) an after-tax discount rate of 4.42% per annum,
discounted quarterly. Any such amount shall be paid by the
Charterer to such indemnitee within thirty (30) days following the
receipt by the Charterer of written notice from such indemnitee
which requests such amount and provides details supporting the
calculation of such amount.
18.5 Records
The Charterer will maintain sufficient records with respect to the
Vessel and this Charter, will preserve and retain any such records
until the expiration of the statutory period of limitations
(including extensions) of the taxable periods to which any such
records relate and will provide copies of such records as the Owner
or any of the Investors or any Affiliate thereof may reasonably
request to enable the Owner, such Investor or any Affiliate thereof
to fulfill its Tax filing obligations.
ARTICLE 19
GENERAL
19.1 Notices
Notices and other communications required or permitted hereunder
shall be in writing and shall be deemed sufficient for all purposes
if sent by registered or certified letter, nationally recognized
overnight courier service specifying one-day delivery, facsimile or
telex to the recipient's address stipulated below and shall be
effective from the date of receipt thereof. Other addresses may be
substituted for those below upon giving notice thereof in the manner
provided above:
if to the Owner: Deep Sea Investors, L.L.C.
"GATX Marine Investors Corporation
Four Embarcadero Center, Suite 2200
San Francisco, California 94111
Attn: Portfolio Management
Fax: (415) 955-3415
Heller Financial
150 East 42nd Street
New York, New York 10017
Attn: Legal Department
Fax: (212) 880-7158
Heller Financial Leasing, Inc.
500 W. Monroe Street
Chicago, Illinois 60661
Attn: CEFD - Central Region Credit Manager
Fax: (312) 441-7519
MDFC Equipment Leasing Corporation
4060 Lakewood Boulevard, 6th Floor
Long Beach, California 90808
Attn: Senior Documentation Officer
Fax: (310) 627-3002
if to the Charterer: Reading & Bates Drilling Co.
901 Threadneedle, Suite 200
Houston, Texas 77079
Attn: Chief Financial Officer
Fax: (281) 496-0285
19.2 Expenses
Whether or not any of the transactions contemplated hereby are
consummated, each of the Charterer and the Owner shall pay its own
expenses, including legal and appraisal fees and expenses, in
connection with the negotiation, execution and delivery of this
Charter. In addition, the Charterer shall pay upon demand all other
costs and expenses incurred by the Owner and the Investors in
connection with the enforcement of any of their rights or remedies,
any future amendments, supplements, waivers or consents with respect
to any of the Charter Documents, including, without limitation:
(a) the reasonable expenses and disbursements of counsel for the
Owner and the reasonable fees, expenses and disbursements of
Baker & Botts, L.L.P., special counsel for the Investors, or
any other counsel for services rendered after the Delivery Date
in connection with any Charter Document or any transaction
contemplated thereby, or any modification, amendment or waiver
of any thereof;
(b) all other reasonable expenses in connection with such
transactions including, without limitation, the expenses of
appraisers, other counsel or of experts whose opinions are
required by the terms hereof (to the extent not specifically
required to be paid by third parties by the terms hereof),
printing expenses and all fees, taxes and other charges payable
in connection with the recording or filing of instruments and
financing statements desirable under the Charter Documents;
(c) reimbursement to the Owner and Investors for their reasonable
out-of-pocket expenses in connection with entering into such
transactions, and any and all fees, expenses and disbursements
of the character referred to in clauses (a) and (b) above which
shall have been paid by the Owner or any of the Investors; and
(d) reimbursement to the Owner and Investors in an amount
sufficient to hold each of them harmless from and against any
and all liability and loss with respect to or resulting from
any and all claims for or on account of brokers' or finders'
fees or commissions or financial advisory fees by any brokers,
finders or financial advisors engaged by the Charterer or the
Guarantor with respect to such transactions.
19.3 The Owner's Right to Perform for the Charterer
If the Charterer fails to perform or comply with any of its
agreements contained herein other than its obligations to pay Hire,
the Owner, may upon notice to the Charterer itself perform or comply
with such agreement, and the amount of any expenses of the Owner
incurred in connection with such performance or compliance, together
with interest on such amount at the Overdue Rate, shall be deemed
Supplemental Hire, payable by the Charterer upon demand.
Without in any way limiting the obligations of the Charterer
hereunder, the Charterer hereby irrevocably appoints the Owner as
its agent and attorney, with full power and authority at any time at
which the Charterer is obligated to deliver possession of the Vessel
to the Owner, to demand and take possession of the Vessel in the
name and on behalf of the Charterer from whomsoever shall be at the
time in possession thereof in the manner described in, and with all
rights and remedies conferred under, Section 3.4(a) hereof.
19.4 Waivers
None of the requirements of this Charter shall be considered as
waived by either party unless the same is done in writing, and then
only by the persons executing this Charter, or other duly authorized
agent or representative of the Person designated in writing by a
senior officer of such Person and then any such waiver shall apply
only in the specific instance and for the specific purpose for which
such is given.
19.5 Entire Agreement
This Charter and the Charter Documents contain the entire agreement
between the parties with respect to the subject matter hereof and
supersede and replace any oral or written communications heretofore
made between the parties relating to the subject matter hereof.
19.6 Successors and Assigns
This Charter shall inure to the benefit of and be binding upon the
successors and assigns of the parties, provided that, except as
expressly set forth herein, the Charterer may not assign its rights
hereunder without the express written consent of the Owner and that
the assignor shall remain liable for the performance of its assignee
unless specifically released by the other party hereto.
19.7 Law
The validity, construction, interpretation and effect of this
Charter shall be governed by the general maritime laws of the United
States, without regard to any choice of law rules that would
otherwise require the application of the laws of any other
jurisdiction, except that where the general maritime laws of the
United States look to or adopt state law, this Charter shall be
governed by the laws of the State of New York, without regard to any
choice of law rules that would otherwise require the application of
the laws of any other jurisdiction.
19.8 Parties' Intention
It is the intent of all parties hereto and affected hereby in the
execution and performance of this Charter, the Charter Documents and
all related documentation to remain in strict compliance with all
applicable laws from time to time in effect. Further, it is the
intent of all parties hereto and affected hereby to evidence, by
this Charter, a lease between the Owner, as lessor, and the
Charterer, as lessee, rather than any other form of financial
arrangement including specifically, but without limitation, a loan
or other debt financing. Any and all payments, amounts,
liabilities, commitment fees and other amounts expended and
obligations of the Charterer incurred or arising in connection with
this Charter, the Charter Documents and all related documentation
are intended to evidence, lease payment obligations of the Charterer
or reimbursements to the Owner and the Investors or their agents,
representatives or designees, for services actually performed, goods
actually furnished or provided, or other expenses or liabilities for
which reimbursement is provided in connection with this Charter and
the Charter Documents. To the extent that any such charge herein
provided for or payment herein made is held or deemed to be held by
a court of competent jurisdiction to be "interest", the parties
hereto and affected hereby stipulate and agree that none of the
terms and provisions contained in or pertaining to this Charter, the
Charter Documents or any related document shall ever be construed to
create a contract to pay for the use, forbearance or detention of
money with interest at a rate or in an amount in excess of the
maximum lawful non-usurious rate or amount of interest permitted to
be charged, paid or received under said laws. For purposes of this
Charter, the Charter Documents and all related documentation,
"interest" shall include the aggregate of all charges which
constitute interest under applicable laws, which term "applicable
laws" shall include, but not be limited to, the laws of the State of
New York and, to the extent they may apply, the laws of the United
States of America, that are contracted for, chargeable or receivable
under this Charter and all related documentation. The Charterer
shall never be required to pay unearned interest on any of its
obligations hereunder or in connection herewith and shall never be
required to pay interest on any of its obligations hereunder or in
connection herewith at a rate or in an amount in excess of the
maximum lawful non-usurious rate or amount of interest that may be
lawfully charged under applicable laws, and the provisions of this
paragraph shall control over all other provisions of this Charter,
the Charter Documents and all related documentation which may be in
apparent conflict herewith. If the effective rate or amount of
interest which would otherwise be payable under or in connection
with this Charter or any related documentation would exceed the
maximum lawful non-usurious rate or amount of interest the Owner or
any Investor or any assignee thereof is allowed by applicable laws
to charge, collect and receive, or in the event any such person or
entity shall charge, collect or receive monies that are deemed to
constitute interest which would, in the absence of this
Section 19.8, be in excess of an amount permitted to be charged,
collected and received under the applicable laws then in effect,
then any such excess amount shall be reduced to the amount allowed
under said laws as now or hereafter construed by courts having
jurisdiction, and all such monies so collected, charged or received
that are deemed to constitute interest in excess of the maximum
lawful non-usurious rate or amount of interest permitted by
applicable laws shall be immediately, at the option of the recipient
thereof, be applied to principal, if any outstanding, or returned to
or credited to the account of the Charterer upon such determination.
19.9 Counterparts; Uniform Commercial Code
This Charter may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but
one and the same instrument. Each counterpart of this Charter which
has been executed by the parties hereto shall be prominently marked
to identify the party to whom originally delivered. If this Charter
constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), a
security interest in this Charter may be created only by the
transfer or possession of the counterpart marked "Owner's Copy" and
containing a receipt therefor executed by the Owner on or
immediately following the signature page thereof and, in addition,
the Owner may file Uniform Commercial Code Financing Statements in
any relevant jurisdiction.
19.10 Warranty of Authority
By executing this Charter on behalf of any entity, each signatory to
this Charter represents and warrants that he or she has full and
valid authority to enter into this Charter on behalf of the entity
for which he or she signs.
19.11 Usage; Headings
Unless the context otherwise requires, use of the singular number in
this Charter shall include the plural number and vice versa, and use
of one gender herein shall include each other gender and vice versa.
Use of the words "hereof", "herein", "hereto", "hereby",
"hereunder", or words of similar import in this Charter refer to
this Charter as a whole and not to any specific paragraph,
subparagraph, section, sentence, clause or part of this Charter.
Section headings and numbers herein are for reference purposes only
and do not constitute a part of this Charter (unless the context
indicates otherwise).
19.12 WAIVER OF JURY TRIAL
EACH OF THE CHARTERER AND THE OWNER WAIVE ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
CHARTER, THE CHARTER DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
19.13 VENUE; SERVICE OF PROCESS
THE CHARTERER, FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY
KNOWINGLY AND INTENTIONALLY AND IRREVOCABLY AND UNCONDITIONALLY
a) SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW YORK AND THE
FEDERAL COURTS SITTING IN THE STATE OF NEW YORK AND AGREES AND
CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL
PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS CHARTER OR THE
OTHER CHARTER DOCUMENTS BY SERVICE OF PROCESS AS PROVIDED BY NEW
YORK LAW, b) WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
LITIGATION ARISING OUT OF OR IN CONNECTION WITH THIS CHARTER OR THE
OTHER CHARTER DOCUMENTS BROUGHT IN ANY NEW YORK STATE COURT OR
FEDERAL COURT SITTING IN THE STATE OF NEW YORK, c) WAIVES ANY CLAIMS
THAT ANY LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM, d) CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE MAILING
OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
POSTAGE PREPAID, TO THE CHARTERER AT THE ADDRESS SET FORTH HEREIN
AND e) AGREES THAT ANY LEGAL PROCEEDING AGAINST THE CHARTERER
ARISING OUT OF, RELATED TO OR IN CONNECTION WITH THIS CHARTER OR THE
OTHER CHARTER DOCUMENTS OR THE OBLIGATIONS HEREUNDER OR THEREUNDER
MAY BE BROUGHT IN ANY COURT OF COMPETENT JURISDICTION IN THE STATE
OF NEW YORK. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE OWNER TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
CHARTERER OR ANY OF THE OTHER MEMBER OF THE CHARTERER GROUP IN ANY
OTHER JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY
APPLICABLE LAW.
19.14 Agent for Service of Process
The Charterer hereby irrevocably designates The Prentice-Hall
Corporation, with offices at 500 Central Avenue, Albany, New York
12206-2290, as agent to receive for and on behalf of the Charterer
service of process in New York. In the event that The Prentice-Hall
Corporation System, Inc. resigns or ceases to serve as the
Charterer's agent for service of process hereunder, the Charterer
agrees forthwith (a) to designate another agent for service of
process in the State of New York and (b) to give prompt written
notice to the Owner of the name and address of such agent. The
Owner agrees to use reasonable efforts to cause a copy of such
process served on such agent to be promptly forwarded to the
Charterer at its address set forth herein, and the Charterer agrees
that the failure of the Charterer to receive such copy shall not
impair or affect in any way the validity of such service of process
or of any judgment based thereon. The Charterer agrees that the
failure of its agent for service of process to give any notice of
any such service of process to the Charterer 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 the Charterer available to be
served, then the Charterer further irrevocably consents to the
service of process by the mailing thereof by the Owner by registered
or certified mail, postage prepaid, to the Charterer at its address
herein. Nothing in this Section 19.14 shall affect the right of the
Owner to serve legal process in any other manner permitted by law or
affect the right of the Owner to bring any action or proceeding
against the Charterer or its property in the courts of any other
jurisdiction.
IN WITNESS HEREOF, the parties hereto have executed this
Charter on the _____ day of July, 1997.
DEEP SEA INVESTORS, L.L.C. READING & BATES DRILLING CO.
By: GATX MARINE INVESTORS
CORPORATION, Member
By: By:
Name: Name:
Title: Title:
By: HELLER FINANCIAL LEASING, INC.
Member
By:
Name:
Title:
By: MDFC EQUIPMENT LEASING CORPORATION,
Member
By:
Name:
Title:
SCHEDULE A
DESCRIPTION OF VESSEL M.G. HULME, JR.,
INCLUDING SPECIFICATIONS
SCHEDULE B-1
FIRST UPGRADE PROGRAM
SCHEDULE B-2
SECOND UPGRADE PROGRAM
SCHEDULE C
CHARTERER'S INSURANCE
As specified in Article 15, the Charterer shall maintain the following
insurance coverage:
1. Workmen's Compensation and Employers' Liability Insurance
All of the Charterer's employees shall be covered for statutory
benefits as set forth and required by applicable law in the Area of
Operation or such other jurisdiction under which the Charterer may
become obligated to pay benefits. Employers' Liability insurance,
including appropriate maritime coverage covering all employees,
shall be provided with minimum primary policy limits as required by
applicable statute, or U.S. $1 million per occurrence, whichever is
greater.
2. Comprehensive General Liability
Insurance coverage shall be provided for liability arising from all
operations of the Charterer. The policy shall include coverage for
premises and operations, independent contractors, completed
operations, and contractual liability (or their equivalents).
Insurance coverage shall also be provided for all owned, hired, and
nonowned vehicles. The minimum primary policy limits shall be U.S.
$1 million single limit per occurrence under the General Liability
policies. Automobile Liability insurance shall have minimum policy
limits of U.S. $1,000,000 single limit per occurrence, or such
greater amount as required by law.
3. Protection and Indemnity (Marine Liability) Insurance
Full form marine protection and indemnity insurance, including, but
not limited to, sudden and accidental pollution liability and
contractual liability coverage or equivalent insurance (including
equivalent insurance against liability for fines and penalties
arising out of the operation of the Vessel) with such club or under
forms of policies approved by the Owner. Such protection and
indemnity insurance shall be maintained in the broadest forms
generally available in the United States market, shall be in an
amount not less than that carried by experienced and responsible
companies engaged in the drilling of petroleum, shall include a
cross-liability endorsement and shall be placed through independent
brokers of recognized standing and with first-class underwriters
reasonably acceptable to the Owner. No hull and machinery or
protection and indemnity insurance shall provide for a deductible
amount in excess of $500,000 with respect to the Vessel without the
prior written consent of the Owner.
4. Excess Liability
The Charterer shall carry Excess Liability Insurance in amounts not
less than $200 million each occurrence in addition to and in excess
of all primary Liability Coverages carried by Charterer, including
but not limited to insurance required under Paragraphs 1, 2 and 3
(oil pollution sublimit $80 million per Paragraph 6).
5. Marine Physical Damage, Including Hull and Machinery
All risk Marine and hull and machinery shall be provided with a
limit equal to that normally carried by experienced and responsible
companies engaged in offshore drilling, but shall not be less than
the greater of (a) 110% of the Stipulated Loss Value of the Vessel;
or (b) the Fair Market Sale Value of the Vessel. Coverage shall
include collision liability and navigation limits adequate for the
Vessel's trade.
6. Oil Pollution Insurance
Oil pollution insurance coverage issued by the Vessel's P & I Club
or equivalent coverage in the amount of not less than US $80,000,000
per occurrence, unless additional insurance or proof of financial
responsibility of a greater amount shall be required by a
governmental authority, in which case such greater amount shall be
obtained and kept in full force and effect by the Charterer. The
Charterer shall maintain insurance, if available, covering similar
oil removal risks or liabilities and civil or criminal penalties
incident thereto and not attributable to the action or inaction of
the Owner under any law, regulation or judicial decision of any of
the United States of America or foreign jurisdiction or
jurisdictions or political subdivision thereof applicable to the
Vessel or its operations to the extent such insurance is requested
in writing by the Owner and recommended by an independent marine
insurance broker as insurance which it would be imprudent not to
carry for the protection of the Charterer and the Owner in view of
the nature of the Vessel and the Vessel's operations.
7. War, Political Risk, Confiscation and Expropriation Insurance
If and to the extent that the Vessel is operated outside of the
territorial waters and/or the Outer Continental Shelf of the United
States (and in addition to any coverage required by the Owner for
such operations under this Charter), War, Political Risk,
Confiscation and Expropriation Insurance shall be provided for the
Vessel with a limit equal to the value insured under Paragraph 5
above.
8. Other Losses
Losses not covered by the above stated policies because of
deductibles and policy limits stated above shall be borne according
to the liability and indemnity provisions of this Charter.
9. Owner Group as Additional Insured
All coverages and other insurance policies carried by the Charterer
or that the Charterer is required at any time to maintain pursuant
to this Charter shall name Owner Group as an additional insured and
loss payee for all risks and losses for which the Charterer is
liable under this Charter.
10. Additional Provisions
The Charterer will deliver to the Owner and each of the Investors
copies of all cover notes and certificates of insurance and, if
requested by the Owner copies of all binders and policies with
respect to insurance carried on the Vessel. On or before the
Delivery Date of the Vessel, and on each anniversary of the Delivery
Date, and each time there is a reduction or material change in the
insurance coverage carried on the Vessel, the Charterer will furnish
to the Owner and each of the Investors a detailed report signed by
independent marine insurance brokers (who may be the insurance
brokers regularly employed by the Charterer) appointed by the
Charterer and reasonably acceptable to the Owner, describing the
insurance policies then carried and maintained on the Vessel
(including the names of the underwriters, the types of risk covered
by such polices, the amount insured thereunder and the expiration
date thereof) and stating that in the opinion of said insurance
brokers such insurance is adequate and reasonable for protection of
the Owner, is in compliance with the terms of Article 15 and is
comparable with that carried by other responsible operators of
similar drilling vessels. All policies shall include the following:
(i) breach of warranty protection to the Owner Group, (ii) waiver of
subrogation clause and (iii) at least 30 days' prior written notice
of cancellation or material modification. The insurance shall be
primary, without right of contribution from any other insurance
which may be carried by the Owner Group, and contain a waiver of set
off of premiums against claims proceeds and provide for no recourse
for premium payments by the Owner Group.
SCHEDULE D
STIPULATED LOSS VALUE*
SCHEDULE E
PENDING LITIGATION
Proceedings disclosed in Reading & Bates' Report on Form 10-Q
dated March 31, 1997 filed with the Securities & Exchange Commission.
SCHEDULE F
Computation of Basic Hire Adjustment for Second Upgrade
Effective as of each Upgrade Disbursement Date (as defined in
the Second Upgrade Agreement), the Basic Hire shall be adjusted for the
amount to be funded by the Owner on such date by reference to the yield
of the 6.375% coupon August 2002 U.S. Treasury note as published in The
Wall Street Journal on the second Business Day immediately preceding such
date and otherwise in accordance with the methodology used in the example
shown below.
Example:
Upgrade Disbursement Date: July 29, 1997
Assumed Published U.S. Treasury note yield: 6.11%
Value of Severables in respect of which
reimbursement is sought: $ 5,560,683.00
Value of Nonseverables in respect of which
reimbursement is sought: $ 4,720,896.00
Total amount in respect of which reimbursement
is sought: $ 10,281,579.00
Revised Primary Term Basic Hire (expressed as
a % of Owner's Cost): 1.1896%
_______________________________
* Immediately prior to an Upgrade Disbursement Date (as defined in
the Second Upgrade Agreement), the Owner will deliver to the Charterer a
revised schedule of Stipulated Loss Values. The revised schedule shall
reflect the amount which the Charterer has requested be reimbursed by the
Owner on such date and shall otherwise be produced using the same
methodology as was used in preparation of the figures which appear in
this Schedule D. Upon the relevant disbursement being made, such revised
schedule shall for all purposes be and become Schedule D of this Charter.
EXHIBIT 10.177
=========================================================================
AMENDED AND RESTATED BAREBOAT CHARTER
M. G. HULME, JR.
BETWEEN
DEEP SEA INVESTORS, L.L.C., as OWNER
AND
READING & BATES DRILLING CO., as CHARTERER
DATED AS OF JULY 1, 1998
====================================================================
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS 1
ARTICLE 2 SCHEDULES AND OBJECTIVES 11
2.1 Schedules 11
2.2 Objectives 11
2.3 CONDITION OF THE PROPERTY 12
ARTICLE 3 TERM, DELIVERY DATE AND PURCHASE OPTION 13
3.1 Duration 13
3.2 Delivery of the Vessel to the Charterer 13
3.3 Early Termination 14
3.4 Remedies 17
3.5 Redelivery of the Vessel 19
3.6 Survey of the Vessel at End of Charter Period 20
3.7 Purchase Option 21
3.8 Determination of Purchase Option Price 21
ARTICLE 4 NATURE OF COMPENSATION 21
4.1 Absolute Obligation 21
4.2 Net Charter 23
ARTICLE 5 CONDITIONS TO EFFECTIVENESS 24
5.1 Conditions 24
ARTICLE 6 REPRESENTATIONS AND WARRANTIES 25
6.1 Representations and Warranties of the Owner 26
6.2 Representations and Warranties of the Charterer 27
ARTICLE 7 USE AND OPERATION OF THE VESSEL 30
7.1 Use of the Vessel 30
7.2 Manning, etc., of the Vessel 31
7.3 Documentation of the Vessel 31
7.4 General and Particular Average 32
7.5 Site and Access 32
7.6 Owner Liability for Materials Furnished
by the Charterer 32
7.7 Environmental and Related Reporting and Inspection 32
7.8 Notice of Entry 32
ARTICLE 8 MAINTENANCE OF CONDITION AND CLASSIFICATION;
REPAIRS 33
8.1 Maintenance of Classification 33
8.2 Repair 34
8.3 Drydocking or Underwater Survey in Lieu
of Drydocking 34
8.4 Required Survey 34
ARTICLE 9 EQUIPMENT AND STORES 35
9.1 Fuel, etc. 35
9.2 Equipment, etc. 35
9.3 The Charterer's Additional Equipment, etc. 35
9.4 Title to Improvements; Option to Purchase 36
9.5 No Lease of Essential Severables 37
ARTICLE 10 THE CHARTERER'S CHANGES, ADDITIONS
AND REPLACEMENTS 37
10.1 Structural Changes or Alterations;
Installation of Equipment, etc. 37
10.2 Replacement of Parts 38
10.3 Vessel Markings 38
ARTICLE 11 ADDITIONAL COVENANTS 38
11.1 General Covenants 38
11.2 No Impairment 39
11.3 Financial Information 39
11.4 Compliance Certificates 40
11.5 Further Assurances, etc. 41
11.6 Maintenance of Corporate Existence, etc. 41
11.7 Conditions of Consolidation, Merger, etc. 41
11.8 Indemnity of the Owner by Customers for
Oil Pollution and Related Environmental Claims 43
ARTICLE 12 PAYMENTS, INVOICES AND SECURITY 43
12.1 Basic Hire 43
12.2 Supplemental Hire 44
12.3 Payment Terms 44
12.4 Invoices 45
12.5 Security for Obligations 45
ARTICLE 13 GENERAL OBLIGATIONS AND PERFORMANCE 48
13.1 Independent Owner Relationships 48
13.2 Inspection 49
13.3 Performance of the Charterer 49
13.4 Operations Outside of U.S. Waters 49
ARTICLE 14 LIABILITY AND INDEMNITY 50
14.1 Survival of Indemnities 50
14.2 Pollution 50
14.3 The Charterer's Indemnity 50
14.4 Patent Infringement 51
14.5 Both-to-Blame Collision Clause 51
14.6 Liens, Attachments and Encumbrances 52
14.7 Indemnification by the Charterer 52
14.8 The Charterer's Duties to Remove Liens, etc. 53
ARTICLE 15 INSURANCE 53
15.1 The Charterer's Insurance 53
15.2 Nonperformance of Insurance Companies 54
15.3 Subrogation 54
ARTICLE 16 ASSIGNMENT OF CHARTER 54
16.1 Assignment and Subcontract by the Owner 54
16.2 Assignment by the Charterer 55
16.3 Assignment of Subcharter Hire 57
ARTICLE 17 LOSS, TAKING OR SEIZURE. 58
17.1 Taking by the U.S. Government 58
17.2 Event of Loss not a Total Loss 58
17.3 Payment of Stipulated Loss Value 58
17.4 Application of Payments 59
17.5 Date of Loss 59
17.6 Effect of Payment of Stipulated Loss Value 59
ARTICLE 18 TAX 60
18.1 Characterization as a Lease 60
18.2 Representations 60
18.3 Tax Indemnity 62
18.4 Payments 63
18.5 Records 64
ARTICLE 19 GENERAL 64
19.1 Notices 64
19.2 Expenses 65
19.3 The Owner's Right to Perform for the Charterer 66
19.4 Waivers 66
19.5 Entire Agreement 66
19.6 Successors and Assigns 67
19.7 Law 67
19.8 Parties' Intention 67
19.9 Counterparts; Uniform Commercial Code 68
19.10 Warranty of Authority 68
19.11 Usage; Headings 68
19.12 WAIVER OF JURY TRIAL 69
19.13 VENUE; SERVICE OF PROCESS 69
19.14 Agent for Service of Process 70
SIGNATURES 70
Schedule A Description of Vessel M. G. Hulme, Jr., Including
Specifications
Schedule B-1 First Upgrade Program
Schedule B-2 Second Upgrade Program
Schedule B-3 Third Upgrade Program
Schedule C Charterer's Insurance
Schedule D Stipulated Loss Value
Schedule E Pending Litigation
Schedule F Computation of Basic Hire Upgrade Adjustment
=======================================================================
AMENDED AND RESTATED BAREBOAT CHARTER
"M.G. HULME, JR."
This Amended and Restated Bareboat Charter dated as of July 1,
1998 is between Deep Sea Investors, L.L.C., a Delaware limited liability
company (the "Owner"), and R&B Falcon Drilling Co. (formerly known as
Reading & Bates Drilling Co.), an Oklahoma corporation, as the Charterer
(the "Charterer");
W I T N E S S E T H:
WHEREAS, the Charterer and the Owner have entered into the
Bareboat Charter dated as of November 28, 1995 (the "Original Agreement")
and the Amended and Restated Bareboat Charter dated as of July 23, 1997
(the "Amended Agreement") under which the Owner as the owner of the
Vessel M.G. HULME, JR. (as described hereunder at Schedule A (the
"Vessel") chartered such Vessel to the Charterer on a bareboat basis to
conduct drilling activities;
WHEREAS, with the concurrence of the Owner and the Charterer,
the Vessel is undergoing an upgrade; and
WHEREAS, the Charterer desires to continue to charter the
Vessel as upgraded, and the Charterer and the Owner have agreed to amend
and restate the Amended Agreement in accordance with the terms and
conditions set forth herein;
NOW, THEREFORE, the parties hereto, each in consideration of
the promises and agreements of the other, hereby amend and restate the
Amended Agreement in its entirety as follows:
ARTICLE 1
DEFINITIONS
When used in this Charter (in addition to the terms defined elsewhere in
this Charter), the following terms shall have the following meanings:
"Additional Collateral" has the meaning assigned to such term in
Section 12.5(a).
"Adequate Provision" means, with respect to any Lien, claim,
liability or other obligation, the posting with or for the benefit
of the Owner Group, of a bond or letter of credit issued by a bank,
surety or other similar institution acceptable to the Owner or other
collateral acceptable to the Owner, in each case, pursuant to
documentation in form and substance acceptable to the Owner, having
a face amount or fair market value no less than the amount owed
under such Lien, claim, liability or other obligation.
"Affiliate(s)" in relation to a party hereto, means any person
controlling, controlled by or under common control with such party,
with the concept of control in such context meaning the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of another, whether through
the ownership of voting securities, by contract or otherwise.
"Appraisal Procedure" means the procedure specified in the
succeeding sentences for determining an amount or value. If either
the Owner or the Charterer shall give written notice to the other
requesting determination of such amount or value by appraisal, the
Owner and the Charterer shall consult for the purpose of appointing
a mutually acceptable qualified independent appraiser. If such
parties shall be unable to agree on an appraiser within 20 days of
the giving of such notice, such amount or value shall be determined
by a panel of three independent appraisers, one of whom shall be
selected by the Charterer, another of whom shall be selected by the
Owner and the third of whom shall be selected by the American
Arbitration Association (or its successor) if such other two
appraisers shall be unable to agree upon a third appraiser within 10
days of the selection date of the second of such two appraisers;
provided, that if (a) either party shall not select its appraiser
within 35 days after giving of such notice, such amount or value
shall be determined solely by the appraiser selected by the other
party, and (b) if both parties shall not select their respective
appraisers within such period, such amount or value shall be
determined solely by an appraiser selected by the American
Arbitration Association (or its successor). The appraiser or
appraisers appointed pursuant to the foregoing procedure shall be
instructed to determine such amount or value within the lesser of:
(i) 45 days after such appointment and (ii) the applicable period
remaining until delivery of such appraisal is required under this
Charter and the Charter Documents; and such determination shall be
final and binding upon the parties. If three appraisers shall be
appointed, the determination of the appraiser that shall differ most
from the other two appraisers shall be excluded, the remaining two
determinations shall be averaged and such average shall constitute
the determination of the appraisers. The Charterer shall pay all
fees and expenses relating to an appraisal for any purpose under
this Charter.
"Basic Hire" means the charter hire amount payable on the Payment
Dates as set forth in Section 12.1.
"Business Day" means any day on which commercial banks are open for
business in New York City, New York.
"Charter" means this Bareboat Charter as it may from time to time be
supplemented, amended, waived or modified in accordance with the
terms hereof.
"Charter Documents" means this Charter, the Guaranty, the Security
Documents, the Upgrade Documents and any other document, instrument
or agreement executed in connection herewith or therewith.
"Charter Period" means, collectively, the Primary Term and, if any,
the Extended Term.
"Charterer" means Reading & Bates Drilling Co., an Oklahoma
corporation, and its successors and assigns to the extent permitted
by the terms hereof.
"Charterer Group" means, individually and collectively, the
Charterer and its subsidiaries, its and their co-venturers,
contractors and subcontractors and its and their Affiliates, and the
employees, invitees and insurers of all of those entities, but shall
expressly exclude the Owner Group.
"Code" means the United States Internal Revenue Code of 1986, as
amended, and any amending or superseding tax laws of the United
States of America.
"Contractor" means Newpark Marine Fabricators, Inc., a Texas
corporation, and any other Person performing all or any part of the
Third Upgrade Program.
"Cunningham Mortgage" means the Preferred Ship Mortgage dated as of
November 28, 1995 made by the Charterer in favor of the Trustee
covering the Jim Cunningham, as amended by the First Supplement to
Preferred Ship Mortgage dated as of July 23, 1997, and the Second
Supplement to Preferred Ship Mortgage dated as of July 1, 1998 and
any other amendment, supplement or modification thereof entered into
in accordance with the term thereof or hereof.
"Crude Oil" means any hydrocarbon product that is in liquid form at
surface temperature and pressure, including condensate.
"Debt" means, for any Person (without duplication), whether recourse
is to all or a portion of the assets of such Person and whether or
not contingent, (a) every obligation of such Person for money
borrowed, (b) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) every
reimbursement obligation of such Person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the
account of such Person, (d) every obligation of such Person issued
or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business), (e) every obligation of such
Person under a lease that under generally accepted accounting
principles is required to be capitalized on the balance sheet of
such Person, (f) every obligation under any charter, operating lease
or title retention arrangement with an original term in excess of
one year or which is renewable at the option of the tenant for a
total term of one year or more, (g) the maximum fixed redemption or
repurchase price of redeemable stock of such Person that by its
terms or otherwise is required to be redeemed, if any, at the time
of determination plus accrued but unpaid dividends, and (h) every
obligation of the type referred to in clauses (a) through (g) of
another Person and all dividends of another Person the payment of
which, in either case, such Person has guaranteed or is responsible
or liable for, directly or indirectly, as obligor, guarantor or
otherwise.
"Default" means any event or condition which after notice or lapse
of time or both would become an Event of Default.
"Delivery Date" means November 29, 1995.
"Drilling Contracts" means any contractual arrangement with respect
to the Vessel providing for the use or employment of the Vessel for
the locating of, drilling for, development of, extraction of or
processing of Crude Oil, Natural Gas or mineral deposits found in
underwater locations, and activities ancillary thereto.
"Escalated" means, with respect to any amount and as at any date of
determination, such amount as multiplied by a fraction (a) the
numerator of which is the Consumer Price Index - U.S. Average as
published by the Bureau of Statistics of the Department of Labor (or
if the publication of the Consumer Price Index is discontinued, a
comparable index similar in nature to the discontinued index which
clearly reflects the change in the real value of the purchasing
power of the Dollar as reasonably selected by the Owner (hereafter
in this definition referred to as the "index")) reported for the
calendar year immediately preceding such date and (b) the
denominator of which is equal to the index reported for 1995.
"Event of Default" means any of the events defined as such in
Section 3.3(b).
"Event of Loss" means any of the following events: (a) the actual
or constructive loss of the Vessel for the lesser of (i) six (6)
months (or such longer period of up to 12 months from the date of
such loss so long as the Charterer shall have made arrangements
within such six (6) month period for the repair and restoration of
the Vessel satisfactory to the Owner and the Independent Engineer
and is diligently proceeding with such repair and restoration) or
(ii) the remainder of the Charter Period, (b) the loss, theft or
destruction of the Vessel, (c) damage or destruction of the Vessel
or damage to the Vessel to such extent as shall make repair thereof
uneconomical or other event resulting in the Vessel's being
permanently rendered unfit for normal use for any reason whatsoever,
other than obsolescence, or (d) the condemnation, confiscation,
requisition, seizure, forfeiture or other taking of title to or use
of the Vessel (except that, in the case of a taking of title, or
taking of use by the United States Government, a period equal to the
lesser of (i) six (6) months and (ii) the then remaining term of the
Charter Period shall have elapsed from the date of such taking), in
each case as determined by the Owner.
"Expiration Date" means the last day of the Primary Term.
"Extended Term" has the meaning assigned to such term in Section
3.1(b).
"Fair Market Sale Value" means, for any property, the cash sale
value of such property that would be obtained in an arm's-length
transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer-user (other
than a person currently in possession or a used equipment dealer),
which determination shall be made (a), in the case of the Vessel,
without deduction for any costs of removal of the Vessel from the
location of current use and in the case of the First Upgrade
Severables without deduction for the cost of removal or delivery,
and (b) on the assumption that such property is free and clear of
all liens, charges and encumbrances and, in the case of the Vessel
is in the condition and repair in which it is required to be
returned pursuant to Section 3.5 hereof (but otherwise on an "as-is"
basis).
"First Upgrade Maintenance" means that portion of the improvements
contemplated by the First Upgrade Program that constitutes ordinary
and usual maintenance as more fully described on Schedule B-1.
"First Upgrade Nonseverables" means that portion of the improvements
contemplated by the First Upgrade Program that is not readily
removable without causing material damage to the Vessel as more
fully described on Schedule B-1.
"First Upgrade Program" means the upgrade of the Vessel from its 850
meter water capacity to 1,000 meters as more fully described in the
First Upgrade Contract, any other Upgrade Documents related thereto
and the plans, specifications and schedules set forth on Schedule B-
1.
"First Upgrade Severables" means that portion of the improvements
contemplated by the First Upgrade Program that is readily removable
from the Vessel without causing material damage to the Vessel as
more fully described on Schedule B-1.
"Guarantor" means R&B Falcon and any other Person that guarantees or
provides collateral or other credit support for the obligations of
the Charterer hereunder.
"Guaranty" shall mean the Guaranty entered into by any Guarantor for
the benefit of the Owner, as the same may from time to time be
supplemented, amended, waived or modified in accordance with the
terms thereof.
"Highest Lawful Rate" means the maximum nonusurious contract rate of
interest permitted by applicable law.
"Hire" means Basic Hire and Supplemental Hire, collectively.
"Income Taxes" means all income, franchise or similar Taxes which
are based on, or measured by or with respect to, net income.
"Indemnitee" has the meaning assigned to such term in Section 14.3.
"Independent Engineer" means Barnett & Casbarian, or any other
Person selected by the Owner and approved by the Charterer, which
approval shall not be unreasonably withheld or delayed.
"Investor" means each of GATX Marine Investors Corporation, MDFC
Equipment Leasing Corporation, Heller Financial Leasing, Inc. and
their respective successors and assigns.
"Jim Cunningham" means the drilling rig Jim Cunningham, official
number 651643.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease,
right, security interest or claim of any nature.
"Limited Liability Company Agreement" means the Amended and Restated
Limited Liability Company Agreement dated as of July 1, 1998 among
GATX Marine Investors Corporation, MDFC Equipment Leasing
Corporation, and Heller Financial Leasing, Inc. creating the Owner.
"MOA" means the Memorandum of Agreement dated as of November 28,
1995 between Reading and Bates, Inc. and the Owner.
"Moody's" means Moody's Investor Service, Inc., a New York
corporation, and its successors and assigns.
"Mortgages" means the Cunningham Mortgage and any other mortgage
that may from time to time secure the Obligations.
"Natural Gas" means any mixture of hydrocarbons or of hydrocarbons
and noncombustible gases, in a gaseous form at surface temperature
and pressure, which consists essentially of methane, but includes
ethane, propane, butanes, and other liquefiable hydrocarbons.
"1954 Code" means the United States Internal Revenue Code of 1954,
as amended and in effect prior to the enactment of the Tax Reform
Act of 1986 (Pub. L. No. 99-514).
"Nonseverables" means improvements, modifications and additions to
the Vessel that are not readily removable without causing damage to
the Vessel or that in accordance with applicable statutes, orders,
cases, rules, regulations and other laws may not be removed from the
Vessel.
"Obligations" means the obligations of the Obligors under the
Charter Documents.
"Obligors" means, collectively, the Charterer and each Guarantor.
"Operating Area" means any area in which the Charterer shall operate
the Vessel with notice to the Owner pursuant to Section 13.4.
"Overdue Rate" means an interest rate per annum equal to the lesser
of (a) the Prime Rate plus four percent (4%) per annum and (b) the
Highest Lawful Rate.
"Owner" means Deep Sea Investors, L.L.C., a limited liability
company organized under the laws of the State of Delaware.
"Owner Group" means, individually and collectively, the Owner and
its subsidiaries, its and their co-venturers and contractors and
subcontractors and the Investors, its and their respective
Affiliates (other than the Charterer), and its and their
shareholders, directors, officers, attorneys, accountants,
consultants and representatives, the employees, insurers and
invitees of all of those entities, the Trustee and the Vessel, but
shall expressly exclude Charterer Group.
"Owner Liens" means Liens described in clause (b) of the definition
of Permitted Liens.
"Owner's Cost" means, as of any date, the sum of (a) the purchase
price of the Vessel, (b) the First Upgrade Nonseverable Cost, (c)
the Second Upgrade Cost and (d) the Third Upgrade Cost.
"Payment Date" means each date that is a monthly anniversary date of
the calendar day immediately before the Delivery Date (such monthly
date being deemed for this purpose to be the day of each succeeding
month corresponding to such date immediately before the Delivery
Date or, if such month does not have a corresponding day, the last
day of such month), up to and including the end of the Charter
Period.
"Permitted Liens" means, as of any date, (a) any lien arising out of
a claim for crew's wages, supplies or the like, or salvage not
covered by insurance, or for taxes, assessments or other
governmental charges, in each case, incurred in the ordinary course
of business, and in existence as of the date of determination for
not more than 30 days and, as of the date of determination, neither
overdue nor in the aggregate in excess of $1,000,000 unless such are
being contested in good faith and by appropriate Persons and
proceedings, in each case, in the Owner's judgment and unless
Adequate Provision has been provided by the Charterer for payment of
such amounts that may become due and payable and such Lien attaches
only to such Adequate Provision and not to the Vessel, any part
thereof or any Drilling Contract and, in the Owner's judgment, no
risk of forfeiture or other loss of the Vessel, any part thereof, or
any right of the Charterer or the Owner under any Drilling Contract,
exists, or is threatened or imminent; (b) any lien created by,
through or under the Owner as a result of claims against the Owner
for which the Owner is not entitled to indemnification from the
Charterer or any Guarantor, or discharge of which is not the
obligation of the Charterer or any Guarantor, whether at law, by
contract, in equity or under admiralty principles; and (c) Drilling
Contracts complying with the provisions of this Charter and the
other Charter Documents and the rights of the Charterer under this
Charter, including subcharters of the Vessel in accordance with the
terms of this Charter, provided that no such contracts, rights or
subcharters shall suffer or permit to be continued any Lien or
encumbrance incurred by Charterer or any subcharterer or any of
their agents which might have priority over the title and interest
of the Owner in the Vessel or any part thereof or equipment or other
property used in connection with the Vessel.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock
company, trust or unincorporated organization or any government or
any agency or any political subdivision thereof.
"Primary Term" has the meaning assigned to such term in Section
3.1(a).
"Prime Rate" means the per annum rate of interest published from
time to time in the Eastern edition of The Wall Street Journal,
which rate shall change with each published change in such rate,
effective as of the date of such publication.
"Purchase Option Price" means the Fair Market Sale Value of the
Vessel determined in accordance with Section 3.8, not to exceed 40%
of Owner's Cost.
"Randolph Yost" means the Randolph Yost, Official Number 601699, and
all fixtures, equipment and improvements of any kind whatsoever
installed or located thereon and owned by the Charterer.
"R&B Falcon" means R&B Falcon Corporation, a Delaware corporation.
"Rated Securities" means the implied long-term senior unsecured debt
of R&B Falcon.
"Reading & Bates" means Reading & Bates Corporation, a Delaware
corporation.
"Rights Assignment" has the meaning assigned to such term in Section
16.3.
"Sale Date" means the date, if any, on which the Charterer acquires
the Vessel by exercise of its purchase option granted pursuant to
Section 3.7.
"Second Upgrade Agreement" means the Upgrade Agreement dated
July 23, 1997, but effective as of April 22, 1997 between the Owner
and R&B Drilling, individually and as agent.
"Second Upgrade Contract" means the Ship Repair Agreement dated as
of April 22, 1997 between Ham Marine, Inc., a Mississippi
corporation, and the Charterer.
"Second Upgrade Cost" means an amount not to exceed (i)
$25,346,756.15 to be paid under the Second Upgrade Agreement plus
(ii) any amounts authorized by the Owner to be paid to construct the
Second Upgrade Program.
"Second Upgrade Default" means the occurrence of an Upgrade Event of
Default (as defined in the Second Upgrade Agreement).
"Second Upgrade Program" means the upgrade of the Vessel from its
current 1,000 meter water capacity to 4,000 feet as more fully
described in the Second Upgrade Agreement, any other Upgrade
Documents (as defined in the Second Upgrade Agreement) and the
plans, specifications and schedules set forth on Schedule B-2.
"Second Upgrade Severables" means the severables acquired in
connection with the Second Upgrade Program.
"Security Agreement" means the Security Agreement dated November 28,
1995 between the Owner and the Trustee, as amended by the
Ratification Agreement dated as of July 23, 1997 between the Owner
and the Trustee, and the Ratification Agreement dated as of July 1,
1998 as such agreement may be further amended, supplemented or
modified in accordance with the terms thereof and hereof.
"Security Documents" means the Mortgages, the Security Agreement,
and any other agreement, instrument or document executed and
delivered for the purpose of supporting or securing the Obligations.
"Severables" means improvements, modifications or additions to the
Vessel that are readily removable without causing damage to the
Vessel and may, in accordance with all applicable statutes, orders,
cases, rules, regulations and other laws, be removed from the
Vessel.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-
Hill Companies, Inc., a New York corporation, and its successors and
assigns.
"Shipping Act, 1916" shall mean the United States Shipping Act,
1916, as amended.
"Shipyard" means Newpark Marine Fabricators's shipyard in Galveston,
Texas.
"Stipulated Loss Value" as of any Payment Date listed by number in
Schedule D hereto means an amount determined by multiplying Owner's
Cost by the percentage set forth in Schedule D opposite such Payment
Date number.
"Subsidiary" means for any Person, any other corporation,
partnership, joint venture, limited liability company or other
entity at least a majority of the voting stock of which is
beneficially owned, directly or indirectly by such Person or its
Subsidiaries.
"Substitute Collateral" has the meaning assigned to such term in
Section 12.5(d).
"Supplemental Hire" shall mean any and all amounts, liabilities and
obligations other than Basic Hire that the Charterer assumes or
agrees to pay hereunder to the Owner, including, without limitation,
Stipulated Loss Value and indemnity payments.
"Taxes" means all federal, foreign, state, local or other net or
gross income, gross receipts, sales, use, stamp, documentary,
transfer, general consumption, ad valorem, property, value added,
franchise, production, import, export, withholding, payroll,
employment, excise or similar taxes, assessments, duties, fees,
levies or other governmental charges, including without limitation,
license, recording, documentation and registration fees, together
with any interest thereon, any penalties, additions to tax or
additional amounts with respect thereto and any interest in respect
of such penalties, additions or additional amounts.
"Third Parties" means all persons and entities that are not
Charterer Group or Owner Group.
"Third Upgrade Agreement" means the Upgrade Agreement dated July 1,
1998 but effective as of May 29, 1998 between the Owner and R&B
Drilling, individually and as agent.
"Third Upgrade Contract" means the Master Service Agreement dated as
of May 29, 1998 between Newpark Marine Fabricators, Inc., a Texas
corporation, and the Charterer.
"Third Upgrade Cost" means an amount not to exceed (i) $9,258,157 to
be paid under the Third Upgrade Agreement plus (ii) any amounts
authorized by the Owner to be paid to construct the Third Upgrade
Program.
"Third Upgrade Default" means the occurrence of an Upgrade Event of
Default (as defined in the Third Upgrade Agreement).
"Third Upgrade Program" means the upgrade of the Vessel from its
current 4,000 feet water capacity to 5,000 feet as more fully
described in the Third Upgrade Agreement, any other Upgrade
Documents (as defined in the Third Upgrade Agreement) and the plans,
specifications and schedules set forth on Schedule B-3.
"Third Upgrade Severables" means the severables acquired in
connection with the Third Upgrade Program.
"Timely Liquidation Value" means, for any property, the cash sale
value of such property that would be obtained in an arm's-length
transaction between a seller that must sell such property in no more
than 90 days and an informed and willing buyer-user, which
determination shall be made with a deduction for the removal of the
property from its location and on the assumption that such property
is in its current actual condition, which condition shall reflect
its current physical condition and location and any applicable
legal, governmental, physical, contractual and other impediments to
sale or use.
"Trustee" means Wilmington Trust Company not in its individual
capacity but solely as trustee for the benefit of the Owner under
the Mortgages and any of its successors or assigns in such capacity.
"UCC" means the Uniform Commercial Code as enacted in the State of
New York.
"Upgrade Documents" has the meaning assigned to such term in the
Third Upgrade Agreement.
"Upgrade Programs" means, collectively, the First Upgrade Program,
the Second Upgrade Program and the Third Upgrade Program.
"Vessel" means the M. G. HULME, JR., as described on Schedule A, as
upgraded pursuant to the Upgrade Programs, and all fixtures,
equipment and improvements of any kind whatsoever installed or
located thereon pursuant to this Charter (including, without
limitation, the First Upgrade Severables, the Second Upgrade
Severables and the Third Upgrade Severables) or as otherwise agreed
to by the Charterer and the Owner.
ARTICLE 2
SCHEDULES AND OBJECTIVES
2.1 Schedules
The following schedules are attached hereto and made a part hereof
for all purposes. In the event there are any conflicts between the
body of this Charter and the schedules attached hereto, the
provisions in the body of this Charter will prevail.
(a) Schedules
Schedule A - Description of the Vessel, including specifications.
Schedule B-1 - First Upgrade Program
Schedule B-2 - Second Upgrade Program
Schedule B-3 - Third Upgrade Program
Schedule C - Charterer's Insurance
Schedule D - Stipulated Loss Value
Schedule E - Pending Litigation
Schedule F - Computation of Basic Hire Adjustment for Third
Upgrade
2.2 Objectives
The Owner shall provide the Vessel to the Charterer on a bareboat or
demise charter basis. The Owner shall not be responsible for any
other service, manning, operations or equipment whatsoever. By the
Owner providing the Vessel to the Charterer in accordance with this
Charter, upon the terms and subject to the conditions hereof, the
Charterer shall take and have command, possession and control of the
Vessel during the term of this Charter; as a part hereof, and
without limit to the foregoing, the Charterer's command, possession
and control of the Vessel shall specifically include the obligation
to have the Vessel under the command of an Offshore Installation
Manager certified by and for the area in which the Vessel is
operating from time to time.
2.3 CONDITION OF THE PROPERTY. THE CHARTERER ACKNOWLEDGES AND AGREES
THAT IT IS CHARTERING THE VESSEL AND OTHER PROPERTY HEREUNDER AAS
IS", AWHERE IS", AND AWITH ALL FAULTS, WHETHER LATENT OR
DISCERNIBLE", WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS
OR IMPLIED) BY THE OWNER, OWNER GROUP OR ANY INVESTOR AND IN EACH
CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF
ANY PARTIES IN POSSESSION THEREOF, (C) ALL APPLICABLE LEGAL
REQUIREMENTS AND (D) VIOLATIONS OF LEGAL REQUIREMENTS WHICH MAY
EXIST ON THE DATE HEREOF. NONE OF OWNER, ANY MEMBER, OWNER GROUP,
OR ANY INVESTOR HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY
REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) OR SHALL
BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE, VALUE,
HABITABILITY, USE, SEAWORTHINESS, CONDITION, STABILITY, SUITABILITY,
DESIGN, OPERATION, CLASS, COMPLIANCE WITH LAWS, CONFORMANCE TO
SPECIFICATIONS, MERCHANTABILITY OR FITNESS FOR USE OF ANY PROPERTY
(OR ANY PART THEREOF FOR A PARTICULAR PURPOSE OR WITH RESPECT TO
PATENT INFRINGEMENT), OR ANY OTHER REPRESENTATION, WARRANTY OR
COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY
PROPERTY (OR ANY PART THEREOF), AND NONE OF OWNER, OWNER GROUP OR
ANY INVESTOR SHALL BE LIABLE FOR ANY LATENT, HIDDEN OR PATENT DEFECT
THEREIN, ANY REPRESENTATION, WARRANTY OR PROMISE, EXPRESS OR
IMPLIED, WHICH ANY MANUFACTURER OR BUILDER OF THE VESSEL OR ANY
PROPERTY (OR ANY PART THEREOF) MAY HAVE MADE OR MAY BE DEEMED TO
HAVE MADE OR THE FAILURE OF ANY PROPERTY, OR ANY PART THEREOF, TO
COMPLY WITH ANY LEGAL REQUIREMENT OR ANY DAMAGES, WHETHER ACTUAL,
SPECIAL, CONSEQUENTIAL OR INCIDENTAL, ARISING HEREFROM OR THEREFROM.
THE CHARTERER HAS BEEN AFFORDED FULL OPPORTUNITY TO INSPECT THE
VESSEL, IS (INSOFAR AS THE OWNER IS CONCERNED) SATISFIED WITH THE
RESULTS OF ITS INSPECTIONS AND IS ENTERING INTO THIS CHARTER SOLELY
ON THE BASIS OF THE RESULTS OF ITS OWN INSPECTIONS, AND ALL RISKS
INCIDENT TO THE MATTERS DESCRIBED IN THE PRECEDING SENTENCE, AS
BETWEEN OWNER, THE OWNER GROUP AND THE INVESTORS, ON THE ONE HAND,
AND THE CHARTERER, ON THE OTHER HAND, ARE TO BE BORNE BY THE
CHARTERER. NOTHING IN THIS SECTION 2.3 OR THE CHARTER SHALL OPERATE
TO NEGATE OR DIMINISH ANY CLAIM FOR BREACH OF ANY REPRESENTATION,
WARRANTY OR COVENANT THAT THE OWNER MAY NOW OR HEREAFTER HAVE UNDER
ANY CHARTER DOCUMENT OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED
THEREBY.
ARTICLE 3
TERM, DELIVERY DATE AND PURCHASE OPTION
3.1 Duration
(a) Subject to the terms and conditions of this Charter, the Owner
bareboat (demise) charters to the Charterer, and the Charterer
bareboat (demise) charters from the Owner, the Vessel for a
period beginning on the Delivery Date and ending on the 10th
anniversary of the Delivery Date (the "Primary Term"), with the
option to extend this Charter pursuant to Section 3.1(b).
(b) At the end of the Primary Term, and subject to the terms and
conditions of this Charter, the term of this Charter may be
extended for a period of 90 days (the "Extended Term") by the
Charterer providing 180 days' written notice to the Owner prior
to the end of the Primary Term if, and only if, such extension
is necessary to complete a Drilling Contract in progress that
is in full force and effect on the date such extension notice
is delivered and no Default or Event of Default has occurred
and is continuing. The Charterer, at its sole cost and
expense, shall provide the Owner with independent verification
of the necessity of any such extension in form and substance
satisfactory to the Owner. During such Extended Term, if any,
all of the obligations of the Charterer under this Charter
during the Charter Period shall continue for the Extended Term,
including, without limitation, the obligation to pay Basic Hire
under Section 12.1. Prior to any extension of the Primary
Period for the Vessel, the Charterer shall give the Owner its
good faith estimate of the date on which the existing Drilling
Contract will be completed.
(c) The Charterer shall, at all reasonable times during the last
180 days of the Charter Period, permit access to the Vessel to
the Owner and to Persons designated by the Owner in connection
with any prospective sale or prospective rechartering of the
Vessel by the Owner, and shall permit the inspection of the
Vessel by such Persons; provided, however, that the exercise of
such rights shall in no way unreasonably interfere with the use
of the Vessel by the Charterer.
3.2 Delivery of the Vessel to the Charterer
The Vessel was delivered by the Owner to the Charterer at Garden
Banks Block 387, Outer Continental Shelf, Gulf of Mexico on November
29, 1995, pursuant to the MOA. Upon such delivery, the Vessel
became subject to all the terms and conditions of this Charter.
Such delivery of the Vessel by the Owner to the Charterer, without
further action, irrevocably constituted acceptance by the Charterer
of the Vessel for all purposes of this Charter, and shall be
conclusive proof that the Vessel was at such time in compliance with
all requirements of this Charter and that the Vessel was at such
time seaworthy, in accordance with specifications, in good working
order, condition and repair and without defect or inherent vice in
title, condition, design, operation or fitness for use, whether or
not discoverable by the Charterer as of the date hereof, and free
and clear of all Liens, other than Permitted Liens; provided,
however, that nothing contained herein shall in any way diminish or
otherwise affect any right the Charterer, the Owner or any of their
respective Affiliates may have against any shipyard, manufacturer,
supplier, vendor or any other Person in respect of the Vessel. FROM
AND AFTER THE DELIVERY DATE, THE CHARTERER SHALL NOT BE ENTITLED TO
MAKE OR ASSERT ANY CLAIM AGAINST OWNER, THE OWNER GROUP OR ANY
INVESTOR ON ACCOUNT OF ANY REPRESENTATION OR WARRANTY WITH RESPECT
TO THE VESSEL, THE CONSUMABLE STORES ON BOARD OR WITH RESPECT TO ITS
TITLE, SEAWORTHINESS, MERCHANTABILITY, FITNESS, HABITABILITY, VALUE,
USE, CONDITION, SUITABILITY, CLASS, COMPLIANCE WITH LAWS, DESIGN,
OPERATION, CONFORMANCE TO SPECIFICATIONS NOR ABSENCE OF DEFECTS,
LATENT, HIDDEN, PATENT OR OTHER, NOR WITH RESPECT TO PATENT
INFRINGEMENT. FROM AND AFTER THE DELIVERY DATE, THE CHARTERER
WAIVES ANY CLAIM IT MIGHT HAVE AGAINST OWNER, THE OWNER GROUP OR ANY
INVESTOR FOR ANY LIABILITY, CLAIM, LOSS, DAMAGE OR EXPENSE OF ANY
KIND OR NATURE BY OR WITH RESPECT TO THE VESSEL OR ANY DEFICIENCY OR
DEFECT THEREIN OR INADEQUACY THEREOF, THE USE OR MAINTENANCE
THEREOF, ANY INTERRUPTION OR LOSS OF SERVICE OR USE THEREOF, WHETHER
IN CONTRACT, TORT OR ANY THEORY OF PRODUCT OR STRICT LIABILITY.
3.3 Early Termination
This Charter shall terminate in accordance with any notice of
termination given in accordance with this Section 3.3. This Charter
shall also terminate at the time stipulated below for any of the
following reasons:
(a) At the option of the Owner, this Charter shall terminate
immediately and upon written notice to the Charterer if any
Event of Loss occurs and upon such termination the Charterer
shall pay the Owner on the earlier of (i) the receipt of any
insurance payable in respect of such Event of Loss and (ii) 60
days after the occurrence of such Event of Loss, the Stipulated
Loss Value of the Vessel set forth on Schedule D as of the
Payment Date preceding the occurrence of such Event of Loss
plus any past due Hire, plus the sum of the per diem of the
Basic Hire due on the next Payment Date, for each day during
the period from the next preceding Payment Date to the date of
such Event of Loss (unless the Event of Loss shall occur on a
Payment Date, in which case, such payment shall be equal to the
Stipulated Loss Value on such Payment Date plus any Hire due on
such Payment Date), in each case, together with interest
thereon computed from the date of such Event of Loss to the
date of actual payment at a rate per annum equal to the Overdue
Rate. If the time of such loss be uncertain, the loss shall be
deemed to have occurred as of the time at which communication
from the Vessel was last heard. It is expressly understood
that the Charterer shall bear all risk of any such loss.
(b) Each of the following events shall be an "Event of Default":
(i) the Charterer shall fail to pay the Owner any amounts due
and payable hereunder when due; or
(ii) the Charterer shall fail to perform any of its obligations
under Article 5, Sections 7.3, 10.1, 11.1(a), 11.6, 11.7,
11.8, 12.5, 13.4, or 14.6, Article 15, Section 17.3 or
Article 18 hereof or any other obligation as to which the
Charterer is specifically accorded elsewhere herein or
otherwise any notice and/or grace period in which to
perform such obligation or to cure such breach thereof or
default therein and such notice shall have been given
and/or such grace period shall have expired without cure
of such failure; or
(iii) any Obligor shall fail to perform any of its
obligations hereunder or under any Charter Document (other
than those specified in Section 3.3(a) or (b)(i)) which is
not cured within the lesser of (A) 10 days or (B) the then
remaining term of the Charter Period of the occurrence
thereof; or
(iv) any representation, warranty or statement made or deemed
made by any Obligor in any Charter Document or information
furnished by or on behalf of any Obligor in any
instrument, certificate or other document delivered by or
on behalf of any Obligor shall be untrue in any material
respect on the date made or deemed made; or
(v) (i) any Obligor shall fail to pay any principal of or
premium or interest on any Debt (excluding Debt under this
Charter) of such Obligor under which any aggregate amount
of at least $1,000,000 is outstanding or committed, when
the same becomes due and payable, and such failure shall
continue after any applicable grace period; or (ii) any
other event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and
shall continue after any applicable grace period, if the
effect of such event or condition results in the
acceleration of, the maturity of such Debt; or any such
Debt shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled
required prepayment), redeemed, purchased or defeased, or
an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case, prior to the
stated maturity thereof; or legal action shall be taken
with respect to such other event (including, but not
limited to, the commencement of proceedings seeking
specific performance or injunctive or other equitable
relief); or
(vi) any Obligor shall generally not pay its debts as such
debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or voluntarily or
involuntarily dissolves or is dissolved, or terminates or
is terminated; or any proceeding shall be instituted by or
against such Person or any of its subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or
its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for
it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain
undismissed or unstayed for a period of 30 days, or any of
the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or
the appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of
its property) shall occur; or any such Person or any of
its subsidiaries shall take any corporate or other
organizational action to authorize any of the actions set
forth above in this subsection (vi); provided, however,
that nothing contained in this Section 3.3(b)(vi) or
otherwise shall be deemed to limit, restrict or prohibit
Owner in any manner from intervening in any such
proceeding described above and enforcing any of its rights
and remedies whether under this Charter or any of the
Charter Documents, at law, in admiralty or equity or
otherwise; or
(vii) a judgment or order for the payment of money in the
amount of at least $1,000,000 or more shall be rendered
against any Obligor and either (i) enforcement proceedings
shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 10
consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(viii) any provision of this Charter or any Charter Document
shall at any time for any reason cease to be valid and
binding on any Obligor, or shall be declared to be null
and void, or the validity or enforceability thereof shall
be contested by any Obligor, or any Obligor shall deny
that it has any or further liability or obligation under
this Charter or any Charter Document; or
(ix) failure of any Obligor to comply with, or to incur any
liability, whether fixed or contingent, under or pursuant
to, any statute, law, regulation or other governmental
requirement to which such Obligor is subject, including
but not limited to ERISA, the Oil Pollution Act of 1990
(AOPA") and any other environmental, health or safety law
or regulation, in each case, which might reasonably be
expected to have a material adverse effect on the
condition (financial and otherwise), business prospects or
the ability of such Obligor to perform its obligations
under the Charter Documents; or
(x) any Lien securing the Obligations shall fail to be
perfected, valid or enforceable, or any material adverse
effect shall occur respecting the value or suitability as
collateral of any property encumbered by such Lien (unless
the Charterer shall have provided Substitute Collateral in
accordance with Section 12.5(c)), including, without
limitation, any levy, attachment or seizure thereof or,
subject to Section 12.5, the Lien securing the Obligations
under the Cunningham Mortgage shall fail to be a first
priority preferred ship mortgage at any time after
December 31, 1997; or
(xi) the Completion (as defined in the Third Upgrade Agreement)
shall not occur on or before September 30, 1998; or
(xii) a Third Upgrade Default shall occur and be continuing.
3.4 Remedies
Upon the occurrence and during the continuation of any Event of
Default, the Owner may, at its option, declare this Charter to be in
default; and at any time thereafter, the Owner may do, and the
Charterer shall comply with, one or more of the following, as the
Owner in its sole discretion shall elect:
(a) Upon written demand (which demand shall have the effect of
terminating all of the Charterer's rights to use or possess the
Vessel or act as agent under the Upgrade Programs), the Owner
may cause the Charterer to, and the Charterer hereby agrees
that it will, at the Charterer's sole cost and expense,
promptly redeliver the Vessel, or cause the Vessel to be
redelivered, to the Owner with all reasonable dispatch and in
the same manner and in the same condition as if the Vessel were
being redelivered at the expiration of the Charter Period in
accordance with all of the provisions of Section 3.5, and all
obligations of the Charterer under said Section shall apply to
such redelivery; or the Owner or its agent, at the Owner's
option, without further notice, may, but shall be under no
obligation to, retake the Vessel wherever found, whether upon
the high seas or at any port, harbor or other place and
irrespective of whether the Charterer, any subcharterer or any
other person may be in possession of the Vessel, all without
prior demand and without legal process, and for that purpose
the Owner or its agent may enter upon any dock, pier or other
premises where the Vessel may be and may take possession
thereof, without the Owner or its agent incurring any liability
by reason of such retaking, whether for the restoration of
damage to property caused by such retaking or for damages of
any kind to any Person for or with respect to any cargo carried
or to be carried by the Vessel or for any other reason.
Henceforth, the Owner shall hold, possess and enjoy the Vessel,
free and clear of any right of the Charterer or its successors
or assigns to possess or use the Vessel for any reason
whatsoever. The exercise by the Owner of its remedies under
this paragraph (a) shall be without prejudice, and in addition,
to any of the Owner's other remedies referred to in this
Charter or any of the other Charter Documents or at law, in
admiralty or equity.
(b) The Owner, by written notice to the Charterer specifying a
payment date not less than 10 days, nor more than 30 days,
after the date of such notice, may require the Charterer to pay
to the Owner, and the Charterer hereby agrees that it will pay
to the Owner, on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a penalty
and in lieu of any further Basic Hire payments hereunder, an
amount equal to all unpaid Basic Hire payable on each Payment
Date occurring on or before the payment date specified in such
notice, plus the Stipulated Loss Value computed as of the
Payment Date preceding the payment date specified in such
notice plus the sum of the per diem of the Basic Hire due on
the next Payment Date for each day during the period from the
next preceding Payment Date to the date of such Event of Loss
(or as of such payment date specified in such notice if such
payment date specified in such notice is a Payment Date),
together with interest on such amounts at the Overdue Rate for
the period, if any, from the Payment Date as of which such
Stipulated Loss Value is calculated to and including the date
of actual payment. Upon such payment of liquidated damages,
the Owner shall pay over to the Charterer the net proceeds of
any sale, charter or other disposition of the Vessel as and
when received but only after deducting all costs and expenses
whatsoever incurred by the Owner in connection therewith, to
the extent such net proceeds do not exceed the amount of such
Stipulated Loss Value actually so paid. Nothing contained in
the preceding sentence or otherwise shall require the Owner to
sell, charter or otherwise dispose of the Vessel at any time.
(c) The Owner may exercise any other right or remedy that may be
available to it under applicable law, in equity or admiralty or
proceed by appropriate court action to enforce the terms of
this Charter or to recover damages for the breach hereof or to
terminate this Charter.
(d) The Owner or its agent may sell the Vessel at public or private
sale, with or without notice to the Charterer, advertisement or
publication, as the Owner may determine, or otherwise may
dispose of, hold, possess, use, operate, charter (whether for a
period greater or less than the balance of what would have been
the Charter Period in the absence of the termination of the
Charterer's rights to the Vessel) to others or keep idle the
Vessel, all on such terms and conditions and at such place or
places as the Owner may determine and all free and clear of any
rights of the Charterer and of any claim of the Charterer in
admiralty, in equity, at law or by statute, whether for loss or
damage or otherwise, and without any duty to the Charterer
except to the extent provided in paragraph (b) above. The
Charterer and the Owner agree that 10 days' written notice of
the sale to be made by the Owner or its designee or after the
time in which a private sale shall occur is commercially
reasonable notice for all purposes.
In addition, the Charterer shall be liable for any and all
Supplemental Hire payable hereunder before, during or after the
exercise of any of the foregoing remedies and for all insurance
premiums and all demurrage, docking and anchorage charges and all
legal fees and any other costs and expenses whatsoever incurred by
the Owner or any Investor by reason of the occurrence of any Event
of Default or by reason of the exercise by the Owner of any right or
remedy hereunder, including, without limitation, any costs and
expenses incurred by the Owner in connection with any retaking of
the Vessel or, upon the redelivery or retaking of the Vessel in
accordance with this Section 3.4, the placing of the Vessel in the
condition required by and otherwise complying with the terms of
Section 3.5 hereof. No right or remedy referred to in this Section
3.4 is intended to be exclusive, but each shall be cumulative and is
in addition to, and may be exercised concurrently with, any other
right or remedy which is referred to in this Section 3.4 or which
may otherwise be available to the Owner at law, in equity or in
admiralty, including without limitation the right to terminate this
Charter. There shall be deducted from the aggregate amount so
recoverable by the Owner, the net balance, if any, remaining of any
monies held by the Owner which would have been required by the terms
hereof to have been paid to the Charterer but for the occurrence of
an Event of Default. The rights of the Owner and the obligations of
the Charterer under this Section 3.4 shall be effective and
enforceable regardless of the pendency of any proceeding which has
or might have the effect of preventing the Owner or the Charterer
from complying with the terms of this Charter. No express or
implied waiver by the Owner of any Event of Default shall in any way
be, or be construed to be, a waiver of any further or subsequent
Event of Default. To the extent permitted by applicable law, the
Charterer hereby waives any rights now or hereafter conferred by
statute or otherwise which may require the Owner to sell, charter or
otherwise use the Vessel in mitigation of the Owner's damages.
3.5 Redelivery of the Vessel
Upon termination of this Charter, the Charterer shall, at its sole
cost and expense not to exceed $2,500,000 as Escalated, redeliver
the Vessel to the Owner at an anchorage of the Owner's choice. The
Charterer shall notify the Owner in writing at least 360 days prior
to the expiration of the Charter Period of the location in which the
Vessel will be operating at the expiration of the Charter Period.
The Charterer agrees that at the time of such redelivery the Vessel
shall be free and clear of all Liens (other than Owner Liens), shall
be entitled to and shall have the classification and rating required
by Section 8.1, with no requirements, specifications or
recommendations of the American Bureau of Shipping or of any
governmental agency or department unfulfilled and with all required
certificates in effect, shall be in compliance with all laws,
conventions, treaties and customs and rules and regulations issued
thereunder or applicable in any way to the Vessel or any use or
operation thereof, shall be free of any insignia of the Charterer or
others, shall be charter free, cargo free, safely afloat, securely
moored, free of charge and be in the same good order and condition
as described in the third sentence of Section 3.2, but with the
Upgrade Programs completed and as required by Section 8.1, ordinary
wear and tear excepted; provided however, that in the event that the
Owner elects not to exercise its option to purchase Severables
(other than Third Upgrade Severables) acquired after the Delivery
Date pursuant to Section 9.4, the Charterer shall redeliver the
Vessel to the Owner with Severables comparable to the Severables
aboard the Vessel when the Vessel was delivered to the Charterer
pursuant to Section 3.2 and Severables comparable to the Third
Upgrade Severables. Any Coast Guard certificates required to be
issued annually with respect to the Vessel shall have been issued
within 12 months of the date of redelivery of the Vessel. At the
time and place of redelivery of the Vessel, the Charterer shall also
deliver to the Owner all documentation, plans, drawings,
specifications, logbooks, classification and inspection, records,
operating manuals, records of modification, overhaul, use and/or
maintenance and other warranties and documents then in its
possession or control which were furnished by the manufacturers or
builders of the Vessel, the Upgrade Programs or any other upgrade of
the Vessel or any supplier of equipment on the Vessel or otherwise
maintained by the Charterer. Upon redelivery of the Vessel
hereunder, the Charterer, if requested in writing by the Owner, will
arrange for, at the Charterer's cost and expense, docking or
appropriate anchorage or storage facilities for the Vessel for a
period not exceeding 150 days, including, but not limited to, any
crew, staffing, materials, fuel or other costs or expenses incurred
to stack the Vessel with full marine and maintenance crews.
3.6 Survey of the Vessel at End of Charter Period
At least 120 days before redelivery of the Vessel pursuant to
Section 3.5, but sufficiently in advance of such redelivery date to
permit any needed repairs to be completed by such redelivery date, a
joint survey shall be made by the Charterer and the Owner (with
drydocking or underwater survey in lieu of drydocking and bottom
painting, unless the Owner shall otherwise agree in writing) to
determine the condition and fitness of the Vessel, during which
survey the Vessel's tanks shall be gas-freed and the Vessel's
engines and boilers opened for inspection; the redelivery survey
shall meet all requirements of the next special survey of the
Vessel, provided that if a special survey of the Vessel has been
made, pursuant to the provisions of Article 8, within 30 months
prior to such redelivery, the records of such special survey shall
be taken into account in determining the scope of the joint survey
required pursuant to this Section 3.6. If requested by the Owner, a
surveyor from the American Bureau of Shipping shall be present and
the Charterer shall permit such surveyor to examine all areas of
hull and items of machinery and other parts of the Vessel. The
Charterer will pay for the costs of such survey, drydocking or
underwater survey in lieu of drydocking and bottom painting and the
Charterer shall notify the Owner at least 10 days in advance of the
time and place of such drydocking or underwater survey in lieu of
drydocking, bottom painting and survey. The Charterer, at its sole
cost and expense, will fully correct and repair any condition
disclosed by such survey to the extent necessary to cause the
Vessel, on or before the date specified for redelivery, to comply
with all of the terms of Section 8.1. The term of the Charter
Period shall be extended for any period necessary (a) so as to
permit the survey described in this Section 3.6 to occur at least
120 days before redelivery of the Vessel pursuant to Section 3.5
whether as a result of this Vessel's use in completing a Drilling
Contract in progress under Section 3.1(b) or otherwise; and (b) to
make such repairs. During such extension period, if any, all of the
obligations of the Charterer under this Charter applicable during
the Charter Period shall continue in respect of such extension
period. Upon redelivery of the Vessel under this or the preceding
paragraph, the Charterer, if requested in writing by the Owner, will
provide docking or appropriate anchorage or storage facilities for
the Vessel (if available at the designated port) for a period not
exceeding 150 days at the Charterer's cost and expense, including,
but not limited to, any crew, staffing, materials, fuels or other
cost or expense to stack the Vessel with full marine and maintenance
crews.
3.7 Purchase Option.
No more than 540, but no less than 360 days prior to the Expiration
Date, the Charterer may, so long as no Default or Event of Default
has occurred and is continuing, give the Owner irrevocable written
notice (the "Expiration Date Election Notice") that the Charterer
elects to exercise its option to purchase the Vessel (except for the
First Upgrade Severables). If the Charterer elects to exercise such
option, then the Charterer shall pay to the Owner on the Expiration
Date an amount in immediately available funds equal to the Purchase
Option Price and, upon receipt of such amount plus all other amounts
payable under this Charter and the other Charter Documents, the
Owner shall transfer all of the Owner's right, title and interest in
the Vessel (except for the First Upgrade Severables), such transfer
shall be AAS IS", AWHERE IS", without recourse and without any
representation or warranty of any kind or nature whatsoever, either
express or implied (except for the absence of Liens arising as a
result of claims against the Owner for which the Owner is not
entitled to indemnification from the Charterer or any Guarantor or
the payment or discharge of which is not the obligation of the
Charterer or any Guarantor), in the then-current physical condition
of the Vessel and without any other representation or warranty on
the part of, or recourse to, the Owner.
3.8 Determination of Purchase Option Price
During the period from the delivery of the Expiration Date Election
Notice to the Owner until 210 days prior to the Sale Date, the
Charterer and the Owner may mutually agree on the Fair Market Sale
Value of the Vessel as of the Sale Date, and if the Charterer and
the Owner fail to so agree, such Fair Market Sale Value shall be
determined not less than 90 days before the Sale Date by application
of the Appraisal Procedure.
ARTICLE 4
NATURE OF COMPENSATION
4.1 Absolute Obligation
The obligation of the Charterer to pay to the Owner the fees, rates,
hires, indemnities and reimbursements specified in this Charter
shall be absolute and unconditional and shall not be affected by any
circumstance whatsoever, and the Charterer waives (and agrees not to
allege or pursue) any right to any such defense, including without
limitation, (a) any setoff, counterclaim, abatement, reduction,
recoupment, defense, or other right that the Charterer may have
against the Owner or any other Person, firm, company, or entity for
any reason whatsoever; (b) any unavailability of the Vessel after
its delivery to the Charterer for any reason; (c) any damage, loss
or destruction of or damage to the Vessel or interruption,
restriction, interference, or cessation in the use or possession
thereof by the Charterer for any reason whatsoever, at whatever time
and of whatever duration; (d) any confiscation, expropriation,
nationalization, requisition, seizure, inability to export,
deprivation, or other taking of title to or possession or use of the
Vessel or any part thereof by any government or governmental
authority or otherwise; (e) any restriction on possession or use of
the Vessel; (f) the interference with or prohibition of the
Charterer's possession or use of the Vessel; (g) any invalidity or
unenforceability or lack of due authorization or other infirmity of
this Charter or the lack of right, power or authority of any Obligor
or the Owner to enter into this Charter or any Charter Document;
(h) any default by the Owner; (i) any defect in the title,
condition, quality or fitness for a particular purpose of the Vessel
or other property or service provided hereunder; (j) any amendment
or modification of or supplement to the Charter Documents, any
agreements relating to any thereof or any other instrument or
agreement applicable to the Vessel or any part thereof, or any
assignment or transfer of any thereof, or any furnishing or
acceptance of additional security, or any release of any security,
or any failure or inability to perfect any security; (k) any failure
on the part of the Owner, the Owner Group or any Investor or any
other Person to perform or comply with any term of any instrument or
agreement; (l) any waiver, consent, change, extension, indulgence or
other action or inaction under or in respect of any such instrument
or agreement or any exercise or nonexercise of any right, remedy,
power or privilege under or in respect of any such instrument or
agreement or this Charter; (m) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation,
or similar proceeding with respect to any Obligor, the Owner, the
Owner Group or any Investor, or their respective properties or
creditors, or any action taken by any trustee or receiver or by any
court in any such proceeding, including, without limitation, any
termination or rejection of this Charter by any court or any
trustee, receiver or liquidating agent of any Obligor, the Owner
Group, any Investor, or the Owner or of any of their respective
properties in connection with any such proceeding; (n) any
assignment or other transfer of this Charter by the Charterer or the
Owner or any lien, charge or encumbrance on or affecting the
Charterer's estate in, or any subchartering of, all or any part of
the Vessel; (o) any libel, attachment, levy, detention,
sequestration or taking into custody of the Vessel, or any
interruption or prevention of or restriction on or interference with
the use or possession of the Vessel; (p) any act, omission or breach
on the part of the Owner under this Charter or under any other
agreement at any time existing among the Owner or any Obligor or
under any other law, governmental regulation or other agreement
applicable to such Persons or the Vessel; (q) any claim as a result
of any other dealing between the Owner and any Obligor; (r) any
ineligibility of the Vessel, or any denial of the Vessel's right, to
engage in any trade or activity; (s) any failure to obtain any
required governmental consent for any transfer of rights or title
required to be made by the Owner under this Charter; (t) any
ineligibility of the Vessel for documentation under the laws of any
jurisdiction; (u) the recovery of any judgment against any Person or
any action to enforce the same; (v) any defect in the seaworthiness,
condition, design, operation or fitness for use or other
characteristics of the Vessel; (w) any change in the ownership,
direct or indirect, of the capital stock of the Owner or any of the
Obligors; or (x) any other cause, circumstance, or happening,
whether similar or dissimilar to the foregoing, any present or
future law to the contrary notwithstanding and whether or not any
Obligor could have foreseen or shall have notice or knowledge of any
of the foregoing. Except as specifically provided herein, the
Charterer hereby waives any and all rights that it may now have or
which at any time hereafter may be conferred upon it, by statute, at
law, in admiralty or equity or otherwise, to terminate, cancel, quit
or surrender this Charter.
All payments hereunder shall be final and, once paid, be fully and
finally earned and nonrefundable, and the Charterer shall not seek
to recover all or any part of such payment from the Owner for any
reason whatsoever.
The Charterer shall remain obligated under this Charter in
accordance with its terms and shall not take any action to
terminate, rescind or avoid this Charter, notwithstanding any action
for bankruptcy, insolvency, reorganization, liquidation,
dissolution, or other proceeding affecting the Owner, any
governmental authority or any other Person, or any action with
respect to this Charter or any Charter Document which may be taken
by any trustee, receiver or liquidator of the Owner, any
governmental authority or any other Person or by any court with
respect to the Owner or any governmental authority. The Charterer
hereby waives all right (i) to terminate or surrender this Charter
or (ii) to avail itself of any abatement, suspension, deferment,
reduction, setoff, counterclaim or defense with respect to any
amount payable hereunder. The Charterer shall remain obligated
under this Charter in accordance with its terms and the Charterer
hereby waives any and all rights now or hereafter conferred by
statute, at law, in admiralty or equity or otherwise to limit or
modify any of the Owner's rights or remedies or any of the
Charterer's rights, remedies, obligations or liabilities as
described in this Charter or any Charter Document (such waiver to
include, without limitation, any and all rights and remedies against
a lessor under Article 2A of the UCC or to avoid strict compliance
with its obligations under this Charter).
4.2 Net Charter
This Charter is a net Charter and it is intended that the Charterer
shall pay all costs, charges, fees, assessments, expenses, duties
and taxes of every character incurred in connection with the
delivery, storage, use, possession, operation, maintenance, repair,
chartering, recovery, retaking, and return of the Vessel, including
without limitation those described elsewhere in this Charter. The
parties intend that the obligations of the Charterer hereunder shall
be covenants and agreements that are separate and independent of the
Owner's obligations hereunder or hereafter arising or existing and
shall continue unaffected.
ARTICLE 5
CONDITIONS TO EFFECTIVENESS
5.1 Conditions
This Charter shall become effective upon (i) receipt by the Owner of
each of the documents described in subsections (a) through (k)
below, in form and substance satisfactory to the Owner and each
Investor, and (ii) satisfaction of each of the other conditions set
forth in subsections (l) through (p) below in a manner satisfactory
to the Owner and each Investor in all respects.
(a) This Charter duly executed by Charterer.
(b) A Guaranty duly executed by R&B Falcon in form and substance
satisfactory to the Owner.
(c) A Second Supplement to Preferred Mortgage, duly executed by
Charterer, mortgaging the Jim Cunningham in form and substance
satisfactory to the Owner.
(d) A Ratification Agreement duly executed by Charterer and the
Owner in form and substance satisfactory to the Owner.
(e) Duly executed Officers' Certificates, dated as of the Closing
Date, from an executive officer and the Secretary or Assistant
Secretary of each of the Charterer and R&B Falcon
(collectively, the AR&B Companies") certifying copies of
resolutions of each of the R&B Companies approving this Charter
and the other Charter Documents to which each is a party and
authorizing the transactions contemplated herein and therein,
duly adopted at a meeting of, or by the unanimous written
consent of, the Board of Directors of each corporation, and the
articles or certificates of incorporation and by-laws of the
R&B Companies, as in effect at such time.
(f) An original executed opinion dated the Closing Date from Wayne
K. Hillin, General Counsel to the R&B Companies, setting forth
customary opinions regarding (i) the R&B Companies' due
organization, valid existence, good standing, corporate power
and authority, (ii) the legal, valid and binding nature of this
Charter and the other Charter Documents, (iii) the absence of
violations of, or conflicts with, laws, corporate
organizational and governance documents or other agreements,
(iv) the absence of any required consents, and (v) such other
matters as the Owner may reasonably require be addressed. In
addition, such opinion shall also opine that no consent or
approval of the U.S. Department of Transportation Maritime
Administration, the United States Coast Guard or any other
entity having jurisdiction over the Vessel, the Collateral
Vessels or any of the R&B Companies is required in order to
consummate the transactions contemplated hereby or by any of
the other Charter Documents.
(g) An original executed opinion from Baker & Botts, L.L.P.,
counsel to the Owner, regarding (i) the legal, valid and
binding nature of this Charter and certain other Charter
Documents and (ii) certain tax matters.
(h) [intentionally deleted]
(i) [intentionally deleted]
(j) A consent to the assignment of Third Upgrade Contract to the
Owner executed by the Contractor.
(k) A duly executed Third Upgrade Agreement.
(l) No loss, constructive loss or requisitioning for use by any
governmental authority of the Vessel shall have occurred.
(m) No change shall have occurred in applicable law or regulations
thereunder or in interpretations thereof by any regulatory
authority which would make it illegal for the Charterer, the
Owner or any Investor to enter into any of the transactions
contemplated in the Charter Documents or which would subject
the Charterer, the owner or any Investor to any penalty or
other liability as a result of any transaction contemplated in
any of the Charter Documents.
(n) No material adverse change shall have occurred in the physical
condition of the Vessel since December 31, 1995.
(o) All governmental and regulatory approvals, licenses and
authorizations necessary or, in the opinion of the Owner, the
Investors or their respective counsel, advisable in connection
with the transactions contemplated in the Charter Documents
shall have been duly received or obtained.
(p) The Owner's determination that, since December 31, 1997, no
material adverse change has occurred with respect to the
financial or other condition of Charterer or Reading & Bates
and R&B Falcon.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of the Owner.
To induce the Charterer to enter into this Charter and to consummate
the transactions contemplated hereby, the Owner represents and
warrants to the Charterer that as of the date of execution of this
Charter:
(a) Organization and Good Standing. The Owner is a limited
liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) Authority. The Owner has taken all action required by Delaware
law, and by the Limited Liability Company Agreement to
authorize the execution and delivery of this Charter. This
Charter constitutes the legal, valid and binding obligation of
the Owner, enforceable against the Owner in accordance with its
terms, subject to bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors'
rights and by general principles of equity. Neither the
execution and delivery of this Charter nor will the
consummation of the transactions by it in accordance with the
terms hereof: (i) violate or conflict with any provision of
the Limited Liability Company Agreement of the Owner, or (ii)
violate or conflict with any provision of any law, rule,
regulation, order, permit, certificate, writ, judgment,
injunction, decree, determination, award or other decision of
any court, government, government agency or instrumentality,
domestic or foreign, or arbitrator binding upon the Owner,
which violation or conflict is reasonably likely to prevent the
Owner's performance of its obligations hereunder.
Neither the execution and delivery of this Charter nor the
consummation of the transactions contemplated hereby will
result in a breach of, or constitute a default (or with notice
or lapse of time or both result in a breach of or constitute a
default) under or otherwise give any person the right to
terminate any mortgage, indenture, loan or credit agreement,
lease, license, contract or any other agreement or instrument
to which the Owner is a party or by which it or any of its
properties is bound or affected.
(c) EXCEPT AS EXPRESSLY SET OUT IN THIS SECTION 6.1, OWNER
EXPRESSLY DISCLAIMS ANY EXPRESS OR IMPLIED REPRESENTATIONS OR
WARRANTIES, INCLUDING WITHOUT LIMITATION, SEAWORTHINESS,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR WITH
RESPECT TO PATENT INFRINGEMENT, VALUE, USE, CONDITION,
SUITABILITY, CLASS, OPERATION, COMPLIANCE WITH LAWS, DESIGN,
CONFORMANCE WITH SPECIFICATIONS, OR ABSENCE OF DEFECTS, HIDDEN,
PATENT, LATENT OR OTHER.
6.2 Representations and Warranties of the Charterer.
To induce the Owner to enter into this Charter and to consummate the
transactions contemplated hereby, the Charterer represents and
warrants to the Owner that as of the date of execution of this
Charter:
(a) Organization and Good Standing. The Charterer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Oklahoma and is duly qualified or licensed
and in good standing as a foreign corporation in each other
jurisdiction in which it owns or leases any facility or
property or has any office, or in which the character of its
business or operations requires such qualification or
licensing, in each case related to the subject matter of this
Charter or any of the Charter Documents.
(b) Authority. The Charterer has taken all action required by law,
its Certificate of Incorporation, as amended, and its By-Laws
to authorize the execution and delivery of this Charter and
each of the Charter Documents to which it is a party. This
Charter and each of the Charter Documents to which it is a
party constitute the legal, valid and binding obligations of
the Charterer, enforceable against the Charterer in accordance
with their respective terms, subject to bankruptcy, insolvency
or similar laws of general application relating to the
enforcement of creditors' rights and by general principles of
equity. Neither the execution and delivery of this Charter or
any of the Charter Documents, nor will the consummation of the
transactions by it in accordance with the terms hereof or
thereof: (i) violate or conflict with any provision of its
Certificate of Incorporation or By-Laws, (ii) violate or
conflict with any provision of any law, rule, regulation,
order, permit, certificate, writ, judgment, injunction, decree,
determination, award or other decision of any court,
government, government agency or instrumentality, domestic or
foreign, or arbitrator binding upon it, or (iii) create any
conflicts or resulting liens or require any consents that the
Charterer has not obtained.
Neither the execution and delivery of this Charter and each of
the Charter Documents to which it is a party nor the
consummation of the transactions contemplated hereby or thereby
will result in a breach of, or constitute a default (or with
notice or lapse of time or both result in a breach of or
constitute a default) under or otherwise give any person the
right to terminate any mortgage, indenture, loan or credit
agreement, lease, license, contract or any agreement or
instrument to which the Charterer is a party or by which it or
any of its properties is bound or affected.
(c) Litigation. There is no action, suit, proceeding, claim or
investigation pending or, to the best of the Charterer's
knowledge after due and reasonable inquiry, threatened against
or affecting the Charterer or any of its properties or related
to the subject matter of this Charter or any of the Charter
Documents before any court, government agency or regulatory
authority (federal, state, local or foreign) that questions the
validity or enforceability of this Charter or any Charter
Document or is reasonably likely to impair its ability to
perform its obligations under this Charter or any of the
Charter Documents or to cause a material adverse effect on the
business, financial condition or prospects of the Charterer.
There are no orders, writs, judgments, stipulations,
injunctions, decrees, determinations, awards or other decisions
of any court, government or governmental agency or
instrumentality, domestic or foreign, or any arbitrator
outstanding against the Charterer having or likely to have any
such effect.
(d) No Defaults. No event or condition has occurred and is
continuing that constitutes, or with the lapse of time or the
giving of notice or both, would constitute, an Event of Default
by the Charterer or any other Member of the Charterer Group, as
the case may be, under this Charter or any of the Charter
Documents or a default or by the Charterer or any other Member
of the Charterer Group under any indenture, trust, deed, loan
agreement, lease other instrument or contract, agreement,
instrument or obligation (i) under which any such Person pays,
receives, borrows, lends, or is obligated or entitled to pay,
receive, borrow or lend, consideration in excess of $1,000,000
to which it is a party or by which it is bound or affected, or
(ii) which is reasonably likely to have a material adverse
effect on the business, financial condition or prospects of the
Charterer or its ability to perform its obligations under the
Charter.
(e) Obligations and Liens. Except as disclosed in writing to, and
specifically consented to in writing by, the Owner, the
Charterer has no outstanding obligations, or Liens on its
properties, for unpaid Taxes other than Taxes incurred in the
ordinary course of business, and in existence for not more than
30 days and which are not overdue unless such Taxes are, in the
Owner's reasonable judgment, being contested in good faith and
by appropriate Persons and proceedings.
(f Government Regulations. The Charterer is not in violation of
and is not alleged to be in violation of any law, rule,
regulation, order, permit, certificate, writ, judgment,
stipulation, injunction, decree, determination, award or
decision of any court, government, or governmental agency or
instrumentality, domestic or foreign, or arbitrator binding
upon it, which violation or alleged violation is reasonably
likely to have a material adverse effect on the business,
financial condition or prospects of the Charterer or its
ability to perform its obligations under this Charter or any of
the Charter Documents.
(g No Labor Unrest. There are no strikes or other significant
labor disputes in progress or pending or, to the best of the
Charterer's knowledge after due and reasonable inquiry,
threatened against or affecting the Charterer.
(h Pollution Regulations. Neither the Charterer nor any member of
the Charterer Group is the subject of any actual or threatened
environmental, health or safety investigation or enforcement
proceeding related to its operations or business or the subject
matter of this Charter or any of the Charter Documents. To the
best of the Charterer's knowledge after due and reasonable
inquiry, the Charterer is in compliance with all applicable
laws and regulations relating to pollution control and
environmental, health and safety matters in all jurisdictions
in which the Charterer is doing business.
(i Providing of Information. All information that the Charterer
at any time has furnished or will furnish the Owner for use in
any statement, application or other filing provided for in this
Charter or any of the Charter Documents, does or shall (as the
case may be) meet all requirements of applicable laws, rules
and regulations and does not or shall not (as the case may be)
as of the date prepared or delivered to the Owner contain any
statement which is false or misleading with respect to any
material fact and does not or shall not (as the case may be) as
of the date prepared or delivered to the Owner omit any
material fact required to be stated therein or necessary in
order to make such information not false or misleading for the
purpose for which such information was furnished and no
correction of any information or omission that is no longer
true and correct in all material respects that has not been
made need be made or updated in order to make such information,
taken as a whole, not false or misleading in any material
respect. For purposes of this Section 6.2(i), "information"
includes, without limitation, all information contained in the
data sheets, projections, pro forma sources and uses, the
Drilling Contracts, the AM.G. Hulme, Jr." 1,000 Meter Water
Depth Upgrade Shipyard Specification, Rev. 5, dated October 21,
1995 by D.N. Edelson, Project Engineer, the Enserch-Green
Canyon Analysis, dated September 11, 1995 and the Reading &
Bates Corporation/GATX Due Diligence Confidential Binder, dated
July 20, 1995, in each case as provided to the Investors prior
to the date hereof.
Each audited income statement, balance sheet and statement of
operation and cash flows dated as of December 31, 1997 and for
the fiscal year then ended and the unaudited income statement,
balance sheet and statement of operation and cash flows dated
as of March 31, 1998 and for the three months then ended were
prepared in accordance with generally accepted accounting
principles, consistently applied, are true, complete and
correct, and fairly present the financial condition, the
results of operations and cash flows for R&B Falcon and its
consolidated subsidiaries, including the Charterer, for the
dates and periods stated; and there is no outstanding Debt,
lien or liability, whether direct or contingent, that is
material to the Charterer and not shown in such financial
statements.
(j Insurance. The Charterer maintains insurance listed on
Schedule C and other insurance in a manner consistent with
persons engaged in the same or similar business and in
compliance with this Charter.
(k Certain Federal Laws and Requirements.
(i) The Charterer and its affiliates are exempt from the
Public Utility Holding Company Act of 1935.
(ii) None of the Charterer and its subsidiaries, whether
separately or together, is an investment company under the
Investment Company Act of 1940.
(iii) Except as expressly identified in this Charter,
neither the Charterer nor any affiliate of the Charterer,
as that term is defined in the Employee Retirement Income
Security Act of 1974, as amended, and the rules and
regulations thereunder (AERISA"), has any material
unfunded ERISA liabilities.
(l Permits and Authorizations. The Charterer has obtained all
governmental permits, authorizations, certificates and
approvals and given or made all notices and filings required
under applicable law for the execution, delivery and
performance of this Charter and the other Charter Documents and
its possession, use and operation of the Vessel. Without
limiting the generality of the foregoing, and more
specifically, the Charterer has and maintains all
environmental, health and safety permits necessary or
appropriate for its operations and all such permits are in good
standing and the Charterer is in compliance with all terms and
conditions of such permits and all applicable environmental,
health or safety requirements of law.
ARTICLE 7
USE AND OPERATION OF THE VESSEL
7.1 Use of the Vessel
The Charterer shall have the full use of the Vessel and may, subject
to the terms and conditions of this Charter, employ the Vessel as a
semisubmersible drilling unit throughout the world consistent with
its design capability, except that the Vessel shall not be used
contrary to and shall comply with (a) all applicable laws or
regulations of any governmental authority, treaties or conventions
(including, but not limited to, all environmental, health and safety
laws) and (b) the terms or policies of any insurance then required
hereunder; and provided that, with respect to the use or possession
of the Vessel outside of the territorial waters and/or the Outer
Continental Shelf of the United States, the Charterer shall give
such indemnities suitable to the Owner in an amount and form, and
obtain and continue such additional insurance coverage, in such
amounts, having such terms and conditions and with such carriers, as
the Owner may reasonably require at any time or from time to time in
connection with the use or possession of the Vessel in any given
area outside the territorial waters and/or the Outer Continental
Shelf of the United States. The Charterer, in respect of the
Vessel, shall at all times comply with all applicable laws and
regulations (including, but not limited to, all environmental,
health and safety laws), and with the applicable provisions and
conditions of all licenses, permits, consents and approvals of any
governmental authority.
7.2 Manning, etc., of the Vessel
During the Charter Period, the Charterer shall have the exclusive
possession and control of the Vessel and shall man, victual,
navigate and operate, supply, fuel, maintain and repair the Vessel
at its own expense or by its own measurement and shall pay all other
charges and expenses of every kind and nature whatsoever incidental
to the possession, use and operation of the Vessel. During the
Charter Period, the possession, use, operation and maintenance of
the Vessel shall be at the sole risk, cost and expense of the
Charterer until redelivery pursuant to the terms hereof upon the
termination or expiration of this Charter. As between the Owner and
the Charterer, the Offshore Installation Manager, officers and crew
of the Vessel and all other persons at any time on board the Vessel
shall be deemed to be engaged and employed exclusively by the
Charterer and shall be deemed to be and remain the Charterer's
servants, navigating and working the Vessel solely on behalf of and
at the risk of the Charterer and the Charterer shall hold each
Indemnitee harmless from any and all claims against it by, or as the
result of any act or omission of, any such Offshore Installation
Manager, officer, member of the crew or other person. The Charterer
assumes and shall satisfy all costs and liabilities incurred in
connection with all salvage services received by the Vessel.
7.3 Documentation of the Vessel
Neither the Owner nor the Charterer (without the prior written
consent of the other) will do or suffer or permit to be done
anything which can or might change or injuriously affect the
documentation of the Vessel for foreign trade under the laws and
flag of the United States of America. The Charterer covenants and
agrees that it will not (a) cause or permit the Vessel to be
operated in any manner which could subject the Owner to any criminal
penalty, or (b) operate or locate the Vessel, or permit the Vessel
to be operated or located, in any area excluded from coverage from
any insurance required by the provisions of Article 15 or (c) unless
there shall have been an actual or total loss or agreed or
compromised total loss of the Vessel, abandon the Vessel in any
foreign port. The Owner and the Charterer hereby respectively
represent that they are as of the date of execution of this Charter,
and covenant that they shall remain during the Charter Period,
"citizens of the United States" within the meaning of Section 2 of
the Shipping Act, 1916, as amended. The Charterer agrees that the
Vessel will be operated solely in the domestic or foreign commerce
of the United States. The Charterer shall throughout the Charter
Period maintain to the satisfaction of the Owner at the Charterer's
sole cost and expense such documentation of the Vessel, and shall
not do or suffer or permit to be done anything which can or might
change or injuriously affect the documentation of the Vessel for
foreign trade under the laws and the flag of the United States or
which would result in a violation of any law or regulation of the
United States applicable to a vessel owned by a citizen of the
United States, as defined in the Shipping Act, 1916.
7.4 General and Particular Average
Whenever necessary, average adjusters shall be appointed by the
Charterer, who shall, at the Charterer's sole cost and expense,
attend to the settlement and collection of both general and
particular average losses.
7.5 Site and Access
The Charterer will be responsible for selecting and mooring the
Vessel in a safe and prudent manner at a location in the Operating
Area. The Charterer will conduct sea bottom condition surveys
acceptable to the Owner where required by the Vessel's hull
underwater surveyor at the Charterer's sole cost and expense and
will be responsible for identifying, marking and clearing the
location of all major impediments or hazards to operations or
causing same to be done. Removal of all impediments or hazards
shall be, as between Owner and the Charterer, at the Charterer's
sole cost and expense.
7.6 Owner Liability for Materials Furnished by the Charterer
Without limiting any indemnity provided by the Charterer, the Owner
shall not be liable for any loss or damage resulting from the use or
possession of equipment, materials, supplies or other items
furnished by the Charterer.
7.7 Environmental and Related Reporting and Inspection
The Charterer shall notify the Owner in writing within five days of
the Charterer's obtaining notice or knowledge thereof of any
(a) notice of claim that there has been a release or threatened
release of any contaminant into the environment from the Vessel or
any equipment, machinery or property related thereto; (b) notice of
any investigation by any governmental authority evaluating whether
any remedial action is necessary or appropriate to respond to any
release or threatened release of any contaminant into the
environment from the Vessel or any equipment, machinery or property
related thereto; (c) notice that the Vessel or any equipment,
machinery or property related thereto is subject to an environmental
Lien; (d) the commencement or threat of any judicial, administrative
or other proceeding alleging a violation of any environmental,
health or safety requirements of law; or (e) any new or proposed
changes to any existing environmental, health or safety requirement
of law that could have a material adverse effect upon the use or
operations of the Vessel or the Charterer. The Charterer shall
provide from time to time documentation deemed adequate by the Owner
showing the Charterer's compliance with financial responsibility
requirements of all applicable environmental, health and safety
laws.
7.8 Notice of Entry
The Charterer will provide written notice within ten (10) days of
entry of the Vessel into the jurisdictional waters of any foreign
country or of any state or territory of the United States other than
Louisiana, Texas and any other state in which the Owner has filed
financing statements or taken other action to perfect its Lien upon
the equipment owned by the Charterer and its Affiliates and used in
connection with the Vessel.
ARTICLE 8
MAINTENANCE OF CONDITION AND CLASSIFICATION; REPAIRS
8.1 Maintenance of Classification
The Charterer shall at all times and, at its sole cost and expense,
procurement and risk (a) have exclusive control of the Vessel, (b)
maintain and preserve the Vessel in accordance with good commercial
maintenance practices, and keep the Vessel and her drilling and
other equipment in good running order, condition and repair, so that
the Vessel shall be tight, staunch, strong and well and sufficiently
tackled, appareled, furnished, equipped and in every respect
seaworthy and in good operating condition, and (to the extent that
such prescribes a standard of maintenance that exceeds the foregoing
standard in any respect) in the condition, running order and repair
which equals or exceeds industry standards and the condition,
running order and repair of vessels and their equipment owned by the
Charterer of like kind and age, and, in addition, shall
(i) cause the Vessel to be a semi-submersible drilling unit capable
of operating in water depths of up to 3,280 feet before
completion of the Second Upgrade Program, 4,000 feet after
completion of the Second Upgrade Program and 5,000 feet after
completion of the Third Upgrade and to have technical
specifications, characteristics and capabilities at least the
substantial equivalent of those set forth in Schedule A hereto
as upgraded in accordance with the First Upgrade Program and
the Second Upgrade Program as set forth in Schedule B-2 and
after completion of the Third Upgrade Program as set forth in
Schedule B-3; and
(ii) keep the Vessel in such condition as will entitle her, during
the Charter Period and at the date of redelivery to the Owner,
to the highest applicable classification and rating to which an
existing vessel of the same age and type can qualify under the
then existing rules and standards of the American Bureau of
Shipping and shall furnish to the Owner within 90 days after
each anniversary of the Delivery Date and at any other time
upon the request of the Owner true and correct photostatic
copies of all certificates issued by the American Bureau of
Shipping evidencing the maintenance of such classification.
(iii) The Vessel shall, and the Charterer covenants that it
will, at all times comply with all applicable safety,
operational and maintenance requirements of the United States
Coast Guard and any other United States, international or other
authority and all laws, treaties and conventions, and rules and
regulations (including, but not limited to, all environmental,
health and safety laws) issued thereby or applicable in any way
to the Vessel or any use, possession or operation thereof and
shall have on board, when required thereby, valid certificates
and appropriate environmental, health and safety permits
showing compliance therewith. The Charterer shall, at its
expense, make all modifications and alterations to the Vessel
which may be necessary to comply with the provisions of this
Section 8.1.
8.2 Repair
The Vessel shall be repaired and overhauled by the Charterer and the
Charterer shall install, affix and attach replacement parts thereon,
at its sole cost and expense, in each case, whenever necessary to
keep the same in good condition, repair and working order in
accordance with Section 8.1 or as a result of any requirement
hereof. The Vessel shall likewise be drydocked or undergo an
underwater survey in lieu of drydocking, cleaned and bottom painted
by the Charterer, at its expense, whenever necessary, but in any
event at least as often as necessary in order to maintain the
classification referred to in Section 8.1. The Charterer shall, at
its expense, promptly and duly comply with all requirements of the
applicable classification society including those resulting from
each special survey of the Vessel. The Charterer shall, at its
expense, promptly furnish the Owner with written information as to
any casualty involving any loss or damage to the Vessel in excess of
$500,000 and, upon request, all survey reports in connection
therewith.
8.3 Drydocking or Underwater Survey in Lieu of Drydocking
The Charterer shall give the Owner notice of each proposed
drydocking or underwater survey in lieu of drydocking 20 days in
advance if practicable, otherwise as long in advance as may be
practicable under the circumstances. The Owner, any Investor or any
authorized representative of any thereof may at any time, upon
reasonable notice at its own expense (but after the occurrence of an
Event of Default, at the Charterer's sole cost and expense), inspect
the Vessel at drydocking or underwater survey in lieu of drydocking
or otherwise, at any time or from time to time, and inspect the
Vessel's logs, but neither the Owner nor any Investor shall have any
duty to do so.
8.4 Required Survey
At the request of the Owner following any explosion, release
accident, storm, act of God or other event or incident that gives
the Owner reasonable concern for the physical condition and
operating ability of the Vessel and at the Charterer's expense, a
qualified independent marine surveyor or surveyors of recognized
standing, acceptable to the Owner, shall conduct a survey of the
Vessel. For purpose of such surveys, the Vessel need not be
drydocked (or subjected to an underwater survey in lieu of
drydocking) unless required by customary survey practices for
drilling vessels of similar age, type and service. The Charterer
shall submit a detailed report of the independent marine surveyor to
the Owner promptly upon the completion of such survey, containing:
(a) the location of the Vessel at the time of inspection;
(b) the findings and recommendations of the independent marine
surveyor with respect to the condition of the Vessel; and
(c) the opinion of the independent marine surveyor as to whether
the Vessel has been maintained in accordance with the terms of
this Article 8.
ARTICLE 9
EQUIPMENT AND STORES
9.1 Fuel, etc.
The Owner acknowledges that such fuel, lubricating oil and
unbroached consumable stores as may be aboard the Vessel at the time
of its delivery to the Charterer will be the property of the
Charterer.
9.2 Equipment, etc.
The Charterer shall have the use, without additional payment to the
Owner, of such equipment, outfit, furniture, furnishings,
appliances, spare or replacement parts and nonconsumable stores as
shall have been on board the Vessel on the Delivery Date. The same
or their substantial equivalent shall be returned to the Owner on
redelivery or retaking of the Vessel in the same good order and
condition as received by the Charterer on the Delivery Date,
ordinary wear and tear excepted, and any such items damaged or so
worn in service as to be unfit for use, or used as a spare part for
replacement purposes, or lost or destroyed shall be replaced by the
Charterer with an identical or substantially equivalent replacement
item in at least as good working order and condition as those of the
replaced item when received by the Charterer on the Delivery Date at
or before redelivery of the Vessel. Such replacement, whenever
made, shall be deemed part of the "Vessel" for all purposes of, and
its use or possession shall be subject to the terms and conditions
of, this Charter.
9.3 The Charterer's Additional Equipment, etc.
The Charterer shall at its own expense provide such additional
equipment, outfit, tools, replacement parts, crockery, linen, and
other items not included in inventories as provided in this
Article 9 as may be required in the operation of the Vessel, and
such equipment, and other items, shall become, on being placed on
board the Vessel and without further act, part of the Vessel and the
property of the Owner for all purposes of this Charter, provided
that so long as no Default or Event of Default shall have occurred
and be continuing, any such equipment and other items, so provided
by the Charterer (and not required to be provided or to have been
provided by Section 9.2 or any other provision of this Charter other
than this Section 9.3) and capable of being removed without causing
damage to the Vessel may be removed by the Charterer at the
expiration of the Charter Period, and such equipment, and other
items, shall become, without further act, the property of the
Charterer. At least 90 days prior to delivery or retaking of the
Vessel (or such lesser time as may be available in connection with
any retaking), the Charterer shall give notice to the Owner of any
such equipment or other items leased from third parties, which the
Charterer has elected not to remove, and will furnish the Owner with
copies of all leases and contracts relating thereto, and the Owner
may, within 30 days thereafter (or such lesser time as may be
applicable in connection with any retaking), elect to retain all or
any part of such equipment on board the Vessel subject to any
required approval of the lessors of such equipment. Upon redelivery
or retaking the Owner shall assume the rights, obligations and
liabilities of the lessee under such leases arising subsequent to
delivery or retaking in connection with any equipment that the Owner
elects to so retain. The Charterer shall at its sole cost and
expense remove from the Vessel any such leased equipment which the
Owner does not so elect to retain and shall cause to be repaired at
its sole cost and expense any damage to the Vessel or any part or
property thereof resulting in any manner from the Charterer's
removal of any equipment.
By its acceptance of the Vessel upon delivery, the Charterer
represents and warrants to the Owner that there is on board the
Vessel an inventory of equipment, outfit, appliances, tools,
replacement parts, nonconsumable stores, crockery, linen, and other
items, as in the reasonable judgment and experience of the Charterer
are necessary or appropriate to the possession, use and operation of
the Vessel and the Charterer hereby covenants that, subject to
Section 9.3, upon redelivery or retaking of the Vessel by the Owner,
such inventory, which may include replacement items of equivalent
value, shall be on board the Vessel.
9.4 Title to Improvements; Option to Purchase
Title to Nonseverables of the Vessel acquired after the Delivery
Date shall without further act vest in the Owner and shall be deemed
to constitute a part of the Vessel and be subject to this Charter.
Title to all Severables of the Vessel acquired after the Delivery
Date (other than Severables that replace or substitute for
Severables that have been provided by the Owner and Severables
provided in connection with the Second Upgrade Program and the Third
Upgrade Program, the title to which shall vest in the Owner) shall
vest in the Charterer; provided, however, that the Charterer may not
remove any thereof from the Vessel (except to the extent
subsequently replaced or worn out) prior to the end of the Charter
Period except that the Charterer may, so long as no Default or Event
of Default shall have occurred and be continuing, remove at the
Charterer's expense and risk any such Severables, provided, further,
that the Owner may elect to purchase for cash any such Severables at
the time of redelivery of the Vessel to the Owner in accordance with
any of the provisions of this Charter. Contemporaneously with its
delivery of the Expiration Date Election Notice, the Charterer shall
notify the Owner of the Severables described above that it intends
to remove. To exercise the election referred to in the second
proviso to the second preceding sentence of this Section 9.4, the
Owner shall give to the Charterer written notice of its election to
purchase on or prior to such redelivery. The purchase price of such
Severables shall be equal to the Fair Market Sale Value thereof, as
of the date of purchase as determined by mutual agreement or, in the
absence of such agreement, by the Appraisal Procedure. The
Charterer shall repair any damage caused by the removal of any
Severables to the Owner's reasonable satisfaction.
9.5 No Lease of Essential Severables
The Charterer shall not lease any Severables that are necessary or
appropriate for the use, possession or operation of the Vessel in
accordance with the terms and conditions of this Charter and the
Charter Documents but shall hold good and marketable title to all
such Severables that are, in accordance with industry practice,
customarily owned by drilling contractors engaged in businesses
similar to the Charterer's business, free and clear of all Liens
other than Permitted Liens.
ARTICLE 10
THE CHARTERER'S CHANGES, ADDITIONS AND REPLACEMENTS
10.1 Structural Changes or Alterations; Installation of Equipment, etc.
Except as may be required by Article 8 or 9 or the Upgrade Programs,
the Charterer shall not make any structural changes or alterations
in the Vessel, or any change, alteration, addition or improvement to
the Vessel that is Nonseverable (except for changes, alterations,
additions or improvements required to be made pursuant to applicable
law), and shall make no material changes or alterations in the
Vessel's machinery or boilers, unless and to the extent that, in
each instance, (a) it first secures written approval of the Owner
(which may be withheld in the Owner's sole discretion if such change
or alteration would materially change the type or character of the
Vessel or would adversely affect Owner's status as a lessor for
federal income tax purposes, but otherwise such approval shall not
be unreasonably withheld) and (b) any such change or alteration is
made at the Charterer's expense and risk and does not diminish the
value, utility, useful life or seaworthiness of the Vessel below the
value, utility, useful life and seaworthiness of the Vessel
immediately prior to such change if the Vessel were then in the
condition and state of seaworthiness required to be maintained by
the terms of this Charter. Subject to the foregoing provision, the
Charterer may install any pumps, gear or equipment it may require in
addition to that on board the Vessel on delivery, provided that such
installations are accomplished at the Charterer's sole cost, expense
and risk. Pumps, gear and equipment so installed shall, without
necessity of further act, become part of the Vessel and the property
of the Owner; provided that so long as no Default or Event of
Default shall have occurred and be continuing, any such pumps, gear
or equipment not required to be installed in order to meet the
requirements of Articles 8 and 9 and not installed as replacements
for property included in the Vessel on the date hereof are subject
to the Owner's option to purchase set forth in Section 9.4, and, if
not purchased by the Owner, may be removed (so long as such removal
can be accomplished without damage to the Vessel) by the Charterer,
at its own expense and risk, at any time during, or at the
expiration of, the Charter Period, whereupon such pumps, gear or
equipment shall, without necessity of further act, become the
property of the Charterer.
10.2 Replacement of Parts
In addition to the permitted structural changes or alterations and
the addition of pumps, gear and equipment referred to in
Section 10.1, the Charterer may, in the ordinary course of
maintenance, repair or overhaul of the Vessel, remove any item of
property (including any item referred to in Section 9.2 or 9.3
constituting a part of the Vessel), provided such item is replaced
as promptly as possible by an item of property which is free and
clear of all Liens and is in as good operating condition, working
order and repair, and is as seaworthy as, and has a value, useful
life and utility at least equal to that of, the item of property
being replaced (including each item of equipment) and assuming the
Vessel is in the working order, condition and repair and state of
seaworthiness required by the terms of this Charter. Any item of
property so removed from the Vessel shall remain the property of the
Owner until replaced in accordance with the terms of the preceding
sentence, but shall then, without further act, become the property
of the Charterer but shall remain subject to the Owner's option to
purchase set forth in Section 9.4. Any such replacement item of
property shall, without further act, become the property of the
Owner, deemed part of the "Vessel" as defined herein for all
purposes, and its use and possession shall be subject to the terms
and conditions hereof.
10.3 Vessel Markings
The Charterer shall not allow the name of any person, association or
corporation, other than as required hereby, to be placed on the
Vessel (other than the current name of AM. G. Hulme, Jr.") as a
designation which might be interpreted as indicating a claim of
ownership thereof by any person, association or corporation other
than the Owner, but, for purposes of identification, the Charterer
shall have the right at its sole cost and expense to paint the
Vessel in its own colors, to install and display its stack insignia
or name, and to fly its own house flag, or to utilize the colors,
insignia, name or flag of any Affiliate of the Charterer. The
Charterer shall notify the Owner of each such choice of colors,
name, insignia or flag before making any such change.
ARTICLE 11
ADDITIONAL COVENANTS
11.1 General Covenants
From and after the date of execution of this Charter and until the
termination or expiration of this Charter, the Charterer shall:
(a continue its business as presently conducted and maintain its
existence, rights and privileges;
(b comply with its obligations set forth in this Charter and all
applicable laws (including, without limitation, all
environmental, health and safety laws); and
(c maintain its books and records in compliance with generally
accepted accounting principles, consistently applied with such
adjustments or changes as to which the independent public
accountants referred to in Section 11.3 concur.
11.2 No Impairment
Notwithstanding any other contract or other claim of right, from and
after the date of execution of this Charter and until the
termination or expiration of this Charter, the Charterer Group shall
not enter any contract or agreement or perform or omit any act that
in any way materially limits or impairs, or the effect of which
would be to materially limit or impair, the ability of any member of
the Charterer Group to comply with and fulfill its obligations set
forth in the Charter Documents.
11.3 Financial Information
The Charterer will furnish, or cause to be furnished, to the Owner
and each Investor:
(a) within 45 days after the end of each of the first three fiscal
quarters during each fiscal year of R&B Falcon, a consolidated
balance sheet of R&B Falcon and its consolidated Subsidiaries
as of the close of each such fiscal quarter, together with a
consolidated income statement and consolidated statement of
cash flows of R&B Falcon and such Subsidiaries for such fiscal
quarter, in each case setting forth in comparative form the
corresponding consolidated figures for the same period of the
next preceding fiscal year, all in reasonable detail and
certified by the Chief Financial Officer or Principal
Accounting Officer of R&B Falcon as being true, complete and
correct and as fairly presenting the financial condition and
the results of operations of the respective corporations
covered thereby, subject to year-end adjustments;
(b) within 90 days after the close of each fiscal year of R&B
Falcon, (i) audited consolidated balance sheets of R&B Falcon
and its consolidated Subsidiaries as of the close of such
fiscal year, together with consolidated profit and loss
statements and consolidated statements of cash flows of R&B
Falcon and such Subsidiaries for such fiscal year, certified as
being true, complete and correct by Arthur Andersen & Co. or
independent public accountants of comparable national standing
and reputation as fairly presenting the consolidated financial
position, results of operations and cash flow of R&B Falcon and
such Subsidiaries as of the end of such fiscal year and the
consolidated results of their operations for such fiscal year,
and as fairly presenting in all material respects in conformity
with generally accepted accounting principles applied on a
basis consistent with prior fiscal years with such adjustments
or changes as to which such independent public accountants
concur; and (ii) an update of the Contract Data Sheet
previously submitted to the Investors (including, but not
limited to, rig and contract status and updated annual budget)
true, complete and correct and fairly presenting the
information contained therein as of the date and of its
submission to the Owner and the Investors);
(c) within 30 days after the filing thereof with the Securities and
Exchange Commission, a copy of each report, form or prospectus
filed by R&B Falcon or any of its Subsidiaries with the
Securities and Exchange Commission, within three days of the
issuance of any press release or similar materials issued by
R&B Falcon or any of its Subsidiaries; and
(d) such other financial or other information relating to the
affairs of R&B Falcon and its consolidated Subsidiaries as the
Owner or any Investor may from time to time reasonably request.
11.4 Compliance Certificates
The Charterer shall furnish or cause to be furnished, to the Owner
and the Investors:
(a) within 45 days after the end of the first, second and third
quarterly accounting period in each fiscal year of R&B Falcon,
and within 90 days after the end of each fiscal year of R&B
Falcon, a certificate of the Chairman, the President or a Vice
President and the Chief Financial Officer or Principal
Accounting Officer of R&B Falcon stating that each of the
Charterer and each Guarantor has performed and complied with
all the terms and provisions of this Charter or the Guaranty
and/or the other Charter Documents, as the case may be, or, if
there shall have been an Event of Default hereunder or if any
Guarantor shall be in default under the Guaranty, specifying
all such defaults and the nature thereof of which the signer of
such certificate may have notice or knowledge;
(b) within 90 days after the end of each fiscal year of R&B Falcon,
a certificate of the independent public accountants reporting
on the financial statements for such year (i) stating that
their examination in connection with such financial statements
has been made in accordance with generally accepted auditing
standards and has included a review of the relevant terms of
the Guaranty, the Charter and the other Charter Documents,
(ii) stating whether or not such examination has disclosed the
existence, during or at the end of such year, of any default by
the Charterer or any Guarantor in the observance of any of the
terms of the Guaranty, this Charter or the other Charter
Documents, insofar as they relate to accounting matters, and,
if such examination has disclosed any such default, specifying
all such defaults and the nature thereof (it being understood
that such accountants shall not be liable for any failure to
obtain knowledge of any such default which would not be
disclosed in the course of such examination), and (iii) stating
that they have reviewed the certificate of the officers of R&B
Falcon, delivered with respect to such year pursuant to
paragraph (a) of this Section 11.4, and confirming the matters
set forth in such certificate;
(c) promptly after R&B Falcon's receipt thereof, any audit
management letter or similar document submitted after the date
hereof by independent accountants in connection with each
annual or interim audit made by such accountants with respect
to the financial condition or affairs of R&B Falcon or any
Guarantor; and
(d) as promptly as practicable (but in any event not later than 15
days) after any officer of the Charterer or any Guarantor
obtains notice or knowledge of the occurrence of any default
(which has not been remedied or waived) in the performance or
observance of any of the terms or provisions of the Guaranty or
any of the other Charter Documents or any Event of Default
under the Charter, a certificate of either the Chairman, the
President or a Vice President and the Chief Financial Officer
or Principal Accounting Officer of the Charterer or Guarantor
(as the case may be) describing the default or Event of Default
and stating the date of commencement thereof, what action the
Charterer proposes to take with respect thereto and the
estimated date when it will be remedied.
11.5 Further Assurances, etc.
The Charterer shall, at its sole cost and expense, promptly and duly
execute, acknowledge and deliver to the Owner such further
documents, instruments, financing and similar statements and
assurances and take such further action as the Owner may from time
to time reasonably request in order more effectively to carry out
the intent and purpose of this Charter or the Charter Documents, to
establish and protect the rights and remedies created or intended to
be created in favor of the Owner hereunder or under the Charter
Documents, and to protect the title of the Owner in and to the
Vessel. The Charterer shall also promptly furnish to the Owner such
information as may be required to enable the Owner timely to file
any reports required to be filed by it as the owner under the
Charter or as the owner of the Vessel with any governmental
authority.
11.6 Maintenance of Corporate Existence, etc.
The Charterer shall at all times maintain its corporate existence
except as permitted by Section 11.7 and will do or cause to be done
all things necessary to preserve and keep in full force and effect
its rights (charter and statutory) and franchises; provided that
(a) it shall not be required to preserve any right or franchise if
its Board of Directors shall determine that the preservation thereof
is no longer desirable in the conduct of its business and (b) the
loss thereof does not materially adversely affect or diminish the
rights of the Owner or any Investor.
11.7 Conditions of Consolidation, Merger, etc.
The Charterer shall not consolidate with or merge into any other
corporation or convey, transfer, or lease, all or substantially all
of its assets as an entirety to any Person, unless each of the
following conditions is satisfied:
(a) The Person formed by such consolidation, merger or acquisition
by conveyance, transfer or lease all or substantially all the
assets of the Charterer as an entirety (the "Resulting
Entity"), shall, at the same time, by consolidation, merger,
conveyance, transfer or lease, acquire all or substantially all
of the assets of the Guarantor as entireties, shall be a
citizen of the United States within the meaning of the Shipping
Act, 1916 or shall have obtained the approval of the U.S.
Maritime Administration for any such consolidation, merger (and
the Owner and the Investors, without any expense to any of the
foregoing, shall have received an opinion of counsel selected
by the Owner as to such citizenship of the United States of
such Person, in form and substance satisfactory in all respects
to the Owner), and shall be a corporation organized and
existing under the laws of one of the several states of the
United States of America or the District of Columbia. Such
Person, prior to or upon the occurrence of any such
transaction, shall execute and deliver to the Owner an
agreement in form and substance satisfactory to the Owner,
containing an assumption by such Person of the due and punctual
performance and observance of each covenant and condition of
the Charter and the Charter Documents to be performed or
observed by the Charterer.
(b) Before and immediately after giving effect to such transaction,
no Default, or Event of Default shall have occurred and be
continuing.
(c) After giving effect to such transaction, the rating of the long-
term unsecured senior debt or implied long-term unsecured
senior debt rating of the Resulting Entity shall be and shall
be maintained for six months thereafter at least AB+" by S&P
and, if rated by Moody's, at least AB1".
(d) The Charterer shall have delivered to the Owner and each
Investor, prior to or upon the occurrence of such transaction,
a Certificate of either the Chairman or the President and the
Chief Financial Officer of the Charterer, and an opinion of
counsel satisfactory to the Owner, each stating that such
consolidation, merger, conveyance, transfer or lease and the
assumption agreement described in Section 11.7(a) comply with
this Section 11.7 and that all conditions precedent relating to
such transaction herein provided for have been fully complied
with.
Upon any consolidation or merger, or any conveyance, transfer or
lease of all or substantially all of the assets of the Charterer as
an entirety in accordance with this Section 11.7, the Resulting
Entity shall succeed to, and be substituted for, and any exercise of
every right and power, obligation and liability of, the Charterer
under this Charter and the Charter Documents with the same effect as
if such Resulting Entity had been named as the Charterer herein and
therein. No such conveyance, transfer or lease of all or
substantially all of the assets of the Charterer, as an entirety
shall have the effect of releasing the Charterer or any Guarantor,
as the case may be, or any Resulting Entity which shall theretofore
have become such in the manner prescribed in this Section 11.7 from
its liability under this Charter, the Guaranty or the Charter
Documents. Nothing contained herein shall permit any charter,
subcharter or other arrangement for the use, operation or possession
of the Vessel except in compliance with the applicable provisions of
this Charter.
11.8 Indemnity of the Owner by Customers for Oil Pollution and Related
Environmental Claims
The Charterer shall cause each of its customers or operators under
any Drilling Contract to (a) indemnify, defend and hold harmless the
Owner, the Investors and their Affiliates from any and all claims,
demands, liabilities, losses, damages, lawsuits and expenses
respecting pollution claims resulting from the release of Crude Oil
as a consequence of a blowout, crater or other cause arising out of
or in connection with operations under such Drilling Contract, in
accordance with normal industry practice, and any and all related
environmental, health or safety matters (including, but not limited
to, all cost and expense of controlling clean-up of pollution and
all penalties imposed by any Person) irrespective of whether the
Charterer, the Owner or any of their Affiliates may have been or may
be alleged to have been negligent or otherwise legally at fault; and
(b) if any customer under such Drilling Contract does not maintain
(i) a consolidated tangible net worth as determined in accordance
with generally accepted accounting principles of at least
$500,000,000 (or be a consolidated Subsidiary of a parent entity
having such consolidated tangible net worth) or (ii) a senior
unsecured debt rating by S&P of ABBB-" or by Moody's of ABaa3" (or
be a consolidated direct or indirect Subsidiary of a parent entity
having a senior unsecured debt rating meeting such criteria), such
customer shall provide (or the Charterer shall provide) operators
extra expense or energy exploration and development insurance
coverage in an amount of at least the difference between
$150,000,000 (or such greater amount, as may be necessary to meet
the applicable financial responsibility requirements under the Oil
Pollution Act of 1990, or any other applicable laws, as amended from
time to time) and the amount of the Charterer's contingent operators
extra expense or energy exploration and development insurance or
other coverage in effect at such time, with such underwriters or
carriers and containing such terms and conditions as the Owner may
require, in the form normally and customarily carried by oil and gas
operators engaged in offshore drilling operations, for oil pollution
liability and expense, with the Owner, Investors, the Owner Group
and the Charterer named as additional insureds and having the
benefit of waivers of subrogation.
ARTICLE 12
PAYMENTS, INVOICES AND SECURITY
12.1 Basic Hire
The Charterer shall pay to the Owner, in arrears on each Payment
Date through the Primary Term, an amount equal to 1.2024% of Owner's
Cost (the "Primary Term Basic Hire") as adjusted on the date of each
disbursement to the Charterer as agent under the Third Upgrade
Agreement according to the methodology outlined on Schedule F
attached hereto, and during any Extended Term, 125% of the Primary
Term Basic Hire payable on each Payment Date during such Extended
Term. The payment each month of the Basic Hire shall be a
continuing obligation for each month during which this Charter is in
effect, and no invoice for such amount need be issued to the
Charterer by the Owner. The Charterer's obligation to make such
payment is unconditional and absolute during the term hereof and
shall not be affected by any event of force majeure or otherwise.
12.2 Supplemental Hire
In addition to its obligation to pay Basic Hire hereunder, the
Charterer shall pay to the Owner any and all Supplemental Hire as
and when the same shall become due and owing, and in the event of
any failure on the part of the Charterer to pay any Supplemental
Hire, the Owner shall have all rights, powers and remedies provided
for herein or at law or in equity or admiralty or otherwise in the
case of nonpayment of Basic Hire.
The Charterer shall pay to the Owner, as Supplemental Hire, all
costs incurred by the Owner in performing or complying with the
Charter Documents if the Charterer fails to perform or comply with
any of its agreements contained in this Charter, or any Charter
Document including, but not limited to:
(a Direct and indirect cost of permits, licenses and the like
required of the Owner as owner of the Vessel. Owner shall use
reasonable efforts, without filing suit or incurring out-of-
pocket or other additional cost or expense, to avail itself of
applicable exemptions and/or reductions of such costs.
(b All premiums and other costs to the Owner for insurance as
specified in Articles 11.8 and 15.
(c Unless otherwise expressly set forth herein in Section 19.2,
the Charterer shall bear directly or reimburse the Owner, upon
proof of payment by the Owner, all fees and expenses (including
fees and expenses of the Owner's counsel) incurred by the Owner
in the performance of or related to this Charter or any Charter
Documents.
12.3 Payment Terms
The Charterer shall pay all amounts for Supplemental Hire invoiced
by the Owner within 10 days after receipt of such invoice. Any
Basic Hire not paid when due and any invoices not paid in
immediately available funds within 10 days after receipt by the
Charterer shall accrue interest from the due date until paid at a
per annum rate of interest equal to the Overdue Rate, computed on a
basis of 360 days, for actual days elapsed. Payments shall be made
by wire transfer in immediately available funds prior to 12:00 noon,
New York City time, on the day when each such payment shall be due
to the Owner's account at a financial institution located in the
State of New York or at such other office as the Owner may from time
to time designate in writing to the Charterer. All payments to the
Owner hereunder shall be without any offset, counterclaim, discount
or deduction and shall be made in United States Dollars. All
payments to the Owner stated in this Charter are exclusive of any
Taxes, including, without limitation, sales, excise, value added,
stamp, documentary, transfer, ad valorem, general consumption,
property, use, export, import, employment, payroll, withholding or
other similar Taxes, which may be imposed on or incurred by the
Owner, its employees or the Investors (other than, except as
otherwise provided herein, Taxes on the net income or franchise of
the Owner, its employees or the Investors), and all costs associated
therewith, in connection with performance by the Owner of, or the
Owner's rights under, this Charter, including the costs associated
with bonds or letters of credit that are not otherwise the
responsibility of the Charterer under this Charter. The Charterer
shall pay the Owner the amount of all such charges, Taxes and costs
upon receipt of an invoice, subject to the Charterer's right to
reasonably verify the Owner's payment of such amounts. The Owner
shall use reasonable efforts, without filing suit or incurring any
out-of-pocket or other additional costs, to avail itself of any and
all applicable exemptions and/or reductions of such taxes. The
Charterer shall, at the Owner's request, pay such sums directly or
post any required bonds or letter of credit required on any such
items.
12.4 Invoices
The Owner shall render to the Charterer a monthly invoice on or
before the 15th day of each month showing all Supplemental Hire
payable to the Owner for the preceding month.
12.5 Security for Obligations
(a To secure the Obligations, the Obligors have executed and
delivered the Security Documents. Subject to Section 12.5(b),
(c), (d) and (e), the Charterer shall maintain (i) the
Cunningham Mortgage or (ii) any Substitute Collateral that has
a fair market value at least equal to the Stipulated Loss Value
at the time of any delivery of such Substitute Collateral
(collectively, the "Additional Collateral") to secure the
Obligations.
(b In the event that, at any time during the periods set forth
below, the Timely Liquidation Value of the Vessel as determined
in accordance with the Appraisal Procedure at such time is at
least the Stipulated Loss Value at such time, neither S&P nor
Moody's has a negative outlook for R&B Falcon at such time and
a Drilling Contract is in full force and effect at such time
that provides adequate cash flow to service the Obligations for
the term of such Drilling Contract, the Charterer may request a
reduction in the amount of Additional Collateral as follows:
(i) after the fourth anniversary of the Delivery Date and so
long as (A) the rating of S&P of the Rated Securities is
at least ABB+" and the rating, if any, of Moody's of the
Rated Securities is at least ABa1", and (B) no Default has
occurred, the Timely Liquidation Value of the Jim
Cunningham or the Timely Liquidation Value of Substitute
Collateral (as determined by the Appraisal Procedure)
required to be maintained shall be reduced to 50% of the
Stipulated Loss Value;
(ii) after the seventh anniversary of the Delivery Date and so
long as (A) the rating of S&P of the Rated Securities is
at least ABBB-" or higher by S&P and the rating, if any,
of Moody's of the Rated Securities is at least ABaa3", and
(B) no Default has occurred, no Additional Collateral
shall be required to be maintained; or
(iii) at any time, and so long as (A) the rating of S&P of
the Rated Securities is at least ABBB+" or higher by S&P
and the rating, if any, of Moody's of the Rated Securities
is at least ABaa1", and (B) no Default has occurred, no
Additional Collateral shall be required to be maintained.
(c The Owner shall release its lien and security interest in that
portion of the Additional Collateral that is in excess of the
Additional Collateral (the "Released Collateral") the Charterer
is required to maintain pursuant to Section 12.5(b). From and
after such release the Charterer shall maintain such Released
Collateral or other property (the "Negative Pledge Property")
mutually agreed upon by the Owner and the Charterer that has a
Timely Liquidation Value equal to the Stipulated Loss Value at
the time of such release, free and clear of all Liens (other
than Permitted Liens as defined in the Cunningham Mortgage).
The Charterer shall immediately notify the Owner and each of
the Investors of the occurrence of any event that would not
entitle the Charterer to maintain reduced Additional Collateral
pursuant to Section 12.5(b) and shall promptly reinstate or
grant, as the case may be, Liens upon the Negative Pledge
Property or, with the approval of the Owner, provide other
Substitute Collateral in accordance with Section 12.5(d) as
required under Section 12.5(b).
(d) The Charterer shall be entitled to exchange collateral for the
Obligations or discharge its obligation to reinstate Additional
Collateral or Substitute Collateral by providing substitute
property as collateral securing the Obligations (the
"Substitute Collateral") if each of the following conditions
precedent shall have been satisfied:
(i) The Charterer shall have notified the Owner of its
intention to provide Substitute Collateral, which
Substitute Collateral shall be cash, cash equivalents, or
a mobile offshore drilling unit and otherwise in all
respects satisfactory in form and substance to the Owner.
(ii) All instruments conveying or granting to the Charterer
such Substitute Collateral and any related agreements or
instruments shall in all respects be satisfactory in form
and substance to the Owner.
(iii) The Owner and each of the Investors shall have
received with respect to such Substitute Collateral a
report at the sole cost and expense of the Charterer
prepared in accordance with the Appraisal Procedure, in
form and substance reasonably satisfactory to the Owner,
that the fair market value of such Substitute Collateral
when added to the fair market value of other Additional
Collateral for the Obligations shall, after giving effect
to any release, be in compliance with Section 12.5 (a) or
(b), as applicable.
(iv) The Charterer shall at its sole cost and expense have
obtained (to the satisfaction of the Owner) all government
approvals required in connection with the ownership, use,
occupancy, possession, operation or ordinary maintenance
of such Substitute Collateral, compliance with applicable
environmental, health and safety laws and regulations and
the mortgaging of such Substitute Collateral to the Owner.
Each such governmental approval shall be in full force and
effect.
(v) The Charterer shall at its sole cost and expense have
conducted or caused to be conducted such title examination
or title review with respect to such Substitute Collateral
as a reasonably prudent operator would conduct under the
circumstances, and the Owner shall have approved the
status of title of such Substitute Collateral. The
Charterer shall have furnished to the Owner such title
policy or other title assurances as it receives in
connection with the acquisition of such Substitute
Collateral.
(vi) The Charterer shall at its sole cost and expense have
obtained such casualty, liability and other insurance with
respect to such Substitute Collateral as shall be
requested by the Owner, which insurance shall in all
respects comply with, and shall be in all respects subject
to, Article 15. The Owner and each of the Investors shall
have received a certificate of an independent insurance
broker setting forth the insurance obtained in accordance
with this paragraph (vi) and certifying that such
insurance is in full force and effect and that all
premiums then due thereon have been paid.
(vii) The Charterer shall at its sole cost and expense have
executed and delivered to the Owner or to a trustee or
collateral agent designated by them and acting on their
behalf, a mortgage and security agreement or other
instrument or other document granting to the Owner or such
trustee or collateral agent a mortgage Lien and security
interest, subject to no other Liens (other than Permitted
Liens as defined in the Cunningham Mortgage), in and to
such Substitute Collateral, each deed, lease, assignment
or other instrument of conveyance referred to in
paragraph (ii) above, each government action as referred
to in paragraph (iv) above, each ancillary contract and
any agreement providing for the operation of such
Substitute Collateral (which assignment shall be consented
to by the operator, on terms satisfactory to the Owner),
subject to no Liens (other than Permitted Liens as defined
in the Cunningham Mortgage). Such mortgage and security
agreement or such other instrument shall be in full force
and effect and shall be in all respects satisfactory in
form and substance to the Owner. Each of the foregoing
instruments and any necessary documents relating thereto,
including, without limitation, financing statements under
the applicable Uniform Commercial Code or other
instruments for filing or recordation, shall have been
duly recorded and filed in all public offices in which
such recordation or filing is necessary in order to
provide constructive notice to third parties of the
interests and Liens created thereby and in order to
establish, perfect, preserve and protect the validity and
effectiveness thereof and the mortgage Lien and security
interest created by such mortgage and security agreement
or other instrument on all property purported to be
subject thereto; and all taxes, fees and other charges
payable in connection with any and all of the foregoing
shall have been paid in full by the Charterer.
(viii) The Owner and the Investors shall have received such
environmental reports with respect to such Substitute
Collateral (in form and substance satisfactory to the
Owner) as they may request.
(ix) The Owner and each of the Investors shall have received
such opinions of counsel satisfactory to the Owner as to
such matters relating to the acquisition of such
Substitute Collateral, including the validity and
enforceability of all documents and instruments referred
to in this Section 12.5(d) and the validity, extent and
priority of the Owner's Lien, as the Owner shall
reasonably request, which opinions shall be in form and
substance satisfactory to the Owner and from counsel
acceptable to the Owner.
(x) The Charterer shall have paid all costs and expenses
incurred by the Owner and each of the Investors in respect
of obtaining any release of Additional Collateral, the
Mortgages or the Substitute Collateral, regardless of
whether such release, Collateral, the Mortgages,
Substitute Collateral or Additional Collateral is
delivered.
(xi) The Owner shall have received an Officer's Certificate,
containing such representations and warranties with
respect to such Substitute Collateral and the matters set
forth in this Section 12.5(d) and any other matters as
shall be reasonably requested by the Owner, and such other
documents or evidence as to the satisfaction of the
conditions set forth in this Section 12.5(d), as the Owner
shall reasonably request.
ARTICLE 13
GENERAL OBLIGATIONS AND PERFORMANCE
13.1 Independent Owner Relationships
In the performance of this Charter, the Owner is an independent
contractor. In the performance of this Charter, the Charterer is an
independent contractor and shall control and direct the operation of
the Vessel and the performance of the details of the work to be
performed by the Charterer's personnel and shall be responsible for
the results of such work, all in accordance with the obligations
imposed upon the Charterer hereunder and under the Charter
Documents. The presence of and the observation by the Owner's
representative(s) at the site of any work shall not relieve the
Charterer from the Charterer's obligations and responsibilities
hereunder.
13.2 Inspection
The Owner shall have the right, at the Charterer's sole cost and
expense, to inspect the Vessel and its book and records at all
reasonable times if the exercise of such inspection right would not
unreasonably interfere with the operator's operations on the Vessel
at the time or any applicable governmental approval, which approvals
the Charterer shall endeavor to obtain in good faith, and shall have
the right to confer with and have access to the officers and
employees of the Charterer and any Guarantor in connection with any
such inspection. The Owner shall have the right annually to cause
the Vessel to be surveyed by a marine surveyor at the Owner's (but,
after the occurrence and during the continuance of any Default, the
Charterer's) expense. The Charterer shall correct at its sole cost
expense all material deficiencies discovered during any such survey
or inspection.
13.3 Performance of the Charterer
The Charterer shall exercise due diligence to carry out any and all
operations with respect to the Vessel in a safe, workmanlike manner
in accordance with good offshore industry practice, which
requirement shall specifically include, not by way of limitation in
any manner whatsoever, the obligations to have the Vessel under the
command of an offshore instillation manager certified by and for the
area in which the Vessel is operating.
13.4 Operations Outside of U.S. Waters
In the event that the Charterer intends to operate the Vessel
outside of U.S. territorial waters and/or the Outer Continental
Shelf, the Charterer shall submit at least 15 days before movement
of the Vessel to the intended area of operation such documentation
demonstrating to the Owner's reasonable satisfaction (a) that
operation of the Vessel within the intended area of operation
complies with all applicable laws and regulations of the United
States and of the intended area of operation; (b) that the Vessel
can be removed from such intended area of operation upon either
cessation of the Vessel's operation in the area or termination of
this Charter; (c) that the Charterer provides all additional
indemnities and has secured political risk insurance for such area
additive to the insurances provided for herein and (d) the Vessel is
not subject to any lien or interest that might have priority over
the title and interest of the Owner. Each move to a new area
outside U.S. territorial waters, whether or not subject to the
jurisdiction of a different foreign country, shall meet the
foregoing requirements and those of Section 7.1.
ARTICLE 14
LIABILITY AND INDEMNITY
14.1 Survival of Indemnities
The indemnities set forth in this Charter shall survive the
termination of this Charter, and shall remain enforceable (subject
only to debtor relief laws and general equitable principles) as to
any claim, demand, liability, damage and expense arising out of or
incidental to this Charter, without regard to the termination of
this Charter.
14.2 Pollution
The Charterer shall assume all responsibility for the control and
removal of, and hold Owner Group harmless from loss, liabilities or
damage or claims arising from, directly or indirectly, pollution or
contamination by any liquid or nonliquid or waste material
wheresoever found that is discharged, spilled or leaked from the
Vessel or noncompliance with environmental, health and safety laws
(including but not limited to, those stemming from release of
pollutants, private toxic tort claims, off-site disposal of waste or
other pollutants, PCB's, and asbestos-containing materials on or in
the Vessel (irrespective of whether any of the foregoing occurred,
existed or arose before or after the date hereof)). To the extent
that any law, regulation or governmental entity acting within its
jurisdiction imposes on Owner Group liability for any such
pollution, notwithstanding such imposition of direct liability, the
Charterer shall have designated Owner Group as an additional insured
under its insurance policies and the Charterer shall hold the Owner
harmless from such loss, liabilities, damage or claims and reimburse
Owner Group for any amounts that Owner Group may be required to pay.
This indemnity is valid irrespective of the negligence or fault,
whether sole, joint, active or passive of the indemnified party and
whether predicated on strict liability, statutory duty, contractual
indemnity or any other theory of liability of the indemnified party.
14.3 The Charterer's Indemnity
(a) The Charterer shall defend, indemnify and hold Owner Group, its
officers, directors, employees, agents and Affiliates
(collectively, the "Indemnitees") harmless from and against all
claims, liabilities, damages, Taxes and expenses (including,
without limitation, attorneys' fees and other costs of
defense), including all claims of any type whatsoever,
irrespective of insurance coverage, arising out of, incidental
to, or related to this Charter, any of the Charter Documents,
any of the transactions contemplated hereby or thereby, the
Vessel, the Jim Cunningham, the Randolph Yost or any Additional
Collateral or Substitute Collateral, except, unless otherwise
specifically provided herein, any claims directly arising out
of the Owner's gross negligence or willful misconduct.
(b) If it is judicially determined that the monetary limits of
insurance required under this Charter or of the indemnities
voluntarily and mutually assumed in this Charter (which the
Owner and the Charterer hereby agree will be supported either
by available liability insurance, under which the insurer has
no right of subrogation against the indemnitee, or voluntarily
self-insured in respect of permitted deductibles) exceed the
maximum limits permitted under applicable law, it is agreed
that such insurance requirements or indemnities shall
automatically be amended to conform to the maximum monetary
limits permitted under such law.
(c) The Charterer shall indemnify, pay and hold harmless Owner
Group against any loss, liability, cost or expense incurred in
respect of the Vessel, including actual or constructive loss of
the Vessel, or any effort to interdict the payment to the Owner
of proceeds arising out of or related to this Charter.
(d) The indemnities in this Charter apply without regard to any
conflicting rules of liability under any applicable law or
regulation and shall include indemnification for any and all
claims in which recovery, indemnification or contribution is
sought directly or indirectly by any person or entity against
Owner Group whether predicated on negligence, strict liability,
statutory duty or contractual indemnity, except any such
liability directly arising out of the gross negligence or
willful misconduct of the Owner unless otherwise expressly
specified herein.
14.4 Patent Infringement
(a) The Charterer shall assume liability for, and shall defend,
indemnify and hold the Owner harmless from and against, all
suits and actions alleging that the Vessel, any equipment or
part thereof, or any operation of the Vessel, any such
equipment or part thereof constitutes an infringement of any
letters patent.
(b) If, as a result of any changes required by the Charterer in
equipment furnished by the Owner, or any changes required by
the Charterer in operation of such equipment or part thereof, a
claim is filed against the Owner alleging that such equipment
or any such operation conducted infringes any letters patent,
then the Charterer shall be liable for all such claims and
indemnify and hold the Owner harmless from all such claims.
14.5 Both-to-Blame Collision Clause
Without limitation on any other indemnity of the Charterer contained
herein, if the liability for any collision in which the Vessel is
involved while performing this Charter should be determined in
accordance with the laws of the United States of America, the
following clauses shall apply:
(a) If the Vessel comes into collision with another ship as a
result of the negligence of the other ship and any act, neglect
or default of the Master, mariner, pilot or the servants of the
Charterer in the navigation or in the management of the Vessel,
the Charterer shall indemnify the Owner against all direct,
consequential or special loss or liability to the other ship or
her owner.
(b) The foregoing provisions shall also apply where the owners,
operators or those in charge of any ship or ships or objects
other than, or in addition to, the colliding ships or objects
are at fault in respect of a collision or contact.
14.6 Liens, Attachments and Encumbrances
None of the Charterer, any subcharterer or party to a Drilling
Contract shall have the right, power or authority to create, incur
or permit to exist any Lien upon the Vessel, except for Permitted
Liens. The Charterer further agrees to carry a true copy of this
Charter with the ship's papers on board the Vessel, and to exhibit
the same to any person having business with the Vessel which may
give rise to any lien or claim upon the Vessel other than a
Permitted Lien or to the sale, conveyance or mortgage of the Vessel,
and on demand, to any person having business with the Vessel or to
any representative of the Owner, the Owner Group or any Investor.
The Charterer shall also place and keep prominently displayed on
board the Vessel a notice, framed under glass, printed in plain type
of such size that the paragraph of reading matter shall cover a
space not less than six inches wide by nine inches high, reading as
follows:
NOTICE OF CHARTER
This Vessel is owned by Deep Sea Investors, L.L.C. It is
under bareboat demise charter to R&B Falcon Drilling Co.
Under the terms of this Charter none of the Charterer, any
subcharterer, the Master nor any other person has any
right, power or authority to create, incur or permit to be
imposed on the Vessel (a) any lien whatsoever other than
liens for current crew's wages, general average and
salvage, in each case, incurred in the ordinary course of
business and that are not yet overdue complying with the
provisions of such charter and (b) any claims whatsoever
under any drilling contracts in respect of the Vessel
other than claims complying with the provisions of such
charter.
Such notice shall be promptly changed from time to time to reflect
the identity of the successors or assigns of the Owner.
14.7 Indemnification by the Charterer
The Charterer shall indemnify and hold harmless the Owner against
any Liens, claims or liabilities of whatsoever nature, other than
Permitted Liens (but if the Vessel is being redelivered to, or
otherwise coming into the possession of, the Owner pursuant to the
terms and conditions of this Charter, other than Permitted Liens
arising as the result of claims against the Owner for which the
Owner is not entitled to indemnification hereunder only), whether
such Liens, claims or liabilities now exist or are created hereafter
or are founded or unfounded, upon or relating to the Vessel, its
possession, management, maintenance, repair, use, employment,
chartering or subchartering or operation or any act or omission of
the Charterer.
14.8 The Charterer's Duties to Remove Liens, etc.
Without limitation of the generality of the Charterer's indemnities
provided for in Section 8.2 and Article 14, the Charterer agrees
that if a libel or a complaint in admiralty or any other legal
proceeding shall be filed against the Vessel, or if the Vessel shall
be otherwise levied upon or taken into custody or detained or
sequestered by virtue of proceedings in any court or tribunal or by
any government or other authority because of any Liens, claims or
liabilities arising from any claims, other than claims against the
Owner the payment or discharge of which is not the obligation of the
Charterer or any Guarantor or with respect to which the Owner is not
entitled to indemnification from the Charterer or any Guarantor.
The Charterer shall at its own expense within 15 days thereafter
cause the Vessel to be released and all such Liens and (except to
the extent that the same shall currently be contested by the
Charterer in good faith by appropriate persons and appropriate
proceedings in the Owner's sole judgment and shall not affect the
continued release, or until any risk of forfeiture or other loss of
or to the Vessel, or in any manner whatsoever interfere with the use
and operation of the Vessel) claims and liabilities to be
discharged. The Charterer shall forthwith notify the Owner by
telecopy, telex or telegram, confirmed by letter, of each such event
and of each such release and discharge. The Charterer shall advise
the Owner in writing at least once in each three-month period as to
the status and merits of all such excepted claims and liabilities
being so contested by the Charterer and not discharged within
fifteen days as provided above, which are either not bonded or
affect the ability of the Charterer to use any Vessel in the
ordinary course of its business. The Charterer will pay and
discharge when due all claims for repairs and other charges incident
to current operations of the Vessel or with respect to any change,
alteration or addition made pursuant to this Charter and will not
permit any lien referred to in clause (b) or (c) of the definition
of "Permitted Liens" which has ripened into a cause of action to be
in effect for more than 30 days unless it is fully bonded or covered
by insurance or Adequate Provision.
ARTICLE 15
INSURANCE
15.1 The Charterer's Insurance
The Charterer shall, at its own expense, procure and maintain in
effect with respect to and for the duration of this Charter the
insurance policies with limits of at least, and with deductibles, if
any, of no more than, those as set forth in Schedule C approved by
the Owner and having such terms and conditions, and with carriers
and/or underwriters approved by the Owner (such approval not to be
unreasonably withheld). Any policies of insurance carried by the
Charterer in accordance with this Article 15 shall (a) provide that
the interests of Owner Group in such policies shall not be
invalidated by any action, inaction, neglect, breach of warranty or
misrepresentation of the Charterer or change in ownership of the
Vessel and shall insure Owner Group's interests as they appear,
regardless of any breach or violation by the Charterer of any
warranty, declaration or condition contained in such policies, and
(b) be primary without right of contribution from any other
insurance which may be carried by Owner Group with respect to its
interests in the Vessel. The Charterer shall immediately notify
underwriters of and shall furnish all necessary information
concerning any occurrence which may give rise to a claim under any
of said insurance policies. Prior to commencement of any operations
under this Charter and any renewal of the insurance policies
required to be maintained hereunder, the Charterer shall provide the
Owner with insurance certificates evidencing the Charterer's
insurance coverage; such certificates shall provide for at least 30
days' (seven days, in the case of war risk) prior written notice to
the Owner and each of the Investors of any material change in,
reduction or cancellation of any of said insurance policies and
shall show the Charterer, the Owner, the Owner Group and the
Investors as sole loss payees and additional insureds thereunder as
their interests appear. If requested, copies of all correspondence
and documents sent to underwriters, related to any accident or claim
arising out of or in connection with the performance of the work
hereunder, shall be provided to the Owner.
15.2 Nonperformance of Insurance Companies
The insolvency, liquidation, bankruptcy, or failure of any insurance
company providing insurance for the Charterer or the Owner or their
respective subcontractors, or failure of any such insurance company
to pay claims accruing, shall not be considered a waiver of, nor
shall it excuse the Charterer from complying with, any of the
provisions of this Charter or any of the Charter Documents, except
that any such act or omission by an insurance company shall not be
deemed a breach of this Charter by the Charterer.
15.3 Subrogation
The Charterer agrees to endorse each such insurance policy to waive
the underwriters' and insurance providers' right of subrogation with
respect to Owner Group; and the Charterer agrees to indemnify and
hold Owner Group harmless with respect to any rights of subrogation
pursued by the Charterer's underwriters or insurance providers
against Owner Group.
ARTICLE 16
ASSIGNMENT OF CHARTER
16.1 Assignment and Subcontract by the Owner
The Owner shall have the right, at any time, to assign all or part
of this Charter to any Person, so long as such Person agrees to be
bound by this Charter and, at the time of such assignment, has, or
is a consolidated Subsidiary of a parent entity having, a
consolidated net worth of at least $50,000,000 as determined in
accordance with generally accepted accounting principles and is not
primarily engaged in the offshore drilling business, other than as a
financier or lessor of offshore drilling equipment or operations.
16.2 Assignment by the Charterer
The Charterer shall not have the right to assign this Charter or to
subcharter the Vessel without the prior written consent of the
Owner. Subject to the terms of applicable law, the Charterer shall
have the right, without the consent of the Owner, so long as no
Default or Event of Default shall have occurred and be continuing,
to subcharter the Vessel on a bareboat or time basis to any
Subsidiary of R&B Falcon that is and remains throughout the term of
such subcharter a Subsidiary of R&B Falcon and a citizen of the
United States within the meaning of the Shipping Act, 1916, and to
enter into, and to permit the Vessel to serve under, Drilling
Contracts that comply with the terms hereof and the other Charter
Documents (provided no such Drilling Contract constitutes a demise
or a bareboat charter or any grant of any property right or other
interest in the Vessel between the Charterer and others) provided
that:
(a) each such subcharter and Drilling Contract shall be consistent
with the terms of this Charter and the subcharterer shall have
agreed not further to subcharter the Vessel without complying
with this Section 16.2 with respect to such further subcharter;
(b) either (i) the subcharterer under such subcharter or the
customer under a Drilling Contract is a citizen of the United
States within the meaning of the Shipping Act, 1916 and
evidence thereof satisfactory to the Owner in its sole judgment
shall be submitted to the Owner within 30 days of entering into
such subcharter, (ii) the prior approval of the U.S. Maritime
Administration under the Shipping Act, 1916 of such subcharter,
in form satisfactory to the Owner in its sole judgment, shall
have been obtained and, within 30 days of entering into such
subcharter or Drilling Contract, evidence thereof satisfactory
to the Owner in its sole judgment, shall have been submitted to
the Owner or (iii) such subcharter or Drilling Contract shall
be covered by a general approval of the U.S. Maritime
Administration under sections 9 and 37 or any other applicable
sections of the Shipping Act, 1916 and the Charterer shall have
given written notice to the Owner to that effect, which notice
shall set forth in reasonable detail the facts which establish
such coverage with respect to such subcharter or Drilling
Contract;
(c) such subcharter or Drilling Contract shall not violate any laws
of the United States of America or any regulations, rules,
interpretations or orders thereunder;
(d) irrespective of any such subcharter, the Charterer shall remain
liable for all of its obligations under this Charter and the
Charter Documents to the same extent as if such subcharter or
Drilling Contract were not in effect;
(e) the subcharterer under each such subcharter shall comply with
all applicable laws and regulations, provided that violations
of laws or regulations by any such subcharterer that (i) will
not result in the Owner, the Owner Group or the Vessel being in
violation of, or subject to any fine, penalty or other sanction
under any applicable law or regulation or any risk of
forfeiture or other loss of or to the Vessel, (ii) do not
otherwise adversely affect the interests of the Owner or the
Owner Group or the Investors hereunder, and (iii) are not
consented to by the Charterer shall not, by reason of this
clause (e), constitute a breach, or cause such subcharter to be
in violation of the terms of this Charter so long as the
Charterer is taking appropriate action to terminate such
violation or to terminate such subcharter;
(f) such subcharter or Drilling Contract shall, by its terms,
expire no later than the end of the Charter Period, or any
extension thereof, and Charterer shall not suffer or permit to
be continued under any such subcharter or Drilling Contract any
lien or encumbrance incurred by it or its agents, which might
have priority over the title and interest of the Owner in the
Vessel and any part thereof, or equipment or other property
used in connection with the Vessel; and
(g) any Drilling Contract shall be on terms and conditions in
substantially the form generally used in offshore drilling and
with an operator and having (i) a consolidated tangible net
worth as determined in accordance with generally accepted
accounting principles of at least $500,000,000 (or be a
consolidated Subsidiary of a parent entity having such a
consolidated tangible net worth), or (ii) a senior unsecured
debt rating by S&P of ABBB-" or by Moody's of ABaa3" (or be a
consolidated direct or indirect Subsidiary of a parent entity
having a senior unsecured debt rating meeting such criteria) or
(iii) maintaining (or the Charterer providing) operators extra
expense or energy exploration and development insurance
coverage in an amount of at least the difference between
$150,000,000 (or such greater amount, as may be necessary to
meet the applicable financial responsibility requirements under
the Oil Pollution Act of 1990, or any other applicable laws, as
amended from time to time) and the amount of the Charterer's
contingent operators extra expense or energy exploration and
development insurance or other coverage in effect at such time,
with such underwriters or carriers and containing such terms
and conditions as the Owner may require, in the form normally
and customarily maintained by oil and gas operators engaged in
offshore drilling operations, for oil pollution liability and
expense, with the Owner, Investors, the Owner Group and the
Charterer named as additional insureds and having the benefit
of waivers of subrogation and with carriers or underwriters
reasonably acceptable to the Owner.
The Charterer shall within 30 days after entering into each Drilling
Contract notify the Owner of the period thereof and of the identity
of the other party and its relationship with the Charterer, if any.
16.3 Assignment of Subcharter Hire.
The Charterer hereby sells, assigns, transfers, creates a security
interest in and sets over unto the Owner all of the Charterer's
right, title and interest in and to all accounts, chattel paper,
contract rights and general intangibles, and all monies and claims
for monies due and to become due under, or arising out of, and all
claims for damages arising out of the breach of, any subcharter or
Drilling Contract (Drilling Contracts being considered, for purposes
of this Section 16.3, subcharters) relating to the Vessel, whether
now existing or hereafter entered into. It is expressly agreed
that, anything herein contained to the contrary notwithstanding, the
Charterer shall remain liable under each such subcharter to perform
all of its obligations thereunder, and the Owner shall have no
obligations or liabilities thereunder by reason of or arising out of
the foregoing assignment (herein, the "Rights Assignment").
Upon the demand of the Owner after the occurrence and during the
continuation of an Event of Default, the Charterer will specifically
authorize and direct each person liable therefor to make payment of
all monies due and to become due under or arising out of each such
subcharter to the Owner or as the Owner shall direct, and upon such
demand irrevocably authorizes and empowers the Owner to ask, demand,
receive, receipt and give acquittance for any and all such amounts
which may be or become due or payable or remain unpaid at any time
or times to the Charterer by each such person under or arising out
of such subcharters; to endorse any checks, drafts or other orders
for the payment of money payable to the Charterer in payment
therefor; and in its discretion to file any claims or take any
action or proceeding either in its own name or in the name of the
Charterer or otherwise which the Owner may deem to be necessary or
advisable in the premises.
The Charterer hereby irrevocably authorizes the Owner after any such
demand has been made, in its own name or in the name and on behalf
of the Charterer, to give notification to persons obligated under
such subcharters that payment is to be made to the Owner or as the
Owner directs and hereby agrees to cause to be delivered to the
Owner consents of such persons to the Rights Assignment, in form and
substance satisfactory to the Owner.
The Charterer agrees that at any time and from time to time, upon
the Owner's written request, the Charterer will execute and deliver
such further documents and do such further acts and things as the
Owner may request in order to effect further the purposes of the
Rights Assignment, provided that no such consent referred to in the
preceding paragraph may be required under this sentence.
The Charterer hereby irrevocably authorizes the Owner, at the
Charterer's expense, to file such financing statements relating to
the Rights Assignment, without the Charterer's signature, as the
Owner at its option may deem appropriate, and appoints the Owner as
the Charterer's attorney-in-fact to execute any such financing
statements in the Charterer's name and to perform all other acts
which the Owner deems appropriate to perfect and continue the
security interest created hereby.
The Charterer covenants and agrees with the Owner that the Charterer
will (a) duly perform and observe all of the terms and provisions of
such subcharters on the part of the Charterer to be performed or
observed, (b) clearly record in the books and records of the
Charterer notations of the Rights Assignment and (c) in the event
that the Charterer shall receive payment of any money which should
have been paid directly to the Owner pursuant to a demand made or
notice given under this Section 16.3 forthwith turn over the same to
the Owner or as the Owner may direct, in the identical form in which
received (except for such endorsements as may be required thereon).
ARTICLE 17
LOSS, TAKING OR SEIZURE.
17.1 Taking by the U.S. Government
A taking of the Vessel for use by the United States Government shall
not terminate this Charter, but the Charterer shall remain liable
for all its obligations hereunder, including its liability for
payment of Hire, until the expiration of the Charter Period. If, at
the expiration of the lesser of the then remaining term of the
Charter Period or 180 days after the taking of the Vessel for use by
the United States Government, the Vessel shall still be subject to
such taking for use by the United States Government, an Event of
Loss shall be deemed to have occurred on the last day of such 180-
day period or the Charter Period, whichever occurs first.
17.2 Event of Loss not a Total Loss
In the case of any Event of Loss arising out of damage to the Vessel
other than actual total loss, the Charterer shall notify the Owner
that the Vessel is deemed to be subject to an Event of Loss and
shall not consent to a compromise or arranged total loss without the
prior written agreement of its insurance underwriters that the
Vessel is a constructive or compromised total loss and that such
underwriters agree to pay an amount at least equal to the amount
payable by the Charterer under Section 17.3.
17.3 Payment of Stipulated Loss Value
Upon the occurrence of an Event of Loss, the Charterer shall
forthwith give the Owner written notice of such Event of Loss and
shall pay to the Owner within 60 days following the date of the
occurrence of such Event of Loss the Stipulated Loss Value of the
Vessel calculated as of such Basic Hire Payment Date occurring after
the occurrence of the Event of Loss plus interest at a rate per
annum equal to the Overdue Rate. The Charterer shall also pay to
the Owner all Basic Hire due on the Payment Dates next occurring
after the date of occurrence of such Event of Loss and, if the date
on which such Stipulated Loss Value actually is paid in full is not
such a Payment Date, an amount equal to the Overdue Rate (computed
on the basis of a 360-day year for actual days elapsed) on the
amount of such Stipulated Loss Value for the period from such
Payment Date to the date such Stipulated Loss Value is paid in full.
17.4 Application of Payments
In the case of all payments (other than insurance proceeds) received
by the Owner or the Charterer from any governmental authority or
otherwise as compensation for an Event of Loss, so much of such
payments as shall not exceed the sum of the Stipulated Loss Value
and an amount equal to interest hereon required to be paid by the
Charterer as above provided and any Hire then due and owing by the
Charterer hereunder shall be applied, provided no Default or Event
of Default shall have occurred and be continuing, first, in
reduction of the Charterer's obligation to pay such Hire, if any,
then due and owing; and second, in reduction of the Charterer's
obligation to pay such Stipulated Loss Value and such amount equal
to interest thereon as provided above if not already paid by the
Charterer or, if already paid by the Charterer, to reimburse the
Charterer for its payment of such Stipulated Loss Value and the
balance, if any, of such payments remaining thereafter shall be paid
over to, or retained by, the Owner.
17.5 Date of Loss
For the purpose of this Charter, the date of the occurrence of an
Event of Loss shall be the date of the casualty or other occurrence
giving rise to such Event of Loss (or the earlier of the expiration
of the remaining term of the Charter Period or the date 180 days
after such taking thereafter, in the case of a taking of title or
use or possession of the government of the United States of America,
as provided in the definition of Event of Loss set forth in
Section 1 hereof), and if the date of such casualty or other
occurrence shall be uncertain, such date shall be deemed the date
the Vessel was last heard from.
17.6 Effect of Payment of Stipulated Loss Value
In the event that the Charterer shall make payment in full of any
overdue payments of Basic Hire, and of such Stipulated Loss Value
and an amount equal to interest thereon as provided above, the
Charterer shall have no further obligation to make any payment of
Basic Hire payable after the Payment Date as of which such
Stipulated Loss Value was calculated, and the Charterer, subject to
the Charterer's obtaining any governmental consent required,
(a) shall be subrogated to all rights which the Owner shall have
with respect to the Vessel, (b) shall receive assignments and bills
of sale from the Owner (in such form described in Section 3.7
hereof, but without any representation or warranty of any character
on the part of the Owner) of any or all such rights, together with
all of the Owner's right, title and interest in and to the Vessel
and all machinery and equipment pertaining thereto, and (c) shall
have the right to abandon the Vessel to underwriters on behalf of
the Owner as well as itself. In such case, the Owner shall execute
such documents and take such other action as the Charterer may
reasonably require to effect the surrender of the Vessel to the
insurance underwriters. Nothing herein contained shall relieve the
Charterer or the Owner of any of its obligations under Article 18
incurred up to and including the date of the Event of Loss. After
the payment in full of the Stipulated Loss Value of the Vessel and
such other amounts, the Charterer's obligation to pay further Basic
Hire with respect to such Vessel shall terminate. All insurance
proceeds received as the result of an Event of Loss with respect to
the Vessel, and all payments (other than insurance proceeds)
received by the Owner or the Charterer from any governmental
authority or otherwise as compensation for an Event of Loss with
respect to the Vessel, shall be applied in reduction of the
Charterer's obligation to pay Stipulated Loss Value with respect to
the Vessel (plus any other amounts of Basic Hire and Supplemental
Hire then due and payable with respect to the Vessel), if not
already paid by the Charterer, or, if already paid by the Charterer,
shall be applied to reimburse the Charterer for its payment of the
Stipulated Loss Value with respect to the Vessel and the balance, if
any, of such proceeds or payments remaining thereafter shall be paid
over to, or retained by, the Charterer.
ARTICLE 18
TAX
18.1 Characterization as a Lease
Each of the parties hereto intends that, for Income Tax purposes,
this Charter will be treated as a lease of the Vessel (except for
the Severables to which Charterer has title pursuant to Section 9.4)
from the Owner to the Charterer, the Owner will be treated as the
sole owner of the Vessel (except for the Severables to which
Charterer has title pursuant to Section 9.4) and the Charterer will
be treated as not having any ownership interest in the Vessel
(except for the Severables to which Charterer has title pursuant to
Section 9.4), the Owner or any partnership or joint venture with the
Owner. The Charterer, the Owner, each of the Investors and any
Affiliate thereof will not take any action or file any return or
other document which is inconsistent with such characterization.
18.2 Representations
The Charterer represents, warrants and covenants to the Owner, each
of the Investors and any Affiliate thereof as follows:
(a) All information provided by the Charterer and its Affiliates to
any independent appraiser or engineer with respect to the
Vessel and the Upgrade Programs was and is true, complete and
accurate, and the Charterer and its Affiliates did not omit any
factual information necessary to make such first-mentioned
information not misleading or omit any factual information
required to permit any such independent appraiser or engineer
to perform the duties for which he was retained;
(b) Reading and Bates, Inc. was the original owner of the Vessel
and initially placed the Vessel in service during its taxable
year ended December 31, 1983;
(c) The Charterer is not, and will not become at any time during
any period in which the Owner is claiming federal income tax
depreciation deductions, a "tax-exempt entity" (within the
meaning of Section 168(h)(1)(A) of the Code and Section
168(j)(3)(A) of the 1954 Code);
(d) During any period during which the Owner is claiming federal
income tax depreciation deductions, the Charterer will take no
action and will not suffer any action to be taken by any Person
(other than the Owner) which would cause the Vessel to
constitute "tax-exempt use property" within the meaning of
Section 168(h)(1) of the Code (or Section 168(j)(3) of the
1954 Code), or property used "predominantly outside the United
States" within the meaning of Section 168(g)(1)(A) of the Code
(or Section 168(f)(2) of the 1954 Code);
(e) Immediately prior to the Delivery Date, Reading and Bates, Inc.
was entitled to accelerated cost recovery deductions with
respect to the Vessel, computed on the basis that (i) the
Vessel is A5-year property" (within the meaning of Section
168(c)(2)(B) of the 1954 Code) and (ii) recovery percentages
applicable to the Vessel are those set forth for 5-year
property pursuant to Section 168(b)(1) of the 1954 Code;
(f) Neither the Charterer nor any of its Affiliates bore any of the
cost of the First Upgrade Nonseverables. Neither the Charterer
nor any of its Affiliates will bear any of the cost of the
Second Upgrade Program or the Third Upgrade Program;
(g) The total cost of the First Upgrade Program was reasonable and
based on arm's-length negotiations;
(h) All of the First Upgrade Severables will be readily removable
from the Vessel without causing material damage to the Vessel;
(i) The allocation of the total cost of the First Upgrade Program
among the First Upgrade Nonseverables, the First Upgrade
Severables, and the First Upgrade Maintenance as set forth on
Schedule B-1 is reasonable;
(j) The First Upgrade Maintenance consisted solely of ordinary and
routine maintenance and repairs that did not materially add to
the Vessel's value or appreciably prolong the Vessel's useful
life;
(k) The Charterer has not made and will not make, with respect to
the period beginning with the Delivery Date and ending with the
date (if any) on which the Charterer acquires title to the
Vessel from the Owner, any claim predicated on tax or legal
ownership of such Vessel;
(l) Immediately after the First Upgrade Completion, the basis for
Income Tax purposes of the Vessel in the hands of the Owner
took into account (a) the purchase price of the Vessel,
including all related costs, expenses, commissions, taxes, etc.
incurred by the Owner in connection with the acquisition of the
Vessel, and (b) all costs incurred by the Owner pursuant to the
First Upgrade Program;
(m) The Vessel does not require any improvements, modifications,
upgrades or additions in order to be rendered complete or
suitable for its intended use, and the Vessel is ready and
available for the Charterer's intended use; and
(n) No member of the "Lessee Group" (as such term is defined in
Revenue Procedure 75-21, 1975-1 C.B. 715, as modified by
Revenue Procedure 79-48, 1979-2 C.B. 529) of which the
Charterer is a member has, nor will it acquire at any time
during the Charter Period, any investment in the Vessel within
the meaning of Section 4(4) of said Revenue Procedures that is
not permitted thereunder.
18.3 Tax Indemnity
The Charterer shall indemnify and hold the Owner, each of the
Investors and any Affiliate thereof harmless from:
(a) Any Taxes (other than Income Taxes) imposed on or incurred by
the Owner, such Investor or any Affiliate, employee, agent or
representative thereof with respect to this Charter or any of
the Charter Documents, the Vessel, any direct or indirect
interest therein or any amounts paid or payable in connection
therewith;
(b) Any Income Taxes (other than U.S. federal Income Taxes) imposed
on or incurred by the Owner, such Investor or any Affiliate
thereof (i) caused by or arising from the location or operation
of the Vessel in any particular waters or (ii) imposed by any
jurisdiction, other than the jurisdiction of incorporation of
such Investor or the jurisdiction of a place of business of
such Investor (unless such place of business is determined on
the basis of the location of the Vessel or the operation of the
Vessel or this Charter or any of the Charter Documents), in
respect of the Vessel or by reason of the transactions
contemplated by the Charter or any of the Charter Documents;
(c) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from the
Vessel's failing to qualify for accelerated cost recovery
deductions, computed on the basis that (i) the Vessel is
A5-year property" (within the meaning of Section 168(c)(2)(B)
of the 1954 Code) and (ii) recovery percentages applicable to
the Vessel are those set forth for 5-year property pursuant to
Section 168(b)(1) of the 1954 Code, by reason of any act of
commission or omission, misrepresentation or breach of any
agreement, covenant or warranty contained in the Charter or any
of the Charter Documents on the part of the Charterer, any
subcharterer, assignee or user of the Vessel or any Affiliate
thereof;
(d) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from the
charter, subcharter or use of the Vessel to or by a "tax-exempt
entity" (within the meaning of Section 168(h)(1)(A) of the Code
or Section 168(j)(3)(A) of the 1954 Code);
(e) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from the
Vessel's becoming limited use property;
(f) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from any
item of loss or deduction attributable to the Vessel, this
Charter or any of the Charter Documents or the transactions
contemplated by the Charter or any of the Charter Documents not
being treated as derived from, or allocable to, sources within
the United States;
(g) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from any
replacement, improvement, modification, upgrade, addition or
capital expenditure made or to be made to or in connection with
the Vessel or pursuant to this Charter, any of the Charter
Documents or the transactions contemplated by the Charter or
any of the Charter Documents or otherwise;
(h) Any Taxes payable as a result of any inaccuracy or breach of
any representation, warranty or covenant of the Charterer under
this Charter or any of the Charter Documents;
(i) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from the
inclusion in income of any amount paid or payable by the
Charterer under this Section 18.3; and
(j) Any attorneys' fees or other costs incurred by the Owner, such
Investor or any Affiliate thereof in connection with any
payment from the Charterer under this Section 18.3.
18.4 Payments
Any amount to which the Owner, any of the Investors or any Affiliate
thereof is entitled under Section 18.3 shall be paid in a lump sum
equal to the present value of the amounts of the existing and
anticipated Taxes described in Section 18.3 payable by such
indemnitee for all affected taxable periods. In the case of any
such amount caused by a loss of Income Tax deductions, such amount
shall be reduced (but not below zero) by an amount equal to the
present value of the amounts of existing and anticipated reductions
in Income Taxes payable by such indemnitee for all affected taxable
periods that would not be realized but for the loss of such
deductions. Any amount to which such an indemnitee is entitled
under Section 18.3 shall be calculated on the basis of (i) a
conclusive presumption that such indemnitee has and will have
sufficient amounts of taxable income, foreign-source income, and
foreign income tax liability so as to be able to fully utilize on a
current basis any Income Tax benefits which could be derived from
the Owner's ownership of the Vessel, (ii) a conclusive presumption
that such indemnitee is and will be liable for Taxes at the highest
marginal rates in effect for the relevant taxable period, (iii) the
date or dates on which any payment of Taxes (including estimated
Taxes) shall be due or would be due for the relevant taxable period
if such indemnitee was actually liable for Taxes for such relevant
period, and (iv) an after-tax discount rate of 4.42% per annum,
discounted quarterly. Any such amount shall be paid by the
Charterer to such indemnitee within thirty (30) days following the
receipt by the Charterer of written notice from such indemnitee
which requests such amount and provides details supporting the
calculation of such amount.
18.5 Records
The Charterer will maintain sufficient records with respect to the
Vessel and this Charter, will preserve and retain any such records
until the expiration of the statutory period of limitations
(including extensions) of the taxable periods to which any such
records relate and will provide copies of such records as the Owner
or any of the Investors or any Affiliate thereof may reasonably
request to enable the Owner, such Investor or any Affiliate thereof
to fulfill its Tax filing obligations.
ARTICLE 19
GENERAL
19.1 Notices
Notices and other communications required or permitted hereunder
shall be in writing and shall be deemed sufficient for all purposes
if sent by registered or certified letter, nationally recognized
overnight courier service specifying one-day delivery, facsimile or
telex to the recipient's address stipulated below and shall be
effective from the date of receipt thereof. Other addresses may be
substituted for those below upon giving notice thereof in the manner
provided above:
if to the Owner: Deep Sea Investors, L.L.C.
"GATX Marine Investors Corporation
Four Embarcadero Center, Suite 2200
San Francisco, California 94111
Attn: Portfolio Management
Fax: (415) 955-3415
Heller Financial, Inc.
150 East 42nd Street
New York, New York 10017
Attn: Legal Department
Fax: (212) 880-7158
Heller Financial Leasing, Inc.
500 W. Monroe Street
Chicago, Illinois 60661
Attn: CEFD - Central Region Credit Manager
Fax: (312) 441-7519
Boeing Capital Corporation
4060 Lakewood Boulevard, 6th Floor
Long Beach, California 90808
Attn: Senior Documentation Officer
Fax: (310) 627-3002
if to the Charterer:
R&B Falcon Drilling Co.
901 Threadneedle, Suite 200
Houston, Texas 77079
Attn: Vice President and Treasurer
Fax: (281) 496-0285
19.2 Expenses
Whether or not any of the transactions contemplated hereby are
consummated, each of the Charterer and the Owner shall pay its own
expenses, including legal and appraisal fees and expenses, in
connection with the negotiation, execution and delivery of this
Charter. In addition, the Charterer shall pay upon demand all other
costs and expenses incurred by the Owner and the Investors in
connection with the enforcement of any of their rights or remedies,
any future amendments, supplements, waivers or consents with respect
to any of the Charter Documents, including, without limitation:
(a) the reasonable expenses and disbursements of counsel for the
Owner and the reasonable fees, expenses and disbursements of
Baker & Botts, L.L.P., special counsel for the Investors, or
any other counsel for services rendered after the Delivery Date
in connection with any Charter Document or any transaction
contemplated thereby, or any modification, amendment or waiver
of any thereof;
(b) all other reasonable expenses in connection with such
transactions including, without limitation, the expenses of
appraisers, other counsel or of experts whose opinions are
required by the terms hereof (to the extent not specifically
required to be paid by third parties by the terms hereof),
printing expenses and all fees, taxes and other charges payable
in connection with the recording or filing of instruments and
financing statements desirable under the Charter Documents;
(c) reimbursement to the Owner and Investors for their reasonable
out-of-pocket expenses in connection with entering into such
transactions, and any and all fees, expenses and disbursements
of the character referred to in clauses (a) and (b) above which
shall have been paid by the Owner or any of the Investors; and
(d) reimbursement to the Owner and Investors in an amount
sufficient to hold each of them harmless from and against any
and all liability and loss with respect to or resulting from
any and all claims for or on account of brokers' or finders'
fees or commissions or financial advisory fees by any brokers,
finders or financial advisors engaged by the Charterer or the
Guarantor with respect to such transactions.
19.3 The Owner's Right to Perform for the Charterer
If the Charterer fails to perform or comply with any of its
agreements contained herein other than its obligations to pay Hire,
the Owner, may upon notice to the Charterer itself perform or comply
with such agreement, and the amount of any expenses of the Owner
incurred in connection with such performance or compliance, together
with interest on such amount at the Overdue Rate, shall be deemed
Supplemental Hire, payable by the Charterer upon demand.
Without in any way limiting the obligations of the Charterer
hereunder, the Charterer hereby irrevocably appoints the Owner as
its agent and attorney, with full power and authority at any time at
which the Charterer is obligated to deliver possession of the Vessel
to the Owner, to demand and take possession of the Vessel in the
name and on behalf of the Charterer from whomsoever shall be at the
time in possession thereof in the manner described in, and with all
rights and remedies conferred under, Section 3.4(a) hereof.
19.4 Waivers
None of the requirements of this Charter shall be considered as
waived by either party unless the same is done in writing, and then
only by the persons executing this Charter, or other duly authorized
agent or representative of the Person designated in writing by a
senior officer of such Person and then any such waiver shall apply
only in the specific instance and for the specific purpose for which
such is given.
19.5 Entire Agreement
This Charter and the Charter Documents contain the entire agreement
between the parties with respect to the subject matter hereof and
supersede and replace any oral or written communications heretofore
made between the parties relating to the subject matter hereof.
19.6 Successors and Assigns
This Charter shall inure to the benefit of and be binding upon the
successors and assigns of the parties, provided that, except as
expressly set forth herein, the Charterer may not assign its rights
hereunder without the express written consent of the Owner and that
the assignor shall remain liable for the performance of its assignee
unless specifically released by the other party hereto.
19.7 Law
The validity, construction, interpretation and effect of this
Charter shall be governed by the general maritime laws of the United
States, without regard to any choice of law rules that would
otherwise require the application of the laws of any other
jurisdiction, except that where the general maritime laws of the
United States look to or adopt state law, this Charter shall be
governed by the laws of the State of New York, without regard to any
choice of law rules that would otherwise require the application of
the laws of any other jurisdiction.
19.8 Parties' Intention
It is the intent of all parties hereto and affected hereby in the
execution and performance of this Charter, the Charter Documents and
all related documentation to remain in strict compliance with all
applicable laws from time to time in effect. Further, it is the
intent of all parties hereto and affected hereby to evidence, by
this Charter, a lease between the Owner, as lessor, and the
Charterer, as lessee, rather than any other form of financial
arrangement including specifically, but without limitation, a loan
or other debt financing. Any and all payments, amounts,
liabilities, commitment fees and other amounts expended and
obligations of the Charterer incurred or arising in connection with
this Charter, the Charter Documents and all related documentation
are intended to evidence, lease payment obligations of the Charterer
or reimbursements to the Owner and the Investors or their agents,
representatives or designees, for services actually performed, goods
actually furnished or provided, or other expenses or liabilities for
which reimbursement is provided in connection with this Charter and
the Charter Documents. To the extent that any such charge herein
provided for or payment herein made is held or deemed to be held by
a court of competent jurisdiction to be "interest", the parties
hereto and affected hereby stipulate and agree that none of the
terms and provisions contained in or pertaining to this Charter, the
Charter Documents or any related document shall ever be construed to
create a contract to pay for the use, forbearance or detention of
money with interest at a rate or in an amount in excess of the
maximum lawful non-usurious rate or amount of interest permitted to
be charged, paid or received under said laws. For purposes of this
Charter, the Charter Documents and all related documentation,
"interest" shall include the aggregate of all charges which
constitute interest under applicable laws, which term "applicable
laws" shall include, but not be limited to, the laws of the State of
New York and, to the extent they may apply, the laws of the United
States of America, that are contracted for, chargeable or receivable
under this Charter and all related documentation. The Charterer
shall never be required to pay unearned interest on any of its
obligations hereunder or in connection herewith and shall never be
required to pay interest on any of its obligations hereunder or in
connection herewith at a rate or in an amount in excess of the
maximum lawful non-usurious rate or amount of interest that may be
lawfully charged under applicable laws, and the provisions of this
paragraph shall control over all other provisions of this Charter,
the Charter Documents and all related documentation which may be in
apparent conflict herewith. If the effective rate or amount of
interest which would otherwise be payable under or in connection
with this Charter or any related documentation would exceed the
maximum lawful non-usurious rate or amount of interest the Owner or
any Investor or any assignee thereof is allowed by applicable laws
to charge, collect and receive, or in the event any such person or
entity shall charge, collect or receive monies that are deemed to
constitute interest which would, in the absence of this
Section 19.8, be in excess of an amount permitted to be charged,
collected and received under the applicable laws then in effect,
then any such excess amount shall be reduced to the amount allowed
under said laws as now or hereafter construed by courts having
jurisdiction, and all such monies so collected, charged or received
that are deemed to constitute interest in excess of the maximum
lawful non-usurious rate or amount of interest permitted by
applicable laws shall be immediately, at the option of the recipient
thereof, be applied to principal, if any outstanding, or returned to
or credited to the account of the Charterer upon such determination.
19.9 Counterparts; Uniform Commercial Code
This Charter may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but
one and the same instrument. Each counterpart of this Charter which
has been executed by the parties hereto shall be prominently marked
to identify the party to whom originally delivered. If this Charter
constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), a
security interest in this Charter may be created only by the
transfer or possession of the counterpart marked "Owner's Copy" and
containing a receipt therefor executed by the Owner on or
immediately following the signature page thereof and, in addition,
the Owner may file Uniform Commercial Code Financing Statements in
any relevant jurisdiction.
19.10 Warranty of Authority
By executing this Charter on behalf of any entity, each signatory to
this Charter represents and warrants that he or she has full and
valid authority to enter into this Charter on behalf of the entity
for which he or she signs.
19.11 Usage; Headings
Unless the context otherwise requires, use of the singular number in
this Charter shall include the plural number and vice versa, and use
of one gender herein shall include each other gender and vice versa.
Use of the words "hereof", "herein", "hereto", "hereby",
"hereunder", or words of similar import in this Charter refer to
this Charter as a whole and not to any specific paragraph,
subparagraph, section, sentence, clause or part of this Charter.
Section headings and numbers herein are for reference purposes only
and do not constitute a part of this Charter (unless the context
indicates otherwise).
19.12 WAIVER OF JURY TRIAL
EACH OF THE CHARTERER AND THE OWNER WAIVE ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
CHARTER, THE CHARTER DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
19.13 VENUE; SERVICE OF PROCESS
THE CHARTERER, FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY
KNOWINGLY AND INTENTIONALLY AND IRREVOCABLY AND UNCONDITIONALLY
a) SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW YORK AND THE
FEDERAL COURTS SITTING IN THE STATE OF NEW YORK AND AGREES AND
CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL
PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS CHARTER OR THE
OTHER CHARTER DOCUMENTS BY SERVICE OF PROCESS AS PROVIDED BY NEW
YORK LAW, b) WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
LITIGATION ARISING OUT OF OR IN CONNECTION WITH THIS CHARTER OR THE
OTHER CHARTER DOCUMENTS BROUGHT IN ANY NEW YORK STATE COURT OR
FEDERAL COURT SITTING IN THE STATE OF NEW YORK, c) WAIVES ANY CLAIMS
THAT ANY LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM, d) CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE MAILING
OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
POSTAGE PREPAID, TO THE CHARTERER AT THE ADDRESS SET FORTH HEREIN
AND e) AGREES THAT ANY LEGAL PROCEEDING AGAINST THE CHARTERER
ARISING OUT OF, RELATED TO OR IN CONNECTION WITH THIS CHARTER OR THE
OTHER CHARTER DOCUMENTS OR THE OBLIGATIONS HEREUNDER OR THEREUNDER
MAY BE BROUGHT IN ANY COURT OF COMPETENT JURISDICTION IN THE STATE
OF NEW YORK. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE OWNER TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
CHARTERER OR ANY OF THE OTHER MEMBER OF THE CHARTERER GROUP IN ANY
OTHER JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY
APPLICABLE LAW.
19.14 Agent for Service of Process
The Charterer hereby irrevocably designates The Prentice-Hall
Corporation, with offices at 500 Central Avenue, Albany, New York
12206-2290, as agent to receive for and on behalf of the Charterer
service of process in New York. In the event that The Prentice-Hall
Corporation System, Inc. resigns or ceases to serve as the
Charterer's agent for service of process hereunder, the Charterer
agrees forthwith (a) to designate another agent for service of
process in the State of New York and (b) to give prompt written
notice to the Owner of the name and address of such agent. The
Owner agrees to use reasonable efforts to cause a copy of such
process served on such agent to be promptly forwarded to the
Charterer at its address set forth herein, and the Charterer agrees
that the failure of the Charterer to receive such copy shall not
impair or affect in any way the validity of such service of process
or of any judgment based thereon. The Charterer agrees that the
failure of its agent for service of process to give any notice of
any such service of process to the Charterer 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 the Charterer available to be
served, then the Charterer further irrevocably consents to the
service of process by the mailing thereof by the Owner by registered
or certified mail, postage prepaid, to the Charterer at its address
herein. Nothing in this Section 19.14 shall affect the right of the
Owner to serve legal process in any other manner permitted by law or
affect the right of the Owner to bring any action or proceeding
against the Charterer or its property in the courts of any other
jurisdiction.
IN WITNESS HEREOF, the parties hereto have executed this Charter on
July 1, 1998.
R&B FALCON DRILLING CO.
(formerly known as READING &
DEEP SEA INVESTORS, L.L.C. BATES DRILLING CO.)
By: GATX MARINE INVESTORS
CORPORATION, Member
By: By:
Name: Name:
Title: Title:
By: HELLER FINANCIAL LEASING, INC.
Member
By:
Name:
Title:
By: MDFC EQUIPMENT LEASING
CORPORATION, Member
By:
Name:
Title:
SCHEDULE A
DESCRIPTION OF VESSEL M.G. HULME, JR.,
INCLUDING SPECIFICATIONS
SCHEDULE B-1
FIRST UPGRADE PROGRAM
SCHEDULE B-2
SECOND UPGRADE PROGRAM
SCHEDULE B-3
THIRD UPGRADE PROGRAM
SCHEDULE C
CHARTERER'S INSURANCE
As specified in Article 15, the Charterer shall maintain the following
insurance coverage:
1. Workmen's Compensation and Employers' Liability Insurance
All of the Charterer's employees shall be covered for statutory
benefits as set forth and required by applicable law in the Area of
Operation or such other jurisdiction under which the Charterer may
become obligated to pay benefits. Employers' Liability insurance,
including appropriate maritime coverage covering all employees,
shall be provided with minimum primary policy limits as required by
applicable statute, or U.S. $1 million per occurrence, whichever is
greater.
2. Comprehensive General Liability
Insurance coverage shall be provided for liability arising from all
operations of the Charterer. The policy shall include coverage for
premises and operations, independent contractors, completed
operations, and contractual liability (or their equivalents).
Insurance coverage shall also be provided for all owned, hired, and
nonowned vehicles. The minimum primary policy limits shall be U.S.
$1 million single limit per occurrence under the General Liability
policies. Automobile Liability insurance shall have minimum policy
limits of U.S. $1,000,000 single limit per occurrence, or such
greater amount as required by law.
3. Protection and Indemnity (Marine Liability) Insurance
Full form marine protection and indemnity insurance, including, but
not limited to, sudden and accidental pollution liability and
contractual liability coverage or equivalent insurance (including
equivalent insurance against liability for fines and penalties
arising out of the operation of the Vessel) with such club or under
forms of policies approved by the Owner. Such protection and
indemnity insurance shall be maintained in the broadest forms
generally available in the United States market, shall be in an
amount not less than that carried by experienced and responsible
companies engaged in the drilling of petroleum, shall include a
cross-liability endorsement and shall be placed through independent
brokers of recognized standing and with first-class underwriters
reasonably acceptable to the Owner. No hull and machinery or
protection and indemnity insurance shall provide for a deductible
amount in excess of $500,000 with respect to the Vessel without the
prior written consent of the Owner.
4. Excess Liability
The Charterer shall carry Excess Liability Insurance in amounts not
less than $200 million each occurrence in addition to and in excess
of all primary Liability Coverages carried by Charterer, including
but not limited to insurance required under Paragraphs 1, 2 and 3
(oil pollution sublimit $80 million per Paragraph 6).
5. Marine Physical Damage, Including Hull and Machinery
All risk Marine and hull and machinery shall be provided with a
limit equal to that normally carried by experienced and responsible
companies engaged in offshore drilling, but shall not be less than
the greater of (a) 110% of the Stipulated Loss Value of the Vessel;
or (b) the Fair Market Sale Value of the Vessel. Coverage shall
include collision liability and navigation limits adequate for the
Vessel's trade.
6. Oil Pollution Insurance
Oil pollution insurance coverage issued by the Vessel's P & I Club
or equivalent coverage in the amount of not less than US $80,000,000
per occurrence, unless additional insurance or proof of financial
responsibility of a greater amount shall be required by a
governmental authority, in which case such greater amount shall be
obtained and kept in full force and effect by the Charterer. The
Charterer shall maintain insurance, if available, covering similar
oil removal risks or liabilities and civil or criminal penalties
incident thereto and not attributable to the action or inaction of
the Owner under any law, regulation or judicial decision of any of
the United States of America or foreign jurisdiction or
jurisdictions or political subdivision thereof applicable to the
Vessel or its operations to the extent such insurance is requested
in writing by the Owner and recommended by an independent marine
insurance broker as insurance which it would be imprudent not to
carry for the protection of the Charterer and the Owner in view of
the nature of the Vessel and the Vessel's operations.
7. War, Political Risk, Confiscation and Expropriation Insurance
If and to the extent that the Vessel is operated outside of the
territorial waters and/or the Outer Continental Shelf of the United
States (and in addition to any coverage required by the Owner for
such operations under this Charter), War, Political Risk,
Confiscation and Expropriation Insurance shall be provided for the
Vessel with a limit equal to the value insured under Paragraph 5
above.
8. Other Losses
Losses not covered by the above stated policies because of
deductibles and policy limits stated above shall be borne according
to the liability and indemnity provisions of this Charter.
9. Owner Group as Additional Insured
All coverages and other insurance policies carried by the Charterer
or that the Charterer is required at any time to maintain pursuant
to this Charter shall name Owner Group as an additional insured and
loss payee for all risks and losses for which the Charterer is
liable under this Charter.
10. Additional Provisions
The Charterer will deliver to the Owner and each of the Investors
copies of all cover notes and certificates of insurance and, if
requested by the Owner copies of all binders and policies with
respect to insurance carried on the Vessel. On or before the
Delivery Date of the Vessel, and on each anniversary of the Delivery
Date, and each time there is a reduction or material change in the
insurance coverage carried on the Vessel, the Charterer will furnish
to the Owner and each of the Investors a detailed report signed by
independent marine insurance brokers (who may be the insurance
brokers regularly employed by the Charterer) appointed by the
Charterer and reasonably acceptable to the Owner, describing the
insurance policies then carried and maintained on the Vessel
(including the names of the underwriters, the types of risk covered
by such polices, the amount insured thereunder and the expiration
date thereof) and stating that in the opinion of said insurance
brokers such insurance is adequate and reasonable for protection of
the Owner, is in compliance with the terms of Article 15 and is
comparable with that carried by other responsible operators of
similar drilling vessels. All policies shall include the following:
(i) breach of warranty protection to the Owner Group, (ii) waiver of
subrogation clause and (iii) at least 30 days' prior written notice
of cancellation or material modification. The insurance shall be
primary, without right of contribution from any other insurance
which may be carried by the Owner Group, and contain a waiver of set
off of premiums against claims proceeds and provide for no recourse
for premium payments by the Owner Group.
SCHEDULE D
STIPULATED LOSS VALUE*
SCHEDULE E
PENDING LITIGATION
Proceedings disclosed in R & B Falcon Corporation's Report on
Form 10-Q dated March 31, 1998 filed with the Securities & Exchange
Commission.
SCHEDULE F
Computation of Basic Hire Adjustment for Third Upgrade
Effective as of each Upgrade Disbursement Date (as defined in
the Second Upgrade Agreement), the Basic Hire shall be adjusted for the
amount to be funded by the Owner on such date by reference to the yield
of the 6.375% coupon August 2002 U.S. Treasury note as published in The
Wall Street Journal on the second Business Day immediately preceding such
date and otherwise in accordance with the methodology used in the example
shown below.
Example:
Upgrade Disbursement Date: July 29, 1997
Assumed Published U.S. Treasury note yield: 6.11%
Value of Severables in respect of which
reimbursement is sought: $5,560,683.00
Value of Nonseverables in respect of which
reimbursement is sought: $4,720,896.00
Total amount in respect of which reimbursement
is sought: $10,281,579.00
Revised Primary Term Basic Hire (expressed as
a % of Owner's Cost): 1.1896%
[needs to be revised]
_______________________________
* Immediately prior to an Upgrade Disbursement Date (as defined in
the Third Upgrade Agreement), the Owner will deliver to the Charterer a
revised schedule of Stipulated Loss Value. The revised schedule shall
reflect the amount which the Charterer has requested be reimbursed by the
Owner on such date and shall otherwise be produced using the same
methodology as was used in preparation of the figures which appear in
this Schedule D. Upon the relevant disbursement being made, such revised
schedule shall for all purposes be and become Schedule D of this Charter.
EXHIBIT 10.183
AMENDMENT NO.1 TO
LIMITED LIABILITY COMPANY AGREEMENT
Amendment No. 1 dated as of February 7, 1997 ("Amendment No. 1") to
the Limited Liability Company Agreement made and entered into on October
28, 1996 (the "Agreement") by and between Conoco Development Company
(sometimes referred to as "Conoco") and RB Deepwater Exploration Inc.
(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 to amend the
Agreement, effective as of the first date shown above, as follows:
A. Definitions. Unless otherwise defined in this Amendment,
capitalized terms shall have the respective meanings ascribed to them in
the Agreement.
B. Amendments to the Agreement. The Agreement is amended as
follows:
1. Section 3.2 of the Agreement is amended in its entirety to
read:
"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
Contract 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 Conoco or an
Affiliate of Conoco shall provide the necessary cost
overrun guaranties in a form acceptable to Conoco or its
Affiliate and the Company (such construction financing
meeting such other conditions as Conoco or its Affiliate
and the Company may require) to support such financing for
the Company from third parties (without any obligation of
Reading & Bates to provide any such guaranties) 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 contract for a second shipshape self-propelled offshore
drilling vessel, substantially the same as the Drillship,
(the "Second Drillship") to be built by the Builder, and
if the necessary approvals are obtained, to notify the
Builder on or before April 30, 1997, all as specified in
the construction contract between the Builder and the
Company for the Second Drillship, and proceed to complete
construction and take delivery of the Second Drillship, to
obtain the necessary construction and permanent financing
(on terms and conditions satisfactory to the Members) to
enable the Company to take delivery of the Second
Drillship, to operate the Second Drillship and perform
drilling and related contracts obtained by the Company for
the Second Drillship, and to carry out any and all
modifications to the Second Drillship to the Second
Drillship deemed necessary 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), (d) 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, (e) to
maximize the profits of the Company, and (f) 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), (d) and (e) of this sentence,
and (g) 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."
2. Section 5.1 of the Agreement is amended to add at the end
thereof the following additional paragraph:
"With respect to the Second Drillship each Member agrees
to loan to the Company, subject to the prior approval of
Conoco Inc., the sum of $7,225,090 in order to enable the
Company: (x) to execute the shipbuilding contract with
the Builder for the Second Drillship, such shipbuilding
contract to be substantially in the form of the
Shipbuilding Contract with such changes therefrom as shall
be approved by the Members Committee, and (y) to pay the
first installment to the Builder due thereunder; such
loan to be secured by a promissory note executed by the
Company substantially in the form attached as Exhibit 1A
to Amendment No. 1."
3. Section 5.2 is amended by adding to the end thereof the
following additional paragraph:
"Each of the Members agrees, to the extent required by the
construction lender(s) of the Company with respect to the
Second 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 to be entered into between the
Company and Builder with respect to the Second Drillship,
in order for the Company to take delivery of the Second
Drillship under such 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 Second Drillship under such shipbuilding
contract (including owner furnished equipment) in
compliance with the terms of any such cost overrun
guaranties.
4. Section 5.3 is amended by deleting the phrase "the Drillship"
in the third and fourth lines and substituting therefor the
phrase "each of the Drillship and the Second Drillship".
C. Full Force and Effect. Except as otherwise amended above, the
Agreement shall remain in full force and effect.
D. Further Assurances. Reading & Bates and Conoco agree to duly
execute and deliver all other documents and take such other action as may
be reasonably necessary and proper to effect the intention of the parties
in connection with this Amendment No. 1 and the transactions contemplated
thereby.
EXECUTED on this 7th day of February, 1997.
MEMBERS
CONOCO DEVELOPMENT COMPANY
By:_________________________
Its:________________________
RB DEEPWATER EXPLORATION INC.
By:_________________________
Its:________________________
STATE OF TEXAS )
) SS
COUNTY OF HARRIS )
BEFORE me, , a Notary Public, on this day
personally appeared ,
, of Conoco Development Company, 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 7th day of February,
1997 in Houston, Texas.
My commission expires: _______________________
Notary Public
STATE OF TEXAS )
) SS
COUNTY OF HARRIS )
BEFORE me, , a Notary Public, on this day
personally appeared ,
, of RB Deepwater Exploration 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 7th day of February,
1997 in Houston, Texas.
My commission expires: ______________________
Notary Public
EXHIBIT 10.184
AMENDMENT NO. 2 TO
LIMITED LIABILITY COMPANY AGREEMENT
Amendment No. 2 dated as of April 30, 1997 ("Amendment No. 2") to
the Limited Liability Company Agreement made and entered into on October
28, 1996 (the "Agreement"), as amended by Amendment No. 1 dated February
7, 1997 ("Amendment No.l"), by and between Conoco Development Company
(sometimes referred to as "Conoco") and RB Deepwater Exploration Inc.
(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 to amend the
Agreement further, effective as of the first date shown above, as
follows:
A. Definitions. Unless otherwise defined in this Amendment,
capitalized terms shall have the respective meanings ascribed to them in
the Agreement.
B. Amendment of Agreement. Effective as of April 30, 1997, the
Agreement is amended so as to delete the modifications and amendments
made by Amendment No. 1 and the Agreement is restored to the terms and
conditions in effect prior to such Amendment No. 1, as if such Amendment
No. 1 had never been made.
C. Full Force and Effect. Except as otherwise amended above, the
Agreement remains in full force and effect.
D. Further Assurances. Reading & Bates and Conoco agree to duly
execute and deliver all other documents and take such other action as may
be reasonably necessary and proper to effect the intention of the parties
set out in this Amendment No. 2.
EXECUTED on this 30th day of April, 1997.
MEMBERS
CONOCO DEVELOPMENT COMPANY
By:_________________________
Its:________________________
RB DEEPWATER EXPLORATION INC.
By:_________________________
Its:________________________
STATE OF TEXAS )
) SS
COUNTY OF HARRIS )
BEFORE me, , a Notary Public, on this day
personally appeared ,
, of Conoco Development Company, 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 25th day of April, 1997
in Houston, Texas.
My commission expires: ______________________
Notary Public
STATE OF TEXAS )
) SS
COUNTY OF HARRIS )
BEFORE me, , a Notary Public, on this day
personally appeared ,
, of RB Deepwater Exploration 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 25th day of April, 1997
in Houston, Texas.
My commission expires: _____________________
Notary Public
EXHIBIT 10.185
AMENDMENT NO. 3 TO
LIMITED LIABILITY COMPANY AGREEMENT
Amendment No. 3 dated as of April 24, 1998 ("Amendment No. 3") to
the Limited Liability Company Agreement made and entered into on October
28, 1996 (the "Agreement") by and between Conoco Development Company
(sometimes referred to as "Conoco") and RB Deepwater Exploration Inc.
(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 to amend the
Agreement, effective as of the first date shown above, as follows:
A. Definitions. Unless otherwise defined in this Amendment,
capitalized terms shall have the respective meanings ascribed to them in
the Agreement.
B. Amendments to the Agreement. The Agreement is amended as
follows:
1. All references in the Agreement to "Reading & Bates
Corporation" shall be deleted, and "R&B Falcon Corporation"
substituted therefor.
2. The form of Indemnification Agreement, with respect to Reading
& Bates, shall be deleted, and in lieu thereof, the attached
form of Indemnification Agreement shall be substituted
therefor.
C. Full Force and Effect. Except as otherwise amended above, the
Agreement shall remain in full force and effect.
D. Further Assurances. Reading & Bates and Conoco agree to duly
execute and deliver all other documents and take such other action as may
be reasonably necessary and proper to effect the intention of the parties
in connection with this Amendment No. 3 and the transactions contemplated
thereby.
EXECUTED as of the 24th day of April, 1998.
MEMBERS
CONOCO DEVELOPMENT COMPANY
By:_________________________
Its:________________________
RB DEEPWATER EXPLORATION INC.
By:_________________________
Tim W. Nagle
Its: Vice President and Treasurer
STATE OF TEXAS )
) SS
COUNTY OF HARRIS )
BEFORE me, , a Notary Public, on this day
personally appeared ,
, of Conoco Development Company, 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 June, 1998
in Houston, Texas.
My commission expires: _____________________
Notary Public
STATE OF TEXAS )
) SS
COUNTY OF HARRIS )
BEFORE me, Harriet L. Ingram, a Notary Public, on this day
personally appeared Tim W. Nagle, Vice President and Treasurer, of RB
Deepwater Exploration 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 24th day of June, 1998
in Houston, Texas.
My commission expires: _____________________
Notary Public
EXHIBIT 10.186
AMENDMENT NO. 4 TO
LIMITED LIABILITY COMPANY AGREEMENT
Amendment No. 4 dated as of August 7, 1998 ("Amendment No. 4") to
the Limited Liability Company Agreement made and entered into on October
28, 1996 (the "Agreement") by and between Conoco Development Company
(sometimes referred to as "Conoco") and RBF Deepwater Exploration Inc.
(formerly known as RB Deepwater Exploration Inc. and 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 to amend the
Agreement, effective as of the first date shown above, as follows:
A. Definitions. Unless otherwise defined in this Amendment,
capitalized terms shall have the respective meanings ascribed to them in
the Agreement.
B. Amendments. The Agreement is amended as follows:
1. All references in the Agreement to "RB Deepwater Exploration Inc."
are amended to read "RBF Deepwater Exploration Inc."
2. Section 5.1 is amended and restated to read as follows:
"5.1 Initial Contributions. Each Member agrees that it will make
an equal initial equity contribution to the Company of $15,750,000
($31,500,000 in the aggregate by Conoco and Reading & Bates). The
equal 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 [September 30, 2008], (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 Amendment No. 4 to this Agreement
(and upon surrender to such Member that certain promissory note
dated October 28, 1996 in the amount of $22,000,000) it will deliver
to the Company a demand promissory note in favor of the Company for
$15,750,000, each such demand promissory note to call for a partial
payment in cash of $2,500,000 on September 30, 1998 and to allow the
Company to make demands contemporaneously to each of the Members for
equal payments of such notes thereafter until maturity. Such
promissory notes shall be in the form attached as Exhibit "E" to
Amendment No. 4 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, in whole or in
part, 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.
3. Section 8.1(b)(ii) is amended and restated to read as follows:
"(ii)to approve (w) the commencement by the Company of any case,
proceeding or other action under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, arrangement, winding-up, liquidation,
dissolution, composition or other relief with respect to the Company
or its debts; (x) the seeking of the appointment of a receiver,
trustee, custodian or other similar official for the Company or for
all or any substantial part of its property; (y) the filing by the
Company of any voluntary petition in bankruptcy or any answer
seeking reorganization in a proceeding under any bankruptcy,
insolvency or similar laws or any answer admitting the material
obigations of a petition filed against the Company in any such
proceeding; or (z) if the Company becomes a debtor-in possession
under applicable bankruptcy laws, to approve any rejection of the
Drilling Contract by the Company."
4. Exhibit "E" of the Agreement is deleted, and Exhibit "E" attached
hereto is substituted therefor.
C. Full Force and Effect. Except as otherwise amended above, the
Agreement shall remain in full force and effect.
D. Further Assurances. Reading & Bates and Conoco agree to duly
execute and deliver all other documents and take such other action as may
be reasonably necessary and proper to effect the intention of the parties
in connection with this Amendment No. 4 and the transactions contemplated
thereby.
EXECUTED as of the __th day of August, 1998.
MEMBERS
CONOCO DEVELOPMENT COMPANY
By:__________________________
Its:_________________________
RBF DEEPWATER EXPLORATION INC.
By:__________________________
Tim W. Nagle
Its: Vice President and Treasurer
STATE OF TEXAS )
) SS
COUNTY OF HARRIS )
BEFORE me, , a Notary Public, on this day
personally appeared ,
, of Conoco Development Company, 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 August,
1998 in Houston, Texas.
My commission expires: _________________________
Notary Public
STATE OF TEXAS )
) SS
COUNTY OF HARRIS )
BEFORE me, Harriet L. Ingram, a Notary Public, on this day
personally appeared Tim W. Nagle, Vice President and Treasurer, of RBF
Deepwater Exploration 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 __th day of August, 1998
in Houston, Texas.
My commission expires: _____________________
Notary Public
EXHIBIT 10.188
AMENDMENT NO. 1 TO
LIMITED LIABILITY COMPANY AGREEMENT
Amendment No. 1 dated as of April 24, 1998 ("Amendment No. 1") to
the Limited Liability Company Agreement made and entered into on April
30, 1997 (the "Agreement") by and between Conoco Development II Inc.
(sometimes referred to as "Conoco") and RB Deepwater II Exploration Inc.
(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 to amend the
Agreement, effective as of the first date shown above, as follows:
A. Definitions. Unless otherwise defined in this Amendment,
capitalized terms shall have the respective meanings ascribed to them in
the Agreement.
B. Amendments to the Agreement. The Agreement is amended as
follows:
1. All references in the Agreement to "Reading & Bates
Corporation" shall be deleted, and "R&B Falcon Corporation"
substituted therefor.
2. The form of Indemnification Agreement, with respect to Reading
& Bates, shall be deleted, and in lieu thereof, the attached
form of Indemnification Agreement shall be substituted
therefor.
C. Full Force and Effect. Except as otherwise amended above, the
Agreement shall remain in full force and effect.
D. Further Assurances. Reading & Bates and Conoco agree to duly
execute and deliver all other documents and take such other action as may
be reasonably necessary and proper to effect the intention of the parties
in connection with this Amendment No. 1 and the transactions contemplated
thereby.
EXECUTED as of the 24th day of April, 1998.
MEMBERS
CONOCO DEVELOPMENT II INC.
By:_________________________
Its:________________________
RB DEEPWATER EXPLORATION II INC.
By:_________________________
Tim W. Nagle
Vice President and Treasurer
STATE OF TEXAS )
) SS
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 June, 1998
in Houston, Texas.
My commission expires: ________________________
Notary Public
STATE OF TEXAS )
) SS
COUNTY OF HARRIS )
BEFORE me, Harriet L. Ingram, a Notary Public, on this day
personally appeared Tim W. Nagle, Vice President and Treasurer, 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 24th day of June, 1998
in Houston, Texas.
My commission expires: _____________________
Notary Public
EXHIBIT 10.191
FIRST AMENDMENT TO
LOAN AGREEMENT
This FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment") dated
as of April 21, 1997 is among TRB HOLDING CORPORATION, a Delaware
corporation (the "Borrower"), READING & BATES (U.K.) LIMITED, a limited
liability company organized under the laws of the United Kingdom
("Reading & Bates (U.K.)"; the Borrower and Reading & Bates (U.K.),
individually, a "Company" and collectively, the "Companies"), and NISSHO
IWAI EUROPE PLC, an English corporation (the "Lender").
PRELIMINARY STATEMENT. The Companies and the Lender are
parties to a Loan Agreement dated as of December 14, 1996 (the "Loan
Agreement"; capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to them in the Loan Agreement)
and desire to amend the Loan Agreement as set forth in this Amendment.
SECTION 1. Amendment of the Loan Agreement.
(a) The following definitions contained in Section 1.01 of the
Loan Agreement are hereby amended in their entirety to read as follows:
"Assignment and Assumption Agreement" means collectively the
various Novation Agreements dated on or about the Drawdown Date among the
Borrower, the Partnership, TRB Subsidiary, Reading & Bates (U.K.) and/or
RBDC.
"Commitment Termination Date" means April 28, 1997, unless the
Commitment is sooner terminated pursuant to Section 2.02 hereof.
"Drawdown Date" means the date of the drawdown of the
Commitment which shall occur no later than April 28, 1997.
"Interest Period" means the period commencing on the date the
Advance is (a) made or (b) continued, and ending on the fifteenth (15th)
calendar day in the next month thereafter, provided that the first
interest period shall end on May 15, 1997. If such fifteenth (15th) day
is not a Business day, the Interest Period shall be extended to the next
succeeding Business Day.
"Maturity Date" means, subject to Section 8.01, January 15,
2002.
"Operating Days" means, for any period, the actual number of
operating days of the Vessel in such period during which the Vessel is
earning a daily rate of renumeration in excess of zero under a Charter
Agreement.
"Vessel Sales Agreement" means the Agreement for the Sale and
Purchase of OPV "Seillean" dated as of May 31, 1996 between Britoil
(Beta) Limited and RB Drilling Co., as novated under the Novation
Agreement dated August 30, 1996 among Britoil (Beta), RB Drilling Co. and
RBDC, and as further amended or modified in accordance with this
Agreement.
(b) Section 3.03(a) of the Loan Agreement is hereby amended in
its entirety to read as follows:
(a) The Borrower shall repay the Loan on each Repayment Date
in an amount equal to the greater of (i) Excess Cash Flow received
during the month prior to the month of each Repayment Date (the
"Monthly Period"); provided that the first Monthly Period shall be
from the Closing Date until April 30, 1997, and (ii) the Minimum
Payment for such Repayment Date. Each repayment shall be applied
first to accrued and unpaid interest and then to principal.
(c) Section 5.01(e) of the Loan Agreement is hereby amended in
its entirety to read as follows:
Insurance. The Borrower and Reading & Bates (U.K.) shall have
delivered to the Lender a certificate of an insurer reasonably
satisfactory to the Lender listing the coverages maintained by the
Borrower, which coverages shall be acceptable to the Lender and
stating that, except as otherwise provided in Schedule 6.11, the
Lender has been named loss payee with first priority to receive
payments in respect of any property insurance on the Vessel and,
except as otherwise provided in Schedule 6.11, each of the NIC
Parties as an additional insured thereunder.
(d) Section 7.14 of the Loan Agreement is hereby amended in
its entirety to read as follows:
Further Assurances. At any time or from time to time upon the
request of the Lender, each Company shall execute and deliver (or
cause to be executed and delivered) such further documents and do
such other acts and things as the Lender may reasonably request in
order to effect fully the transactions contemplated by of the
Transaction Documents. Without limiting the generality of the
foregoing, the Companies shall execute and deliver any documents,
including amendments to, or replacements of, the Assignment of
Charter, and take such other action (including, without limitation,
filing of the Ship Mortgage, the Assignment of Charter, and
appropriately completed and duly executed Uniform Commercial Code
financing statements and other documents in the State of Texas, the
Republic of Panama, the United Kingdom and other jurisdictions and
obtaining appropriate acknowledgments from any charterer under any
Charter Agreement) as may be necessary or as the Lender shall have
reasonably requested to perfect the Lender's first priority liens in
the Vessel and any earnings and other amounts payable under any
Charter Agreement or in connection therewith. The Companies agree
to take any action requested by the Lender to exercise any of their
respective rights or remedies, at law, by contract or otherwise, in
the event that any default or event of default by Britoil or any
other charterer shall occur under the Donan Charter Agreement, any
Charter Agreement or document executed in connection therewith
(collectively, the "Charter Documents"). The Companies shall
provide to the Lender copies of all Charter Documents promptly after
their receipt thereof. The Companies shall provide the Lender
notice of any default or event of default that occurs under any
Charter Document within three Business Days after any Company
obtains knowledge thereof. The Companies shall consult with the
Lender before taking any action to enforce any of its rights or
remedies in respect of any such default or event of default and
shall take or omit to take such actions only at the direction of the
Lender.
(e) A new Section 7.23 is hereby added to the Loan Agreement:
Section 7.23 Charter Agreement Payments. Immediately upon its
receipt of any payment under any Charter Agreement, each Company
shall deposit or cause to be deposited such payment in the Lockbox
in the same form received, with any necessary endorsement. Until
such payment has been so deposited, such Company shall segregate
such payment from its other funds and hold such payment in trust for
the Lender.
(f) Section 8.01(d) is hereby amended by deleting the
reference to "7.22" in such section and substituting "7.23" in lieu
thereof.
(g) Schedule 6.11 to the Loan Agreement is hereby deleted and
a new Schedule 6.11 is hereby added to the Loan Agreement in the form of
Schedule 6.11 attached hereto.
SECTION 2. Execution of Exhibits. Attached to the Loan
Agreement are certain exhibits. The parties hereto have agreed to
execute and deliver or accept certain agreements in the form of such
exhibits. The parties have executed and delivered or accepted the
execution and delivery of definitive documentation respecting Exhibits A
through F, I, K, M and O in a form other than as attached to the Loan
Agreement. The parties agree that any reference in the Loan Agreement or
the other Loan Documents to any of such agreement or certificate shall
mean and be a reference to the definitive document as executed or
accepted.
SECTION 3. Representations and Warranties True; No Default or
Event of Default. By its execution and delivery hereof each of the
Borrower and Reading & Bates (U.K.) represents and warrants that, as of
the date hereof and after giving effect to this Amendment, (a) the
representations and warranties contained the Loan Document to which such
Person is a party are true and correct on and as of the date hereof as
though made on and as of such date (except to the extent that such
representations and warranties relate solely and expressly to an earlier
date), and (b) no event has occurred and is continuing which constitutes
a Default or an Event of Default.
SECTION 4. Effectiveness, Reference to the Loan Agreement.
This Amendment shall become effective when each of the Lender, the
Borrower and Reading & Bates (U.K.) shall have executed and returned to
the other party a counterpart of this Amendment. Upon and after the
effectiveness of this Amendment, each reference in the Loan Agreement,
the Note or the Security Instruments to "the Loan Agreement," "this
Agreement," "hereunder," "herein" or words of like import shall mean and
be a reference to the Loan Agreement as amended hereby.
SECTION 5. Ratification of Loan Agreement. Except as
expressly affected by the provisions set forth herein, the Loan
Agreement, as amended hereby, shall remain in full force and effect and
is hereby ratified and confirmed by the Borrower and Reading & Bates
(U.K.). The execution, delivery, and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as an amendment
or waiver of any right, power or remedy of the Lender under the Loan
Agreement, the Note, the Security Instruments, or any other Loan
Document, nor constitute a waiver of any other provision of the Loan
Agreement.
SECTION 6. Further Assurances. Each of the Borrower and
Reading & Bates (U.K.) agrees to do, execute, acknowledge and deliver all
and every such further acts and instruments as the Lender may request for
the better assuring and confirming unto the Lender all and singular the
rights granted or intended to be granted hereby or hereunder.
SECTION 7. Costs and Expenses. Pursuant to Section 9.03 of
the Loan Agreement, each of the Borrower and Reading & Bates (U.K.)
agrees to pay on demand all costs and expenses of the Lender in
connection with the preparation, reproduction, execution and delivery of
this Amendment (including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Lender).
SECTION 8. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND
SHALL BE BINDING UPON THE COMPANIES AND THE LENDER AND THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS.
SECTION 9. Final Agreement. This Amendment may be executed in
one or more counterparts, each of which shall constitute an original but
when taken together shall constitute but one agreement. The written Loan
Agreement, as amended by this Amendment, and the other documents executed
in connection therewith, represent the final agreement between the
parties and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties. This
Agreement and such writings supersede all prior proposals, negotiations,
agreements, and understandings relating to such subject matter.
IN WITNESS WHEREOF, the parties hereto, by their officers duly
authorized have executed this Amendment as of the date first written
above.
TRB HOLDING CORPORATION,
as Borrower
By:________________________________
T.W. Nagle
Executive Vice President Finance
Administration
READING & BATES (U.K.) LIMITED
By:________________________________
T.W. Nagle
Authorized Agent
NISSHO IWAI EUROPE PLC, as Lender
By:________________________________
Kazutoshi Kimura
Attorney-in-Fact
EXHIBIT 10.193
FIRST AMENDMENT TO
FIRST NAVAL MORTGAGE
This First Amendment to First Naval Mortgage (this
"Amendment"), made as of April 21, 1997, by TRB HOLDING CORPORATION, a
Delaware corporation (the "Mortgagor"), whose address is
901 Threadneedle, Suite 200, Houston, Texas 77079, TRB SUBSIDIARY
CORPORATION, a Delaware corporation ("TRBS"), which has the same address
as the Mortgagor, to NISSHO IWAI EUROPE PLC, an English corporation,
whose address is Bastion House, 140 London Wall, London, EC2Y SJT, United
Kingdom (the "Lender");
WHEREAS:
1. Mortgagor has executed and delivered to the Lender the
First Naval Mortgage dated as of April 7, 1997 (the "Original Mortgage"),
recorded at Entry No. 6108, Volume 255 in the Registry Journal Book of
the Republic of Panama which covers the vessel known as "Seillean", Gross
Register Tons (GRT): 50,928.00; Net Register Tons: 15,278.00, Length:
236.47 meters, Width: 37 meters, Depth: 19.80 meters, Permanent
Navigation Patent No. 23272-96, Radio Call Letters: 3FPF6, and
Registration No. 25519-PEXT, and with the home port of Panama City, the
Republic of Panama (the "Vessel") to secure, among other obligations, the
obligations of Mortgagor, Reading & Bates (U.K.) Limited, an English
limited liability company (the "Charterer") and Lender under the Loan
Agreement (the "Loan Agreement") dated as of December 14, 1996. Unless
otherwise defined herein, all capitalized terms used herein have the
meanings assigned thereto in the Original Mortgage.
2. The Mortgagor has transferred a 10% undivided interest in
and to the Vessel to TRBS pursuant to a Bill of Sale dated April 21,
1997, which interest is transferred subject to the lien and mortgage of
the Original Mortgage and the Lender has consented to such transfer in
accordance with the terms hereof.
3. This Amendment is entered in to for the purpose of
evidencing TRBS' acknowledgment of such lien and mortgage and the
Lender's consent to such transfer.
4. TRBS will derive substantial benefit from obtaining its
interest in the Vessel.
NOW, THEREFORE, THIS MORTGAGE WITNESSETH:
That in consideration of the premises and of other good and
valuable consideration, the receipt of which is hereby acknowledged, to
secure and guarantee the payment on demand of the Obligations, TRBS
hereby executes and constitutes a first and absolute naval mortgage in
accordance with the provisions of Chapter V, Title IV of Book II of the
Code of Commerce, and the pertinent provisions of the Civil Code and
other legislation of the Republic of Panama, upon its 10% undivided
interest in and to the Vessel, including all masts, boilers, cables,
engines, machinery, bowsprits, sails, rigging, boats, anchors, chains,
tackle, apparel, furniture, fittings, tools, pumps, equipment and
supplies, and all other appurtenances and accessories and additions,
improvements and replacements now or hereafter belonging thereto, whether
or not removed therefrom, property of the shipowner, of Panamanian flag
and registry;
TO HAVE AND TO HOLD all and singular the above described Vessel
unto the Lender, its successors and assigns, forever;
PROVIDED, HOWEVER, that if Mortgagor and TRBS, their successors
or assigns shall perform, discharge and observe all and singular the
terms, the Obligations and the other covenants and agreements herein,
then this Mortgage shall cease, otherwise to remain in full force and
affect.
1. TRBS agrees that its interest in the Vessel and related
property is subject to the lien of the Original Mortgage, although TRBS
is not otherwise personally liable for the obligations under the Loan
Agreement.
2. TRBS covenants and agrees to the extent of its interest in
the Vessel, to perform all obligations of the Mortgagor under the
Original Mortgage in the same manner as if TRBS were an original party
thereto as follows:
3. All notices to the Mortgagor and the Lender hereto shall
be given at the addresses and in the manner set forth in Section 9.02 of
the Loan Agreement and all notices to TRBS shall be to the address set
forth in the preamble and sent in the manner set forth in Section 9.02 of
the Loan Agreement.
4. All covenants and agreements of Mortgagor herein contained
shall bind Mortgagor and TRBS, their successors and assigns, and shall
inure to the benefit of Lender and its successors and assigns. Following
any assignment hereof by Lender, any reference herein to "Lender" shall
be deemed to refer to the assignee.
5. If any provision of this Amendment be held to be invalid
under the provisions of any applicable law, such invalid provision shall
be deemed deleted from this Amendment but the validity of the Mortgage
shall not otherwise be affected.
6. Except as amended hereby the Original Mortgage shall be in
full force and effect.
7. TRBS, Mortgagor and Lender confer a Special Power of
Attorney with right of substitution upon Messrs. ICAZA, GONZALEZ-RUIZ &
ALEMAN, a law firm domiciled in the City of Panama, Republic of Panama to
take all necessary steps to record this instrument of mortgage in the
Public Registry Office of the Republic of Panama, and do whatsoever said
law firm may consider appropriate for the fulfillment of any and all laws
and regulations governing the ship mortgage in the Republic of Panama.
IN WITNESS WHEREOF, the undersigned have caused this Amendment
to be executed as of the day and year first above written.
TRB HOLDING CORPORATION
By:_____________________________
T. W. Nagle
Executive Vice President
Finance and Administration
NOTARIAL CERTIFICATE
I, the undersigned, NOTARY PUBLIC, duly authorized, admitted
and sworn, residing and practicing in Houston, Harris County, Texas,
U.S.A.,
DO HEREBY CERTIFY THAT:
I. T. W. Nagle, as Executive Vice President Finance and
Administration of the above mentioned corporation did sign and deliver
the above written mortgage in my presence and that the signature
appearing above is his authentic signature.
II. Sufficient proof has been produced to me that T. W. Nagle has
power to execute said mortgage on behalf of the corporation. I further
certify that the above signature of T. W. Nagle was set thereon in my
presence and is, therefore, authentic.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and
affixed my seal of office this _________ day of __________ in the year of
Our Lord One thousand nine hundred ninety-seven.
Notary Public
(Apostille)
TRB SUBSIDIARY CORPORATION
By:______________________________
T. W. Nagle
Vice President and Treasurer
NOTARIAL CERTIFICATE
I, the undersigned, NOTARY PUBLIC, duly authorized, admitted
and sworn, residing and practicing in Houston, Harris County, Texas,
U.S.A.,
DO HEREBY CERTIFY THAT:
I. T. W. Nagle, as Vice President and Treasurer of the above
mentioned corporation did sign and deliver the above written mortgage in
my presence and that the signature appearing above is his authentic
signature.
II. Sufficient proof has been produced to me that T. W. Nagle has
power to execute said mortgage on behalf of the corporation. I further
certify that the above signature of T. W. Nagle was set thereon in my
presence and is, therefore, authentic.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and
affixed my seal of office this _________ day of __________ in the year of
Our Lord One thousand nine hundred ninety-seven.
Notary Public
(Apostille)
ACCEPTANCE OF MORTGAGE
I, the undersigned, as Senior Vice President and Senior General
Manager of Houston office of NISSHO IWAI EUROPE, PLC., referred to as the
"Lender" in the above First Preferred Ship Mortgage on the m.v.
"Seillean", hereby ACCEPTS for all legal purposes said First Preferred
Ship Mortgage on behalf of the "Lender".
Date: NISSHO IWAI EUROPE PLC.
By:__________________________________
Kazutoshi Kimura
Senior Vice President and Senior
General Manager of Houston Office
NOTARIAL CERTIFICATE OF ACCEPTANCE OF MORTGAGE
I, the undersigned, NOTARY PUBLIC, duly authorized, admitted
and sworn, residing and practicing in Houston, Harris County, Texas,
U.S.A.,
DO HEREBY CERTIFY THAT:
I. Kazutoshi Kimura, as Senior Vice President and Senior General
Manager of Houston office of the above mentioned corporation did sign and
accept the above written mortgage in my presence and that the signature
appearing above is his authentic signature.
II. Sufficient proof has been produced to me that the said
Kazutoshi Kimura has power to execute said mortgage on behalf of the
corporation. I further certify that the above signature of Kazutoshi
Kimura was set thereon in my presence and is, therefore, authentic.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and
affixed my seal of office this _________ day of __________ in the year of
Our Lord One thousand nine hundred ninety-seven.
Notary Public
(Apostille)
EXHIBIT 10.194
SECOND AMENDMENT TO
FIRST NAVAL MORTGAGE
This Second Amendment to First Naval Mortgage (this
"Amendment"), made as of April 25, 1997, by RB FPSO L.P., a Cayman
Islands limited partnership (the "Partnership"), TRB HOLDING CORPORATION,
a Delaware corporation (the "Mortgagor"), whose address is
901 Threadneedle, Suite 200, Houston, Texas 77079, and TRB SUBSIDIARY
CORPORATION, a Delaware corporation ("TRBS") to NISSHO IWAI EUROPE PLC,
an English corporation, whose address is Bastion House, 140 London Wall,
London, EC2Y SJT, United Kingdom (the "Lender");
WHEREAS:
1. The Mortgagor has executed and delivered to the Lender the
First Naval Mortgage dated as of April 7, 1997 (the "Original Mortgage"),
recorded at Entry No. 6108, Volume 255 in the Registry Journal Book of
the Republic of Panama which covers the vessel known as "Seillean", Gross
Register Tons (GRT): 50,928.00; Net Register Tons: 15,278.00, Length:
236.47 meters, Width: 37 meters, Depth: 19.80 meters, Permanent
Navigation Patent No. 23272-96, Radio Call Letters: 3FPF6, and
Registration No. 25519-PEXT, and with the home port of Panama City, the
Republic of Panama (the "Vessel") to secure, among other obligations, the
obligations of TRBH, Reading & Bates (U.K.) Limited, an English limited
liability company (the "Charterer") and Lender under the Loan Agreement
(the "Loan Agreement") dated as of December 14, 1996. Unless otherwise
defined herein, all capitalized terms used herein have the meanings
assigned thereto in the Original Mortgage.
2. The Mortgagor transferred a 10% undivided interest in and
to the Vessel to TRBS pursuant to a Bill of Sale dated April 21, 1997,
which interest was transferred subject to the lien and mortgage of the
Original Mortgage and the Lender consented to such transfer in accordance
with the terms hereof. The First Amendment to First Naval Mortgage (the
"First Amendment") dated April 21, 1997 was entered in to for the purpose
of evidencing TRBS' acknowledgment of such lien and mortgage and the
Lender's consent to such transfer.
3. The Mortgagor and TRBS transferred all of their interest
in and to the Vessel to the Partnership pursuant to two Bill of Sale
dated April 25, 1997, which interest was transferred subject to the lien
and mortgage of the Original Mortgage and the Lender consented to such
transfer in accordance with the terms hereof.
4. This Amendment is entered in to for the purpose of
evidencing the Partnership's acknowledgment of such lien and mortgage and
the Lender's consent to such transfer.
5. The Partnership will derive substantial benefit from
obtaining its interest in the Vessel.
NOW, THEREFORE, THIS MORTGAGE WITNESSETH:
That in consideration of the premises and of other good and
valuable consideration, the receipt of which is hereby acknowledged, to
secure and guarantee the payment on demand of the Obligations, the
Partnership hereby executes and constitutes a first and absolute naval
mortgage in accordance with the provisions of Chapter V, Title IV of Book
II of the Code of Commerce, and the pertinent provisions of the Civil
Code and other legislation of the Republic of Panama, upon its undivided
interest in and to the Vessel, including all masts, boilers, cables,
engines, machinery, bowsprits, sails, rigging, boats, anchors, chains,
tackle, apparel, furniture, fittings, tools, pumps, equipment and
supplies, and all other appurtenances and accessories and additions,
improvements and replacements now or hereafter belonging thereto, whether
or not removed therefrom, property of the shipowner, of Panamanian flag
and registry;
TO HAVE AND TO HOLD all and singular the above described Vessel
unto the Lender, its successors and assigns, forever;
PROVIDED, HOWEVER, that if Mortgagor and the Partnership, their
successors or assigns shall perform, discharge and observe all and
singular the terms, the Obligations and the other covenants and
agreements herein, then this Mortgage shall cease, otherwise to remain in
full force and affect.
1. The Partnership agrees that its interest in the Vessel and
related property is subject to the lien of the Original Mortgage,
although the Partnership is not otherwise personally liable for the
obligations under the Loan Agreement.
2. The Partnership covenants and agrees to the extent of its
interest in the Vessel, to perform all obligations of the Mortgagor under
the Original Mortgage in the same manner as if the Partnership were an
original party thereto as follows:
3. All notices to the Mortgagor and the Lender hereto shall
be given at the addresses and in the manner set forth in Section 9.02 of
the Loan Agreement and all notices to the Partnership and TRBS shall be
addressed as follows and sent in the manner set forth in Section 9.02 of
the Loan Agreement.
If to the Partnership, at:
RB FPSO L.P.
901 Threadneedle, Suite 200
Houston, Texas 77079
If to TRBS, at:
TRB Subsidiary Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
4. All covenants and agreements of Mortgagor herein contained
shall bind Mortgagor and the Partnership, their successors and assigns,
and shall inure to the benefit of Lender and its successors and assigns.
Following any assignment hereof by Lender, any reference herein to
"Lender" shall be deemed to refer to the assignee.
5. If any provision of this Amendment be held to be invalid
under the provisions of any applicable law, such invalid provision shall
be deemed deleted from this Amendment but the validity of the Mortgage
shall not otherwise be affected.
6. Except as amended hereby and by the First Amendment the
Original Mortgage shall be in full force and effect.
7. The Partnership, Mortgagor and Lender confer a Special
Power of Attorney with right of substitution upon Messrs. ICAZA,
GONZALEZ-RUIZ & ALEMAN, a law firm domiciled in the City of Panama,
Republic of Panama to take all necessary steps to record this instrument
of mortgage in the Public Registry Office of the Republic of Panama, and
do whatsoever said law firm may consider appropriate for the fulfillment
of any and all laws and regulations governing the ship mortgage in the
Republic of Panama.
IN WITNESS WHEREOF, the undersigned have caused this Amendment
to be executed as of the day and year first above written.
TRB HOLDING CORPORATION
By:__________________________________
T. W. Nagle
Executive Vice President Finance
and Administration
NOTARIAL CERTIFICATE
I, the undersigned, NOTARY PUBLIC, duly authorized, admitted
and sworn, residing and practicing in Houston, Harris County, Texas,
U.S.A.,
DO HEREBY CERTIFY THAT:
I. T. W. Nagle, as Executive Vice President Finance and
Administration of the above mentioned corporation did sign and deliver
the above written mortgage in my presence and that the signature
appearing above is his authentic signature.
II Sufficient proof has been produced to me that T. W. Nagle has
power to execute said mortgage on behalf of the corporation. I further
certify that the above signature of T. W. Nagle was set thereon in my
presence and is, therefore, authentic.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and
affixed my seal of office this _________ day of __________ in the year of
Our Lord One thousand nine hundred ninety-seven.
___________________________
Notary Public
TRB SUBSIDIARY CORPORATION
By:_____________________________
T. W. Nagle
Vice President and Treasurer
NOTARIAL CERTIFICATE
I, the undersigned, NOTARY PUBLIC, duly authorized, admitted
and sworn, residing and practicing in Houston, Harris County, Texas,
U.S.A.,
DO HEREBY CERTIFY THAT:
I. T. W. Nagle, as Vice President and Treasurer of the above
mentioned corporation did sign and deliver the above written mortgage in
my presence and that the signature appearing above is his authentic
signature.
II Sufficient proof has been produced to me that T. W. Nagle has
power to execute said mortgage on behalf of the corporation. I further
certify that the above signature of T. W. Nagle was set thereon in my
presence and is, therefore, authentic.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and
affixed my seal of office this _________ day of __________ in the year of
Our Lord One thousand nine hundred ninety-seven.
________________________
Notary Public
RB FPSO L.P.
By: TRB Holding Corporation, its general
partner
By:__________________________________
T. W. Nagle
Executive Vice President Finance
and Administration
NOTARIAL CERTIFICATE
I, the undersigned, NOTARY PUBLIC, duly authorized, admitted
and sworn, residing and practicing in Houston, Harris County, Texas,
U.S.A.,
DO HEREBY CERTIFY THAT:
I. T. W. Nagle, as Executive Vice President Finance and
Administration of TRB Holding Corporation, general partner of RB FPSO
L.P. did sign and deliver the above written mortgage in my presence and
that the signature appearing above is his authentic signature.
II. Sufficient proof has been produced to me that the said
T. W. Nagle has power to execute said mortgage on behalf of the
corporation as general partner of the partnership. I further certify
that the above signature of T. W. Nagle was set thereon in my presence
and is, therefore, authentic.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and
affixed my seal of office this _________ day of __________ in the year of
Our Lord One thousand nine hundred ninety-seven.
__________________________
Notary Public
ACCEPTANCE OF MORTGAGE
I, the undersigned, as Senior Vice President and Senior General
Manager of Houston office of NISSHO IWAI EUROPE, PLC., referred to as the
"Lender" in the above Second Amendment to First Naval Mortgage on the
m.v. "Seillean", hereby ACCEPTS for all legal purposes said Second
Amendment to First Naval Mortgage on behalf of the "Lender".
Date: NISSHO IWAI EUROPE PLC.
By:_________________________________
Kazutoshi Kimura
Senior Vice President and Senior
General Manager of Houston office
NOTARIAL CERTIFICATE OF ACCEPTANCE OF MORTGAGE
I, the undersigned, NOTARY PUBLIC, duly authorized, admitted
and sworn, residing and practicing in Houston, Harris County, Texas,
U.S.A.,
DO HEREBY CERTIFY THAT:
I. Kazutoshi Kimura, as Senior Vice President and Senior General
Manager of Houston office of the above mentioned corporation did sign and
accept the above written mortgage in my presence and that the signature
appearing above is his authentic signature.
II. Sufficient proof has been produced to me that the said
Kazutoshi Kimura has power to execute said mortgage on behalf of the
corporation. I further certify that the above signature of Kazutoshi
Kimura was set thereon in my presence and is, therefore, authentic.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and
affixed my seal of office this _________ day of __________ in the year of
Our Lord One thousand nine hundred ninety-seven.
_________________________
Notary Public
EXHIBIT 10.198
==========================================================================
CONTRACT
FOR
CONSTRUCTION AND SALE
OF
VESSEL
(HULL NO. HRBS8-D)
BETWEEN
R&B FALCON DRILLING CO.
AND
HYUNDAI HEAVY INDUSTRIES CO., LTD.
AND
HYUNDAI CORPORATION
===========================================================================
INDEX
PAGE
PREAMBLE P-1
ARTICLE I - DESCRIPTION AND CLASS
1. Description: I-1
2. Dimensions and Characteristics: I-1
3. The Classification, Rules and Regulations: I-2
4. Registration: I-3
5. Drawings and Document Approval I-3
ARTICLE II - CONTRACT PRICE, TERMS OF PAYMENT & OPTIONS
1. Contract Price: II-5
2. Adjustment of Contract Price: II-5
3. Currency: II-5
4. Terms of Payment: II-5
5. Method of Payment: II-6
6. Notice of Payment before Delivery: II-7
7. Expenses: II-7
8. Prepayment: II-7
9. Options II-7
10. Supply of Marine Equipment II-8
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
1. Delivery: III-1
2. Displacement: III-2
3. Weight Control III-3
4. Effect of Rescission: III-3
ARTICLE IV - APPROVAL OF PLANS
AND DRAWINGS AND INSPECTION DURING CONSTRUCTION
1. Approval of Plans and Drawings: IV-1
2. Appointment of OWNER's Supervisor IV-1
3. Inspection by the Supervisor: IV-1
4. Facilities: IV-3
5. Liability of BUILDER and OWNER: IV-3
6. Responsibility of OWNER: IV-4
7. Delivery and Construction Schedule: IV-5
8. Responsibility of BUILDER: IV-5
ARTICLE V MODIFICATIONS, CHANGES AND EXTRAS
1. How Effected: V-1
2. Changes in Rules of Classification Society,
Regulations, etc.: V-1
3. Substitution of Materials: V-2
ARTICLE VI - TRIALS AND ACCEPTANCE
1. Notice: VI-1
2. Weather Condition: VI-1
3. How Conducted: VI-2
4. Method of Acceptance or Rejection: VI-2
5. Effect of Acceptance: VI-3
6. Disposition of Surplus Consumable Stores VI-3
ARTICLE VII - DELIVERY
1. Time and Place: VII-1
2. When and How Effected: VII-1
3. Documents to be delivered to OWNER: VII-1
4. Tender of VESSEL: VII-2
5. Title and Risk: VII-3
6. Removal of VESSEL: VII-3
ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE
MAJEURE)
1. Causes of Delay (Force Majeure): VIII-1
2. Notice of Delay: VIII-1
3. Definition of Permissible Delay: VIII-2
4. Right to Rescind for Excessive Delay: VIII-2
ARTICLE IX - WARRANTY OF QUALITY
1. Guarantee: IX-1
2. Notice of Defects: IX-1
3. Remedy of Defects: IX-2
4. Extent of BUILDER's Responsibility: IX-3
5. Guarantee Engineer: IX-4
ARTICLE X - RESCISSION BY OWNER
1. Notice: X-1
2. Refundment by BUILDER: X-1
3. Discharge of Obligations: X-1
ARTICLE XI - OWNER'S DEFAULT
1. Definition of Default: XI-1
2. Effect of Default on or
before Delivery of VESSEL: XI-1
3. Disposal of VESSEL: XI-2
4. Dispute: XI-2
ARTICLE XII - ARBITRATION
1. Decision by the Classification Society: XII-1
2. Proceedings of Arbitration: XII-1
3. Notice of Award: XII-2
4. Expenses: XII-2
5. Entry in Court: XII-2
6. Alteration of Delivery Date: XII-2
ARTICLE XIII - SUCCESSOR AND ASSIGNS
ARTICLE XIV - TAXES AND DUTIES
1. Taxes and Duties Incurred in Korea: XIV-1
2. Taxes and Duties Incurred Outside Korea XIV-1
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
1. Patents: XV-1
2. General Plans, Specifications
and Working Drawings: XV-1
ARTICLE XVI - OWNER'S SUPPLIES
1. Responsibility of OWNER: XVI-1
2. Responsibility of BUILDER: XVI-3
3. Title: XVI-4
4. OWNERS's Supplies Refundment: XVI-4
ARTICLE XVII - INSURANCE
1. Extent of Insurance Coverage: XVII-1
2. Application of the Recovered Amounts: XVII-3
3. Termination of BUILDER's
Obligation to Insure: XVII-3
ARTICLE XVIII - NOTICE
1. Address: XVIII-1
2. Language: XVIII-1
3. Effective Date of Notice: XVIII-1
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT
ARTICLE XX - INTERPRETATION
1. Laws Applicable: XX-1
2. Discrepancies: XX-1
3. Entire Agreement: XX-1
4. Amendments and Supplements: XX-1
ARTICLE XXI - CONFIDENTIALITY
END OF CONTRACT E-1
EXHIBIT "A" LETTER OF REFUNDMENT GUARANTEE EA-1
THIS CONTRACT, made and entered into on this 16th day of December,
1998 by and between R&B FALCON DRILLING CO., a corporation existing under
the laws of Oklahoma, 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, Dong-Ku, 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 Delivery and Construction
Schedule attached hereto as Exhibit 2 and (ii) the BUILDER's Unit Rates
attached hereto as Exhibit 3 (said Exhibits 1 through 3 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. HRBS8-D, 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 120.7 m 396.0 ft.
Breadth 78.0 m 255.9 ft.
Upper Hull
Length 81.5 m 267.4 ft.
Breadth 61.0 m 200.1 ft.
Depth 8.5 m 27.9 ft.
MainDeck
Length 84.1 m 275.9 ft.
Breadth 61.0 m 200.1 ft.
Pontoons (two each)
Length 114.0 m 374.0 ft.
Breadth (amidship) 13.4 m 44.0 ft.
Breadth (ends) 16.5 m 54.1 ft.
Depth 9.1 m 29.9 ft.
Corner Radius 3.0 m 9.8 ft.
Transverse Distance (c. to c.) 61.50 m 201.8 ft.
Columns (four each)
Horizontal Section (LxB)
17.0 m X 16.5 m (@WL) 55.8 ft. X 54.1 ft.
14.0 m X 16.5 m (bottom)45.9 ft. X 54.1 ft.
Corner Radius 3.0 m 9.8.ft.
Vertical Height 23.9 m 78.4 ft.
Longitudinal Distance
(c. to c.) 60.0 m 196.9 ft.
Transverse Distance
(c. to c.) at Top 46.0 m 150.9 ft.
at Bottom 61.5 m 201.8 ft.
Transverse Braces (two each)
Length 45.0 m 147.6 ft.
Breadth 6.0 m 19.7 ft.
Depth 3.0 m 9.8 ft.
Corner Radius 0.6 m 2.0 ft.
Longitudinal Distance
(c. to c.) 68.0 m 223.1 ft.
Centerline Elevation 1.5 m 4.9 ft.
Diagonal Braces (four each)
Diameter 3.0 m 9.8 ft.
Centerline Elevation 1.5 m 4.9 ft.
Elevations
Drill Floor 46.0 m 150.9 ft.
Main Deck (at sides) 41.5 m 136.2 ft.
Second Deck 38.0 m 124.7 ft.
Third Deck (Inner bottom Top) 34.5 m 113.2 ft.
Upper Hull Bottom 33.0 m 108.3 ft.
Lower Hull Top 9.1 m 29.9 ft.
Draft
Operating Condition (G.O.M.) 23.0 m 75.5 ft.
Severe Storm Condition 16.5 m 54.1 ft.
Transit Condition 8.8 m 28.9 ft.
Operating Condition (W.O.S.) 9.1 m 29.9 ft.
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. The design criteria, deckload criteria and
variable loads will be as in the Specifications.
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 "Column Stabilized Drilling Unit", +CDS,
+AMS, (P) , PAS, DPS - 3
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.
5. Drawings and Document Approval
The BUILDER shall be responsible to prepare detailed working
drawings and submit these to ABS and the OWNER for approval in
accordance with the Specifications. The BUILDER shall provide to the
OWNER a copy of all correspondence to ABS concurrent with its sending
to ABS. Furthermore, the BUILDER shall request ABS to copy the OWNER
on all its correspondence to the BUILDER and vendors relative to this
project, including relevant output from ABS' engineering management
system.
(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-Nine Million Five Hundred SeventySeven (US$139,577,000)
(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 in regards to the Contract
Price 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 Five Hundred Eighty-Eight
Thousand Eight Hundred(US$13,588,800) shall be due and
payable by January 31, 1999, 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 Five Hundred Eighty-Eight
Thousand Eight Hundred(US$13,588,800) shall be due and
payable thirteen (13) months after the first
installment payment.
(c) Third Installment:
The Third Installment amounting to United States
Dollars Thirteen Million Five Hundred Eighty-Eight
Thousand Eight Hundred(US$13,588,800) shall be due and
payable eighteen (18) months after the first
installment payment.
(d) Fourth Installment:
The Fourth Installment amounting to United States
Dollars Ninety-Eight Million Eight Hundred and Ten
Thousand Six Hundred(US$98,810,600) 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 January 31, 1999, 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 and Third Installments:
Upon the due date of the second and third installments,
in accordance with Article II, 4 (b), (c) and (d) 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) Fourth 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
fourth 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 one
(1) additional deepwater semisubmersible drilling units (the "OPTION
VESSEL(S)") of the same size and Specifications as the VESSEL. In the
event OWNER exercises this option, the purchase price, payment terms
and delivery period of the OPTION VESSEL shall be the same as for the
Vessel. The notice period for exercising such option shall be within
eight months of the date of this contract. All 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 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 but
OWNER shall be entitled to request same pursuant to the shipbuilding
contract for the OPTION VESSEL with appropriate credits for design,
engineering and other non-recurring costs and any other price and
delivery date adjustment or consequence.
10. Supply of Marine Equipment
OWNER has the option to pay BUILDER United States Dollars One Million
Eight Hundred Thousand (US$1,800,000) as a fixed lump sum for
procurement engineering, purchasing and the associated costs for the
supply of six generators, medium voltage switchgear and IACS, with
vendors, invoices to be passed through to the Buyer for direct
payment.
OWNER also has the option to purchase individually, medium voltage
switchgear and ICAS, in which case the BUILDER has proposed that its
fee be 11.5% of vendors' net prices and/or engine generator sets in
which case, Builder has proposed its fee for purchase of such engine
generator sets be 4.78% of vendors' net prices.
(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) 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 40,700 metric tons
at 16.5 meters draft and 47,509 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 furnished 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 as further specified in the Specifications.. The
OWNER shall pay for any extra services 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 2 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) BUILDER agrees that any material and/or supplies not fabricated by the
BUILDER will originate from a vendor so specified in the
Specifications. 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 (two
sent directly to OWNER's Houston office) 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. The BUILDER will respond within fourteen (14) days
of OWNER's request for quotation (unless otherwise agreed) of the
aforementioned change. Likewise, the OWNER shall notify its approval
or rejection or give its comments to BUILDER within fourteen (14) days
of receipt of BUILDER's quotation. In the event of an adverse effect,
the BUILDER and the OWNER shall first approve a Shipyard Change Order,
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 Shipyard Change Order 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 only by a Shipyard Change Order signed by the authorized
representatives of the parties hereto. Such Shipyard Change Orders
exchanged by the parties hereto pursuant to the foregoing shall
constitute an amendment, and such Shipyard Change Orders 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.
4. Pricing Mechanism for Change Orders
The parties agree that the following principles for the pricing of
change orders shall apply:
i) mark-up will be 12.5% of net price of materials;
ii) all other costs at unit rates;
iii) for credits, 100% of net price for deletion of materials will be
used; and
iv) no additional engineering costs for items already added pursuant
to the construction of the RBS-6.
(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, 2000(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 DATE11.
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 fourth 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 in the Gulf of Mexico, if any, 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 equa 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 "All 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 or third 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 fourth 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.
XI-1
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 R&B Falcon 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 RBS8-D design without seeking the agreement of
OWNER and IHI, nor will BUILDER disclose RBS8-D 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 "RBS8-D" Type
semisubmersible Drilling Unit.
(b) In order to protect the rights of the LICENSORS as joint owners
of RBS8-D design, LICENSORS agree to grant BUILDER a
non-exclusive license to construct and to sell RBS8-D 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 RBS8-D 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. HRBS8D) 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 precommissioning 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 Ninety-Two Million United States Dollars (US$92,000,000)
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 Ninety-Two Million United States Dollars
(US$92,000,000) 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:
R&B Falcon Drilling Co.
901 Threadneedle
Houston, Texas 77079-2902
Attn: President
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.
(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:
R&B FALCON DRILLING 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
By: Title: Senior Vice President
EXHIBIT "A"
LETTER OF REFUNDMENT GUARANTEE NO.
Gentlemen:
We hereby open our irrevocable letter of guarantee No.____ in favor
of R&B Falcon Drilling Co.(hereinafter called the "OWNER") for account of
Hyundai Heavy Industries Co., Ltd. and Hyundai Corporation, as follows in
consideration of the shipbuilding contract dated December 16,
1998(hereinafter called the "Contract") made by and among the OWNER and
Hyundai Heavy Industries Co., Ltd. and Hyundai Corporation (hereinafter
collectively 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 USD 13,588,800
(Say Thirteen Million Five Hundred Eighty-Eight Thousand Eight Hundred
only) together with interest thereon at the rate of eight per cent (8%)
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 two (2) times, upon BUILDER's receipt of the respective
installment: each time by the amount of installment of USD 13,588,800 (Say
Thirteen Million Five Hundred Eighty-Eight Thousand Eight Hundred only),
plus interest thereon as provided in the Contract, but in any eventuality
the amount of this guarantee shall not exceed the total sum of USD
40,766,400 (Say United States Dollars Forty Million Seven Hundred Sixty-Six
Thousand Four Hundred 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 United
States Dollars.
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 II
RBS -8D MASTER SCHEDULE (L-1)
EXHIBIT III
4.2 Schedules of Rates
NOTE - HHI includes Schedules of Rates which shall be used to cost
additional work that may arise outside the scope of work covered in
the Lump Sum Contract price (i.e., work that will be addressed by
Change Orders). Them schedules of rates shall also be used as
factored at 85% to calculate credits to the Company for deleted or
reduced work scope, when such credits cannot be directly determined
from the Lump Sum Price.
1) Schedule of Manhour Rates for Fabrication/Construction
DESCRIPTION HOURLY RATE (US$)
STANDARD OVERTIME
Project Management / Engineering
Manager 75 94
Lead engineer 68 85
Engineer 62 78
Administrator 62 78
Drafting 45 56
Secretary 30 38
Labor(See Note below)
Structural Welder / Fitter 35 53
Pipe Welder / Fitter 35 53
Mechanics 35 53
Electrican/Instruim.Technician 35 53
Blaster / Painter 35 53
Scaffolder / Rigger 32 48
Inspection / Testing /
NDE Technician 40 60
NOTE The labor rates include all related management, supervision,
overhead, construction consumables, overhead profit etc.
2) Unit rates for Carbon steel Pipe Work(fabricated, erected and installed)
Items Size Unit Unit rates(US)
Install
Pipe & Fitting 1.5" & below Ton 20,160
2" to 3" Ton 15,360
4" to 6" Ton 8,640
8" to 12" Ton 4,800
14" to 18" Ton 4,320
20" & above Ton 4,080
Supports All Ton 6,240
3) Unit rates for Structural Steel (fabrication/erection and installation)
Items Description Unit Unit rates(U S)
Install
Steel Work I)Upper Hull Ton 2,640
2)Column Ton 2,928
3)Brace Ton 2,064
4)Lower Hull Ton 2,208
5)Outfitting Ton 2,544
4) Unit Rates for Plant, Equipment and Instruments (installation labor)
Items Description Unit Unit rates(US)
Mat'l Install
Installation
Lobor M-H 48
5)Unit rates for Insulation (Material: Mineral wool)
Description Unit Unit rates (US)
Mat'l Install
1)Vertical, 100 mm Thickness * 14 48
2)Overhead, 150 mm Thickness * 20 48
3)StructuralMember, 50 mm T. * 9 38
4)Under Exposed Deck, 300 mm T. * 41 82
*meter squared
6) Unit rates for Catholic Protection (Anode)
Items Description Unit Unit rates (US)
Mat'l Install
Anode Ton 3,335 960
7) Unit Rates for Blasting and Painting
Items Area Unit Unit rates (US)
Mat'l Install
Blasting/Paint All * 6 26
Paint
*meter squared
8) Unit rates for Heating, Ventilating and Air Conditioning Duct
Description Unit Unit rates (US)
Mat'l Install
1)Rectangular Duct (Hot Dipped Gal )
-N.E. 2000 mm Girth Meter 293 144
-Over 2000mm N.E 4000mm Girth Meter 437 216
-Over 4000mm N.E 6000mm Girth Meter 591 432
-Over 6000mm Girth Meter 1,018 576
2)Circular or Flatoval Duct
-N.E. 100mm Dia Meter 9 17
-Over 100mm N.E. 200mm Dia Meter 16 31
-Over 200mm n.e. 300mm Dia Meter 26 46
-Over 300mm N.E. 400mm Dia Meter 37 62
-Over 400mm Dia Meter 52 72
9) Unit rates for Joiner Work
Description Unit Unit rates (US)
Mat'l Install
1) Intemal B-Class Bulkhead/Liner Panels
-25mm Thk. PVC Film finished * 44 48
-50mm Thk. PVC Film finished * 60 48
-25mm Thk. SUS finished * 78 48
-50mm Thk. SUS finished * 94 48
2) Ceilings
-PVC Film finished * 26 120
-US finished * 52 120
*meter squared
10) Unit rates for Electrical Cabling including Cable Tray
b) Reprographic Services
Use by the Owner of the Equipment Installation Yard's reprographic
department to provide additional copies of documents and drawings.
Reproducible Dyeline Photocopy
per Copy per Copy per Copy
-------- -------- --------
Size A0 USD 4 USD 8 USD 16
Size Al USD 2 USD 4 USD 8
Size A2 USD 1.5 USD 3 USD 6
Size A3 USD 1 USD 2 USD 4
Size A4 USD 0.7 USD 1.5 USD 3
c) Secretaries
Person/month - USD 1,500
11) Rate of Housing Facilities for Company Personnel
EXHIBIT 10.200
===========================================================================
CONTRACT
FOR
CONSTRUCTION AND SALE
OF
A 98,000 METRIC TONS DISPLACEMENT
DRILLSHIP
(HULL NO. 1300)
BETWEEN
R&B FALCON DRILLING CO.
AND
SAMSUNG HEAVY INDUSTRIES CO., LTD.
===========================================================================
INDEX
PAGE
PREAMBLE P-1
ARTICLE I - DESCRIPTION AND CLASS . . . . . . . . . . . . . . I-1
1. Description: . . . . . . . . . . . . . . . . . . . . I-1
2. Dimensions and Characteristics: . . . . . . . . . . I-1
3. The Classification, Rules and Regulations: . . . . . I-1
4. Registration: . . . . . . . . . . . . . . . . . . . I-2
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT . . . . . . II-3
1. Contract Price: . . . . . . . . . . . . . . . . . . II-3
2. Adjustment of Contract Price: . . . . . . . . . . . II-3
3. Currency: . . . . . . . . . . . . . . . . . . . . . II-3
4. Terms of Payment: . . . . . . . . . . . . . . . . . II-3
5. Method of Payment: . . . . . . . . . . . . . . . . II-4
6. Notice of Payment before Delivery: . . . . . . . . II-4
7. Expenses: . . . . . . . . . . . . . . . . . . . . . II-4
8. Prepayment: . . . . . . . . . . . . . . . . . . . . II-5
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE . . . . . . . . III-1
1. Delivery: . . . . . . . . . . . . . . . . . . . . III-1
2. Capacity of Extended Well Test Tanks: . . . . . . III-2
3. Displacement: . . . . . . . . . . . . . . . . . . III-2
4. Effect of Rescission: . . . . . . . . . . . . . . III-3
ARTICLE IV - APPROVAL OF PLANS
AND DRAWINGS AND INSPECTION DURING CONSTRUCTION . . . IV-1
1. Approval of Plans and Drawings: . . . . . . . . . IV-1
2. Appointment of BUYER's Supervisor: . . . . . . . IV-1
3. Inspection by the Supervisor: . . . . . . . . . . IV-1
4. Facilities: . . . . . . . . . . . . . . . . . . . IV-3
5. Liability of BUILDER: . . . . . . . . . . . . . . IV-3
6. Responsibility of BUYER: . . . . . . . . . . . . IV-4
7. Delivery and Construction Schedule: . . . . . . . IV-5
8. Responsibility of BUILDER: . . . . . . . . . . . IV-5
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS . . . . . . . . V-1
1. How Effected: . . . . . . . . . . . . . . . . . . . V-1
2. Changes in Rules of Classification Society , Regulations,
etc.: . . . . . . . . . . . . . . . . . . . . . . . V-1
3. Substitution of Materials: . . . . . . . . . . . . V-2
ARTICLE VI - TRIALS AND ACCEPTANCE . . . . . . . . . . . . VI-1
1. Notice: . . . . . . . . . . . . . . . . . . . . . . VI-1
2. Weather Condition: . . . . . . . . . . . . . . . VI-1
3. How Conducted: . . . . . . . . . . . . . . . . . . VI-2
4. Method of Acceptance or Rejection: . . . . . . . . VI-2
5. Effect of Acceptance: . . . . . . . . . . . . . VI-3
6. Disposition of Surplus Consumable Stores: . . . . . VI-3
ARTICLE VII - DELIVERY . . . . . . . . . . . . . . . . . . VII-1
1. Time and Place: . . . . . . . . . . . . . . . . . VII-1
2. When and How Effected: . . . . . . . . . . . . . VII-1
3. Documents to be delivered to BUYER: . . . . . . . VII-1
4. Postponement of Delivery: . . . . . . . . . . . . VII-2
5. Title and Risk: . . . . . . . . . . . . . . . . . VII-3
6. Removal of DRILLSHIP: . . . . . . . . . . . . . . VII-3
ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY
MAJEURE) . . . . . . . . . . . . . . . . . . . . . . VIII-1
1. Causes of Delay (Force Majeure): . . . . . . . . VIII-1
2. Notice of Delay: . . . . . . . . . . . . . . . . VIII-1
3. Definition of Permissible Delay: . . . . . . . . VIII-2
4. Right to Rescind for Excessive Delay: . . . . . VIII-2
ARTICLE IX - WARRANTY OF QUALITY . . . . . . . . . . . . . IX-1
1. Guarantee: . . . . . . . . . . . . . . . . . . . IX-1
2. Notice of Defects: . . . . . . . . . . . . . . . IX-1
3. Remedy of Defects: . . . . . . . . . . . . . . . IX-2
4. Extent of BUILDER's Responsibility: . . . . . . IX-3
5. Guarantee Engineer: . . . . . . . . . . . . . . IX-4
ARTICLE X - RESCISSION BY BUYER . . . . . . . . . . . . . X-1
1. Notice: . . . . . . . . . . . . . . . . . . . . X-1
2. Refundment by BUILDER: . . .. . . . . . . . . . X-1
3. Discharge of obligations: . . . . . . . . . . . X-2
ARTICLE XI - BUYER'S DEFAULT . . . . . . . . . . . . . . . XI-1
1. Definition of Default: . . . . . . . . . . . . . XI-1
2. Effect of Default on or
before Delivery of DRILLSHIP: . . . . . . . . . XI-1
3. Disposal of DRILLSHIP- . . . . . . . . . . . . . XI-2
4. Dispute: . . . . . . . . . . . . . . . . . . . . XI-2
ARTICLE XII - ARBITRATION . . . . . . . . . . . . . . . . XII-1
1. Decision by the Classification Society: . . . . XII-1
2. Proceedings of Arbitration: . . . . . . . . . . XII-1
3. Notice of Award: . . . . . . . . . . . . . . . . XII-2
4. Expenses: . . . . . . . . . . . . . . . . . . . XII-2
S. Entry in Court: . . . . . . . . . . . . . . . . XII-2
6. Alteration of Delivery Date: . . . . . . . . . . XII-2
ARTICLE XIII - SUCCESSOR AND ASSIGNS . . . . . . . . . . XIII-1
ARTICLE XIV - TAXES AND DUTIES . . . . . . . . . . . . . . XIV-1
1. Taxes and Duties Incurred in Korea: . . . . . . . XIV-1
2. Taxes and Duties Incurred Outside Korea: . . . . XIV-1
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC . . . . . XV-1
1. Patents: . . . . . . . . . . . . . . . . . . . . . XV-1
2. General Plans, Specifications and Working Drawings: XV-1
ARTICLE XVI - BUYER'S SUPPLIES . . . . . . . . . . . . . . XVI-1
1. Responsibility of BUYER: . . . . . . . . . . . . XVI-1
2. Responsibility of BUILDER: . . . . . . . . . . . XVI-3
3. Title: . . . . . . . . . . . . . . . . . . . . . XVI-4
4. BUYER's Supplies Refundment: . . . . . . . . . . XVI-4
ARTICLE XVII - INSURANCE . . . . . . . . . . . . . . . . XVII-1
1. Extent of Insurance Coverage: . . . . . . . . . XVII-1
2. Application of the Recovered Amounts: . . . . . XVII-1
3. Termination of BUILDER's Obligation to Insure: XVII-2
ARTICLE XVIII - NOTICE . . . . . . . . . . . . . . . . . XVIII-1
1. Address: . . . . . . . . . . . . . . . . . . . XVIII-1
2. Language: . . . . . . . . . . . . . . . . . . . XVIII-1
3. Effective Date of Notice: . . . . . . . . . . . XVIII-1
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT . . . . . . . . . XIX-1
ARTICLE XX - INTERPRETATION . . . . . . . . . . . . . . . . XX-1
1. Laws Applicable: . . . . . . . . . . . . . . . . XX-1
2. Discrepancies: . . . . . . . . . . . . . . . . . XX-1
3. Entire Agreement: . . . . . . . . . . . . . . . . XX-1
4. Amendments and Supplements: . . . . . . . . . . . XX-1
ARTICLE XXI - CONFIDENTIALITY . . . . . . . . . . . . . . . XXI-1
EXHIBIT "A" - LETTER OF REFUNDMENT GUARANTEE . . . . . . E"A"-1
THIS CONTRACT, made and entered into on this 14th day of October,
1998 by and between R&B FALCON 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 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 DaechiDong, Kangnam-Ku, Seoul, Korea (hereinafter 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, Volume I of
this Contract (hereinafter referred to as the "VESSEL") and topside part as
described in the specification attached hereto as Exhibit 1, Volume II of
this Contract (hereinafter referred to as 11TOPSIDE11) (the VESSEL and
TOPSIDE being hereinafter collectively referred to as the 11DRILLSHIP11)
and in accordance with (i) the BUYER's Supplies List attached hereto as
Exhiit 2, (ii) the BUILDER's Approved Vendor List attached hereto as
Exhibit 3, and (iii) 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. 1300, 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. 227.6 meters
Length, between perpendiculars abt. 219.4 meters
Breadth, molded abt. 42.0 meters
Depth, molded abt. 19.0 meters
Scantling draft, moulded abt. 13.0 meters
(structural design only)
Operating draft, moulded abt. 12.0 meters
Transit draft, moulded abt. 8.5 meters
Thruster Motor: 5.5 MW X 6 ea.
Displacement, guaranteed: 98,000 metric tons at the
operating draft, moulded,
of 12.0 meters.
Speed: The trial speed will not be less than 12. 5 knots on the
transit draught of 8.5 meters and at propulsion shaft power
of 28,695 KW
Cargo tank capacity, guaranteed:
The total capacity of the Extended Well Test ("EWT11) 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, +CDS, OMBO (except field of vision).
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 offshore the United
States Gulf of Mexico/the Outer Continental Shelf of the United
States, Brazil and West Africa. 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.
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 Fourteen Million Eight Hundred
and Sixty Thousand United States Dollars (US$ 114,860,000)
(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 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 Twenty-One Million Nine
Hundred and Fifty Thousand United States Dollars (US$ 21,950,000)
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.
(b) Second Installment:
The Second Installment amounting to Ninety-Two Million Nine
Hundred and Ten Thousand United States Dollars (US$ 92,910,000)
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 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
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 favor of Samsung Heavy Industries Co., Ltd., provided
that the Letter of Refundment Guarantee required under Article X
has been received by the BUYER.
(b) Second 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 second installment to the account at
the BUILDER's BANK in favor 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:
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 the second 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. 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.
3. Displacement:
(a) The guaranteed displacement of the DRILLSHIP is 98,000 metric
tons at 12.0 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).
4. 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:
The BUILDER shall obtain the approval of the BUYER for the plans
and drawings in accordance with the Specification.
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 favor 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 favor 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 the BUYER requests the 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 saf ety, etc. Upon request by
the BUYER, the saf ety 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.1255, 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.
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 IS09001 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 with
one (1) set and the (1) one set of negatives delivered to the project
manager in Koje and two sets of photographs delivered to project
sponsor in Houston, Texas.
(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 July 31, 2000 (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 or later 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 permits and clearances by Korean Government to
enable the DRILLSHIP to sail from 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 BUYER on or before the
delivery of the DRILLSHIP.
4. Postponement of Delivery:
Notwithstanding the conditions of this Contract, BUYER shall have
the option to keep the DRILLSHIP at BUILDER's yard after the
Contractual Delivery Date described in this Article VII and postpone
the delivery until January 31, 2001 at the latest.
In the event that BUYER exercises the delayed delivery option and
decides to keep the DRILLSHIP at BUILDER's yard at BUYERS's cost and
its own risk after the Contractual Delivery Date:
(a) the Contract Amount shall be increased at the rate of Twenty-Five
Thousand Five Hundred United States Dollars (US$ 25,500) per day
to cover BUILDER's financing cost for the delayed second payment;
(b) the property of the DRILLSHIP shall remain at BUILDER until final
payment. However, BUYER may use the DRILLSHIP for testing and
training purposes and shall be responsible for any maintenance or
damages;
(c) any costs caused by the delayed delivery and paid by BUILDER
shall be reimbursed at cost (plus ten percent (10% mark-up on
non-BUILDER reimbursable items.) This shall include, but not be
limited to, additional insurance cost for any risks, electricity,
fuel, office supplies, consumables, port charges (if any),
equipment and labor costs rendered to BUYER for safe maintenance
and under written request.
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, except
as otherwise agreed, 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 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 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, including any period under the delayed
delivery option which may be exercised by the BUYER as specified in
Article VII-4 herein (hereinafter called "Guarantee Period"),
guarantees the DRILLSHIP 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 af ter 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 ser-vants 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
or otherwise, 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
man 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)additional 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 (8t) 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 favor of the BUYER. Such letter of guarantee shall have
substantially the same form and substance as Exhibit "All 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 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 second 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 (816) 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 (other than BUYER assigning this contract to
its parent, subsidiary or affiliated 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 f irst
installment of the Contract Price, BUYER, upon giving notice in writing
to the BUILDER, shall be f reely 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.
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 second 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 represent-
atives 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) The Delivery Schedule of the BUYER's Supplies and vendor data
shall be mutually agreed, finalized and settled within thirty
(30) 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 One Hundred Million United States Dollars (US$
100,000,000) 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.
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
Address:
Any and all notices and communications in connection with this
Contract shall be addressed as follows:
To the BUYER:
R&B Falcon Drilling Co.
Attn: Project Sponsor
901 Threadneedle
Houston, Texas 77079-2902
Facsimile No.: (281)589-5189
To the BUILDER:
Samsung Heavy Industries Co., Ltd.
Dongnam Tower Building 890-25,
Daichi-dong, Kangnam-ku,
Seoul, Korea
Facsimile No.
(822) 3458 7503
(822) 3458 7501
or preferably to its Koje Yard:
Samsung Heavy Industries Co., Ltd.
P.O. Box Gohyun 9
530, Jangpyung-ri,
Sinhyun-up, Koje City,
Kyungnam, Korea
Telex No.: K52213
Facsimile No.: (82558) 632 2160 (Design Department)
(82558) 636 2560 (Customer Coordination Team)
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 November
14, 1998 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 f
irst 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.
(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:
R&B FALCON DRILLING CO. SAMSUNG HEAVY INDUSTRIES CO., LTD.
By: Andras Bakonyi By:
Title: President Title:
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
duly executed on the day and year first above written.
BUYER: BUILDER:
R&B FALCON DRILLING CO. SAMSUNG HEAVY INDUSTRIES CO., LTD.
By: Andras Bakonyi By: J.W. Kim
Title: President Title: President & C.E.O.
EXHIBIT "A"
LETTER OF REFUNDMENT GUARANTEE NO.
Gentlemen:
We hereby open our irrevocable letter of guarantee No. in favour of
R&B Falcon Drilling Co. (hereinafter called the "BUYER") for account of
Samsung Heavy Industries Co., Ltd. (hereinafter called the "BUILDER"),
Seoul, Korea as follows in consideration of the shipbuilding contract
dated October 14, 1998 (hereinafter called the "Contract") made by and
among the BUYER and the BUILDER for the construction of one (1) drillship
composed of hull part and topside part, having BUILDER's Hull No. 1300
(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 Twenty-One
Million Nine Hundred and Fifty Thousand Unites States Dollars (Say US$
21,950,000 only) together with interest thereon at the rate of 8% 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.
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
United States Dollars.
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 B"
UNIT RATE
EXHIBIT B: UNIT RATE
In connection with the DRILLSHIP Contract for HULL NO. 1300 agreed and
signed on October 14, 1998, the Buyer and the Builder agree to the
following consideration for the modifications and variation:
1. Should the variation cost proposed by the Builder is not agreed by
the BUYER following calculation formula will be applied:
A. Material 107% of FOB cost
B. Labour Manhour x Rate
C. Engineering and Supervision 11% x (A+B)
D. Overhead 10% x (A+B+C)
2. Any other matters not contained and/or implied herein should be
referred the Contract.
3. Applied Man-Hour is attached.
4. Rate to be applied = US $45/hour
d) Valves (M-H/each) / Insulation (M-H/LINE-M)
Application A B C D
Diameter(mm)
50 1.7/0.6 2.9/0.8 3.5/0.9 4.5/1.2
100 1.7/0.8 3.0/0.9 3.6/1.2 4.8/1.5
150 1.7/0.9 3.0/1.2 3.6/1.5 4.8/2.0
200 3.0/1.1 4.5/1.2 6.0/1.5 7.5/2.3
300 4.5/1.5 6.8/2.3 9.4/3.0 12.1/3.8
450 6.0/1.4 10.8/2.7 13.8/3.6 17.4/4.5
600 9.0/2.3 16.5/4.1 21.0/5.3 26.1/6.6
e) Cable Installation (M-H/LINE-M)
Application A B C D
Out diameter(mm)
5-15 0.06 0.08 0.09 0.12
15-30 0.08 0.10 0.12 0.15
30-50 0.09 0.14 0.18 0.23
Greater than 50 0.12 0.20 0.23 0.31
f) Paintwork for Hullside (M-H/square meter)
Application In In Dry Dock
Paint Outside Inside D/R Inside
Cells Hull accommodation Tank
Blasting/Priming 0.10 0.2 0.3 0.6
Paint application 0.06 0.13 0.15 0.24
Productivity (TOPSIDE)
1. Unit Manhour applied for the progress of Building:
A. PAU pre-fabrication stage in the shop
B. PAU Assembly stage on the ground
C. PAU Assembly on the vessel of the module inside
D. PAU Assembly on the vessel of module outside
2. Major Manhour
a) Steelwork (M-H. MT)
Application A B C D
Drill floor and Sub 52.0 58.5 65.0 74.8
Structure
Modules 48.0 63.0 60.0 69.0
Skid Support, 38.5 43.2 48.0 55.2
Bridge/Crane Truss
and Riser Rack
Miscellaneous steel 60.0 67.6 75.0 86.0
including Handrail,
Ladders, Walkways, etc.
b) Pipework (M-H/MT)
Application A B C D
n.e. 1.5" iameter 125 133 166 185
Over 1.5" n.e.6" Diameter 87 92 115 127
Over 6" Diameter 74 79 98 108
c) Cable Trays/Ladders (M-H/meter)
Application A B C D
n.e. 6" Width 0.42 0.50 0.63 0.70
Over 6" n.e. 12" width 0.54 0.72 0.81 0.90
Over 12" n.e.18" width 0.60 0.80 0.90 1.00
Over 18" n.e.24" width 0.72 0.96 1.08 1.20
Over 24" n.e.30" width 0.90 1.20 1.35 1.50
Over 30" Width 1.14 1.52 1.71 1.90
d) Valves (M-H/each)/ Installation (M-H/meter)
Application A B C D
Diameter - 3.36 4.20 4.62
n.e.2"
41' - 5.60 7.00 7.70
6" - 7.68 9.60 10.56
8" - 8.40 10.50 11.55
101, - 11.28 14.10 15.51
12" - 13.60 17.00 18.70
16" - 17.84 22.30 24.53
20" - 20.96 26.20 28.82
24" - 26.40 33.00 36.30
e) Cable Installation (M-H/meter)
Application A B C D
n.e. 4mm2 0.16 0.16 0.16
Over 4mm2 n.e. 10mm2 - 0.16 0.16 0.23
Over 10mm2 n.e. 25mm2 - 0.23 0.30 0.43
Over 25mm 2 n.e. 40mm2 - 0.30 0.43 0.56
Over 70mm2 n.e. 110mm2 - 0.56 0.85 0.98
Over 110mm2 n.e.150mm2 - 0.69 0.98 1.25
Over 150mm2 n.e. 225mm2 - 0.85 1.25 1.41
f) Paintwork (M-Wsquare meter)
Application Over 500 n.e.500 Small
mm nun piece
Depth Depth Inside of
tank
Blasting/Priming 0.358 0.416 0.708
Paint application 0.057 0.065 0.098
per coat
"EXHIBIT 2"
BUYER'S SUPPLIES LIST
SHI HN1300 (S4M) OFE
Primary
AFE No. Equipment P8 Vendor P8 PM Eng comment
P.O. No.
002- Marine Systems:
002-001.1 Bulk Air Pressure Reducing TBA 255 NDH
Stations, 40psi & 60psi
002-002.1 Cascade Air Compressor
& SCBA's TBA 257 NDH
002-003.1 Central Hydraulic Unit
& Filters TBA 299 SAL
002-003.2 Hydr./Pneu. Power Packs
(General Purpose) TBA 299 SAL
Purpose)
002-004.1 Deck Crane 40 T, Amclyde 8P011 249 NDH
120' boom (Port Fwd)
002-004.2 Deck Crane 80 T, 120' Amclyde 8PO11 249 NDH
boom (Sth Fwd)
002-004.3 Deck Crane 80 T, 140' Amclyde 8P011 249 NDH
boom) (Sib Aft)
002-004.4 Deck Crane 80 T, Amclyde 8P011 249 NDH
120'boom (Port Aft)
002-004.5 Deck Crane 40 T, Amclyde 8P011 249 NDH
120'boom (Aft Stem)
002-006.1 Fenders Yokahama TBA 375 NDH
002-007.1 Driller's Intercom Nautronix 8P015 156 JJM 1
002-007.3 Emergency Acoustic Nautronix 8PO15 164 JJM 3,4
BOP Equipment
002-007.5 Position Reference Nautronix 8P015 164 JJM
Equipment
002-007.6 Compasses and autopilot Nautronix 8PO15 164 JJM
002-007.7 GPS Receiver Nautronix 8PO15 164 JJM
002-0071 Wi; speed Nautronix 8PO15 173 JJM
002-007.10 Environmental Nautronix 8PO15 173 JJM
Sensors
002-007.11 Weather Fax Nautronix 8PO15 173 JJM
002-007-12 Training Simulator Nautronix 8PO15 181 JJM
and Software
002-007.13 Engine Control Desk Nautronix 8PO15 181 JJM 1
002-007-14 Bridge Control Desk Nautronix 8PO15 181 JJM 1
002-007-15 Single Operator Nautronix 8PO15 181 JJM
Control Console
002-007.16 Dynamic Positioning Nautronix 8PO15 181 JJM 1
System
002-007.17 Peripheral Equipment Nautronix 8PO15 181 JJM 1
002-007.18 Dual Operator Nautronix 8PO15 181 JJM
Control Console
002-007.19 Thruster Control Console Nautronix 8P015 181 JJM
002-007.20 Uninterruptible Power Nautronix 8PO15 246 JJM 1
Supplies (UPS)
002-007.21 Radar Plants Nautronix 8P015 345 JJM
002-007.22 Navigation Sounder Nautronix 8P015 346 JJM
002-007.23 Round Robin (part of Nautronix 8PO15 347 JJM
auto telephone)
002-007.24 Public address Nautronix 8PO15 347 JJM 1
002-007.25 Automatic Telephone Nautronix 8PO15 347 JJM 1
002-W7.26 Air Band VHF, Radio Nautronix 8PO15 348 JJM
Beacon
002-007.27 Radio Life-saving Nautronix 8PO15 348 JJM
Equipment
002-007.28 Radio Plant Nautronix 8PO15 349 JJM
002-008.1 Thrusters Aquamaster-Rauma 8POO8 360 JJM from P6
002-008.2 Thruster Nozzles Aquamaster-Rauma 8POO8 360 JJM
002-009.1 Thruster Drives ABB Industry 8P002 360 JJM
002-010.1 Thruster Fittings Aker Mantyluoto 8PO48 360 JJM 1 confirmw/SHl
002-011.1 Thruster Stand-by Aquamaster-Rauma 8PO58 360 JJM
Automation System
002-011.2 Thruster Steering Aquamaster-Rauma 8P058 360 JJM
Pumps
002-012.1 Thruster Launching Hollming Oy 8PO64 360 JJM
Plates & Domes
002-013.1 Thruster AC-DC Aquamaster-Rauma 8P085 360 JJM
Converters
002-014.1 Lifeboats & Davits Schat-Harding 8PO49 301 NDH
1 - Eng'n Req'd
2 - BFE
3 - No Effect to SHI
4 - May be Deleted 13 October 1998 ds4m-ofe
SHI HN300 (DS4M) OFE
Primary
AFE No. Equipment P8 Vendor P8 PM Eng Comment
P.O. No.
003 - BOP,
Diverter, & Choke
Systems:
003-0011 High Pressure Shaffer SP014 135 MNA
Test Pump for BOP
003-0012 18-3/4 15,0000 Cameron 8PO46 135 MNA 3
WP. 'TL" BOP (P6)
Stack System
003-001.3 Lower Riser Cameron 8PO46 135 MNA 3
Package for 18- (P6)
3/4" 15MX WP.
003-001.4 BOP Test Stump & ABB Vetco 8PO56 135 MNA
Mandrel Gray
003-001.5 1 BOP Stack ABB Vetco 8PO56 135 MNA 3
Wellhead Gray
Connector
003-001-6 Gauge sys. & Houston SP060 135 RLH
chart recorder Digital
f/BOP test pump
003-001.7 LMRP Test Stump & ABB Vetco 8P078 135 MNA
Mandrel Gray
003-001-8 LMRP Connector ABB Vetco 8PO78 135 MNA 3
Gray
003-002.1 Multiplex Subsea ABB Seatec 8P010 139 RLH
BOP Control
System:
003-002.2 Hot Line Hose Sea" 8P073 139 RLH
003-002.3 -Hot Line Storage Beattie 8P073 139 RLH
Reel
003-M.4 Mux cable clamps All-Points 8P079 139 RLH 3
003-002.5 Spare mux cable ABB Seatec 8PO81 139 RLH 3
003-003.1 BOP Cart SMST 8P051 142 SAL 1
003-003.2 Hydraulic SMST 8P051 142 SAL 1
Cylinders
003-003,3 BOP Skid Rails SMST 8PO51 142 SAL 1
003-003.4 BOP Support Pads SMS 8P051 142 SAL 1
003-OW.5 BOP Skidding SMST 8PO51 142 SAL 1
Jacks
003-003.6 BOP Handling SMST 8PO51 142 SAL 1
Cranes
003-003.7 BOP SMST 8PO51 142 SAL 1
Transportation
System
003-003.8 Fivdraulic SMST 8PO51 142 SAL 1
Control Console
003-003.9 Cart, Foward SMST 8P051 142 SAL 1
Moonpool
Au)dliary
003-M. 10 BOP Handling SMST 8P051 142 SAL 1
Trolleys
003-003-11 Hvdraulic Power SMST 8PO51 142 SAL 1
Unit
003-00112 BOP Bulkhead TBA 142 SAL
Guidance
003-004.1 Drilling Choke QOP 8PO43 140 SAL
Remote Panel
003-004.2 Choke And Kill OOP 8PO43 140 SAL
Manifold
003-005.1 Diverter Control ABB Seatec 8P010 138 DS4 1
System
003-005.2 Diverter Insert Hydril 8PO38 138 DS4 3
003-005.3 Diverter Insert Hydril 8PO38 138 DS4
Storage Base
003-005.4 Diverter Handling Hydril 8PO38 138 DS4 3
Tools Etc.
003-005.5 Diverter Upper Hydril SP038 138 DS4 3
Fle4oint
003-005.6 Diverter Valves Hydril SP038 138 DS4
003-005.7 Diverter Housing Hydril 8PO38 138 DS4
003-005.8 Check Valve Hydril SP084 138 DS4
F/Diverter System
003-005.9 Diverter Selector TBA 138 DS4
/ Deflector Valve
1 - Eng'n Req'd
2 - BFIE
3 - No Effect to SHI
4 - May be Deleted 13 October 1998 ds4m-ofe
SHI HN1300 (DS4M) OFE
Primary
AFE No. Equipment PS Vendor PS PM Eng. Comment
P.O. No.
004 - Marine Riser System:
004-0011 Riser Hi2h Angle TBA 144 DS4 3
Intermediate Flex Joint
004-001.2 Riser Hangoff Tool Joint TBA 144 DS4 3
004-001.3 Riser Gas Handler TBA 144 DS4 3
004-001.4 Riser Lower Flex TBA 144 DS4 3
Joint
004-001.5 Standard Joints, Vetco SP037 144 DS4 3
Bare ClassF, 1340ft
004-001.6 Standard Joints, Vetco 8PW7 144 DS4 3
Buoyant Class'F,
86x9Oft
004-001.7 Standard Joints, Vetco 8P,03 144 DS4 3
Bare Class'H', 7
l8x90ft
004-001.8 Automatic riser fill-Vetco 8PO37 144 DS4
up valve
004-001.9 Riser Spider and Vetco 8PW7 144 DS4
gimbal
004-001 - Riser Termination Vetoo SP037 144 DS4 3
10 Joint
004-001.11 Joint Telescopic Vetco 8PO37 144 DS4
with Riser Tension
Ring, 2 pcs
004-001.12 PupJoi Vetco 8PO37 144 DS4 3
50,40,30,20,i5,iOand
5fts
004-001.13 Riser Adapter Joint vetco 8PW7 144 DS4 3
004-001-14 Riser Crossover Vetco 8PO37 144 DS4 3
Joints
004-001.15 Marine Riser Vetco SP037 144 DS4 3
Handling Tools
004-003.1 Buoyancy for the Emerson 8PO42 144 DS4 3
standard hser joints Cuming
004-004.1 Crown Block Shaffer 8P007 104 DS4
004-004.2 Active Heave System Shaffer 8P007 ill DS4
004-004.3 Pressure Air Naptech Wool 144 DS4
Accumulators 5Ox344
004-004.4 Crown Mounted Heave Shaffer SP007 145 DS4
Motion Compensator
004-004.5 Riser Anti-Recoil Shaffer 8P007 145 DS4
System
004-004.6 Direct Hydraulic Shaffer SP007 145 DS4
Control Console
Assembly
D04-004.7 Sheaves Shaffer 8P007 145 DS4
004-004.8 Electrically Powered Shaffer 8POO7 145 DS4
Hydraulic Charge
Pump
004-004.9 Hydraulic Power Unit Shaffer SPOO7 145 DS4
004-004-10 Remote (System Shaffer 8P007 145 DS4
Master) Junction Box
004-004.11 Riser Tensioners Shaffer 8P007 145 DS4
004-004.12 Main Barrier Panel Shaffer SP007 145 DS4
004-004.13 Riser Tensioner Shaffer 8P007 145 DS4
Control Panels
004-004.14 Operator (Master) Shaffer 8P007 145 DS4
Control Console
004-004.15 Wire Lines For Holloway/ SP035 145 DS4
Tensioners Houston
004-004.16 Tensioner Wire Rope Amclyde 8PO44 145 DS4
Grips
004-W4.17 Air Dryer Hamworthy 8PO25 258 DS4
D04-004.18 High Pressure Hamworthy TBA 259 DS4
Filters
004-004.19 HP Air Compressor Hamworthy W025 259 DS4
004-005.1 Riser Centralizer 150 SAL
System
1 - Eng'n Req'd
2 - BFE
3 - No Effect to SHI
4 - May be Deleted 13 October 1998 ds4m-ofe
SHI HN1300 (DS4M) OFE
Primary
AFE No. Equipment P8 Vendor P8 PM Eng. Comment
P.O. No.
OOS - Hoisting & Rotating System:
005-001,1 Drilling Dernck Dreco 8P005 103 SAL
005-001.2 Drilling Derrick Dreco 8POO5 103 SAL
Piping
005-001.3 Drilling Derrick Dreco 8POO5 103 SAL
Electrical Wiring
005-002.1 Travelling Block Shaffer 8PO31 105 DS4
005-004.1 Drawwork's Brake Emsco 8P003 338 SAL
Water Coating
Package
005-004.2 Drawworks Auto Emsco 8P003 108 SAL 1
Block Control
System
005-004.3 Rotary Table Emsco 8P003 122 SAL
005-004.4 Drawworks Machinery Emsoo 8P003 108 SAL
With El Motors
005-004.5 Dead Line Anchor Emsm SP003 110 SAL
005-004.6 Insert Bowls Emsco 8POO3 124 SAL 3
005-004.7 Insert BovAs For Emsco 8POO3 124 SAL 3
Casings
005-004.8 Mud Pumps With El Emsco 8POO3 212 SAL
Motors
005-005.9 Drilling Line Emsco SP034 107 SAL
005-008.1 Kelly Drive TBA 128 DS4 3
Bushings & Spares
005-009.1 Top Drive Retract Varco 8POO6 128 SAL
Dolly Assembly
005-0092 Too Drive & Motor Varco 8POO6 128 SAL
Assembly
005-009.3 Counterbalance Varco 8P006 128 SAL
Assembly
005-009.4 Rotating Hook Varco 8POO6 128 SAL
Adapter
005-OD9.5 Pipe Handlers Varco 8POO6 128 SAL
005-M.6 Adaptor Kits, 3 Pcs Varco 8POO6 128 SAL
005-009.7 Top Drive Parking Varco SPOO6 128 SAL
System
005-009,8 Service Loops & Varco 8POO6 128 SAL
Termination Kit
005-009,9 Control System Less Varco 8POO6 128 SAL
Driller'S Console
005-M. 10 Hook Varco 8POO6 106 SAL 3
005-009.11 Retractable Dolly Varco 8POO6 128 SAL
And Dolly Guide
005-010.1 Derrickman's Escape Charter 8PO16 211 DS4
Device
005-011.1 Elevator For Emscor 8PO68 268 DS4
Derrick Man Champion
005-011.2 Spares For Derrick Emscor 8PO69 268 DS4
Man's Elevator Champion
005-012A Drill Line Stand TBA 107 SAL
005-013.1 SvAvel (Required W TBA 127 SAL
Top Drive) For Park
006 - Downhole Drill String & Tools:
006-001.1 Drill Pipe & Woodhouse 8PO57 271 DS4 3
Acoessories
006-002.1 Pon Collars Technofor 8PO59 273 DS4 3
006-002.2 Hvy. Wate, Drill Technofor 8PO59 273 DS4 3
Pipe
006-OW.3 Drill Collars and Technofor SP059 273 DS4 3
Accessories
006-002.4 Drill Pipe Pup Technofor 8PO59 271 DS4 3
joints
006-003.1 Sub and Lift Plugs GRANT TBA 272 DS4 3
006-OM.2 Lifting subs & Gotco TBA 272 DS4 3
Pump4n subs
006-003.3 Keltv saver subs Waters TBA 125 DS4 3
006-003.4 Subs Smith Int. 8PO61 272 DS4 3
006-004-1 Kelly valves Waters TBA 141 DS4 3
006-004.2 Baker float valves Charter 8PO17 141 DS4 3
and repair kits
006-005.1 Fishing Tools Gotco 8PO53 281 DS4 3
006-005,2 Fishing Tools Gotco 8P054 281 DS4 3
006-005.3 Fishing Tool Spares Gotco 8PO62 281 DS4 3
006-005.4 Fishing Tool Spares Gotco SP063 281 DS4 3
006-M.1 Kel!y Spinner Waters TBA 290 DS4
006-007.1 Bit breakers, R&R 8PO30 141 DS4 3
calipers & inside
BOP valves
006-008.1 Casing Scrapers Mid- 8PO29 278 DS4 3
Continent
006-009.1 Kelly 6" Waters TBA 125 DS4 3
1 - Eng'n Req'd
2 - BFE
3 - No Effect to SHI
4 - May be Deleted 13 October 1998 ds4m-ofe
SHI HN1300 (DS4M) OFE
Primary
AFE No. Equipment P8 Vendor P8 PM Eng. Comment
P.O. No.
OO7 - Hoisting & Rotating System:
005-001,1 Dfillinq Dernck Dreco 8P005 103 SAL
005-W1.2 Drilling Derrick Dreco 8POO5 103 SAL
Piping
005-001.3 Drilling Derrick Dreco 8POO5 103 SAL
Electrical Wiring
005-002.1 Travelling Block Shaffer 8P031 105 DS4
005-004.1 Drawwork's Brake Emsco 8P003 338 SAL
Water Coating
Package
005-004.2 Drawworks Auto Block Emsco 8P003 108 SAL 1
Control System
005-004.3 Rotary Table Emsco 8P003 122 SAL
005-004.4 Drawworks Machinery Emsoo 8P003 108 SAL
With El Motors
005-004.5 Dead Line Anchor Emsco SP003 110 SAL
005-004.6 Insert Bowls Emsco 8P003 124 SAL 3
005-004.7 Insert BoWs For Emsco 8POO3 124 SAL 3
Casings
005-004.8 Mud Pumps With El Emsco 8POO3 212 SAL
Motors
005-005.9 Drilling Line Emsco SP034 107 SAL
005-008.1 Kelly Drive Bushings TBA 128 DS4 3
& Spares
005-009.1 Too Drive Retract Varco 8POO6 128 SAL
Dolly Assembly
005-0092 Top Drive & Motor Varco 8POO6 128 SAL
Assembly
005-009.3 Counterbalance Varco SPOO6 128 SAL
Assembly
005-009.4 Rotating Hook Adapter Varco 8POO6 128 SAL
005-OD9.5 Pipe Handlers Varco 8POO6 128 SAL
005-009.6 Adaptor Kits, 3 Pcs Varco 8POO6 128 SAL
D05-009.7 Top 0 Parking System Varco 8POO6 128 SAL
005-009,8 Service Loops & Varco 8POO6 128 SAL
Termination Kit
005-009,9 Control System Less Varco 8POO6 128 SAL
Driller'S Console
005-M. 10 Hook Varco 8POO6 106 SAL 3
005-009.11 Retractable Dolly Varco 8POO6 128 SAL
And Dolly Guide
005-010.1 Derrickman's Escape Charter 8PO16 211 DS4
Device
00"11.1 Elevator For Derrick Emscor 8PO68 268 DS4
Man Champion
005-011.2 Spares For Derrick Emscor 8PO69 268 DS4
Man's Elevator Champion
005-012A Drill Line Stand TBA 107 SAL
005-013.1 Swivel (Required W TBA 127 SAL
Top Drive) For Park
006 - Downhole Drill
String & Tools:
006-001.1 Drill Pipe & Woodhouse 8PO57 271 DS4 3
Acoessories
006-002.1 Pony Collars Technofor 8P059 273 DS4 3
006-002.2 HvY. Wate Drill Pipe Technofor 8PO59 273 DS4 3
006-002.3 Drill Collars and Technofor SP059 273 DS4 3
Accessories
006-002.4 Drill Pipe Pup Technofor 8PO59 271 DS4 3
joints
006-OW.1 Sub and Lift Plugs GRANT TBA 272 DS4 3
006-003.2 Lifting subs & Gotco TBA 272 DS4 3
Pump4n subs
006-M.3 Kelly saver subs Waters TBA 125 DS4 3
006-W3.4 Subs Smith Int. 8PO61 272 DS4 3
006-004-1 Kelly valves Waters TBA 141 DS4 3
006-004.2 Baker float valves Charter 8PO17 141 DS4 3
and repair kits
006-005.1 Fishing Tools Gotco 8P053 281 DS4 3
006-005,2 Fishing Tools Gotco 8P054 281 DS4 3
006-M.3 Fishing Tool Spares Gotco 8PO62 281 DS4 3
006-005.4 Fishing Tool Spares Gotco SP063 281 DS4 3
006-006.1 Kel!y Spinner Waters TBA 290 DS4
006-007.1 Bit breakers, R&R 8P030 141 DS4 3
calipers & inside
BOP valves
006-008.1 Casing Scrapers W- 8P029 278 3
Continent
006-009.1 Kelly 6" Waters TBA 125 DS4 3
1 - Eng'n Req'd
2 - BFE
3 - No Effect to SHI
4 - May be Deleted 13 October 1998 ds4m-ofe
SHI HN1300 (DS4M) OFE
Primary
AFE No. Equipment P8 Vendor P8 PM Eng Comment
P.O. No.
007 - Pipe Handling Tools & Equipment:
007-001.1 PowerTongs Va rco 8POO4 292 SAL 1
007-0012 Main Deck Pipe Hoist Varco 8P004 297 SAL 1
/ Conveyor
007-001.3 Conveyor for Varco 8POO4 297 SAL 1
Drillpipe
007-001A Easy Torque Varco 8POO4 288 SAL 1
007-001.5 Iron Roughneck Track Varco 8POO4 294 SAL 1
& Turntable
007-001.6 Iron Roughneck Varoo 8POO4 294 SAL 1
007-001.7 Mousehole Spiders Varco 8POO4 286 SAL 1
007-001.8 Pipe Racking System Varco 8POO4 296 SAL 1
Custom Bellyboard
007-001.9 Pipe Racking System Varco 8POO4 296 SAL 1
Custom Fingerboard
007-001.10 Casing Iron Roughneck Varco 8POO4 294 SAL 1
007-001.11 Conveyors for Riser Varoo 8POO4 151 SAL 1
and Casing, 60' and
100'
007-001.12 RBS, Raised Backup Varco 8POO4 296 SAL 1
System
007-001.13 Pipe Racking System, Varco 8POO4 296 SAL 1
PRS-6i, 2 units
007-003.1 Casing Stabbing Board Dreco 8POO5 295 SAL
007-004.1 Crane, Drill Pipe TBA 249 SAL
Knuckle Boom
007-004.2 Riser Handling Gantry SMST 8P050 151 SAL 1
Crane - Casing
Spreader Bar
007-004.3 Riser Handling Gantry SMST 8PO50 151 SAL 1
Crane
007-004.4 Riser Handling Gantry SMST 8PO50 151 SAL 1
Crane - Riser areader
Bar
007-005.1 Mousehole & Rathole TBA 296 SAL 2
007-007.1 Tubing Spider Cavins TBA 286 OS4
007-W7.2 Casing Elevators 30" Gray Eng. 8PO24 285 DS4 3
007-007.3 Casing Elevators 16" Gray Ena- 8P024 285 DS4 3
SO
007-WT4 Spinning Wrench Gray Eng. 8PO24 291 DS4 3
007-007,5 Spinning Wrench Gray Eng- 8PO24 291 DS4 3
Spares
007-007.6 Elevator Links Varco 8PO39 282 DS.4 3
007-0077 Drill Collar Clamps Varco 8PO74 287 DS4 3
007-007.8 Drill Collar Slips Varco 8P074 287 DS4 3
007-007.9 Drill Pipe Slips Varco 8PO74 287 DS4 3
007-007.10 Drill Pipe and Tubing Varco 8PO74 283 DS4 3
Elevators
007-007.11 Sincle Elevators Varoo 8P074 283 DS4 3
007-007.12 Drill Collar Elevator Varco 8P074 283 DS4 3
007-007.13 Casing levators/ Varoo 8P074 286 DS4 3
Spiders
007-007.14 Casing Elevators/ Varco 8PO74 286 DS4 3
Spiders
007-007.15 Slips Varco 8PO74 287 DS4 3
007-007.16 Casing Tongs Varoo 8PO75 292 DS,4 3
007-007.17 Drill Pipe & Drill Varoo 8PO75 289 DS4 3
Collar Rotary Tongs
007-007.18 1000 ton links Varco 8PO76 283 DS4 3
007-007.19 1000 ton elevators Varco 8PO76 283 DS4 3
007-009.1 Air Winches - Industrial 8PO26 261 DS4
Moonpool Air
007-009.2 Air Winches - Decks Industrial SP026 261 DS4
Air
007-009.3 Air Winches - Derrick Industrial -YP- DS4
Fingerboard Air 026
F0-07-009.4 Air Winches - Industrial 8PO26 261 DS4
Drilltor Air
A - Eng'n Req'd
2 - BFE
3 - No Effect to SHI
4 - May be Deleted 13 October 1998 ds4m-ofe
SHI HN1300 (DS4M) OFE
Primary
AFE No. Equipment P8 Vendor P8 PM Eng Comment
P.O. No.
008 - Circulating System, Mud & Cement:
008-002.1 Stand Pipe Manifold OPR 8PO21 217 NDH
008-003.1 Desander Pumps Halco 8PO41 333 NDH
008-003,2 Desifter Pumps Halco 8PO41 333 NDH
008-003.3 Mud Mixing Pumps Halco, 8PO41 334 NDH
008-003.4 Degasser Pump Halco 8PO41 333 NDH
008-003.5 Hoppers Halco 8PO41 334 NDH
008-003.6 Trip Tank Pump Halco 8PO41 332 NDH
008-003.7 Mud Cleaner gumps Halco 8PO41 333 NDH
008-003.8 Mud Charge Pumps Halco 8PO45 336 NDH
008-003.9 Turboshear Pumps Halco 8PO45 333 NDH
008-003.10 Brine Pump Halco 8PO45 343 NDH
008-00311 Oil Pump For Mud Halco 8PO45 343 NDH
(Base Oil)
008-004.1 Mud Buckets DoubleLife 8PO23 228 NDH 3
008-007.1 Low Pressure Mud Brandt 8PO40 215 NDH
Guns
008-007.2 Shaker With Brandt 8PO40 224 NDH
Desilter Cones
008-007.3 Mud Gas Separator Brandt 8PO40 226 NDH
(Poor Boy)
008-007.4 Shaker With Brandt 8PO40 223 NDH
Desander Cones
ON-007.5 Bug Blowers Brandt 8PO40 235 NDH
008-007.6 Degasser Brandt 8PO40 226 NDH
008-007.7 Shale Shakers Brandt 8PO40 222 NDH
008-007.8 Mud Pit Agitators Brandt 8PO40 215 NDH
008-007.9 Gumbo Box Nu-Tec 8P052 158 NDH
008-ON.1 Flowfine Degasser TBA 226 NDH
008-009.1 High Pressure Specialties 8PO55 229 NDH 1
Flexible Hoses
008-009.2 Moon Pool (C+K) Specialties 8P055 229 NDH 1
Hoses
008-009.3 Moon Pool (gas Specialties 8PO55 229 NDH 1
handler) Hoses
008-009.4 Moon Pool Specialties 8PO55 229 NDH 1
(hydraulic) Hoses
008-009.5 Moon Pool (booster)Specialties 8PO55 229 NDH 1
Hoses
008-009.6 Rotary Hoses (See Specialties 8P055 229 NDH 3
Top Drive Service
Loops)
008-009,7 Cement Hoses Specialties 8PO55 229 NDH 3
008-009.8 Clamp, API#6, TBA 229 NDH 3
Cement Hose
008-009.9 Clamp, API#6, TBA 229 NDH 3
Moonpool Drape C&K
008-009.10 Clamp, AP186, TBA 229 NDH 3
Moonpool Drape Gas
Handler
008-009.11 Clamp, API#6, TBA 229 NDH 3
Moonpool Drape Mud
Boost
008-009.12 Clamp, AP#6, TBA 229 NDH 3
Moonpool Drape
Rigid Conduit
008-010.1 Chiksan Joints R&R 8PO32 217 NDH 3
008-011.1 Bulk Tank, 4,000 TBA 214 SAL
ftA3 Storage, 10 ea.
008-011.2 Bulk Tank, 1,000 TBA 214 SAL
ftA3 Cement Surge,
2 ea.
008-011.3 Bulk Tank, 120 ftA3 TBA 214 SAL
Bentonde/Barite
Surge, 4 ea.
008-011.4 Bulk Control System TBA 214 SAL
008-012.1 Manifold, Pumproom TBA 217 SAL
HP Mud Discharge,
7500 psi
009 - Quarters, Safety, Utilities, & Drilling Support:
009-001.1 Computers (network PC 2000 8PO65 368 JJM 1
PC's)
.009-002.1 Onboard-NAPA Na 8PO80 368 NDH 1
Computer System
009-003.1 Safety Equipment, TBA 311 NDH
Life Saving & Fire
Fighting
009-003.2 Safety Equipment, TBA 311 NDH
Hospital & Medical
Supplies
009-004.1 Mathey Wireline Charter 8P018 364 DS4
Unit
009-005.1 Forklift Action 8PO19 378 NDH 3
Handling
009-006.1 Welding & Cutting TBA 263 JJM
System
009-008.1 Hand tools f/sub sea Snap-On 8P086 396 DS4 3
009-008.2 Hand tools f/sub sea Snap-On SP087 396 DS4 3
009-008.3 Supplies f/sub sea GrainQer 8P088 396 DS4 3
shop
009-008.4 Supplies f/sub sea R&R SP089 396 DS4 3
shop
009-008.5 Lifting Hoists, TBA 396 DS4 3
Chain Fall & Lever
009-009.1 Trash Compactor TBA 370 NDH
1 - Eng'n Req'd
2 - BFE
3 - No Effect to SHI
4 - May be Deleted 13 October 1998 ds4m-ofe
SHI HN1300 (DS4M) OFE
Primary
AFE No. Equipment P8 Vendor P8 PM Eng. Comment
P.O. No.
010 - Power Generation & Electrical:
010-002.1 Current Transformers M&I 8P070 237 JJM 1
Electic
010-003-1 Automation Equipment 0MC 8PO83 181 JJM 1
for Diesel Aggregates
010-003.2 11 kV Main 0mC 8PO83 232 JJM
Switchboard
010-003.4 460 V Main 0MC 8PO83 232 JJM
Switchboard
010-003.6 Thyristor Main 0MC 8PO83 232 JJM
Switchboard 600
VAC850 VDC
010-003.12 460 V Emergeney 0MC, 8PO83 233 JJM
Switchboard
010-003.13 Group Starters 0MC 8PO83 234 JJM 1
(MCC's)
010-003.15 Main Transformers 0MC 8PO83 237 JJM
010-003.16 Ship Service 0MC 8PO83 237 JJM
Transformers
010-004.1 Power Management Nautronix 8PO67 181 JJM 1
System
010-005.1 Diesel Aggregates Wartsila 8P009 201 JJM 1
010-006.2 Generators Wartsila 8POO9 230 JJM
010-006.1 Fuel Oil Separator Wes1falia 8P022 340 JJM
010-006.2 Lube Oil Separators Westfalia 8P022 340 JJM
010-007.1 Heat Recovery Fresh Drexel 8PO20 328 JJM
Water Generator
011 - Instrumentation, Communication, & Control Systems:
011-001.1 Acoustic Doppler TBA 173 NDH 4
Current Profiler
(ADCP)
011-001.2 ADCP Winch & Running TBA 173 NDH 4
Gear
011-004.1 Driller's Cabins, 2 Hftec SP066 156 JJM 1
each
011-004.2 Interfaces Hitec 8PO66 156 JJM 1
011-004.3 Drilling Control Hitec 8PO66 156 JJM 1
011-004.4 Control Modules (SDI, Hitec OP066 156 JJM 1
Sensors, Chairs)
Third Party Supplied Items:
999-999.1 Electric Well Logging Client TBA 380 DS4 1
Equipment Provided
999-999.2 ROV Equipment and Client TBA 382 DS4 1
Systems Provided
999-999.5 Mud Logging Equipment Client TBA 381 DS4
Provided
999-999.6 BumerBoorn Client TBA 383 DS4 1
Provided
999-999.7 Well Testing Client TBA 383 DS4 1
Equipment Provided
999-999.8 Cementing Unit Client TBA 384 DS4 1
Provided
I - Eng'n Req'd
2 - BFIE
3 - No Effect to SHI
4 - May be Deleted 13 October 1998 ds4m-ofe
"EXHIBIT 3"
Builder's Approved Vendor List
SAMSUNG CONOCO/R&B Drillship (tk9603.ML2)
- -------------------------------------------------------------------------
EQUIPMENT MANUFACTURER
- -------------------------------------------------------------------------
Paint HEMPEL Korea
JOTUN Korea
IPK Korea
SIGMA Korea
DEVOE Korea
I-C.C.P WWI Korea
ELECTROCATALYTIC U.S.A.
Marine Growth JOTUN Norway
Preventer System WWI Korea
DEVOE U.S.A.
INTERNATIONAL U.S.A.
Cargo Oil Pump SHINKO Japan
NANIWA Japan
Inert Gas Plant KVAERNER MOSS Norway
GADE11US Japan
MARITIME PROJECTION Norway
Cargo Tank Level
Gauge SAAB Sweden
BERGAN U.S.A.
Fire Detecting
System SALWICO Sweden
AUTRONICA Norway
NITTAN Sweden
DETCON U.S.A.
PYROTRONICS U.S.A.
Gas Sampling
System SALWICO Sweden
VIMEX Norway
OMICRON Norway
DETCON U.S.A.
Gas Detection
System OMICRON Norway
DETCON U.S.A.
TQ ENVIRONMENTAL U.K.
Butterfly Valve forAMR1 France
C-0-and W.B.System WESTAD Norway
KEYSTONE U.S.A.
Actuator for SAMGONG DANFOSS Korea
Butterfly Valve & SKARPENORD Norway
Valve Control System
O.D.M.S. SEIL SERES Korea
Helideck MARINE ALUMMUM Norway
HYDRO ALUNUNMM Norway
LIAS Italy
Ballast Tank/
F.O.Tank AUTRONICA Norway
Level Gauge SAAB Sweden
BERGAN U.S.A.
C.O.W.Machine GUN CLEAN Sweden
POLAR MARINE Sweden
TOFTEJORG Denmark
DASIC U.K.
Portable Hand MMC Japan
Dipping, Oil/ TANK SYSTEM Norway
Water Interface
Detector,Seal
Valve
GRP AMERON Singapore
VETRORESINA Italy
Personnel Lift LUTZ Germany
DAN ELEVATOR Denmark
OTIS U.S.A.
Main Generator WARTSILA Finlanc
Engine
(medium speed)
Oil Fired Boiler AALBORG-SUNROD Denmark
NOTSUBISFU Japan
Exh. gas AALBORG-SUNROD Denmark
economizer MITSUBISHI Japan
Emergency MAN-LINDENBERG Germany
Generator MAN-DEMP Denmark
Engine CATERPILLAR U.S.A.
Centrifugal Pump TAIKO Japan
including Motor NANIWA Japan
SHINKO Japan
Gear & Screw Pump TAIKO Japan
including Motor NANIWA Japan
ALWEILLER Norway
IMO Sweden
Purifier ALFA LAVAL Japan/Sweden
WESTFALIA Germany
Thrusters KAMEWA (AQUAMASTER) Finland
Mooring Winch SAMSUNG - ULSTEIN Korea
Windlass SAMSUNG - PUSNES Korea
Anchor & Chain CSSC China
Watertight Doors SCHENROK Germany
WINELL Netherlands
Heli. deck SAMSUNG-NORLIFT Korea
Service Handling SAMSUNG-BLM Korea
Crane
Air Handling HI-PRES KOREA Korea
unit for Air DIRECT ENGINEERING SERVICE Australia
Conditioning
Plant
Conditioning unit SABROE Denmark
for Air CARRIER U.S.A./Australia
Conditioning UNITOR U.S.A.
Plant
Provision Ref. HI-PRES KOREA/SABROE Korea
Plant CARRIER U.S.A.
UNITOR U.S.A.
Package Air con. UNITOR U.S.A.
Lifeboat/Davit SCHAT-HARDING Norway
Rescue Boat/Davit NORSAFE Norway
(MAGNUM 750 JET,
YANMAR 4LH - DTE 170 HP)
Liferafts VIKING Denmark
Fire Extinguishing UNITOR-KOREA Korea
System HEIEN LARSEN - FAIN Norway/Korea
Accommodation BUIL Korea
Panel SHINSUNG Korea
Galley/Pantry METOS Finland
Equipment ELECTROLUX Sweden
Laundry Equipment METOS Finland
MAYTAG U.S.A.
Window Wipers JUNG-A (Horizontal Type) Korea
Lifesaving UNITOR Norway
Equipment ALEXANDER INDUSTRIES U.S.A.
Sewage Treatment HAMWORTHY U.K.
SASAKURA Japan
TAIKO Japan
Prefabricated Bath BUIL Korea
Room Unit SBINSUNG Korea
WARTSILA-KOREA Korea
Vacuum Toilet EVAC Sweden
JETS Norway
Air Compressor HATLAPA Germany
SAUER & SOHN Germany
SPERRE Norway
INGERSOLL - RAND U.S.A.
Air Compressor ALUP Germany
(screw) ATLAS COPCO Sweden
INGERSOLL RAND U.S.A
Plate Cooler ALFA LAVAL Korea
APV Korea
SWEP Sweden
Tubular Cooler DONG HWA Korea
BLOKSMA Netherlands
Auto flater BOLL & KIRCH Germany
YMON-KANAKAWA Korea
Oil Heater DONG HWA Korea
VESTA Denmark
BLOKSMA Netherlands
Bilge Water
Separator SASAKURA Japan
HAMWORTHY U.K.
DETEGASA Spain
BLOHM & VOSS Germany
F.W. Generator ALFA-LAVAL Sweden
SASAKURA Japan
GEFICO Spain
Integrated Control SIMRAD NORGE Norway
and Monitoring
System
Dynamic SIMRAD NORGE Norway
Positioning
System
Electric ABB Norway
Switchboards
and Motor Starters
(High voltage)
Electric K.T. ELECTRIC Korea
Switchboards ABB Norway
and Motor Starters
(Low voltage) ABBNorway
Electric Cable LG CABLE (GOLDSTAR) Korea
(DUPONT Product shall be used as much as possible.)
BIW CABLE SYSTEM U.S.A.
EXANE U.S.A.
Main Generator ABB Norway
Lighting fixtures WISKA Germany
AQUA SIGNAL Germany
GLAMOX Norway
PAULUHN U.S.A.
Radar RACAL MARINE U.K.
J.R.C. Japan
Integrated RACAL MARINE U.K.
Navigation System STN ATLAS Germany
NORCONTROL Norway
Gyro Compass TOKIMEC Japan
ANSCHUTZ Germany
Radio Plant/ J.R.C. Japan
Satellite FURUNO Japan
Communication
High Voltage ABB Finland/Norway
Motors
MIP System AUTRONICA Norway
ABB-CYLDET Germany
Radio MOTOROLA U.S.A.
Communication
(Oil Movement)
CCTV HERNIS Norway
JAVELEN U.S.A.
IWL COMMUNICATIONS U.S.A
FMEA ABS U.S.A.
GLOBAL MARITIME U.K.
SAMSUNG CONOCO/R&B Drillship (TK9603.ML2)
NOTE
1. Selection of supplier from above list to be Builder's option as long
as the equipment fulfil the required contract performances.
2. Builder can propose other supplier than above list for Buyer's
acceptance.
3. Buyer has the right to select his own preferred one among the
suppliers listed herein above subject to additional cost and
adjustrnent of delivery involved, if any, bome by Buyer.
For this purpose, Builder should inform the selected supplier to Buyer
before order, and Buyer should confirm the agreement to Builder's
selection or inform the preferred supplier within two(2) weeks.
When the Builder does not receive the agreement or information
regarding the supplier within two(2) weeks, Budder's selection for
supplier is deemed to have been confirmed by the Buyer without
comments and the Builder may proceed the work with the supplier.
4. Selection of supplier for the other equipment than the listed herein
above to be Builder's option, which need not confirmation from Buyer
before order.
"EXHIBIT 4"
DELIVERY AND CONSTRUCTION SCHEDULE
Deep Water Drillship DPDS4M (HN1300) Overall Project Schedule
EXHIBIT 10.212
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT AND RELEASE OF GUARANTY
(this "Second Amendment") is entered into as of November 9, 1998 (the
"Effective Date"), among DEEPWATER DRILLING II L.L.C., a Delaware limited
liability company (the "Company"), BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative Agent (the "Administrative Agent")
for the Banks, and NATIONAL WESTMINSTER BANK PLC, as Documentation Agent
(the "Documentation Agent", and together with the Administrative Agent,
the "Agents") and the several financial institutions party to this Second
Amendment (collectively, the "Banks"; individually, a "Bank").
Capitalized terms which are used herein without definition and which are
defined in the Credit Agreement referred to below shall have the meanings
ascribed to them in the Credit Agreement.
WHEREAS, the Company, the Banks, the Administrative Agent and the
Documentation Agent are parties to a certain Credit Agreement dated as of
November 10, 1997 as amended by First Amendment and Release of Guaranty
dated as of April 24, 1998 (as at any time further amended, modified or
supplemented and in effect from time to time, the "Credit Agreement");
and
WHEREAS, the Company has requested that the Banks increase their
Commitments and extend the Revolving Termination Date; and
WHEREAS, subject to the terms and conditions herein contained, the
Banks are willing to consent to the above-described requests by executing
this Second Amendment;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby
agree as follows:
SECTION 1. Increased Commitments. Schedule A-1 attached hereto
sets forth the Commitment, outstanding Revolving Loans and Pro Rata Share
of each of the Banks prior to the Effective Date of this Second
Amendment. Schedule 2.01 attached hereto sets forth the Commitment and
Pro Rata Share of each of the Banks on and after the Effective Date of
this Second Amendment. Schedule 2.01 to the Credit Agreement is hereby
deleted and replaced with Schedule 2.01 in the form attached hereto.
SECTION 2. Amendment to Section 6.12 (Use of Proceeds). Section
6.12 of the Credit Agreement is hereby amended to add the following
sentence: "In addition, proceeds of Loans may be used to repay
Indebtedness of the Borrower owed to Bank of America NT & SA in the
principal amount of $10,000,000 together with interest thereon. The
Borrower represents that the proceeds of said Indebtedness were used to
fund costs incurred in connection with construction of the Drillship."
SECTION 3. Extension of Revolving Termination Date. The
definition of "Revolving Termination Date" set forth in Schedule 1.01 of
the Credit Agreement is hereby amended by deleting "November 9, 1998" and
inserting "January 30, 1999."
SECTION 4. Representations and Warranties of the Company. The
Company represents and warrants to the Agents and to each of the Banks
that:
(a) This Second Amendment has been duly authorized, executed
and delivered by the Company and the Credit Agreement as amended hereby
constitutes the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally or
by equitable principles relating to enforceability.
(b) The representations and warranties set forth in Article V
of the Credit Agreement are true and correct in all material respects
before and after giving effect to this Second Amendment with the same
effect as if made on the date hereof, except to the extent such
representations and warranties expressly related to an earlier date, in
which case they were true and correct in all material respects on and as
of such earlier date.
(c) As of the date hereof, at the time of and immediately
after giving effect to this Second Amendment, no Default or Event of
Default has occurred and is continuing.
SECTION 5. Conditions of Effectiveness. The Company shall
deliver the following to the Administrative Agent as conditions precedent
to the effectiveness of this Second Amendment:
(a) This Second Amendment, signed by the Company, the Agents,
and each of the Banks, together with each Consent of Guarantor attached
hereto, executed by R&B Falcon and by Conoco;
(b) Payment by the Company to each Bank of an amendment fee in
an amount equal to 15 basis points based on each Bank's Commitment as set
forth on Schedule 2.01 attached hereto;
(c) A Certificate signed by the members of the Borrower,
consenting to the execution and delivery of this Second Amendment and
certifying the name and true signature of the representative authorized
to sign this Second Amendment;
(d) Copies of resolutions of the board of directors of each
Guarantor authorizing its guaranty of the increased and extended
Commitments, certified as of the Effective Date by the Secretary or an
Assistant Secretary of such Guarantor or other evidence of authority;
(e) Opinions of counsel to the Borrower substantially in the
form attached hereto as Exhibit A;
(f) An opinion of counsel to each Guarantor, substantially in
the form attached hereto as Exhibit A; and
(g) Such other evidence as the Agent or the Majority Banks may
request to establish the consummation of the transactions contemplated
hereby or the compliance with the conditions set forth herein.
SECTION 6. Effect of Amendment. This Second Amendment (i)
except as expressly provided herein, shall not be deemed to be a consent
to the modification or waiver of any other term or condition of the
Credit Agreement or of any of the instruments or agreements referred to
therein and (ii) shall not prejudice any right or rights which the
Administrative Agent or the Banks may now have under or in connection
with the Credit Agreement, as amended by this Second Amendment. Except
as otherwise expressly provided by this Second Amendment, all of the
terms, conditions and provisions of the Credit Agreement shall remain the
same. It is declared and agreed by each of the parties hereto that the
Credit Agreement, as amended hereby, shall continue in full force and
effect, and that this Second Amendment and such Credit Agreement shall be
read and construed as one instrument.
SECTION 7. Miscellaneous This Second Amendment shall for all
purposes be construed in accordance with and governed by the laws of the
State of New York. The captions in this Second Amendment are for
convenience of reference only and shall not define or limit the
provisions hereof. This Second Amendment may be executed in separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one instrument. In
proving this Second Amendment, it shall not be necessary to produce or
account for more than one such counterpart.
NO ORAL AGREEMENTS. THE CREDIT AGREEMENT (AS AMENDED BY THIS SECOND
AMENDMENT) AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN 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 THE PARTIES.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed and delivered by their proper and duly
authorized representatives or officers as of the date and year first
above written.
DEEPWATER DRILLING II L.L.C.
By:_________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE SECOND AMENDMENT
TO CREDIT AGREEMENT]
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent and as a
Bank
By:_________________________
Claire M. Liu
Managing Director
[THIS IS A SIGNATURE PAGE TO THE SECOND AMENDMENT
TO CREDIT AGREEMENT]
NATIONAL WESTMINSTER BANK PLC
NEW YORK BRANCH, as a Bank
By:_________________________
Name:
Title:
NATIONAL WESTMINSTER BANK PLC
NASSAU BRANCH, as a Bank
By:________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE SECOND AMENDMENT
TO CREDIT AGREEMENT]
BANCA POPOLARE DI MILANO,
NEW YORK BRANCH
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE SECOND AMENDMENT
TO CREDIT AGREEMENT]
BAYERISCHE HYPO-UND VEREINSBANK AG,
NEW YORK BRANCH
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE SECOND AMENDMENT
TO CREDIT AGREEMENT]
CREDITO ITALIANO
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE SECOND AMENDMENT
TO CREDIT AGREEMENT]
BANCA MONTE DEI PASCHI DI SIENA
S. P. A.
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE SECOND AMENDMENT
TO CREDIT AGREEMENT]
CONSENT OF GUARANTOR
The undersigned Guarantor hereby consents to the provisions of the
foregoing Second Amendment to Credit Agreement, and confirms that the
Guaranty Agreement dated as of November 10, 1997 executed by it remains
in full force and effect in accordance with its terms.
CONOCO INC. (formerly Continental
Oil Company)
By:_________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE SECOND AMENDMENT
TO CREDIT AGREEMENT]
CONSENT OF GUARANTOR
The undersigned Guarantor hereby consents to the provisions of the
foregoing Second Amendment to Credit Agreement, and confirms that the
Guaranty Agreement dated as of April 24, 1998 is in full force and effect
in accordance with its terms.
R&B FALCON CORPORATION
By:__________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE SECOND AMENDMENT
TO CREDIT AGREEMENT]
SCHEDULE A-1
COMMITMENTS, OUTSTANDING LOANS AND PRO RATA SHARE
PRIOR TO SECOND AMENDMENT
Outstanding Pro Rata
Bank Commitment Revolving Loans Share
- ---- ---------- --------------- --------
Bank of America NT&SA $ 32,500,000 $ 32,500,000 18.57142857%
National Westminster Bank PLC $ 32,500,000 $ 32,500,000 18.57142857%
Banca Popolare diMilano,
New York Branch $ 25,000,000 $ 25,000,000 14.28571429%
Bayerische Hypo-Und Vereinsbank
AG, New York Branch $ 25,000,000 $ 25,000,000 14.28571429%
Credito Italiano $ 25,000,000 $ 25,000,000 14.28571429%
Great-West Life & Annuity
Insurance Company $ 20,000,000 $ 20,000,000 11.42857143%
Banca Monte dei Paschi di Siena
S.p.A., New York Branch $ 15,000,000 $ 15,000,000 8.57142857%
------------ ------------ ------------
$175,000,000 $175,000,000 100.00000000%
============ ============ ============
SCHEDULE 2.01
COMMITMENTS, OUTSTANDING LOANS AND PRO RATA SHARE
AFTER SECOND AMENDMENT
Pro Rata
Bank Commitment Share
- ---- ---------- --------
Bank of America NT&SA $102,500,000 45.56%
National Westminster Bank PLC $ 32,500,000 14.44%
Banca Popolare di Milano,
New York Branch $ 25,000,000 11.11%
Bayerische Hypo-Und Vereinsbank
AG, New York Branch $ 25,000,000 11.11%
Credito Italiano $ 25,000,000 11.11%
Banca Monte dei Paschi di Siena
S.p.A., New York Branch $ 15,000,000 6.67%
------------ ------
$225,000,000 100%
============ ======
EXHIBIT 10.213
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement") dated as
of November 9, 1998 is made between GREAT-WEST & ANNUITY LIFE INSURANCE
COMPANY (the "Assignor") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (the "Assignee").
R E C I T A L S
WHEREAS, the Assignor is party to that certain Credit Agreement
dated as of November 10, 1997, as amended by the First Amendment to
Credit Agreement and Release of Guaranty dated as of April 24, 1998 (as
the same may be further amended, modified or restated from time to time,
the "Credit Agreement"), among DEEPWATER DRILLING II L.L.C. ("Company"),
the several financial institutions from time to time party thereto (the
"Banks"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
Administrative Agent (the "Administrative Agent") for the Banks, and
NATIONAL WESTMINSTER BANK PLC, as Documentation Agent (the "Documentation
Agent") for the Banks (terms defined in the Credit Agreement are used
herein with the same meaning);
WHEREAS, as provided in the Credit Agreement, the Banks have
committed to extend credit to the Company;
WHEREAS, pursuant to Section 10.08 of the Credit Agreement, the
Assignor wishes to assign to the Assignee all of the rights and
obligations of the Assignor under the Credit Agreement in respect of its
Commitment, together with its outstanding Revolving Loans in a total
amount equal to Twenty Million Dollars (U.S. $20,000,000.00) (the
"Assigned Amount") on the terms and subject to the conditions set forth
herein and in the Credit Agreement, and the Assignee wishes to accept
assignment of such rights and to assume such obligations from the
Assignor on such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Assignment and Assumption.
(a) Before giving effect to this Agreement, Assignor's (a)
Commitment is $20,000,000.00, (b) aggregate principal amount of its
outstanding Revolving Loans is $20,000,000.00, and (c) Pro Rata Share is
11.42857143%. With effect on and after the Effective Date (as defined in
Section 4 hereof), the Assignor hereby sells, transfers and assigns to
the Assignee, and the Assignee hereby purchases, assumes and undertakes
from the Assignor, without recourse, and without representation or
warranty (except as provided in this Agreement) the Assigned Amount,
which shall be equal to all of Assignee's share of (i) the Commitment,
(ii) outstanding Revolving Loans, and (iii) all related rights, benefits,
obligations, liabilities and indemnities of the Assignor under and in
connection with the Credit Agreement and the other Loan Documents. After
giving effect to this Agreement on the Effective Date, the Commitment,
outstanding Revolving Loans, and Pro Rata Share of Assignor and Assignee,
respectively, are set forth as follows:
Outstanding Pro Rata
Revolving Share Commitments
Loans
Assignor $ 0 0% $ 0
Assignee $52,500,000.00 30% $52,500,000.00
(b) It is the intent of the parties hereto that (i) the
Commitment of the Assignor shall, as of the Effective Date, be reduced to
zero and (ii) the Assignor shall relinquish its rights and be released
from its obligations under the Credit Agreement; provided, however, that
the Assignor shall not relinquish its rights under Section 10.04 and
10.05 of the Credit Agreement to the extent such rights relate to the
time prior to the Effective Date.
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor
on the Effective Date in immediately available funds an amount equal to
Twenty Million Dollars ($20,000,000.00), representing the Assignee's Pro
Rata Share of the principal amount of all Loans previously made, and
currently owned, by the Assignor under the Credit Agreement and
outstanding on the Effective Date.
(b) To the extent payment to be made by the Assignee pursuant
to Section 2(a) hereof is not made when due, the Assignor shall be
entitled to recover such amount together with interest thereon at the
Federal Funds Rate per annum accruing from the date such amounts were
due.
3. Reallocation of Payments. Any interest, fees and other
payments accrued to but excluding the Effective Date with respect to the
Assignor's Pro Rata Share of the Revolving Loans shall be for the account
of the Assignor. Any interest, fees and other payments accrued on and
after the Effective Date with respect to the Assigned Amount shall be for
the account of the Assignee. Each of the Assignor and the Assignee agree
that it will hold in trust for the other party any interest, fees and
other amounts which it may receive to which the other party is entitled
pursuant to the preceding sentence and pay to the other party any such
amounts which it may receive promptly upon receipt.
4. Effective Date; Notices; Notes.
(a) The effective date for this Agreement shall be
November 9, 1998 (the "Effective Date"); provided that the following
conditions precedent have been satisfied on or before the Effective Date:
(i) this Agreement shall be executed and delivered by the Assignor and
the Assignee; (ii) the consent of each of the Company and of the
Administrative Agent shall have been duly obtained and shall be in full
force and effect as of the Effective Date; and (iii) the Assignee shall
pay to the Assignor all amounts due to the Assignor under this Agreement.
(b) Promptly following payment by the Assignee of the
consideration as provided in Section 2 hereof, the Assignor shall deliver
its promissory note(s) to the Administrative Agent.
5. Representations and Warranties.
(a) The Assignor represents and warrants that (i) 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 lien, security interest
or other adverse claim; (ii) it is duly organized and existing and it has
the full power and authority to take, and has taken, all action necessary
to execute and deliver this Agreement and any other documents required or
permitted to be executed or delivered by it in connection with this
Agreement and to fulfill its obligations hereunder.
(b) The Assignor 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 the
execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement or any other instrument or document
furnished pursuant thereto. The Assignor makes no representation or
warranty in connection with, and assumes no responsibility with respect
to, the solvency, financial condition or statements of the Company or any
guarantor or the performance or observance by the Company or any
guarantor of any of its respective obligations under the Credit Agreement
or any other instrument or document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and
has taken, all action necessary to execute and deliver this Agreement and
any other documents required or permitted to be executed or delivered by
it in connection with this Agreement, and to fulfill its obligations
hereunder; (ii) it is eligible under the Credit Agreement to be an
assignee in accordance with the terms hereof; and (iii) that it has
received a copy of the Credit Agreement and the exhibits and schedules
thereto, and has received (or waived the requirement that it receive)
copies of each of the documents which were required to be delivered under
the Credit Agreement as a condition to the making of the Loans
thereunder.
6. Further Assurances. The Assignor and the Assignee each hereby
agree to execute and deliver such other instruments, and take such other
action, as either party may reasonably request in connection with the
transactions contemplated by this Agreement, including, without
limitation, the delivery of any notices or other documents or instruments
to the Company, the Administrative Agent or any guarantor which may be
required in connection with the assignment and assumption contemplated
hereby.
7. Miscellaneous.
(a) Any amendment or waiver of any provision of this Agreement
shall be in writing signed by the parties hereto. No failure or delay by
either party hereto in exercising any right, power or privilege hereunder
shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Agreement shall be without prejudice to any rights
with respect to any other or further breach hereof.
(b) All payments made hereunder shall be made without any set-
off or counterclaim.
(c) Neither the Assignor nor the Assignee shall be responsible
to each other for payment of their costs and expenses incurred in
connection with the negotiation, preparation, execution and performance
of this Agreement.
(d) The representations and warranties made herein shall
survive the consummation of the transactions contemplated hereby.
(e) This Agreement may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed
to constitute one and the same instrument.
(f) This Agreement shall be governed by and construed in
accordance with the law of the State of New York (without regard to
principles of conflicts of law). The Assignor and the Assignee each
irrevocably submits to the non-exclusive jurisdiction of any New York
State or Federal court sitting in the Southern District of New York over
any suit, action or proceeding arising out of or relating to this
Agreement or the Credit Agreement and irrevocably agrees that all claims
in respect of such action or proceeding may be heard and determined in
such New York State or Federal court. Each party to this Agreement
hereby irrevocably waives, to the fullest extent it may effectively do
so, the defense of an inconvenient forum to the maintenance of such
action or proceeding.
(g) This Agreement and any agreement, document or instrument
attached hereto or referred to herein integrate all the terms and
conditions mentioned herein or incidental hereto, and together with the
Credit Agreement constitutes the entire agreement and understanding
between the parties hereto and supersedes any and all prior agreements
and understandings related to the subject matter hereof. In the event of
any conflict between the terms, conditions and provisions of this
Agreement and the Credit Agreement, the terms, conditions and provisions
of the Credit Agreement shall prevail.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Agreement to be executed and delivered by their duly authorized officers
as of the date first above written.
ASSIGNOR:
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
By_________________________
Name:
Title:
By_________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE ASSIGNMENT AND ACCEPTANCE AGREEMENT]
ASSIGNEE:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By_________________________
Claire M. Liu
Managing Director
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent, herby grants
its consent to the foregoing assignment
By_________________________
Claire M. Liu
Managing Director
[THIS IS A SIGNATURE PAGE TO THE ASSIGNMENT AND ACCEPTANCE AGREEMENT]
DEEPWATER DRILLING II L.L.C.
hereby grants its consent to the
foregong assignment
By_________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE ASSIGNMENT AND ACCEPTANCE AGREEMENT]
EXHIBIT 10.214
THIRD AMENDMENT TO CREDIT AGREEMENT
This THIRD AMENDMENT TO CREDIT AGREEMENT (this "Third Amendment") is
entered into as of January 29, 1999 (the "Effective Date"), among
DEEPWATER DRILLING II L.L.C., a Delaware limited liability company (the
"Company"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
Administrative Agent (the "Administrative Agent") for the Banks, and
NATIONAL WESTMINSTER BANK PLC, as Documentation Agent (the "Documentation
Agent", and together with the Administrative Agent, the "Agents") and the
financial institutions party to this Third Amendment (collectively, the
"Banks"; individually, a "Bank"). Capitalized terms which are used
herein without definition and which are defined in the Credit Agreement
referred to below shall have the meanings ascribed to them in the Credit
Agreement.
WHEREAS, the Company, the Banks and the Exiting Banks (as herein
defined), the Administrative Agent and the Documentation Agent are
parties to a certain Credit Agreement dated as of November 10, 1997 as
amended by First Amendment and Release of Guaranty dated as of April 24,
1998, as amended by Second Amendment dated as of November 9, 1998 (as at
any time further amended, modified or supplemented and in effect from
time to time, the "Credit Agreement"); and
WHEREAS, immediately prior to the effectiveness of this Third
Amendment, seven financial institutions were parties as "Banks" to the
Credit Agreement, the aggregate Commitments were $225,000,000 and the
Revolving Termination Date was January 30, 1999; and simultaneously with
the effectiveness of this Third Amendment, the Commitments of four of
said financial institutions (the "Exiting Banks") expire and the Company
is repaying outstanding Loans owed to the Exiting Banks; and
WHEREAS, the Company has requested that the Banks extend the Revolving
Termination Date and permit certain loans from members as herein
described; and
WHEREAS, subject to the terms and conditions herein contained, the
Banks are willing to consent to the above-described requests by executing
this Third Amendment;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby
agree as follows:
SECTION 1. (a) Amendment to Section 7.05 (Limitation on
Indebtedness). Section 7.05 is hereby amended by deleting the period at
the end of clause (c) and adding the following at the end of said
Section: "; and (d) Indebtedness consisting of loans from the members of
the Company not to exceed the aggregate principal amount of $135,000,000,
for the purpose of repaying amounts owed hereunder to the Exiting Banks
and funding costs associated with construction of the Drillship."
(b) Reference is made to Section 2 of the Consent and Waiver Letter
dated effective as of January 21, 1999, which stated that "the Company
shall be permitted to incur Indebtedness in an amount not to exceed
$45,000,000 in principal amount in order to fund costs associated with
construction of the Drillship". The parties agree that such Section 2 of
said Consent and Waiver is superseded hereby and therefore is of no
further force or effect.
SECTION 2. Definition of Applicable Margin. Clause (ii) of the
definition of "Applicable Margin" set forth in Schedule 1.01 of the
Credit Agreement is hereby amended deleting "0.35%" and inserting
"0.50%".
SECTION 3. Extension of Revolving Termination Date. The definition
of "Revolving Termination Date" set forth in Schedule 1.01 of the Credit
Agreement is hereby amended by deleting "January 30, 1999" and inserting
"March 31, 1999."
SECTION 4. Amended Schedule 2.01; Banks and Commitments. Schedule
2.01 of the Credit Agreement is hereby deleted and replaced with Schedule
2.01 in the form attached hereto. The parties to this Third Amendment
hereby acknowledge and agree that from and after the effectiveness of
this Third Amendment, the Exiting Banks are no longer "Banks" as defined
in the Credit Agreement and are no longer parties to the Credit
Agreement.
SECTION 5. Additional Commitment Fee. The Company agrees that on
March 1, 1999, if the Commitments have not been terminated by the Company
pursuant to Section 2.05 of the Credit Agreement by such date (and all
Obligations repaid at the time of such termination), then on March 1,
1999 the Company shall pay to each Bank a commitment fee equal to 5 basis
points based on such Bank's Commitment in effect at such time.
SECTION 6. Representations and Warranties of the Company. The
Company represents and warrants to the Agents and to each of the Banks
that:
(a) This Third Amendment has been duly authorized, executed and
delivered by the Company and the Credit Agreement as amended hereby
constitutes the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally or
by equitable principles relating to enforceability.
(b) The representations and warranties set forth in Article V of
the Credit Agreement are true and correct in all material respects before
and after giving effect to this Third Amendment with the same effect as
if made on the date hereof, except to the extent such representations and
warranties expressly related to an earlier date, in which case they were
true and correct in all material respects on and as of such earlier date.
(c) As of the date hereof, at the time of and immediately after
giving effect to this Third Amendment, no Default or Event of Default has
occurred and is continuing.
SECTION 7. Conditions of Effectiveness. The Company shall deliver
the following to the Administrative Agent as conditions precedent to the
effectiveness of this Third Amendment:
(a) Payment by the Company of an amount sufficient to repay all
outstanding loans made by the Exiting Banks, together with accrued
interest thereon and any other amounts owed to the Exiting Banks under
the Credit Agreement;
(b) This Third Amendment, signed by the Company, the Agents, and
each of the Banks, together with each Consent of Guarantor attached
hereto, executed by R&B Falcon and by Conoco;
(c) Payment by the Company to each Bank of an amendment fee in an
amount equal to 5 basis points based on each Bank's Commitment;
(d) A Certificate signed by the members of the Borrower, consenting
to the execution and delivery of this Third Amendment and certifying the
name and true signature of the representative authorized to sign this
Third Amendment;
(e) Copies of resolutions of the board of directors of each
Guarantor authorizing its officer to execute this document, certified as
by the Secretary or an Assistant Secretary of such Guarantor, or other
evidence of authority; and
(f) Such other evidence as the Agent or the Majority Banks may
request to establish the consummation of the transactions contemplated
hereby or the compliance with the conditions set forth herein.
SECTION 8. Effect of Amendment. This Third Amendment (i) except as
expressly provided herein, shall not be deemed to be a consent to the
modification or waiver of any other term or condition of the Credit
Agreement or of any of the instruments or agreements referred to therein
and (ii) shall not prejudice any right or rights which the Administrative
Agent or the Banks may now have under or in connection with the Credit
Agreement, as amended by this Third Amendment. Except as otherwise
expressly provided by this Third Amendment, all of the terms, conditions
and provisions of the Credit Agreement shall remain the same. It is
declared and agreed by each of the parties hereto that the Credit
Agreement, as amended hereby, shall continue in full force and effect,
and that this Third Amendment and such Credit Agreement shall be read and
construed as one instrument.
SECTION 9. Miscellaneous This Third Amendment shall for all purposes
be construed in accordance with and governed by the laws of the State of
New York. The captions in this Third Amendment are for convenience of
reference only and shall not define or limit the provisions hereof. This
Third Amendment may be executed in separate counterparts, each of which
when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Third
Amendment, it shall not be necessary to produce or account for more than
one such counterpart.
NO ORAL AGREEMENTS. THE CREDIT AGREEMENT (AS AMENDED BY THIS THIRD
AMENDMENT) AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN 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 THE PARTIES.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment to be duly executed and delivered by their proper and duly
authorized representatives or officers as of the date and year first
above written.
DEEPWATER DRILLING II L.L.C.
By:_________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE THIRD AMENDMENT
TO CREDIT AGREEMENT]
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent and as a
Bank
By_________________________
Claire M. Liu
Managing Director
[THIS IS A SIGNATURE PAGE TO THE THIRD AMENDMENT
TO CREDIT AGREEMENT]
NATIONAL WESTMINSTER BANK PLC
NEW YORK BRANCH, as
Documentation Agent and as a
Bank
By_________________________
Name:
Title:
NATIONAL WESTMINSTER BANK PLC
NASSAU BRANCH, as a Bank
By_________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE THIRD AMENDMENT
TO CREDIT AGREEMENT]
RZB FINANCE LLC
By_________________________
Name:
Title:
By_________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE THIRD AMENDMENT
TO CREDIT AGREEMENT]
CONSENT OF GUARANTOR
The undersigned Guarantor hereby consents to the provisions of the
foregoing Third Amendment to Credit Agreement, and confirms that the
Guaranty Agreement dated as of November 10, 1997 executed by it remains
in full force and effect in accordance with its terms.
CONOCO INC. (formerly
Continental Oil Company)
By_________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE THIRD AMENDMENT
TO CREDIT AGREEMENT]
CONSENT OF GUARANTOR
The undersigned Guarantor hereby consents to the provisions of the
foregoing Third Amendment to Credit Agreement, and confirms that the
Guaranty Agreement dated as of April 24, 1998 is in full force and effect
in accordance with its terms.
R&B FALCON CORPORATION
By_________________________
Name:
Title:
[THIS IS A SIGNATURE PAGE TO THE THIRD AMENDMENT
TO CREDIT AGREEMENT]
SCHEDULE 2.01
COMMITMENTS, OUTSTANDING LOANS AND PRO RATA SHARE
AFTER THIRD AMENDMENT
Bank Commitment Pro Rata Share
- ---- ---------- --------------
Bank of America NT&SA $ 87,500,000 65.00%
National Westminster Bank PLC $ 32,500,000 24.00%
RZB Finance LLC $ 15,000,000 11.00%
$135,000,000 100.00%
============ ======
EXHIBIT 10.217
SECOND AMENDMENT TO CREDIT AGREEMENT
SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of October 22,
1998 (this "Amendment"), among R&B FALCON CORPORATION, a Delaware
corporation ("Holdings"), RBF DEEPWATER EXPLORATION III INC., a Nevada
corporation (f/k/a RB Deepwater Exploration III Inc.) (the "Borrower"),
the various lending institutions party to the Credit Agreement referred
to below (each, a "Bank" and, collectively, the "Banks"), CREDIT LYONNAIS
NEW YORK BRANCH, as Syndication Agent and CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH, as Administrative Agent for the Banks (the
"Agent"). All capitalized terms used herein and not otherwise defined
shall have the meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Banks and the Agent are
parties to a Credit Agreement, dated as of February 24, 1998 (as amended
to date, the "Credit Agreement"); and
WHEREAS, the parties thereto and hereto wish to amend the
Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to Credit Agreement.
1. The first Paragraph of the Credit Agreement is hereby
amended by (i) deleting the reference therein to "RB DEEPWATER
EXPLORATION III INC." and inserting in lieu thereof a reference to "RBF
DEEPWATER EXPLORATION III INC. (f/k/a RB Deepwater Exploration III
Inc.)".
2. Section 7.01 of the Credit Agreement is hereby amended by
(i) deleting the word "and" at the end of clause (e) thereof, (ii)
redesignating clause (f) thereof as clause (g) and (iii) inserting the
following new clause (f) immediately following clause (e) thereof:
(f) Indebtedness of Cliffs Drilling acquired pursuant to the
Cliffs Acquisition in an aggregate principal amount not to exceed
$235,000,000, provided that (i) such Indebtedness existed at the
time of the consummation of the Cliffs Acquisition and was not
created in contemplation thereof (and the provisions thereof were
not altered in any material respect in contemplation thereof), (ii)
Holdings and the Borrower have no liability with respect to any such
Indebtedness and (iii) any Liens securing such Indebtedness apply
only to the assets of Cliffs Drilling acquired pursuant to the
Cliffs Acquisition (and no additional assets are granted as security
following, or in contemplation of, the Cliffs Acquisition); and
3. Section 7.04 of the Credit Agreement is hereby amended by
(i) deleting the word "and" at the end of clause (c) thereof, (ii)
redesignating clause (d) thereof as clause (e) and (iii) inserting the
following new clause (d) immediately following clause (c) thereof:
(d) Holdings and its Subsidiaries may consummate the Cliffs
Acquisition in accordance with the Cliffs Acquisition Documents
delivered to the Administrative Agent prior to the Second Amendment
Effective Date; and
4. Section 7.08 of the Credit Agreement is hereby amended by
(i) deleting the word "and" at the end of clause (iv) thereof and
inserting a comma in lieu thereof and (ii) inserting the following new
clause (vi) immediately following clause (v) thereof:
"and (vi) this Section 7.08 shall not prohibit the restricted
payment provisions contained in the Cliffs Indenture and the Cliffs
Credit Agreement to the extent such restrictions and any exceptions
thereto are not materially altered pursuant to the Cliffs
Acquisition or in anticipation thereof in a manner which would be
adverse to the Banks"
5. Section 7.12 of the Credit Agreement is hereby amended by
inserting the text ",the Cliffs Indenture or the Cliffs Credit Agreement"
immediately following the reference to "Indenture" appearing therein.
6. Section 9 of the Credit Agreement is hereby amended by
inserting the following new definitions in appropriate alphabetical
order:
"Cliffs Acquisition" shall mean the acquisition by a Wholly-
Owned Subsidiary of Holdings by way of merger of all of the capital
stock of Cliffs Drilling in accordance with the Cliffs Acquisition
Documents.
"Cliffs Acquisition Documents" shall mean the Agreement and
Plan of Merger, dated as of August 21, 1998, among Holdings, RBF
Cliffs Acquisition Corp. and Cliffs Drilling, and all exhibits,
schedules and ancillary documents thereto.
"Cliffs Credit Agreement" shall mean the Third Restated Credit
Agreement, dated July 29, 1998, among Cliffs Drilling, Cliffs Oil &
Gas Company, Cliffs Drilling International, Inc. and ING (U.S.)
Capital Corporation, as agent for the lenders named therein, as the
same may be amended, modified or supplemented from time to time in
accordance therewith and herewith.
"Cliffs Drilling" shall mean Cliffs Drilling Company, a
Delaware Corporation.
"Cliffs Indenture" shall mean the Indenture, dated as of May
15, 1996, among Cliffs Drilling Company, certain of its
subsidiaries, and Fleet National Bank, as Trustee, governing Cliffs
Drilling's 10.25% Senior Notes due 2003 and each supplemental
indenture executed in connection therewith prior to the date hereof.
II Miscellaneous Provisions.
1. In order to induce the Banks to enter into this Amendment,
the Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Second
Amendment Effective Date both before and after giving effect to this
Amendment; and
(b) all of the representations and warranties contained in the
Credit Agreement and the other Credit Documents are true and correct
in all material respects on the Second Amendment Effective Date both
before and after giving effect to this Amendment, with the same
effect as though such representations and warranties had been made
on and as of the Second Amendment Effective Date (it being
understood that any representation or warranty made as of a specific
date shall be true and correct in all material respects as of such
specific date).
2. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of
the Credit Agreement or any other Credit Document.
3. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered
shall be an original, but all of which shall together constitute one and
the same instrument. A complete set of counterparts shall be lodged with
the Borrower and the Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the
"Second Amendment Effective Date") when each of Holdings, Parent, the
Borrower and the Required Banks shall have signed a counterpart hereof
(whether the same or different counterparts) and shall have delivered
(including by way of facsimile transmission) the same to the Agent at its
Notice Office. The Agent will give the Borrower and each Bank prompt
notice of the occurrence of the Second Amendment Effective Date.
6. From and after the Second Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents
to the Credit Agreement shall be deemed to be references to the Credit
Agreement as amended hereby.
* * *
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date
first above written.
R&B FALCON CORPORATION
By:_________________________
Title:
RBF DEEPWATER EXPLORATION III INC.
By:_________________________
Title:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH, Individually and as Agent
By:_________________________
Title:
By:_________________________
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
Individually and as Syndication Agent
By:_________________________
Title:
SKANDINAVISKA ENSKILDA BANKEN AB (Publ.)
By:_________________________
Title:
By:_________________________
Title:
CREDIT AGRICOLE INDOSUEZ
By:_________________________
Title:
BANK OF NOVA SCOTIA
By:_________________________
Title:
EXHIBIT 10.218
THIRD AMENDMENT TO CREDIT AGREEMENT
THIRD AMENDMENT TO CREDIT AGREEMENT, dated as of December 9,
1998 (this "Amendment"), among R&B FALCON CORPORATION, a Delaware
corporation ("Holdings"), RBF DEEPWATER EXPLORATION III INC., a Nevada
corporation (f/k/a RB Deepwater Exploration III Inc.) (the "Borrower"),
the various lending institutions party to the Credit Agreement referred
to below (each, a "Bank" and, collectively, the "Banks"), CREDIT LYONNAIS
NEW YORK BRANCH, as Syndication Agent and CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH, as Administrative Agent for the Banks (the
"Agent"). All capitalized terms used herein and not otherwise defined
shall have the meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Banks and the Agent are
parties to a Credit Agreement, dated as of February 24, 1998 (as amended
to date, the "Credit Agreement"); and
WHEREAS, the parties thereto and hereto wish to amend the
Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to Credit Agreement.
1. Section 7.01 of the Credit Agreement is hereby amended by
(i) deleting the word "and" at the end of clause (f) thereof, (ii)
redesignating clause (g) thereof as clause (h) and (iii) inserting the
following new clause (g) immediately following clause (f) thereof:
(g) Additional senior Indebtedness of Holdings in an aggregate
principal amount not to exceed $400,000,000 and additional
subordinated Indebtedness of Holdings in an aggregate principal
amount not to exceed $200,000,000; provided that (i) no respective
issue of Indebtedness incurred pursuant to this clause (g) shall
have any scheduled amortization payments or a final maturity prior
to the fourth anniversary of the initial borrowing of such
respective issue of Indebtedness and (ii) Holdings shall not make
any optional repayments (whether in cash, securities, or other
property), including any sinking fund or similar deposit, on account
of such Indebtedness; and
2. Section 7.02 of the Credit Agreement is hereby amended by
(i) deleting the word "and" at the end of clause (c) thereof, (ii)
deleting the period at the end of clause (d) thereof and inserting a semi-
colon in lieu thereof and (iii) inserting the following new clauses (e)
and (f) immediately following clause (d) thereof:
(e) Holdings and its Subsidiaries may pledge assets in support
of Indebtedness permitted by Section 7.01(e), provided that the
aggregate principal amount of Indebtedness secured by Liens
permitted by this clause (e) shall not at any time exceed 15.0% of
Holdings' Consolidated Net Worth (as defined in the Indenture); and
(f) Holdings and its Subsidiaries may pledge the rig RBS8M,
the contract with Shell Deepwater Development Inc. relating to such
rig, the construction contact with respect to such rig and the
insurances maintained on such rig in support of Permitted Project
Debt described in clause (ii) of the definition of Permitted Project
Debt (including any refinancing of such Indebtedness permitted by
clause (iii) of the definition of Permitted Project Debt).
3. Section 7.06 of the Credit Agreement is hereby amended by
(i) deleting the word "and" at the end of clause (b) thereof and
inserting a comma in lieu thereof and (ii) inserting the following new
clause (d) immediately prior to the period at the end of clause (c)
thereof:
and (d) Arcade Drilling AS may make share capital distributions to
its shareholders pro rata according to their respective ownership
percentages
4. Section 7.10 of the Credit Agreement is hereby amended by
deleting said section in its entirety and inserting the following new
Section 7.10 in lieu thereof:
7.10. EBITDA Leverage Ratio. Holdings will not permit its
EBITDA Leverage Ratio as of the end of any fiscal quarter of
Holdings (calculated quarterly at the end of each fiscal quarter) to
be greater than 3.75:1.00. For purposes of this Section 7.10,
"EBITDA Leverage Ratio" shall mean the ratio of (i) the difference
of Funded Debt minus cash and cash equivalents of Holdings on a
consolidated basis to (ii) EBITDA for the four fiscal quarters
ending on such date; provided that (A) EBITDA for the period ending
on June 30, 1998 shall equal the product of EBITDA for the six-month
period ending on such date times 2 and (B) EBITDA for the period
ending on September 30, 1998 shall equal the product of EBITDA for
the nine-month period ending on such date times 1.33.
5. Section 9 of the Credit Agreement is hereby amended by
deleting the definitions of "Eurodollar Margin" and "Permitted Project
Debt" appearing therein and inserting the following new definitions,
respectively, in lieu thereof:
"Eurodollar Margin" shall mean a percentage equal to 1.25% per
annum.
"Permitted Project Debt" shall mean Indebtedness (including,
without limitation, or duplication, the Guarantee of any such
Indebtedness by Holdings and, in the case of clause (ii) below, the
issuance by Holdings or any of its Subsidiaries of a surety bond in
support of any such Indebtedness) incurred in connection with (i)
the construction of Deepwater Pathfinder, Deepwater Frontier and
Drillship III (including, without limitation, the Loans) by the
respective joint venture or Subsidiary owning such vessel not to
exceed $375,000,000 in the aggregate, (ii) the construction of the
rig RBS8M (formerly RBS6) in an aggregate principal amount not to
exceed $250,000,000 and (iii) all extensions, renewals and
replacements of any such Indebtedness described in clauses (i) and
(ii) above by the primary obligor thereof that do not increase the
outstanding principal amount thereof.
II Miscellaneous Provisions.
1. In order to induce the Banks to enter into this Amendment,
the Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Third
Amendment Effective Date both before and after giving effect to this
Amendment; and
(b) all of the representations and warranties contained in the
Credit Agreement and the other Credit Documents are true and correct
in all material respects on the Third Amendment Effective Date both
before and after giving effect to this Amendment, with the same
effect as though such representations and warranties had been made
on and as of the Third Amendment Effective Date (it being understood
that any representation or warranty made as of a specific date shall
be true and correct in all material respects as of such specific
date).
2. In order to induce the Banks to enter into this Amendment,
Holdings and the Borrower hereby agree that in the event the Borrower
takes delivery of the Drillship pursuant to the Construction Contract at
any time prior to the Maturity Date, the Borrower shall grant to the
Collateral Agent on such date a first preferred ship mortgage on the
Drillship, and shall deliver to the Agent such legal opinions and other
documentation with respect to such security interest as the Agent may
reasonably request, all of which shall be reasonably satisfactory in form
and substance to the Agent.
3. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of
the Credit Agreement or any other Credit Document.
4. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered
shall be an original, but all of which shall together constitute one and
the same instrument. A complete set of counterparts shall be lodged with
the Borrower and the Agent.
5. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
6. This Amendment shall become effective on the date (the
"Third Amendment Effective Date") when (i) each of Holdings, the Borrower
and the Required Banks shall have signed a counterpart hereof (whether
the same or different counterparts) and shall have delivered (including
by way of facsimile transmission) the same to the Agent at its Notice
Office and (ii) Holdings and/or the Borrower shall have paid to each Bank
an amendment fee equal to 0.15% of such Banks Commitment as in effect on
the Third Amendment Effective Date immediately prior to giving effect to
this Amendment. The Agent will give the Borrower and each Bank prompt
notice of the occurrence of the Third Amendment Effective Date.
7. From and after the Third Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents
to the Credit Agreement shall be deemed to be references to the Credit
Agreement as amended hereby.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date
first above written.
R&B FALCON CORPORATION
By:_________________________
Title:
RBF DEEPWATER EXPLORATION III INC.
By:_________________________
Title:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH, Individually and as Agent
By:_________________________
Title:
By:_________________________
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
Individually and as Syndication Agent
By:_________________________
Title:
SKANDINAVISKA ENSKILDA BANKEN AB (Publ.)
By:_________________________
Title:
By:_________________________
Title:
CREDIT AGRICOLE INDOSUEZ
By:________________________
Title:
BANK OF NOVA SCOTIA
By:_________________________
Title:
EXHIBIT 10.219
FOURTH CONSENT AND AMENDMENT TO CREDIT AGREEMENT
FOURTH AMENDMENT TO CREDIT AGREEMENT, dated as of December 18,
1998 (this "Amendment"), among R&B FALCON CORPORATION, a Delaware
corporation ("Holdings"), RBF DEEPWATER EXPLORATION III INC., a Nevada
corporation (f/k/a RB Deepwater Exploration III Inc.) (the "Borrower"),
the various lending institutions party to the Credit Agreement referred
to below (each, a "Bank" and, collectively, the "Banks"), CREDIT LYONNAIS
NEW YORK BRANCH, as Syndication Agent and CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH, as Administrative Agent for the Banks (the
"Agent"). All capitalized terms used herein and not otherwise defined
shall have the meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Banks and the Agent are
parties to a Credit Agreement, dated as of February 24, 1998 (as amended
to date, the "Credit Agreement"); and
WHEREAS, the parties thereto and hereto agree as follows and
wish to amend the Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Consents and Amendments.
1. On and as of the Extension Date (as defined below) and
after giving effect to the prepayment and commitment reduction to be made
on such date, Section 9 of the Credit Agreement is hereby amended by
deleting the definition of "Maturity Date" appearing therein and
inserting the following new definition in lieu thereof:
"Maturity Date" shall mean June 30, 1999.
2. Notwithstanding anything to the contrary contained in the
Credit Agreement (including, without limitation, Sections 2.02, 3.01 and
3.03), and in addition to any other payments or Commitment reductions
which may be required or permitted pursuant to the terms of the Credit
Agreement, the parties hereto agree that on December 31, 1998 (the
"Extension Date") the Borrower may , upon one day's prior notice to the
Administrative Agent, make a non-pro rata prepayment (such prepayment,
except as expressly provided herein, to be made in accordance with
Section 3.03 of the Credit Agreement) of Loans for the account of Bank of
Nova Scotia equal to the then outstanding principal amount of Loans made
by Bank of Nova Scotia plus accrued but unpaid interest and fees owing to
Bank of Nova Scotia on such date; provided that such prepayment of Loans
shall be accompanied by a simultaneous non-pro rata permanent reduction
to the Total Commitment which shall reduce the Commitment of Bank of Nova
Scotia in effect at such time to $0. As of the Extension Date, and after
giving effect to the prepayment and commitment reduction to be made on
such date, Bank of Nova Scotia shall relinquish its rights and be
released from any further obligations under the Credit Agreement, and
shall cease to be a Bank for all purposes of the Credit Agreement.
3. Notwithstanding anything to the contrary contained in the
Credit Agreement (including, without limitation, Section 7.08), the
indenture governing Holdings' $400,000,000 notes offering closing on or
about December 22, 1998 shall be permitted to contain such negative
covenants with respect to Liens and Restricted Payments as Holdings deems
appropriate to effectuate such notes offering, provided that, in no event
shall such restrictive covenants prohibit (i) the granting to the
Collateral Agent of the Security Agreement Collateral or a mortgage on
the Drillship or (ii) the performance by Holdings of its obligations
under Section 12 of the Credit Agreement.
II. Miscellaneous Provisions.
1. In order to induce the Banks to enter into this Amendment,
the Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Fourth
Amendment Effective Date both before and after giving effect to this
Amendment; and
(b) all of the representations and warranties contained in the
Credit Agreement and the other Credit Documents are true and correct
in all material respects on the Fourth Amendment Effective Date both
before and after giving effect to this Amendment, with the same
effect as though such representations and warranties had been made
on and as of the Fourth Amendment Effective Date (it being
understood that any representation or warranty made as of a specific
date shall be true and correct in all material respects as of such
specific date).
2. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision
(or of any provision beyond the specific consents or waivers granted
herein) of the Credit Agreement or any other Credit Document.
3. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered
shall be an original, but all of which shall together constitute one and
the same instrument. A complete set of counterparts shall be lodged with
the Borrower and the Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the
"Fourth Amendment Effective Date") when each of Holdings, the Borrower
and each of the Banks (other than Bank of Nova Scotia) shall have signed
a counterpart hereof (whether the same or different counterparts) and
shall have delivered (including by way of facsimile transmission) the
same to the Agent at its Notice Office; provided that, notwithstanding
the foregoing, the consent granted pursuant to paragraph I.3. of this
Amendment shall be effective upon the execution and delivery of such
counterparts by Holdings, the Borrower and the Required Banks.
6. From and after the Fourth Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents
to the Credit Agreement shall be deemed to be references to the Credit
Agreement as amended hereby.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date
first above written.
R&B FALCON CORPORATION
By:_________________________
Title:
RBF DEEPWATER EXPLORATION III INC.
By:_________________________
Title:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH, Individually and as Agent
By:_________________________
Title:
By:_________________________
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
Individually and as Syndication Agent
By:_________________________
Title:
SKANDINAVISKA ENSKILDA BANKEN AB (Publ.)
By:_________________________
Title:
By:_________________________
Title:
CREDIT AGRICOLE INDOSUEZ
By:_________________________
Title:
BANK OF NOVA SCOTIA
By:_________________________
Title:
EXHIBIT 10.220
FIFTH AMENDMENT TO CREDIT AGREEMENT
FIFTH AMENDMENT TO CREDIT AGREEMENT, dated as of January 21,
1999 (this "Amendment"), among R&B FALCON CORPORATION, a Delaware
corporation ("Holdings"), RBF DEEPWATER EXPLORATION III INC., a Nevada
corporation (f/k/a RB Deepwater Exploration III Inc.) (the "Borrower"),
the various lending institutions party to the Credit Agreement referred
to below (each, a "Bank" and, collectively, the "Banks"), CREDIT LYONNAIS
NEW YORK BRANCH, as Syndication Agent and CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH, as Administrative Agent for the Banks (the
"Agent"). All capitalized terms used herein and not otherwise defined
shall have the meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Banks and the Agent are
parties to a Credit Agreement, dated as of February 24, 1998 (as amended
to date, the "Credit Agreement"); and
WHEREAS, the parties thereto and hereto wish to amend the
Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to Credit Agreement.
1. Section 7.01 of the Credit Agreement is hereby amended by
(i) deleting the word "and" at the end of clause (g) thereof, (ii)
redesignating clause (h) thereof as clause (i), (iii) inserting the
following new clause (h) immediately following clause (g) thereof:
(h) Indebtedness of Holdings (including any extensions or
refinancing thereof, provided that any such refinancing or extension
does not increase the principal amount thereof beyond that
outstanding on the date of such extension or refinancing), the
proceeds of which are used solely to discharge indebtedness of
Cliffs Drilling under the 10.25% senior notes of Cliffs Drilling due
2003, and in an aggregate principal amount not to exceed that
necessary to discharge the portion of such notes required to be
redeemed pursuant to the offer to repurchase made pursuant to the
Cliffs Acquisition; provided that such Indebtedness (or refinancing
thereof, as the case may be) shall (i) be unsecured and subordinate
to the Loans and (ii) shall have a maturity date not earlier than
one year after the Maturity Date (as such term is defined from time
to time), except that such maturity may occur earlier if and to the
extent such maturity results solely in the conversion of such
Indebtedness into, or exchange for, other Indebtedness of the
Borrower, in the same aggregate principal amount, which is unsecured
and subordinated to the Loans and has a maturity date not earlier
than one year after the Maturity Date (as such term is defined from
time to time); and
, and (iv) deleting clause (f) thereof in its entirety and inserting the
following new clause (f) in lieu thereof :
(f) Indebtedness of Cliffs Drilling acquired pursuant to the
Cliffs Acquisition (including any loans made pursuant to unused
revolving commitments) in an aggregate principal amount not to
exceed $235,000,000, provided that (i) such Indebtedness (or
commitments, as the case may be) existed at the time of the
consummation of the Cliffs Acquisition and was not created in
contemplation thereof (and the provisions thereof were not altered
in any material respect in contemplation thereof), (ii) Holdings and
the Borrower have no liability with respect to any such Indebtedness
and (iii) any Liens securing such Indebtedness apply only to the
assets of Cliffs Drilling acquired pursuant to the Cliffs
Acquisition (and no additional assets are granted as security
following, or in contemplation of, the Cliffs Acquisition), and any
extension or refinancing of such Indebtedness, provided that such
extension or refinancing (x) does not increase the principal amount
of such Indebtedness above the outstanding amount thereof
immediately prior to giving effect to such refinancing, (y) does not
have a maturity date prior to one year after the Maturity Date (as
defined from time to time) and (z) is not secured by any assets not
securing the Indebtedness to be refinanced; and
2. Section 7.06 of the Credit Agreement is hereby amended by
(i) deleting the word "and" appearing at the end of clause (c) thereof
and inserting a comma in lieu thereof and (ii) inserting the following
new clause (e) immediately prior to the period at the end of clause (d)
thereof:
and (e) so long as no Default or Event of Default then exists or
would result immediately after giving effect thereto, Holdings may
pay dividends on its preferred stock not to exceed a rate
commensurate with a 10% coupon on such preferred stock.
3. Section 7.09 of the Credit Agreement is hereby amended by
deleting said section in its entirety and inserting the following new
Section 7.09 in lieu thereof:
7.09. Tangible Net Worth. Holdings will not permit at any
time its Tangible Net Worth to be less than $600,000,000 plus (i)
50% of its cumulative Consolidated Net Income, if positive, for the
period from April 1, 1998 through the date of calculation, plus (ii)
100% of any equity issued by Holdings after the Effective Date;
provided that , for purposes of this Section 7.09, the Cliffs
Acquisition shall be deemed to constitute the issuance by Holdings
of equity in an amount equal to the increase in Holdings' Tangible
Net Worth resulting from the Cliffs Acquisition.
4. Section 7 of the Credit Agreement is hereby amended by
inserting the following new Section 7.13:
Section 7.13 Restriction on Certain Debt Payments. Holdings
shall not repay any indebtedness incurred pursuant to Section
7.01(h) except out of net proceeds from the issuance by the Borrower
of (i) capital stock permitted to be issued hereunder or (ii)
refinancing Indebtedness permitted pursuant to Section 7.01(h);
provided that, so long as no Default or Event of Default exists or
would result immediately after giving effect to such payment, this
Section 7.13 shall not be deemed to prevent Holdings from making
regularly scheduled payments of accrued interest on such
Indebtedness.
5. Annex 7.01 of the Credit Agreement is hereby amended by
adding thereto the following item:
"20. Guaranty by R&B dated as of November 28, 1995 in favor of
Deep Sea Investors, L.L.C. with respect to the obligations of
Reading & Bates Drilling Co. under the Memorandum of Agreement
and a charter as of the same date with respect to the
semisubmersible drilling unit M.G Hulme."
6. Annex V of the Credit Agreement is hereby amended by adding
thereto the following item:
"12. Preferred Mortgage on the Jim Cunningham dated November
28, 1995 between Reading & Bates Drilling Co. and Wilmington
Trust Company, as Trustee, for the benefit of Deep Sea
Investors, L.L.C., in connection with item 20 of Schedule
7.01."
II Miscellaneous Provisions.
1. In order to induce the Banks to enter into this Amendment,
the Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Fifth
Amendment Effective Date both before and after giving effect to this
Amendment; and
(b) all of the representations and warranties contained in the
Credit Agreement and the other Credit Documents are true and correct
in all material respects on the Fifth Amendment Effective Date both
before and after giving effect to this Amendment, with the same
effect as though such representations and warranties had been made
on and as of the Fifth Amendment Effective Date (it being understood
that any representation or warranty made as of a specific date shall
be true and correct in all material respects as of such specific
date).
2. In order to induce the Banks to enter into this Amendment,
Holdings and the Borrower hereby agree that in the event the Borrower
takes delivery of the Drillship pursuant to the Construction Contract at
any time prior to the Maturity Date, the Borrower shall grant to the
Collateral Agent on such date a first preferred ship mortgage on the
Drillship, and shall deliver to the Agent such legal opinions and other
documentation with respect to such security interest as the Agent may
reasonably request, all of which shall be reasonably satisfactory in form
and substance to the Agent.
3. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of
the Credit Agreement or any other Credit Document.
4. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered
shall be an original, but all of which shall together constitute one and
the same instrument. A complete set of counterparts shall be lodged with
the Borrower and the Agent.
5. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
6. This Amendment shall become effective on the date (the
"Fifth Amendment Effective Date") when (i) each of Holdings, the Borrower
and the Required Banks shall have signed a counterpart hereof (whether
the same or different counterparts) and shall have delivered (including
by way of facsimile transmission) the same to the Agent at its Notice
Office and (ii) Holdings and/or the Borrower shall have paid to each Bank
that has executed and delivered a counterpart hereof on or before 12:00
Noon (New York time) on January 21, 1999 an amendment fee equal to 0.15%
of such Banks Commitment as in effect on the Fifth Amendment Effective
Date immediately prior to giving effect to this Amendment. The Agent
will give the Borrower and each Bank prompt notice of the occurrence of
the Fifth Amendment Effective Date.
7. From and after the Fifth Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents
to the Credit Agreement shall be deemed to be references to the Credit
Agreement as amended hereby.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date
first above written.
R&B FALCON CORPORATION
By:_________________________
Title:
RBF DEEPWATER EXPLORATION III INC.
By:_________________________
Title:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH, Individually and as Agent
By:_________________________
Title:
By:_________________________
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
Individually and as Syndication Agent
By:_________________________
Title:
SKANDINAVISKA ENSKILDA BANKEN AB (Publ.)
By:_________________________
Title:
By:_________________________
Title:
CREDIT AGRICOLE INDOSUEZ
By:_________________________
Title:
By:_________________________
Title:
EXHIBIT 10.221
SIXTH AMENDMENT TO CREDIT AGREEMENT
SIXTH AMENDMENT TO CREDIT AGREEMENT, dated as of February 22,
1999 (this "Amendment"), among R&B FALCON CORPORATION, a Delaware
corporation ("Holdings"), RBF DEEPWATER EXPLORATION III INC., a Nevada
corporation (f/k/a RB Deepwater Exploration III Inc.) (the "Borrower"),
the various lending institutions party to the Credit Agreement referred
to below (each, a "Bank" and, collectively, the "Banks"), CREDIT LYONNAIS
NEW YORK BRANCH, as Syndication Agent and CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH, as Administrative Agent for the Banks (the
"Agent"). All capitalized terms used herein and not otherwise defined
shall have the meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Banks and the Agent are
parties to a Credit Agreement, dated as of February 24, 1998 (as amended
to date, the "Credit Agreement"); and
WHEREAS, the parties thereto and hereto wish to amend the
Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to Credit Agreement and Consents.
1. Section 7.01 of the Credit Agreement is hereby amended by
(i) deleting clause (e) thereof in its entirety and inserting the
following new clause (e) in lieu thereof:
(e) Indebtedness of Holdings created under the R&B Falcon
Credit Agreement in an aggregate principal amount not exceed
$200,000,000.
, (ii) deleting the word "and" at the end of clause (h) thereof, (ii)
redesignating clause (i) thereof as clause (j), and (iii) inserting the
following new clause (i) immediately following clause (h) thereof:
(i) Senior unsecured Indebtedness of Holdings (including any
refinancing thereof, provided that any such refinancing does not
increase the principal amount thereof beyond that outstanding on the
date of such refinancing) in an aggregate principal amount not to
exceed $350,000,000; provided that such Indebtedness (or refinancing
thereof, as the case may be) shall at all times (i) be unsecured and
(ii) have a maturity date not earlier than one year after the
Maturity Date (as such term is defined from time to time) (except
for any refinancing which results solely in the conversion of such
Indebtedness into, or exchange for, other Indebtedness of Holdings,
in an aggregate principal amount not to exceed that outstanding on
the date of such refinancing, which is unsecured and has a maturity
date not earlier than one year after the Maturity Date (as such term
is defined from time to time)); and
2. Section 7.11 of the Credit Agreement is hereby amended by
(i) deleting clause (iii) thereof in its entirety and inserting the
following new clause (iii) in lieu thereof:
and (iii) sales of properties and assets which shall not exceed
$50,000,000 in fair market value in the aggregate in any fiscal year
of Holdings; provided that in addition to the above permitted asset
sales, Holdings and its Subsidiaries shall be permitted to sell Non-
Core Assets not exceeding $250,000,000 in fair market value in the
aggregate in any fiscal year of Holdings.
3. (a) Section 7.10 of the Credit Agreement is hereby amended
by deleting said section in its entirety and inserting the following new
Section 7.10 in lieu thereof:
7.10. Interest Coverage Ratio. Holdings will not permit its
Interest Coverage Ratio at the end of any fiscal quarter of Holdings
(calculated quarterly at the end of each fiscal quarter of Holdings)
to be less than 1.50:1.00. For purposes of this Section 7.10, the
"Interest Coverage Ratio" shall mean the ratio of (i) EBITDA for the
four fiscal quarters of Holdings ending on such date to (ii)
Consolidated Interest Expense for the four fiscal quarters of
Holdings ending on such date.
(b) Notwithstanding the foregoing amendment to Section 7.10 of
the Credit Agreement, for purposes of calculating the EDITDA Leverage
Ratio of Holdings for the periods ending December 31, 1998, March 31,
1999, June 30, 1999 and September 30, 1999 (in each case to the extent
such period ends prior to the Sixth Amendment Effective Date),
Consolidated Net Income, interest, taxes, depreciation, depletion and
amortization shall be determined on a pro forma basis as if the Cliffs
Acquisition had occurred on October 1, 1997 and as if the Cliffs
Acquisition had been accounted for as a pooling of interests (but without
duplication in the case of months previously consolidated).
4. Section 7.13 of the Credit Agreement is hereby amended by
deleting said section in its entirety and inserting the following new
Section 7.13 in lieu thereof:
Section 7.13 Restriction on Certain Debt Payments. Holdings
shall not (i) repay any indebtedness incurred pursuant to Section
7.01(h) except out of net proceeds from the issuance by the Borrower
of (x) capital stock permitted to be issued hereunder or (y)
refinancing Indebtedness permitted pursuant to Section 7.01(h);
provided that, so long as no Default or Event of Default exists or
would result immediately after giving effect to such payment, this
Section 7.13(i) shall not be deemed to prevent Holdings from making
regularly scheduled payments of accrued interest on such
Indebtedness or (ii) make any optional or voluntary payment or
prepayment on or redemption or acquisition for value of, or any
prepayment or redemption as a result of any asset sale, change of
control or similar event of any indebtedness incurred pursuant to
Section 7.01(i).
5. Section 9 of the Credit Agreement is hereby amended by (i)
deleting the definitions of "EBITDA" and "Eurodollar Margin" appearing
therein and (ii) inserting the following new definitions in appropriate
alphabetical order:
"Consolidated Interest Expense" shall mean, for any
period, total interest expense (including that attributable to
Capital Lease Obligations) of Holdings and its Subsidiaries in
accordance with GAAP (provided that, in any event, Consolidated
Interest Expense shall not include capitalized interest) 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.
"EBITDA" shall mean, for any period, the sum of
Consolidated Net Income for such period plus the following
expenses or charges to the extent deducted from Consolidated
Net Income in such period: interest, dividends on preferred
stock, taxes, depreciation, depletion and amortization.
Notwithstanding the foregoing, the calculation of EBITDA shall
not take into account any extraordinary gains or losses, any
non-cash items, or any non-recurring gains or charges.
"Eurodollar Margin" shall mean a percentage equal to 2.00%
per annum.
"Non-Core Assets" shall mean (i) the drilling rigs
Seillean, Iolair, Peregrine VI (Hull), Peregrine VIII (Hull)
and Rig 82, (ii) Equipment Packages for Peregrine VI and
Peregrine VIII and (iii) four supply boats located in West
Africa on the Sixth Amendment Effective Date, each as
determined on the Sixth Amendment Effective Date.
"Sixth Amendment" shall mean the Sixth Amendment to this
Agreement, dated as of February 22, 1999.
"Sixth Amendment Effective Date" shall mean February 23,
1999.
6. Pursuant to Section 7.12 of the Credit Agreement, the Banks
hereby consent to the Fourth Amendment to the R&B Falcon Credit
Agreement, and the granting of the collateral contemplated therein, in
the form delivered to the Agent prior to the Sixth Amendment Effective
Date.
II Miscellaneous Provisions.
1. In order to induce the Banks to enter into this Amendment,
the Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Sixth
Amendment Effective Date both before and after giving effect to this
Amendment; and
(b) all of the representations and warranties contained in the
Credit Agreement and the other Credit Documents are true and correct
in all material respects on the Sixth Amendment Effective Date both
before and after giving effect to this Amendment, with the same
effect as though such representations and warranties had been made
on and as of the Sixth Amendment Effective Date (it being understood
that any representation or warranty made as of a specific date shall
be true and correct in all material respects as of such specific
date).
2. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of
the Credit Agreement or any other Credit Document.
3. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered
shall be an original, but all of which shall together constitute one and
the same instrument. A complete set of counterparts shall be lodged with
the Borrower and the Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
5. This Amendment shall become effective as of 12:01 AM (New
York time) on the date (the "Sixth Amendment Effective Date") when (i)
each of Holdings, the Borrower and the Required Banks shall have signed a
counterpart hereof (whether the same or different counterparts) and shall
have delivered (including by way of facsimile transmission) the same to
the Agent at its Notice Office, (ii) Holdings shall have consummated an
issuance of its convertible preferred stock and received cash proceeds
from such issuance of not less than $250,000,000 less fees and
commissions and (iii) Holdings and/or the Borrower shall have paid, to
each Bank that has executed and delivered a counterpart hereof on or
before 5:00 P.M. (New York time) on February 22, 1999, an amendment fee
equal to 0.15% of such Bank's Commitment as in effect on the Sixth
Amendment Effective Date immediately prior to giving effect to this
Amendment. Notwithstanding the foregoing, the consent set forth in
paragraph I.3.(b) above shall be effective upon the satisfaction of the
condition set forth in clause (i) of this Paragraph II.5 and said consent
shall continue in effect whether or not the remaining conditions are
satisfied. The Agent will give the Borrower and each Bank prompt notice
of the occurrence of the Sixth Amendment Effective Date.
6. From and after the Sixth Amendment Effective Date (or in
the case of Paragraph I.3.(b) only, the satisfaction of the conditions
set forth in Paragraph II.5.(i)), all references in the Credit Agreement
and each of the other Credit Documents to the Credit Agreement shall be
deemed to be references to the Credit Agreement as amended hereby.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date
first above written.
R&B FALCON CORPORATION
By:_________________________
Title:
RBF DEEPWATER EXPLORATION III INC.
By:_________________________
Title:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH, Individually and as Agent
By:_________________________
Title:
By:_________________________
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
Individually and as Syndication Agent
By:_________________________
Title:
SKANDINAVISKA ENSKILDA BANKEN AB (Publ.)
By:_________________________
Title:
By:_________________________
Title:
CREDIT AGRICOLE INDOSUEZ
By:_________________________
Title:
By:_________________________
Title:
SCHEDULE OF NON-CORE ASSETS
EXHIBIT 10.227
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT dated as of November
13, 1998 (this "Amendment") is among: R&B FALCON CORPORATION, the LENDERS
party hereto, and THE CHASE MANHATTAN BANK, as Administrative Agent.
R E C I T A L S
A. The Borrower, the Administrative Agent, and the Lenders (as
defined in the Credit Agreement as hereafter defined) have entered into
that certain Credit Agreement dated as of April 24, 1998 (the "Credit
Agreement"), pursuant to which the Lenders have agreed to make certain
loans and extensions of credit to the Borrower upon the terms and
conditions as provided therein;
B. The Borrower has entered into a merger agreement pursuant to
which Cliffs Drilling Company would merge with a wholly owned subsidiary
of the Borrower in a stock-for-stock exchange; and
C. The Borrower, the Administrative Agent, and the Lenders now
desire to make certain amendments to the Credit Agreement in connection
with the proposed merger.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration and the mutual benefits, covenants and agreements
herein expressed, the parties hereto now agree as follows:
1. All capitalized terms used in this Amendment and not otherwise
defined herein shall have the meanings ascribed to such terms in the
Credit Agreement.
2. Section 1.01 of the Credit Agreement is hereby supplemented,
where alphabetically appropriate, with the addition of the following
definitions:
"Cliffs" means Cliffs Drilling Company, a Delaware
corporation.
"Cliffs Group" means Cliffs and its subsidiaries.
"EBITDA" shall mean, for any period, the sum of
Consolidated Net Income for such period plus the following
expenses or charges to the extent deducted from Consolidated
Net Income in such period: interest, taxes, depreciation,
depletion and amortization for the Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP.
"First Amendment" means that certain First Amendment to
Credit Agreement dated as of November 13, 1998, among the
Borrower, the Lenders and the Administrative Agent."
"Merger" means the merger of RBF Cliffs Acquisition Corp.,
a Delaware corporation and a direct wholly owned subsidiary of
the Borrower, with and into Cliffs, as a result of which Cliffs
would become a direct wholly owned subsidiary of the Borrower.
3. Section 6.01 of the Credit Agreement is hereby amended to add
the following clauses (f) and (g):
"(f) Indebtedness of Cliffs existing under the 10.25%
senior notes of Cliffs due 2003 not to exceed $203,103,000
outstanding, but not any extensions, renewals and replacement
of any such Indebtedness."
"(g) Indebtedness of Cliffs (and its subsidiaries party
thereto) under a revolving credit facility with ING (U.S.)
Capital Corporation as the agent not to exceed $35,000,000
outstanding, but not any extensions, renewals and replacement
of any such Indebtedness."
4. Section 6.02 of the Credit Agreement is hereby further amended
to add the following clause (e):
"(e) Liens on any property or assets of the Cliffs Group
to secure the Indebtedness permitted by Section 6.01(g)."
5. Section 6.03 of the Credit Agreement is hereby waived for the
limited purpose of permitting the Merger on the terms and conditions set
forth in the Form S-4 of the Borrower filed with the Securities and
Exchange Commission on September 15, 1998.
6. Section 6.03 of the Credit Agreement is hereby amended by
adding the following sentence at the end of the section:
"Notwithstanding any other provision in this Section 6.03
to the contrary, for so long as any Indebtedness permitted by
Sections 6.01(f) and (g) of the Credit Agreement is outstanding
(or any commitment for any such Indebtedness is outstanding),
no member of the Cliffs Group may merge with or consolidate
into the Borrower or any other Subsidiary of the Borrower not
in the Cliffs Group."
7. Section 6.04 of the Credit Agreement is hereby amended by
adding the following clause (e):
"(e) the acquisition by the Borrower of Cliffs pursuant
to the Merger."
8. Sections 6.04(b) and (c) of the Credit Agreement are hereby
amended to read as follows:
"(b) investments by the Borrower or by any Subsidiary in
the capital stock of its Subsidiaries; provided that neither
the Borrower nor any Subsidiary that is not in the Cliffs
Group may invest in any member of the Cliffs Group except for
the investment to acquire Cliffs pursuant to the Merger;
(c) loans or advances made by the Borrower to any
Subsidiary and made by any Subsidiary to the Borrower or any
other Subsidiary; provided that neither the Borrower nor any
Subsidiary that is not in the Cliffs Group may make loans or
advances to any member of the Cliffs Group; and"
9. Section 6.08 of the Credit Agreement is hereby amended by
adding the following clause (vi) before the period at the end of the
sentence:
"and (vi) the foregoing shall not apply to restrictions
and conditions existing on the date of the Merger and contained
in the instruments evidencing the Indebtedness permitted by
Sections 6.01(f) and (g) (but shall apply to any extension or
renewal of, or any amendment or modification expanding the
scope of, any such restriction or condition)."
10. Section 6.09 of the Credit Agreement is hereby amended by
adding the following clause before the period at the end of the sentence:
", plus (iii) 100% of any equity issued by the Borrower in
connection with the Merger to the extent not included in clause
(ii) above."
11. Section 6.10 of the Credit Agreement is hereby supplemented by
adding the following sentence at the end of the present Section 6.10
following the graph:
"Notwithstanding anything to the contrary herein, for the
purposes of determining the EDITBA Leverage Ratio pursuant to
this Section 6.10 for the periods ending December 31, 1998,
March 31, 1999, June 30, 1999 and September 30, 1999,
Consolidated Net Income and interest, taxes, depreciation,
depletion and amortization in such ratio shall be determined on
a pro forma basis as if the Merger had occurred on October 1,
1997 and as if the Merger had been accounted for as a pooling
of interests (except without duplication for months already
consolidated) and (ii) such ratio shall be calculated as if the
Merger had occurred on October 1, 1997 and been accounted for
as a pooling of interests."
12. This Amendment shall become binding on the Lenders when, and
only when, the Administrative Agent shall have received each of the
following in form and substance satisfactory to the Administrative Agent
or its counsel:
(a) counterparts of this Amendment executed by the Borrower
and the Required Lenders;
(b) all conditions precedent to the Merger shall have been
waived or satisfied except for the effectiveness of this Amendment
and the Merger shall become effective promptly thereafter; and
(c) such other documents as it or its counsel may reasonably
request.
13. The parties hereto hereby acknowledge and agree that, except as
specifically supplemented and amended, changed or modified hereby, the
Credit Agreement shall remain in full force and effect in accordance with
its terms.
14. The Borrower hereby reaffirms that as of the date of this
Amendment, the representations and warranties contained in Article III of
the Credit Agreement are true and correct on the date hereof as though
made on and as of the date of this Amendment, except as such
representations and warranties are expressly limited to an earlier date.
15. THIS AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND
ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, OTHER THAN THE CONFLICT OF LAWS
RULES THEREOF.
16. This Amendment may be executed in two or more counterparts, and
it shall not be necessary that the signatures of all parties hereto be
contained on any one counterpart hereof; each counterpart shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
[SIGNATURES BEGIN NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first above written.
BORROWER: R&B FALCON CORPORATION
By:_____________________________
Robert Fulton
Executive Vice President
ADMINISTRATIVE AGENT THE CHASE MANHATTAN BANK
AND LENDER:
By:_____________________________
Name:
Title:
SYNDICATION AGENT CREDIT SUISSE FIRST BOSTON
AND LENDER:
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
DOCUMENTATION AGENT PARIBAS
AND LENDER:
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
CO-SYNDICATION AGENT CHRISTIANIA BANK OG KREDITKASSE ASA,
AND LENDER: NEW YORK BRANCH
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
MANAGING AGENT THE BANK OF NOVA SCOTIA
AND LENDER:
By:_____________________________
Name:
Title:
MANAGING AGENT BANK OF TOKYO-MITSUBISHI, LTD.
AND LENDER:
By:_____________________________
Name:
Title:
MANAGING AGENT WELLS FARGO BANK (TEXAS), N.A.
AND LENDER:
By:_____________________________
Name:
Title:
OTHER LENDERS: BANK AUSTRIA AKTIENGESELLSCHAFT
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
CREDIT AGRICOLE INDOSUEZ
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
FIRST NATIONAL BANK OF COMMERCE
By:_____________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED
By:_____________________________
Name:
Title:
SKANDINAVISKA ENSKILDA BANKEN AB (PUBL)
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
ABN AMRO BANK N.V.
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:_____________________________
Name:
Title:
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
CAYMAN ISLAND BRANCH
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
THE DAI-ICHI KANGYO BANK, LIMITED
By:_____________________________
Name:
Title:
THE FUJI BANK, LIMITED
By:_____________________________
Name:
Title:
KREDIETBANK N.V.
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
NATEXIS BANQUE
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
EXHIBIT 10.228
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment")
dated as of the Second Amendment Effective Date (hereinafter defined) is
among: R&B FALCON CORPORATION, and the REQUIRED LENDERS under the
hereinafter defined Credit Agreement.
R E C I T A L S
A. The Borrower and the Lenders (as defined in the Credit
Agreement hereafter defined) have entered into that certain Credit
Agreement dated as of April 24, 1998 (as amended by First Amendment to
Credit Agreement dated as of November 13, 1998, the "Credit Agreement"),
pursuant to which the Lenders have agreed to make certain loans and
extensions of credit to the Borrower upon the terms and conditions as
provided therein;
B. The Borrower has requested approval of certain amendments to
the Credit Agreement in order to, among other things, permit the Borrower
to incur certain additional indebtedness;
C. The Chase Manhattan Bank, in it capacity as Administrative
Agent under the Credit Agreement, is resigning as Administrative Agent,
effective as of the date hereof;
D. The Required Lenders, as set forth below, shall select a
successor Administrative Agent;
E. The Borrower and the Lenders now desire to make certain
amendments to the Credit Agreement to effectuate the foregoing.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration and the mutual benefits, covenants and agreements
herein expressed, the parties hereto now agree as follows:
1. All capitalized terms used in this Amendment and not otherwise
defined herein shall have the meanings ascribed to such terms in the
Credit Agreement.
2. The following terms, defined in Section 1.01 of the Credit
Agreement, are hereby amended as follows:
(a) The term "Administrative Agent" is hereby amended to
read in its entirety as follows:
"Administrative Agent" means Paribas, in its
capacity as administrative agent for the Lenders
hereunder.
(b) The chart contained in the definition of "Applicable
Margin" is hereby amended to read in its entirety as follows:
ABR Eurodollar Facility Fee
Index Debt Ratings: Spread Spread Rate
------ Tranche A Tranche B ------------
Loans Loans
--------- ---------
Category 1 0.0 0.45 1.075 0.175
Category 2 0.0 0.55 1.175 0.200
Category 3 0.0 0.65 1.275 0.225
Category 4 0.0 0.75 1.375 0.250
Category 5 0.0 1.00 1.625 0.250
(c) The term "Commitment" is hereby amended to read in
its entirety as follows:
"Commitment" means, with respect to each Lender,
the commitment of such Lender to make Revolving Loans
and to acquire participations in Letters of Credit
hereunder, expressed as an amount representing the
maximum aggregate amount that such Lender's Revolving
Credit Exposure could be hereunder, as such
commitment may be (a) reduced from time to time
pursuant to Section 2.07 and (b) reduced or increased
from time to time pursuant to assignments by or to
such Lender pursuant to Section 9.04. The initial
amount of each Lender's Commitment is set forth on
Schedule 2.01 attached to and made a part of the
Second Amendment, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its
Commitment, as applicable. The initial aggregate
amount of the Lenders' Commitments is $350,000,000.
"Commitment", with respect to each Lender, shall
equal the sum of its Tranche A Commitment and Tranche
B Commitment, as set forth on Schedule 2.01 attached
to the Second Amendment.
(d) The term "Issuing Bank" is hereby amended to read in
its entirety as follows:
"Issuing Bank" means Paribas, in its capacity as
the issuer of Letters of Credit hereunder, and its
successors in such capacity as provided in
Section 2.04(i). The Issuing Bank may, in its
discretion, arrange for one or more Letters of Credit
to be issued by Affiliates of the Issuing Bank, in
which case the term "Issuing Bank" shall include any
such Affiliate with respect to Letters of Credit
issued by such Affiliate.
(e) The term "Maturity Date" is hereby amended to read in
its entirety as follows:
"Maturity Date" means January 24, 2002, or such
later date as such date may be extended pursuant to
Section 2.07(d).
(f) The term "Permitted Encumbrances" is hereby amended by (i)
deleting the word "and" at the end of clause (f) thereof, (ii)
adding the word "and" at the end of clause (g) thereof, (iii)
deleting the proviso at the end thereof, and (iv) adding the
following clause "(h)":
"(h) Liens securing the payment of all or any
portion of the Indebtedness created hereunder;
provided that the term "Permitted Encumbrances" shall
not include any Lien securing Indebtedness other than
the Indebtedness created hereunder."
(g) The term "Permitted Investments" is hereby amended by
adding the word "Paribas" after the "comma (,)" and before the word
"any" found in the third line thereof.
(h) The term "Permitted Project Debt" is hereby amended
to read in its entirety as follows:
"Permitted Project Debt" means Indebtedness
(including, without limitation or duplication, the
Guarantee of any such Indebtedness by the Borrower)
incurred in connection with the construction of
Deepwater Pathfinder, Deepwater Frontier, Drillship
III and the semi-submersible rig RBS8M (formerly
known as the RBS6), by the respective joint venture
or Subsidiary owning such vessel, and all extensions,
renewals and replacements of any such Indebtedness by
the primary obligor thereof that do not increase the
outstanding principal amount thereof; provided,
however, that such Indebtedness shall not exceed
$625,000,000 in the aggregate; and provided further,
however, that all such Indebtedness relating to the
rig RBS8M shall be nonrecourse upon the acceptance
and delivery of such rig.
3. Section 1.01 of the Credit Agreement is hereby supplemented,
where alphabetically appropriate, with the addition of the following
definitions:
"Drilling Inc." shall mean R&B Falcon Drilling
(International & Deepwater) Inc., a Delaware corporation.
"Notes Offering" means that certain $400,000,000 Notes
Offering by the Borrower anticipated to close prior to January
15, 1999.
"Notes Offering Closing Date" means the date the proceeds
are received by the Borrower pursuant to the Notes Offering.
"Second Amendment" means that certain Second Amendment to
Credit Agreement dated as of the Second Amendment Effective
Date, among the Borrower and the Required Lenders.
"Second Amendment Effective Date" shall mean the day on
which the last of the events set forth in Paragraph 15 of the
Second Amendment as conditions shall have occurred.
"Tranche A Commitment" means in the aggregate the first
$100,000,000 principal amount of the Commitment.
"Tranche B Commitment" means in the aggregate the
principal amount of the Commitment in excess of the Tranche A
Commitment.
4(a) Pursuant to and subject to all of the provisions contained in
Section 2.07 of the Credit Agreement, the Borrower hereby voluntarily
reduces (and the Lenders hereby accept the reduction of) the aggregate
amount of the Lenders' Commitments under the Credit Agreement to
$350,000,000, such reduction to be made pro rata among the Lenders in
accordance with their Commitment.
(b) Section 2.07 of the Credit Agreement is hereby amended by
adding thereto a new subsection, to be Subsection 2.07(e), to
read in its entirety as follows:
"(e) The aggregate amount of the Tranche B Commitments in
effect on March 31, 2001, shall be reduced by an amount equal
to $15,000,000, commencing March 31, 2001 and on the last day
of each calendar quarter thereafter until the Maturity Date."
5. Section 2.09 of the Credit Agreement is hereby amended by
adding thereto two new subsections, to be Subsections 2.09(c) and
2.09(d), to read in their entirety as follows:
"(c) If, following any reduction in the Tranche B
Commitments pursuant to Section 2.07(e) hereof, the sum of the
outstanding aggregate principal amount of the Loans
attributable to the Tranche B Commitments exceed the then
current Tranche B Commitments, the Borrower shall pay or prepay
the amount of such excess amount together with accrued interest
to the extent required by Section 2.11 and subject to the
provisions of Section 2.14 for break funding payments."
(d) All payments of principal and interest by Borrower shall
be applied first in the reduction of Indebtedness incurred under the
Tranche B Commitment."
6. Section 6.01 of the Credit Agreement is hereby amended to add
the following clause (h):
"(h) additional Indebtedness of the Borrower not to exceed
$600,000,000 at any time outstanding; provided, however (i) no
such additional Indebtedness shall be senior to the
Indebtedness created under this Agreement, (ii) not more than
$400,000,000 of such additional Indebtedness shall be pari pasu
with the Indebtedness created under the Tranche B Commitment,
and (iii) no such additional Indebtedness shall have a maturity
of less than four (4) years."
7. Section 6.02(c) of the Credit Agreement is hereby amended in
its entirety to read as follows:
"(c) any Lien on the Deepwater Pathfinder, Deepwater
Frontier, RBS8M and Drillship III and on the equity of the
entity that owns such vessel to secure the respective Permitted
Project Debt incurred to construct such vessel, and any related
drilling or other contract to secure the respective Permitted
Project Debt incurred in connection with the financing of such
vessel;"
8. Section 6.06 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"Section 6.06. Restricted Payments. The Borrower will
not, and will not permit any of its Subsidiaries to, declare or
make, or agree to pay or make, directly or indirectly, any
Restricted Payment, except (a) the Borrower may declare and pay
dividends with respect to its capital stock payable solely in
additional shares of its common stock, (b) Subsidiaries may
declare and pay dividends ratably with respect to their capital
stock, (c) the Borrower may make Restricted Payments pursuant
to and in accordance with stock option plans or other benefit
plans for management or employees of the Borrower and its
Subsidiaries, and (d) Arcade Drilling A/S (a 74.4% owned
Subsidiary of the Borrower) may make share capital reduction
distributions pro rata to its shareholders (including the
Borrower)."
9. Section 6.10 of the Credit Agreement is hereby amended and
supplemented by deleting the graph found therein and substituting
therefor the following:
Period EBITDA Leverage Ratio
------ ---------------------
9/1/98 through 12/31/99 3.75X
1/1/00 through 12/31/00 3.25X
1/1/01 and thereafter 2.75X
10. Notwithstanding the provisions of Section 6.12 of the Credit
Agreement, the Borrower may amend, modify or supplement the Indenture in
such manner as it deems appropriate to effectuate the Notes Offering.
11. Article VI of the Credit Agreement is hereby amended by adding
thereto the following three (3) new sections, to be Sections 6.13, 6.14
and 6.15, to read in their entirety as follows:
"Section 6.13. Fundamental Changes With Respect to
Drilling Inc. Notwithstanding anything to the contrary
contained in Section 6.03 hereof, with respect to Drilling Inc.
and its subsidiaries, neither Drilling Inc. nor any of its
subsidiaries shall merge into or consolidate with any other
Person, nor permit any Person to merge into or consolidate with
it, except that, if at the time thereof and immediately after
giving effect thereto no Default shall have occurred and be
continuing (i) any subsidiary of Drilling Inc. may merge into
Drilling Inc. in a transaction in which Drilling Inc. is the
surviving corporation, and (ii) any subsidiary of Drilling Inc.
may merge into any other subsidiary of Drilling Inc. in a
transaction in which the surviving entity is a subsidiary of
Drilling Inc."
"Section 6.14. Investments, Loans, Advances, Guarantees
and Acquisitions with Respect to Drilling Inc. Notwithstanding
anything to the contrary contained in Section 6.04 hereof, with
respect to Drilling Inc. and its subsidiaries, neither Drilling
Inc. nor any of its subsidiaries shall Guarantee any
obligations of any other Person, or purchase, hold or acquire
any capital stock, evidences of indebtedness or other
securities (including any option, warrant or other right to
acquire any of the foregoing) or make or permit any loans or
advances to , or make or permit to exist any investment or any
other interest in, any other Person, or purchase or otherwise
acquire (in one transaction or a series of transactions) any
assets of any other Person constituting a business unit, except
that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be
continuing, the following shall be permitted:
(a) investments by Drilling Inc. or by any of
its subsidiaries in the capital stock of Drilling
Inc.'s subsidiaries;
(b) loans or advances made by Drilling Inc. to
any of its subsidiaries and made by any of Drilling
Inc.'s subsidiaries to Drilling Inc. or any other
subsidiary of Drilling Inc.; and
(c) purchases and acquisitions on an arms-
length basis in the ordinary course of business;
(d) guarantees of obligations of Drilling Inc.
and its subsidiaries; and
(e) other investments, loans and advances
consistent with prior practices of the Borrower and
its Subsidiaries reflected in the regularly
maintained financial records of the Borrower and its
Subsidiaries."
"Section 6.15. Restricted Payments with Respect to Drilling Inc.
Notwithstanding anything to the contrary contained in Section 6.06, with
respect to Drilling Inc. and its subsidiaries, neither Drilling Inc. nor
any of its subsidiaries shall declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, except, if at the time
thereof and immediately after giving effect thereto no Default shall
occurred and be continuing (a) any subsidiary of Drilling Inc. may
declare and pay dividends to Drilling Inc. or to another subsidiary of
Drilling Inc., and (b) Drilling Inc. or any of its subsidiaries may
declare and pay dividends consistent with prior practices of the Borrower
and its Subsidiaries reflected in the regularly maintained financial
records of the Borrower and its Subsidiaries.
12. The Borrower and the Required Lenders hereby select and appoint
Paribas as successor Administrative Agent for the Lenders under the
Credit Agreement, as amended hereby, effective upon the resignation of
The Chase Manhattan Bank as Administrative Agent, and Paribas hereby
accepts such appointment and agrees to act as Administrative Agent for
the Lenders under the Credit Agreement, as amended hereby, effective upon
the resignation of The Chase Manhattan Bank, as Administrative Agent.
13. Section 9.01 is hereby amended in its entirety to read as
follows:
"Section 9.01. Notices. Except in the case of notices
and other communications expressly permitted to be given by
telephone, all notices and other communications provided for
herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered
mail or sent by telecopy, as follows:
(a) if to the Borrower, to
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention of Chief Financial Officer
Telecopy No.: (281) 496-0285;
(b) if to the Administrative Agent, to:
Paribas
1200 Smith Street, Suite 3100
Houston, Texas 77002
Attention: Mr. Brian Malone
Phone No.: (713) 659-4811
Telecopy No.: (713) 659-6915
with respect, Eurodollar Lending Office, to:
Paribas
_______________________
_______________________
Attention: _______________
Phone No.: ______________
Telecopy No.: ____________
(c) if to the Issuing Bank, to:
Paribas
1200 Smith Street, Suite 3100
Houston, Texas 77002
Attention: Ms. Cheryl Johnson
Phone No.: _______________
Telecopy No.: ____________; and
(d) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices
and other communications hereunder by notice to the other parties hereto.
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have
been given on the date of receipt.
14. The Borrower hereby agrees to pledge, as security for all
amounts owing in connection with the Tranche A Commitment, all of the
issued and outstanding capital stock of Drilling Inc. pursuant to a
security agreement, financing statements and stock powers, satisfactory
to Paribas.
15. In addition to all other applicable conditions precedent
contained in the Credit Agreement, the obligation of the Lenders under
this Amendment and to their agreement and consent to the matters set
forth herein, shall be conditioned upon the following:
(a) Paribas shall have received a copy of this Amendment, duly
completed and executed by the Borrower and the Required Lenders;
(b) Paribas shall have received a legal opinion of Leighton E.
Moss, Esq., counsel to the Borrower with respect to this Amendment
and the matters addressed herein, non-contravention and such other
matters as Paribas reasonably request, all in form and substance
satisfactory to Paribas;
(c) The Notes Offering shall have been completed, and the net
proceeds received by the Borrower from the Notes Offering shall be
delivered to Paribas or the Administrative Agent, for the benefit of
the Lenders, to be applied as a principal reduction of the
Indebtedness created under the Credit Agreement, as amended hereby;
(d) Paribas shall have received a Security Agreement (Stock)
duly completed and executed by the Borrower, pledging all of the
capital stock of Drilling Inc., as security for all amounts owing in
connection with the Tranche A Commitment, together with an
Assignment Separate from Stock Certificate duly executed in blank by
the Borrower, the original stock certificate representing such
capital stock and appropriate Uniform Commercial Code financing
statement relating thereto.
(e) Paribas shall have received such other information,
documents or instruments as it or its counsel may reasonably
request;
16. All provisions of this Amendment except for Section 12 shall be
deemed effective at 12:01 a.m. Houston, Texas time on the date that the
conditions set forth in Section 15 have been met. The provisions of
Paragraph 12 shall be effective upon the last to occur of (i) the
resignation of The Chase Manhattan Bank as Administrative Agent and (ii)
the execution of this Amendment by Borrower and the Required Lenders.
17. Pursuant to Section 2.04(i) of the Credit Agreement, The Chase
Manhattan Bank is hereby replaced as Issuing Bank by Paribas. This
Paragraph 13 shall satisfy the written agreement and notification
requirements of Section 2.04(i).
18. The Borrower shall pay to each Lender which executes this
Amendment and delivers its signature pages to Paribas or the
Administrative Agent (or its counsel) on or before 2:00 p.m., Houston,
Texas time, December 16, 1998, an amendment fee equal to 25 basis points
on such Lender's then current Commitment (based upon $350,000,000 of
total Commitments), which shall be due and payable on or before the third
Business Day after the Notes Offering Closing Date.
19. The parties hereto hereby acknowledge and agree that, except as
specifically supplemented and amended, changed or modified hereby, the
Credit Agreement shall remain in full force and effect in accordance with
its terms.
20. The Borrower hereby reaffirms that as of the date of this
Amendment, the representations and warranties contained in Article III of
the Credit Agreement are true and correct on the date hereof as though
made on and as of the date of this Amendment, except as such
representations and warranties are expressly limited to an earlier date;
provided, for purposes of this paragraph, Section 3.04(b) shall read:
"(b) Except as disclosed in reports filed by the Company
under the Securities Exchange Act of 1934, since December 31,
1997, there has been no material adverse change in the
business, assets, operations, prospects or condition, financial
or otherwise, of the Borrower and its subsidiaries, taken as a
whole."
20. THIS AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND
ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, OTHER THAN THE CONFLICT OF LAWS
RULES THEREOF.
21. This Amendment may be executed in two or more counterparts, and
it shall not be necessary that the signatures of all parties hereto be
contained on any one counterpart hereof; each counterpart shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
NOTICE. THIS WRITTEN AMENDMENT, THE CREDIT AGREEMENT, AS AMENDED
HEREBY AND THE NOTES REPRESENT THE FINAL AGREEMENT BETWEEN 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 THE PARTIES.
[SIGNATURES BEGIN NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first above written.
BORROWER: R&B FALCON CORPORATION
By:_____________________________
Robert Fulton
Executive Vice President
RESIGNING ADMINISTRATIVE THE CHASE MANHATTAN BANK
AGENT AND LENDER:
By:_____________________________
Name:
Title:
SYNDICATION AGENT CREDIT SUISSE FIRST BOSTON
AND LENDER:
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
SUCCESSOR ADMINISTRATIVE PARIBAS
AGENT; DOCUMENTATION
AGENT AND LENDER:
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
CO-SYNDICATION AGENT CHRISTIANIA BANK OG KREDITKASSE ASA,
AND LENDER: NEW YORK BRANCH
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
MANAGING AGENT THE BANK OF NOVA SCOTIA
AND LENDER:
By:_____________________________
Name:
Title:
MANAGING AGENT BANK OF TOKYO-MITSUBISHI, LTD.
AND LENDER:
By:_____________________________
Name:
Title:
MANAGING AGENT WELLS FARGO BANK (TEXAS), N.A.
AND LENDER:
By:_____________________________
Name:
Title:
OTHER LENDERS: BANK AUSTRIA AKTIENGESELLSCHAFT
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
CREDIT AGRICOLE INDOSUEZ
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
BANK ONE, LOUISIANA, NA,
as successor to First National Bank
of Commerce
By:_____________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED
By:_____________________________
Name:
Title:
SKANDINAVISKA ENSKILDA BANKEN AB (PUBL)
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
ABN AMRO BANK N.V.
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:_____________________________
Name:
Title:
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
CAYMAN ISLAND BRANCH
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
THE DAI-ICHI KANGYO BANK, LIMITED
By:_____________________________
Name:
Title:
THE FUJI BANK, LIMITED
By:_____________________________
Name:
Title:
KREDIETBANK N.V.
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
NATEXIS BANQUE
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
EXHIBIT 10.229
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated
as of January 19, 1999 is among: R&B FALCON CORPORATION, and the REQUIRED
LENDERS under the hereinafter defined Credit Agreement.
R E C I T A L S
A. The Borrower and the Lenders (as defined in the Credit Agreement
hereafter defined) have entered into that certain Credit Agreement dated
as of April 24, 1998 (as the same has been heretofore amended, the
"Credit Agreement"), pursuant to which the Lenders have agreed to make
certain loans and extensions of credit to the Borrower upon the terms and
conditions as provided therein;
B. The Borrower has requested approval of certain amendments to the
Credit Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration and the mutual benefits, covenants and agreements
herein expressed, the parties hereto now agree as follows:
1. (a) All capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings ascribed to such terms
in the Credit Agreement.
(b) "Cliffs Senior Debt" shall mean the indebtedness of Cliffs
Drilling Company under its 10.25% senior notes due 2003 not to exceed
$200,000,000 face principal amount outstanding, and any extensions,
renewals, replacements and refinancings (but not increases) thereof,
provided the maturity is not prior to May 15, 2003.
2. Section 6.01 (f) of the Credit Agreement is amended to read as
follows:
"(f) Cliffs Senior Debt;"
1. Section 6.01 of the Credit Agreement is amended by adding thereto a
clause (i) as follows:
"(i) Indebtedness of the Borrower (including renewals,
extensions, and replacements thereof), the proceeds of which are
used solely to discharge Cliffs Senior Debt; provided (i) such
Indebtedness is unsecured and subordinate to the Loans, and (ii) the
maturity of such Indebtedness is not prior to one year after the
Maturity Date, except for maturities that result in such
Indebtedness being converted into or exchanged for Indebtedness that
is unsecured and subordinate to the Loans and has a maturity not
prior to one year after the Maturity Date. A guaranty by Borrower
of Cliffs Senior Debt shall be considered Indebtedness of the
Borrower within the meaning of this clause, provided such guaranty
obligation is unsecured, subordinate to the Loans, and has a
maturity not prior to one year after the Maturity Date."
4. Sections 6.04(b) and (c) of the Credit Agreement are amended to
read as follows:
"(b) investments by the Borrower or any Subsidiary in the
capital stock of its Subsidiaries; provided, neither the Borrower
nor any Subsidiary that is not in the Cliffs Group may invest in any
member of the Cliffs Group except for the investment to acquire
Cliffs pursuant to the Merger and except as otherwise permitted by
clause (f) of this Section;
(c) loans or advances made by the Borrower to any Subsidiary or
made by any Subsidiary to the Borrower or any other Subsidiary;
provided, neither the Borrower nor any Subsidiary that is not in the
Cliffs Group may make loans or advances to any member of the Cliffs
Group except as otherwise permitted by clause (f) of this Section;"
5. Section 6.04 of the Credit Agreement is amended by adding thereto
the following clause (f):
"(f) loans to Cliffs and investments in Cliffs, provided (i)
the aggregate amount thereof does not exceed the aggregate net
proceeds received by Borrower and its Subsidiaries after the date
hereof from the issuance of (A) capital stock and/or (B)
Indebtedness that is subordinate to the Loans, and (ii) all amounts
so loaned or invested are used to repay Cliffs Senior Debt."
6. Section 6.06 of the Credit Agreement is amended by adding at the
end thereof the following:
"and (e) Borrower may pay dividends on preferred stock;
provided (i) at the time of the payment of such dividend, no Event
of Default shall be existing, (ii) the payment of such dividend
would not result in an Event of Default immediately thereupon, and
(iii) aggregate cash dividends paid on preferred stock shall not at
any time exceed 10% per annum of the price at which the Company sold
such preferred stock, computed from the date of sale of such
preferred stock."
2. Section 6.07 of the Credit Agreement is amended by adding at the
end thereof the following:
"and any investments and loans permitted by Section 6.04."
8. Section 6.09 of the Credit Agreement is amended in its
entirety to read as follows:
"SECTION 6.09 Tangible Net Worth. The Borrower will not permit
at any time its Tangible Net Worth to be less than $600,000,000 plus
(i) 50% of its cumulative Consolidated Net Income, if positive, for
the period from April 1, 1998 through the date of calculation, plus
(ii) 100% of any equity issued by the Borrower after the date of
this Agreement; provided, for purposes of this Section, the Merger
shall be deemed to be the issuance by the Borrower of equity in an
amount equal to the increase in the Borrower=s Tangible Net Worth
resulting from the Merger."
9. There is added to the Credit Agreement a Section 6.16 as follows:
"Section 6.16 Restriction on Certain Debt Payments. The
Borrower shall not repay any Indebtedness incurred pursuant to
Section 6.01(i) except out of the net proceeds of the issuance by
the Borrower of (i) capital stock or (ii) Indebtedness which is
subordinate to the Loans and has a maturity which is not prior to
one year after the Maturity Date; provided, Borrower may in any
event pay accrued interest on such Indebtedness as long as no Event
of Default has occurred and is continuing.
10. Schedule 6.01 is amended by adding thereto the following, which
was inadvertently omitted when such Exhibit was prepared:
"21. Guaranty by R&B dated as of November 28, 1995 in favor of
Deep Sea Investors, L.L.C. with respect to the obligations Reading &
Bates Drilling Co. under a Memorandum of Agreement and a Charter as
of the same date with respect to the semisubmersible drilling unit
M. G. Hulme."
11. Schedule 6.02 is amended by adding thereto the following, which
was inadvertently omitted when such Exhibit was prepared:
"12. Preferred Mortgage on the Jim Cunningham dated November
28, 1995 between Reading & Bates Drilling Co. and Wilmington Trust
Company, as Trustee for the benefit of Deep Sea Investors, L.L.C.,
in connection with item 21 of Schedule 6.01."
12. The parties hereto hereby acknowledge and agree that, except as
specifically supplemented and amended, changed or modified hereby, the
Credit Agreement shall remain in full force and effect in accordance with
its terms.
13. THIS AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND
ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, OTHER THAN THE CONFLICT OF LAWS
RULES THEREOF.
14. This Amendment may be executed in two or more counterparts, and it
shall not be necessary that the signatures of all parties hereto be
contained on any one counterpart hereof; each counterpart shall be deemed
an original, but all of which together shall constitute one and the same
instrument. This amendment shall become effective when executed by the
Required Lenders and the Borrower. Within three business days after the
effective date of this amendment, Borrower shall pay to each Lender who
has executed and returned a counterpart hereof to the Administrative
Agent prior to 5:00 p.m. Houston, Texas time on January 22, 1999, a fee
equal to 0.15% times such Lender=s Commitment.
15. On the date that this amendment becomes effective, the Facility
Fee Rate set forth in the chart contained in the definition of
"Applicable Rate" shall be increased by 0.10%.
NOTICE. THIS WRITTEN AMENDMENT, THE CREDIT AGREEMENT, AS AMENDED
HEREBY AND THE NOTES REPRESENT THE FINAL AGREEMENT BETWEEN 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 THE PARTIES.
[SIGNATURES BEGIN NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first above written.
R&B FALCON CORPORATION
By: /s/ Leighton E. Moss
---------------------
Name: Leighton E. Moss
Title: Senior Vice President
CREDIT SUISSE FIRST BOSTON
By: /s/ James P. Moran By: /s/Douglas E. Maher
-------------------- -----------------------
Name: James P. Moran Name: Douglas E. Maher
Title: Director Title: Vice President
PARIBAS
By: /s/ Marian Livingston By: /s/ Michael H. Fiuzat
---------------------- -----------------------
Name: Marian Livingston Name: Michael H. Fiuzat
Title: Vice President Title: Vice President
CHRISTIANIA BANK OG KREDITKASSE ASA, NEW YORK BRANCH
By: /s/ Angela Dogancay By: /s/ William S. Phillips
--------------------- ------------------------
Name: Angela Dogancay Name: William S. Phillips
Title: Vice President Title: First Vice President
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. Ashby
----------------------
Name: F.C.H. Ashby
Title: Senior Manager
Loan Operations
BANK OF TOKYO-MITSUBISHI, LTD.
By: /s/ Michael G. Meiss
------------------------
Name: Michael G. Meiss
Title: VP & Manager
WELLS FARGO BANK (TEXAS), N.A.
By: /s/ Frank Schagemann
------------------------
Name: Frank Schagemann
Title: Vice President
BANK AUSTRIA AKTIENGESELLSCHAFT
By: /s/ Christine A. Renard By: /s/R. Tentlave
------------------------- -----------------
Name: Christine A. Renard Name: R. Tentlave
Title: Vice President Title: Senior Vice President
CREDIT AGRICOLE INDOSUEZ
By: /s/ Isabelle Billecocq By: /s/Jean-Yves Gueritaud
------------------------- -----------------------
Name: Isabelle Billecocq Name: Jean-Yves Gueritaud
Title: Account Manager Title: First Vice President
BANK ONE, LOUISIANA, NA, as successor to First National Bank of Commerce
By: /s/ J. Charles Freel, Jr.
--------------------------
Name: J. Charles Freel, Jr.
Title: Senior Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ William R. McKown, III
---------------------------
Name: William R. McKown, III
Title: Vice President & Manager
SKANDINAVISKA ENSKILDA BANKEN AB (PUBL)
By: /s/Jan Sjolte By:_______________________
-----------------
Name: Jan Sjolte Name:
Title: Senior Client Executive Title:
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH
By: /s/ Kenneth R. Crespo By: /s/ Richard R. Newman
----------------------- -------------------------
Name: Kenneth R. Crespo Name: Richard R. Newman
Title: Vice President Title: Director
ABN AMRO BANK N.V.
By: /s/ Stuart Murray By: /s/ Charles W. Randall
--------------------- -------------------------
Name: Stuart Murray Name: Charles W. Randall
Title: Vice President Title: Senior Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
By: /s/ Claire M. Liu
----------------------
Name: Claire M. Liu
Title: Managing Director
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK, CAYMAN ISLAND BRANCH
By: /s/ Mark Connely By: /s/ Wolfgang Bollmann
------------------- ------------------------
Name: Mark Connely Name: Wolfgang Bollmann
Title: Vice President Title: Senior Vice President
THE DAI-ICHI KANGYO BANK, LIMITED
By: /s/ Matthew Murphy
---------------------
Name: Matthew Murphy
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ C. Alec Dana
-------------------
Name: C. Alec Dana
Title: Associate
KBC BANK N.V.
By: /s/ Marcel Claes By: /s/ Robert Snauffer
------------------- -----------------------
Name: Marcel Claes Name: Robert Snauffer
Title: Deputy General Manager Title: First Vice President
NATEXIS BANQUE
By:_________________________ By:________________________
Name: Name:
Title: Title:
EXHIBIT 21
R&B FALCON CORPORATION
AND SUBSIDIARIES
SCHEDULE OF CONSOLIDATED SUBSIDIARIES OF THE COMPANY
AS OF DECEMBER 31, 1998
The following table and text sets forth the subsidiaries of the
Company and of such subsidiaries:
State or
Jurisdiction of
Name Incorporation
---- -------------
R&B Falcon Holdings, Inc. Delaware
[formerly R&B Falcon Drilling (U.S.), Inc.]
R&B Falcon Drilling Delaware
(International & Deepwater) Inc.
Cliffs Drilling Company Delaware
SUBSIDIARIES OWNED BY R&B FALCON HOLDINGS, INC.
BSI Drilling & Workover, Inc. Louisiana
Caribe USA, Inc. Louisiana
Double Eagle Marine, Inc. Louisiana
Eilert-Olsen Investments, Inc. Texas
Falcon Atlantic Ltd. Cayman Islands
Falcon Drilling De Venezuela, Inc. Delaware
Falcon Drilling Do Brasil, Ltda. Brazil
Falcon Offshore, Inc. Delaware
Falcon Services Company, Inc. Delaware
(also d/b/a as Falcon Drilling Company)
Falgout Brothers, Inc. Louisiana
Falgout Marine, Inc. Louisiana
G&B Marine Tugs, Inc. Louisiana
Knots Marine Inc. Louisiana
Perforaciones Falrig De Venezuela C.A. Venezuela
Raptor Exploration Co., Inc. Delaware
R&B Falcon Drilling (S.E.A.) Pte. Ltd. Singapore
R&B Falcon Drilling U.S.A. Inc. Delaware
SUBSIDIARIES OWNED BY R&B FALCON DRILLING (INTERNATIONAL
& DEEPWATER) INC.
Arcade Drilling AS Norway
[R&B Falcon Drilling (International &
Deepwater) Inc. owns approximately
74.4% of Arcade Drilling AS]
R&B Falcon Drilling Co. Oklahoma
RBF Holding Corporation Delaware
RBF Management Services, Inc. Delaware
Reading & Bates Coal Co. Nevada
Reading & Bates Development Co. Delaware
Reading & Bates Petroleum Co. Texas
SUBSIDIARIES OWNED BY CLIFFS DRILLING COMPANY
Cliffs Drilling International, Inc. Delaware
Cliffs Oil and Gas Company Delaware
Cliffs Drilling Venezuela, Inc. Delaware
Cliffs Drilling de Venezuela, S.A. Venezuela
Cliffs Drilling do Brasil Servicos
de Petroleo S/C Ltda. Brazil
[Owned 90% by Cliffs Drilling Company
and 10% by a third party as nominee for
the benefit of Cliffs Drilling Company]
Cliffs Drilling Trinidad L.L.C. Delaware
Cliffs Drilling (Barbados) Holdings SRL Barbados
[Owned 99.99% by Cliffs Drilling Company
and .01% by Cliffs Drilling Trinidad L.L.C.]
Servicios Integrados Petroleros C.C.I., S.A.
[A joint venture among Cliffs Drilling
Company (which owns 33 1/3%), Inelectra
S.A. and Cementaciones Petroleras
Venezolanas C.A.]
SUBSIDIARIES OWNED BY R&B FALCON DRILLING CO.
Onshore Services, Inc. Texas
R&B Falcon Borneo Drilling Co., Ltd. Oklahoma
R&B Falcon Deepwater Development Inc. Nevada
R&B Falcon Drilling Limited Oklahoma
R&B Falcon Exploration Co. Oklahoma
R&B Falcon Enterprises Co. Texas
R&B Falcon, Inc. Oklahoma
R&B Falcon International Energy
Services B.V. Netherlands
R&B Falcon (Ireland) Limited Ireland
R&B Falcon Offshore, Limited Oklahoma
R&B Falcon (U.K.) Limited England
RBF Deepwater Exploration Inc. Nevada
RBF Deepwater Exploration II Inc. Nevada
RBF Deepwater Exploration III Inc. Nevada
RBF Drilling Co. Oklahoma
RBF Drilling Services, Inc. Oklahoma
RBF Exploration Co. Nevada
RBF Offshore, Inc. Nevada
RBF Rig Corporation Oklahoma
Rig Logistics, Inc. Nevada
R&B Falcon Drilling Co. and R&B Falcon
Enterprises Co. together own 100% of
Reading & Bates-Demaga Perfuracoes Ltda.,
a civil society with shares of limited
responsibility organized under the laws
of the Federative Republic of Brazil
SUBSIDIARIES OWNED BY READING & BATES DEVELOPMENT CO.
RB Gabon Inc. Oklahoma
RB International Ltd. Cayman Islands
RB Mediterranean Ltd. Cayman Islands
Total Offshore Production Systems Texas
Reading & Bates Development owns
75% of Total Offshore Production
Systems, a joint venture organized
under the laws of the State of
Texas
SUBSIDIARIES OWNED BY READING & BATES COAL CO.
Appalachian Permit Co. Kentucky
Bismarck Coal Inc. Kentucky
Caymen Coal Inc. West Virginia
SUBSIDIARIES OWNED BY RBF HOLDING CORPORATION
RBF Subsidiary Corporation Delaware
SUBSIDIARIES OWNED BY R&B FALCON BORNEO DRILLING
CO., LTD.
R&B Falcon Borneo Drilling Co., Ltd.
owns 49.99% of R&B Falcon (M) Sdn.
Berhad, incorporated in Malaysia
SUBSIDIARIES OWNED BY R&B FALCON ENTERPRISES CO.
Shore Services, Inc. Texas
R&B Falcon Drilling Co. and R&B Falcon
Enterprises Co. together own 100% of
Reading & Bates-Demaga Perfuracoes Ltda.,
a civil society with shares of limited
responsibility organized under the laws
of the Federative Republic of Brazil
SUBSIDIARIES OWNED BY R&B FALCON EXPLORATION CO.
R&B Falcon (A) Pty Ltd Australia
SUBSIDIARIES OWNED BY R&B FALCON INTERNATIONAL
ENERGY SERVICES B.V.
R&B Falcon B.V. Netherlands
SUBSIDIARIES OWNED BY R&B FALCON (U.K.) LIMITED
R&B Falcon (Caledonia) Limited England
SUBSIDIARY OWNED BY RBF DEEPWATER EXPLORATION INC.
RBF Deepwater Exploration Inc. owns 50%
of Deepwater Drilling L.L.C., a limited
liability company organized under the
laws of the State of Delaware
SUBSIDIARY OWNED BY RBF DEEPWATER EXPLORATION II INC.
RBF Deepwater Exploration II Inc. owns
60% of Deepwater Drilling L.L.C., a
limited liability company organized
under the laws of the State of Delaware
SUBSIDIARIES OWNED BY RBF DRILLING SERVICES, INC.
RBF Drilling Services, Inc. owns 60%
of NRB Drilling Services Limited
incorporated in Nigeria
RBF Drilling Services, Inc. and Onshore
Services, Inc. together own 100% of
RBF (Nigeria) Limited, a company limited
by shares and organized under the laws
of the Federal Republic of Nigeria
SUBSIDIARIES OWNED BY BISMARCK COAL INC.
Certicoals, Inc. West Virginia
SUBSIDIARIES OWNED BY RB INTERNATIONAL LTD.
RB Anton Ltd. Cayman Islands
RB Astrid Ltd. Cayman Islands
SUBSIDIARIES OWNED BY CLIFFS DRILLING INTERNATIONAL, INC.
Cliffs Drilling de Mexico, S.A. de C.V. Mexico
Cliffs Central Drilling International
[A joint venture among Cliffs Drilling
International, Inc. (which owns 50%) and
Perfordora Central, S.A. de C.V.]
Cliffs Neddrill Central Turnkey International
[A joint venture among Cliffs Drilling
International, Inc. (which owns 33 1/3%),
Neddrill Turnkey Drilling B.V. and
Perforadora Central, S.A. de C.V.]
SUBSIDIARIES OWNED BY CLIFFS DRILLING (BARBADOS) HOLDINGS SRL
Cliffs Drilling (Barbados) SRL Barbados
[Owned 99.99% by Cliffs Drilling
(Barbados)Holdings SRL and .01%
by Cliffs Drilling Trinidad L.L.C.]
SUBSIDIARIES OWNED BY CLIFFS DRILLING (BARBADOS) SRL
Cliffs Drilling Trinidad Offshore Limited Trinidad
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Form 10-K of our report dated March 26, 1999
included in Registration Statement File Nos. 333-43475, 333-56821, 333-
63471, 333-67755, 333-67757 and 333-68101. It should be noted that we
have not audited any financial statements of the Company subsequent to
December 31, 1998 or performed any audit procedures subsequent to the
date of our report.
/s/Arthur Andersen LLP
Houston, Texas
March 30, 1999
<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
recontinuance of the oil and gas operations for the three years ended
December 31, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1998 JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<CASH> 177 101 144
<SECURITIES> 0 0 0
<RECEIVABLES> 271 197 147
<ALLOWANCES> 12 7 3
<INVENTORY> 36 15 13
<CURRENT-ASSETS> 527 321 307
<PP&E> 3,550 2,009 1,427
<DEPRECIATION> 519 426 355
<TOTAL-ASSETS> 3,709 1,933 1,456
<CURRENT-LIABILITIES> 352 336 111
<BONDS> 1,697 0 0
0 0 0
0 0 0
<COMMON> 2 2 2
<OTHER-SE> 1,248 726 715
<TOTAL-LIABILITY-AND-EQUITY> 3,709 1,933 1,456
<SALES> 0 0 0
<TOTAL-REVENUES> 1,033 933 610
<CGS> 0 0 0
<TOTAL-COSTS> 817 773 431
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 64 42 41
<INCOME-PRETAX> 161 124 140
<INCOME-TAX> 59 85 27
<INCOME-CONTINUING> 91 30 106
<DISCONTINUED> 36 (36) 0
<EXTRAORDINARY> (24) 0 0
<CHANGES> 0 0 0
<NET-INCOME> 103 (6) 103
<EPS-PRIMARY> .61 (.04) .70
<EPS-DILUTED> .61 (.04) .67
</TABLE>
