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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-13729
R&B FALCON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 76-0544217
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 Threadneedle, Houston, Texas 77079
(Address of principal executive offices)(Zip code)
(281) 496-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes_X_ No___
NUMBER OF SHARES OUTSTANDING OF REGISTRANT'S COMMON STOCK
AT OCTOBER 31, 1999: 193,628,687
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Forward-Looking Statements and Assumptions
This Quarterly Report on Form 10-Q may contain or
incorporate by reference certain forward-looking statements,
including by way of illustration and not of limitation,
statements relating to liquidity, revenues, expenses, margins and
contract rates and terms. The Company strongly encourages
readers to note that some or all of the assumptions, upon which
such forward-looking statements are based, are beyond the
Company's ability to control or estimate precisely, and may in
some cases be subject to rapid and material changes. Such
assumptions include the contract status of the Company's offshore
units, general market conditions prevailing in the marine
drilling industry (including daily rates and utilization) and
various other trends affecting the marine drilling industry,
including world oil and gas prices, the exploration and
development programs of the Company's customers, the actions of
the Company's competitors and economic conditions generally.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Company or Group of Companies for Which Report is Filed:
R&B Falcon Corporation and Subsidiaries
The financial statements for the three and nine month
periods ended September 30, 1999 and 1998, include, in the
opinion of the Company, all adjustments (which only consist of
normal recurring adjustments) necessary to present fairly the
financial position and results of operations for such periods.
The financial data for the three and nine month periods ended
September 30, 1999 included herein have been reviewed in
accordance with standards established by the American Institute
of Certified Public Accountants by Arthur Andersen LLP, the
registrant's independent public accountants, whose report is
included herein. Results of operations for the three and nine
month periods ended September 30, 1999 are not necessarily
indicative of results of operations which will be realized for
the year ending December 31, 1999. The financial statements
should be read in conjunction with the Company's Form 10-K for
the year ended December 31, 1998.
R&B FALCON CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(unaudited)
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents, gross $ 830.6 $ 177.4
Less cash dedicated to capital projects (184.8) -
--------- ---------
Cash and cash equivalents, net 645.8 177.4
Short-term investments 32.2 -
Accounts receivable:
Trade, net 165.9 197.0
Other 78.2 73.5
Materials and supplies inventory 45.4 36.1
Drilling contracts in progress 15.8 29.5
Other current assets 16.6 25.0
--------- ---------
Total current assets 999.9 538.5
--------- ---------
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED
INVESTEES 86.3 28.2
--------- ---------
PROPERTY AND EQUIPMENT:
Drilling 3,869.0 3,369.2
Other 246.2 181.1
--------- ---------
Total property and equipment 4,115.2 3,550.3
Accumulated depreciation (625.3) (519.4)
--------- ---------
Net property and equipment 3,489.9 3,030.9
--------- ---------
GOODWILL, NET OF ACCUMULATED AMORTIZATION 73.6 70.6
--------- ---------
DEFERRED CHARGES AND OTHER ASSETS 263.1 45.8
--------- ---------
TOTAL ASSETS $ 4,912.8 $ 3,714.0
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Short-term obligations $ - $ 123.4
Long-term obligations due within one year 13.0 6.3
Accounts payable - trade 95.2 83.1
Accrued liabilities 168.0 140.4
--------- ---------
Total current liabilities 276.2 353.2
LONG-TERM OBLIGATIONS 2,942.6 1,866.2
OTHER NONCURRENT LIABILITIES 37.9 39.2
DEFERRED INCOME TAXES 97.9 142.4
--------- ---------
Total liabilities 3,354.6 2,401.0
--------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 52.5 62.8
--------- ---------
REDEEMABLE PREFERRED STOCK 256.3 -
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value 1.9 1.9
Capital in excess of par value 1,112.6 1,061.5
Retained earnings 142.9 199.1
Other (8.0) (12.3)
--------- ---------
Total stockholders' equity 1,249.4 1,250.2
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,912.8 $ 3,714.0
========= =========
The accompanying notes are an integral part of the interim consolidated
financial statements.
R&B FALCON CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions except per share amounts)
(unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1999 1998 1999 1998
------- ------- ------- -------
OPERATING REVENUES:
Deepwater $ 93.6 $ 100.9 $ 270.1 $ 297.9
Shallow water 41.0 88.8 156.1 306.0
Inland water 28.3 53.7 84.7 199.7
Engineering services and
land operations 51.2 .1 173.4 .3
Development .1 - .2 -
------- ------- ------- -------
Total operating revenues 214.2 243.5 684.5 803.9
------- ------- ------- -------
COSTS AND EXPENSES:
Deepwater 43.0 52.2 126.4 140.3
Shallow water 34.2 40.0 116.2 119.6
Inland water 9.6 41.8 65.6 126.0
Engineering services and
land operations 37.9 .2 126.9 .4
Development .2 7.6 2.5 15.6
Cancellation of conversion
projects 31.7 85.8 31.7 85.8
Depreciation and amortization 39.7 24.1 114.3 68.1
General and administrative 14.0 15.0 55.3 44.4
Merger expenses - - - (1.0)
------- ------- ------- -------
Total costs and expenses 210.3 266.7 638.9 599.2
------- ------- ------- -------
OPERATING INCOME (LOSS) 3.9 (23.2) 45.6 204.7
------- ------- ------- -------
OTHER INCOME (EXPENSE):
Interest expense, net of
capitalized interest (45.2) (13.9) (116.5) (43.0)
Interest income 9.7 2.6 24.6 7.6
Income from equity investees
plus related income 2.7 - 9.0 -
Other, net (.4) (.3) (.7) (.1)
------- ------- ------- -------
Total other income (expense) (33.2) (11.6) (83.6) (35.5)
------- ------- ------- -------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES,
MINORITY INTEREST AND
EXTRAORDINARY LOSS (29.3) (34.8) (38.0) 169.2
------- ------- ------- -------
INCOME TAX EXPENSE (BENEFIT):
Current 11.4 16.5 30.0 28.9
Deferred (22.1) (26.2) (43.8) 38.9
------- ------- ------- -------
Total income tax
expense (benefit) (10.7) (9.7) (13.8) 67.8
------- ------- ------- -------
MINORITY INTEREST (3.8) (3.1) (9.1) (8.2)
------- ------- ------- -------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE
EXTRAORDINARY LOSS (22.4) (28.2) (33.3) 93.2
INCOME FROM DISCONTINUED OPERATIONS - 7.7 - 16.5
EXTRAORDINARY LOSS, NET OF
TAX BENEFIT - - (1.7) (22.0)
------- ------- ------- -------
NET INCOME (LOSS) (22.4) (20.5) (35.0) 87.7
DIVIDENDS AND ACCRETION ON
PREFERRED STOCK 12.1 - 21.2 -
------- ------- ------- -------
NET INCOME (LOSS) APPLICABLE
TO COMMON STOCKHOLDERS $ (34.5) $ (20.5) $ (56.2) $ 87.7
======= ======= ======= =======
NET INCOME (LOSS) PER COMMON SHARE:
Basic:
Continuing operations $ (.18) $ (.17) $ (.28) $ .56
Discontinued operations - .05 - .10
Extraordinary loss - - (.01) (.13)
------- ------- ------- -------
Net income (loss) $ (.18) $ (.12) $ (.29) $ .53
======= ======= ======= =======
Diluted:
Continuing operations $ (.18) $ (.17) $ (.28) $ .56
Discontinued operations - .05 - .10
Extraordinary loss - - (.01) (.13)
------- ------- ------- -------
Net income (loss) $ (.18) $ (.12) $ (.29) $ .53
======= ======= ======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 192.8 165.3 192.6 165.2
======= ======= ======= =======
Diluted 192.8 165.3 192.6 166.4
======= ======= ======= =======
The accompanying notes are an integral part of the interim consolidated
financial statements.
R&B FALCON CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)(unaudited)
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (35.0) $ 87.7
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 114.3 68.1
Deferred income taxes (44.5) 38.9
Gain on dispositions of property and equipment (18.9) (3.0)
Cancellation of conversion projects 31.7 85.8
Recognition of deferred expenses 10.5 9.2
Deferred compensation 4.5 -
Income from equity investees plus
related income (9.0) -
Minority interest in income of
consolidated subsidiaries 9.1 8.2
Dryhole and exploration expenses
relating to oil and gas properties - 13.2
Income from discontinued operations - (16.5)
Extraordinary loss from extinguishment
of debt, net of tax benefit 1.7 22.0
Changes in assets and liabilities:
Accounts receivable, net 51.8 (43.4)
Materials and supplies inventory (9.3) (13.9)
Drilling contracts in progress 13.6 -
Deferred charges and other assets (25.8) (21.7)
Accounts payable - trade 6.6 (16.5)
Accrued liabilities (24.9) .1
Accrued interest 41.2 23.8
Income taxes 3.9 (5.4)
Other, net (1.1) (.6)
--------- ---------
Net cash provided by operating activities 120.4 236.0
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Dispositions of property and equipment 10.1 3.7
Purchases of property and equipment,
exclusive of noncash items (624.3) (845.9)
Increase in cash dedicated to capital projects (184.8) -
Purchase of short-term investments (32.2) (36.6)
Increase in investments in and advances to
unconsolidated investees (49.1) -
--------- ---------
Net cash used in investing activities (880.3) (878.8)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on revolving credit facilities (150.0) (222.0)
Increase (decrease) in short-term obligations (123.4) 113.6
Proceeds from long-term obligations 1,250.0 1,094.0
Net proceeds from issuance of preferred stock 288.8 -
Principal payments on long-term obligations (18.0) (303.2)
Premium paid on debt extinguishment - (25.1)
Distribution to minority shareholders of
consolidated subsidiaries, net of contributions (19.4) (4.0)
Other .3 1.7
--------- ---------
Net cash provided by financing activities 1,228.3 655.0
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 468.4 12.2
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 177.4 55.5
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 645.8 $ 67.7
========= =========
Supplemental Cash Flow Disclosures:
Interest paid $ 69.7 $ 17.0
Income taxes paid $ 27.1 $ 29.5
Purchase of property and equipment in
exchange for debt or equity $ 9.2 $ 35.5
The accompanying notes are an integral part of the interim consolidated
financial statements.
R&B FALCON CORPORATION
AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A) SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS - In the second quarter of
1999, the Company's majority-owned subsidiary Arcade
Drilling AS ("Arcade") declared a distribution of $27.8
million, of which the Company received $17.6 million, net of
withholding taxes. At September 30, 1999, Arcade's cash,
cash equivalents and short-term investments balance was
$32.5 million.
In the third quarter of 1999, the Company completed the
project financing for the Deepwater Nautilus (see Note C)
and the Deepwater Frontier (which the Company owns 60%) and
as a result $184.8 million of the Company's cash at
September 30, 1999 was restricted as to use. Such amount
consists of $134.8 million related to the financing of the
Deepwater Nautilus and will be used for capital expenditures
and certain principal and interest payments. The remaining
$50.0 million relates to the financing for the construction
of the Deepwater Frontier which collateralizes a five year
standby letter of credit that the Company was required to
secure for the limited liability company to obtain such
financing. As a result of the above, the cash dedicated to
these capital projects has been reclassified to Other
Assets.
GOODWILL - Goodwill was recorded as a result of the
purchase of Cliffs Drilling Company in December 1998 (see
Note B). Goodwill has increased $3.0 million since December
31, 1998. Such increase represents revisions to the estimate
in the initial purchase price allocation offset by $1.4
million of amortization.
REVENUE RECOGNITION - In the first quarter of 1999, a
customer terminated a drilling contract for one of the
Company's third-generation semisubmersibles and the Company
received an early termination fee of $7.2 million. The
semisubmersible was immediately contracted to another
customer and as a result the Company recognized the early
termination fee as revenue in the first quarter of 1999.
CAPITALIZED INTEREST - The Company capitalizes interest
applicable to the construction and significant upgrades of
its marine equipment as a cost of such assets. Interest
capitalized for the three months ended September 30, 1999
and 1998 was $22.5 million and $12.2 million, respectively
and for the nine months ended September 30, 1999 and 1998
was $58.5 million and $27.5 million, respectively. Interest
capitalized is included as a reduction of interest expense
in the Consolidated Statement of Operations.
EXTRAORDINARY LOSS - In the first quarter of 1999, the
Company incurred an extraordinary loss of $1.7 million, net
of a tax benefit of $.9 million, due to the early
extinguishment of debt obligations. Such loss consisted of
the write-off of unamortized debt issuance costs (see Note
C).
GAIN ON DRILLING BARGE CASUALTY - In June 1999, one of
the Company's inland drilling barges was declared a total
loss as a result of a blowout and fire at a location in
inland waters approximately two miles southeast of Amelia,
Louisiana. No injuries of personnel were sustained. The
Company's physical damage insurance covered the loss of the
barge and as a result the Company recorded a gain of
approximately $16.1 million in the third quarter of 1999.
RECLASSIFICATION - Certain prior period amounts in the
consolidated financial statements have been reclassified for
comparative purposes. Such reclassifications had no effect
on net income or the overall financial condition of the
Company.
B) BUSINESS COMBINATION
On December 1, 1998, R&B Falcon acquired all of the
outstanding stock of Cliffs Drilling Company ("Cliffs
Drilling"). 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. 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.
Pro forma consolidated operating results of the Company
and Cliffs Drilling for the nine months ended September 30,
1998, assuming the Cliffs Drilling transaction occurred as
of January 1, 1998, are as follows (in millions except per
share amounts):
Nine Months Ended
September 30, 1998
------------------
Operating revenues $ 1,073.1
Income from continuing operations
before extraordinary loss 133.1
Net income 127.6
Net income per common share:
Basic .69
Diluted .69
The pro forma information for the nine months ended
September 30, 1998 includes adjustments for additional
depreciation of $4.0 million based on the fair market
values of the drilling rigs and other property and
equipment, goodwill amortization of $1.4 million and a
reduction in income taxes of $1.9 million. The pro forma
information is not necessarily indicative of the results of
operations had the Merger occurred on the assumed dates or
the results of operations for any future period.
C) LONG-TERM OBLIGATIONS
(in millions)
-------------
Debt obligations at December 31, 1998 $ 1,872.5
Proceeds from debt offering (1) 1,000.0
Proceeds from credit facility (2) 200.0
Proceeds from project financing (3) 250.0
Payment on retired credit facility (2) (350.0)
Payments on debt obligations other
than credit facility (18.0)
Other 1.1
---------
Debt obligations at September 30, 1999 2,955.6
Less long-term obligations
due within one year (13.0)
---------
Long-term obligations at September 30, 1999 $ 2,942.6
=========
(1) In March 1999, the Company issued $200.0 million of
12.25% Senior Notes due 2006 (the "Senior Notes").
Also in March 1999, RBF Finance Co., a limited
purpose finance company and a consolidated affiliate
of the Company, issued $400.0 million of 11% Senior
Secured Notes due 2006 and $400.0 million of 11.375%
Senior Secured Notes due 2009 (collectively the
"Secured Notes"). The Company borrowed the proceeds
from the Secured Notes from RBF Finance Co. pursuant
to ten separate loan agreements, each of which is
secured by one of the Company's drilling rigs or the
construction contract to build a drilling rig. The
Company also guaranteed the payment of the Secured
Notes issued by RBF Finance Co. Interest is payable
semiannually on March 15 and September 15 on both the
Senior Notes and Secured Notes. As a result, the
Company received net proceeds of approximately $971.5
million after deducting offering expenses. The
Company used the proceeds to repay existing indebted-
ness of $350.0 million of long-term obligations,
$125.0 million of short-term obligations (see Note D)
and the Company's portion ($81.0 million) of an
interim facility for the construction of the Deep-
water Frontier. Remaining proceeds will be used for
planned capital expenditures, working capital and
other general corporate purposes. As a result of the
repayment of existing indebtedness, the Company
incurred an extraordinary loss of $1.7 million, net
of tax, in the first quarter of 1999 which consisted
of the write-off of unamortized debt issuance costs.
(2) During the first quarter of 1999, the Company drew
the remaining $200.0 million available under its
$350.0 million revolving credit facility. The Company
retired such facility during the first quarter with
proceeds from the Senior Notes and Secured Notes.
(3) In August 1999, the Company completed a $250.0
million project financing for the construction the
Deepwater Nautilus in which the Company received net
proceeds of approximately $245.5 million. The
financing consists of two five-year notes. The first
note is for $200.0 million and bears interest at
7.31%, with monthly interest payments, which
commenced in September 1999, and monthly principal
payments commencing in June 2000. The second note is
for $50.0 million and bears interest at 9.41%, with
monthly interest payments, which commenced in
September 1999, and a balloon principal payment which
is due at maturity of the loan in May 2005. Both
notes are collateralized by the Deepwater Nautilus
and drilling contract revenues from such rig.
D) SHORT-TERM OBLIGATIONS
During the first quarter of 1999, the Company drew the
remaining $1.6 million available under its $125.0 million
short-term credit facility for the construction of the
Deepwater Millennium. In March 1999, the Company repaid
such facility with proceeds from the Senior Notes and
Secured Notes.
E) PREFERRED STOCK
On April 22, 1999, the Company issued 300,000 shares of
13.875% Senior Cumulative Redeemable Preferred Stock (the
"Preferred Stock") and warrants to purchase 10,500,000
shares of the Company's common stock at an exercise price of
$9.50 per share (the "Warrants"). The Company received net
proceeds of approximately $288.8 million from the issuance
of the Preferred Stock and Warrants. Each share of
Preferred Stock has a liquidation preference of $1,000 per
share and one Warrant to purchase 35 shares of the Company's
common stock. The Warrants became exercisable on July 7,
1999, the date in which the registration of the Preferred
Stock with the Securities and Exchange Commission was
declared effective. The Warrants expire on, and the
Preferred Stock must be redeemed by, May 1, 2009.
Dividends are to be paid quarterly commencing on August
1, 1999 and at the Company's option may be paid in cash or,
on or before May 1, 2004, in additional shares of Preferred
Stock. Dividends paid through September 30, 1999 were $11.4
million and were paid by the issuance of additional shares
of Preferred Stock. Dividends accrued during the three and
nine month periods ended September 30, 1999 were $10.7
million and $18.7 million, respectively. The Warrants'
initial fair value of $159.95 per Warrant, or approximately
$48.0 million in total, was recorded as a discount to the
Preferred Stock and an addition to capital in excess of par.
The Warrants' initial fair value and Preferred Stock
offering expenses of $9.7 million are being amortized on a
straight line basis over the Warrants' ten year term.
Amortization expense for the three and nine month periods
ended September 30, 1999 was $1.4 million and $2.5 million,
respectively. Preferred Stock dividends and the amortization
of the Warrants' initial value and Preferred Stock offering
expenses are deducted from net income to arrive at net
income applicable to common stockholders.
The Company may redeem the Preferred Stock beginning
May 1, 2004. The initial redemption price is 106.938% of the
liquidation preference, declining thereafter to 100% on or
after May 1, 2007, in each case plus accrued and unpaid
dividends to the redemption date. In addition, on or before
May 1, 2002, the Company may redeem shares of the Preferred
Stock having an aggregate liquidation preference of up to
$105.0 million at a price equal to 113.875% of its
liquidation preference, plus accrued and unpaid dividends to
the redemption date, with proceeds from one or more public
equity offerings.
F) CANCELLATION OF CONVERSION PROJECTS
In 1998, the Company cancelled four drillship
conversion projects in which the Company had purchased or
committed to purchase drilling equipment for such projects.
The Company had expected to use some of the surplus
equipment on other construction and/or upgrade projects and
to maintain the balance as inventory. A majority of the
equipment originally ordered was directed to other
construction projects. However, the Company has determined
that a portion of such surplus equipment is not usable for
other projects or as spare parts and as a result the Company
expensed $25.6 million in the third quarter of 1999. As of
September 30, 1999, the Company had approximately $55.4
million remaining of such surplus drilling equipment. The
Company is continually reviewing the value and utility of
such equipment and if in the future it is determined the
Company cannot realize the recorded value of the surplus
equipment, the Company could incur additional write-offs or
write-downs of such equipment.
In September 1999, the Company sold the Peregrine X
(with the hull being the primary remaining asset) for
approximately $5.8 million. As a result of the sale, the
Company recorded a loss of $6.1million that has been
included in the cancellation of conversion projects in the
Consolidated Statement of operations.
G) SEGMENT INFORMATION
Segment information for the three and nine month
periods ended September 30, 1999 and 1998 is as follows (in
millions):
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
1999 1998 1999 1998
------- ------- ------- -------
Operating revenues by segment:
Deepwater $ 93.6 $ 100.9 $ 270.1 $ 297.9
Shallow water 42.5 88.8 159.2 306.0
Inland water 28.7 53.7 85.5 199.7
Engineering services
and land operations 51.2 .1 173.4 .3
Development .1 - .2 -
Intersegment (1.9) - (3.9) -
------- ------- ------- -------
Total operating revenues $ 214.2 $ 243.5 $ 684.5 $ 803.9
======= ======= ======= =======
Operating income (loss) by segment:
Deepwater $ 3.8 $ (49.0) $ 70.5 $ 38.7
Shallow water (7.4) 42.6 (2.7) 168.4
Inland water 11.3 6.1 (2.1) 57.2
Engineering services
and land operations 11.3 (.1) 40.5 (.1)
Development (.1) (7.6) (2.5) (15.6)
------- ------- ------- -------
18.9 (8.0) 103.7 248.6
Unallocated depreciation
and amortization (1.0) (.2) (2.8) (.5)
Unallocated general
and administrative (14.0) (15.0) (55.3) (44.4)
Unallocated merger expenses - - - 1.0
------- ------- ------- -------
Operating income (loss) $ 3.9 $ (23.2) $ 45.6 $ 204.7
======= ======= ======= =======
Total assets by segment were as follows (in millions):
September 30, December 31,
1999 1998
--------- ---------
Deepwater $ 2,817.8 $ 2,079.8
Shallow water 1,100.4 1,038.5
Inland water 222.3 251.2
Engineering services
and land operations 182.5 159.3
Development 20.7 11.6
Corporate 569.1 173.6
--------- ---------
Total $ 4,912.8 $ 3,714.0
========= =========
In April 1998, Cliffs Drilling was awarded a contract
from PDVSA Exploration and Production ("PDVSA") to drill 60
turnkey wells in Venezuela. The drilling program commenced
in March 1998 and the program was expected to extend over
approximately three and one-half years and was expected to
utilize 7 of the Company's land drilling rigs in Venezuela.
However, during the first quarter of 1999, in response to
the downturn in the market, PDVSA and the Company
renegotiated prices for the next 14 wells to be drilled
under this program. In the fourth quarter of 1999,
negotiations were completed for the following seven wells to
be drilled under this program at further reduced margins. As
of September 30, 1999, the Company had completed 24 wells
with 11 wells remaining to be completed. Such remaining
wells are expected to be completed by the end of the first
quarter in 2000. In regards to the remaining 25 of the
original 60 wells, a contractual commitment no longer exists
and no assurance can be given that such wells will
ultimately be drilled.
For the three and nine months ended September 30, 1999,
revenues from PDVSA of $38.5 million and $120.5 million,
respectively, reported in the engineering services and land
operations segment, accounted for 18.0% and 17.6%,
respectively, of the Company's consolidated operating
revenues.
H) RESTRUCTURING EXPENSES
On April 7, 1999, the Company announced that Mr. Steven
Webster, the Company's president and chief executive
officer, had agreed to resign from these officer positions
effective May 31, 1999. On May 19, 1999, Mr. Paul B. Loyd,
Jr., the Company's chairman of the board, was elected as the
Company's chief executive officer, and Mr. Andrew Bakonyi
was elected as president and chief operating officer. Mr.
Webster remains a director of the Company.
As a result of Mr. Webster's resignation and the
termination of certain other executive officers, the Company
incurred $6.6 million of expense in the second quarter of
1999. Such expense is reported as general and
administrative expense in the Company's Consolidated
Statement of Operations.
I) EARNINGS PER SHARE
The following table summarizes the basic and diluted
per share computations for income from continuing operations
before extraordinary loss for the three and nine month
periods ended September 30, 1999 and 1998 (in millions
except per share amounts):
Three Months Nine Months
Ended September 30, Ended September 30,
------------------ ------------------
1999 1998 1999 1998
------- ------- ------- -------
Numerator:
Income (loss) from continuing
operations before extraordinary loss $ (22.4) $ (28.2) $ (33.3) $ 93.2
Dividends and accretion on
preferred stock (12.1) - (21.2) -
------- ------- ------- -------
Income (loss) from continuing
operations before extraordinary
loss - basic and diluted $ (34.5) $ (28.2) $ (54.5) $ 93.2
======= ======= ======= =======
Denominator:
Weighted average common shares
outstanding - basic 192.8 165.3 192.6 165.2
Outstanding stock options and
restricted stock awards - - - 1.2
------- ------- ------- -------
Weighted average common
shares outstanding - diluted 192.8 165.3 192.6 166.4
======= ======= ======= =======
Earnings per share:
Income (loss) from continuing operations
before extraordinary loss:
Basic $ (.18) $ (.17) $ (.28) $ .56
Diluted $ (.18) $ (.17) $ (.28) $ .56
J) STOCK AWARDS
During the first six months of 1999, the Company
granted stock options, with respect to the Company's common
stock, of approximately 7.4 million shares to certain
employees of the Company and approximately .5 million shares
to non-employee members of the board of directors. Such
options vest at varying times from six months to three years
and were granted at prices ranging from $6.15625 to $10.0625
per share (the market price on the date of grants). All such
options expire ten years from the date of grant.
In the second quarter of 1999, a wholly-owned indirect
subsidiary of the Company made awards of restricted stock of
the subsidiary to certain directors, officers and employees
of the Company, as well as awards of restricted stock to
certain former directors of Reading & Bates Corporation who
served in such capacity prior to completion of the merger
with Falcon Drilling Company, Inc. in December 1997. Such
award comprised of approximately 13.75% of the outstanding
common stock of such subsidiary. The awards vested upon
issuance, but are subject to restrictions on sale or
transfer for a period of six months following the date of
the award. As a result, the Company incurred $1.5 million of
expense in the second quarter of 1999 which has been
included in general and administrative expenses.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
R&B Falcon Corporation
We have reviewed the accompanying consolidated balance sheet of
R&B Falcon Corporation (a Delaware corporation) and Subsidiaries as of
September 30, 1999, the related consolidated statement of operations
for the three and nine month periods ended September 30, 1999 and 1998
and the related consolidated statement of cash flows for the nine
months ended September 30, 1999 and 1998. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A review
of interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the financial statements referred
to above for them to be in conformity with generally accepted
accounting principles.
/s/Arthur Andersen LLP
Houston, Texas
October 29, 1999
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Industry Conditions
Activity in the contract drilling industry and related oil
service businesses has deteriorated significantly in the past
year due to decreased worldwide demand for drilling rigs and
related services resulting from a substantial decline in crude
oil prices experienced in 1998 through the first quarter of 1999.
In recent months, crude oil prices have recovered somewhat, but
there can be no assurance that demand for drilling rigs and
related services will increase. The financial condition and
results of operations of the Company and other drilling
contractors are dependent upon the price of oil and natural gas,
as demand for their services is primarily dependent upon the
level of spending by oil and gas companies for exploration,
development and production activities. In late 1998 and early
1999, lower crude oil prices affected exploration and production
spending, which led to significantly lower dayrates and
utilization for offshore drilling companies, particularly in the
U.S. Gulf of Mexico. Crude oil and natural gas prices have
continued to fluctuate over the last several years. If crude oil
prices decline from current levels, or a weakness in crude oil
prices continued for an extended period, there could be a further
deterioration in both rig utilization and dayrates.
Utilization of the Company's domestic jack-up fleet has
declined from approximately 75% in the third quarter of 1998 to
approximately 47% in the third quarter of 1999, and dayrates have
declined from an average of $33,000 during the third quarter of
1998 to an average of $12,000 during the third quarter of 1999.
Dayrates for the Company's domestic barge drilling rig fleet have
not declined materially, but utilization of the fleet declined
from approximately 52% in the third quarter of 1998 to
approximately 27% in the third quarter of 1999. As a result, the
Company experienced a decline in operating revenues from the
first nine months of 1998 to the first nine months of 1999 (see
Results of Operations below).
Results of Operations
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED
TO NINE MONTHS ENDED SEPTEMBER 30, 1998
The Company's net loss for the nine months ended September
30, 1999 was $35.0 million ($.29 loss per diluted share after
preferred stock dividends and accretion of $21.2 million)
compared with net income of $87.7 million ($.53 per diluted
share) for the same period of 1998. Included in the results for
the nine months ended September 30, 1999 was a $1.7 million
extraordinary loss due to the extinguishment of debt obligations.
Included in the results for the nine months ended September 30,
1998 was a $22.0 million extraordinary loss due to the
extinguishment of debt obligations and $16.5 million of income
related to discontinued operations.
Operating revenues are primarily a function of dayrates and
utilization. Operating revenues decreased for the nine months
ended September 30, 1999 compared to the same period in 1998
despite a $225.4 million revenue increase generated from the
purchase of Cliffs Drilling in December 1998. The revenue
decrease is primarily due to lower utilization and dayrates in
the shallow water and inland water segments. Partially
offsetting the decrease was $7.2 million of revenue recorded in
the first quarter of 1999 for the early termination of a drilling
contract for one of its third-generation semisubmersibles. For
the nine months ended September 30, 1999, revenues from one
customer in Venezuela (PDVSA Exploration and Production) of
$120.5 million, reported in the engineering services and land
operations segment, accounted for 17.6% of the Company's total
operating revenues. See Liquidity and Capital Resources - Other
below.
Operating expenses do not necessarily fluctuate in
proportion to changes in operating revenues due to the
continuation of personnel on board and equipment maintenance when
the Company's units are stacked. It is only during prolonged
stacked periods that the Company is able to significantly reduce
labor costs and equipment maintenance expense. Additionally,
labor costs fluctuate due to the geographic diversification of
the Company's units and the mix of labor between expatriates and
nationals as stipulated in the contracts. In general, labor
costs increase primarily due to higher salary levels and
inflation. Equipment maintenance expenses fluctuate depending
upon the type of activity the unit is performing and the age and
condition of the equipment. Scheduled maintenance and overhauls
of equipment are performed on the basis of number of hours
operated in accordance with the Company's preventive maintenance
program. Operating expenses for a unit are typically deferred or
capitalized as appropriate during periods of mobilization,
contract preparation, major upgrades or conversions unless
corresponding revenue is recognized, in which case such costs are
expensed as incurred.
The increase in operating expenses for the nine months ended
September 30, 1999 as compared to the same period in 1998 is
primarily due to the purchase of Cliffs Drilling in December
1998, partially offset by lower operating expenses fleet wide due
to lower utilization and the cold stacking of some of the units.
Included as a reduction of operating expenses for the nine months
ended September 30, 1999 is an $8.3 million gain in the shallow
water segment due to the W.D. Kent derrick equipment casualty.
Such casualty occurred in the third quarter of 1997 as a result
of a blowout and fire. Also included in operating expenses for
the nine months ended September 30, 1999 in the inland water
segment is $2.4 million of expense relating to a reserve for
potentially uncollectable receivables and a gain of $16.1 million
due to the total loss of a drilling barge as a result of a
blowout and fire.
Cancellation of conversion projects expense of $31.7 million
for the nine months ended September 30,1999 consisted of the
write-down of $25.6 million of surplus equipment relating to the
four drillship conversion projects which the Company had
cancelled in 1998 and a $6.1 million loss on the sale of the
Peregrine X.
Depreciation and amortization expense increased for the nine
months ended September 30, 1999 as compared to the same period in
1998. Such increase is primarily due to the purchase of Cliffs
Drilling in December 1998 and the purchase and/or significant
upgrades of offshore and inland marine vessels during 1998.
General & administrative expense increased for the nine
months ended September 30, 1999 as compared to the same period in
1998. Such increase is due to $6.6 million of executive
termination expense, $1.5 million of employee incentive
compensation expense and the purchase of Cliffs Drilling in
December 1998.
Interest expense increased for the nine months ended
September 30, 1999 as compared to the same period in 1998
primarily due to increased average debt balances outstanding and
increased average interest rates, partially offset by increased
capitalized interest related to significant upgrade and new build
projects.
Interest income increased for the nine months ended
September 30, 1999 as compared to the same period in 1998 due to
increased cash and short-term investment balances during the
period.
Income from equity investees plus related income increased
for the nine months ended September 30, 1999 as compared to the
same period in 1998 due to the Deepwater Pathfinder and the
Deepwater Frontier both of which commenced operations in the
latter part of the first quarter of 1999.
Income taxes resulted in a benefit for the nine months ended
September 30, 1999 as compared to an expense for the same period
in 1998 primarily due to the incurrence of losses by the Company
in 1999.
Income from discontinued operations for the nine months
ended September 30, 1998 was the reversal of accrued estimated
losses from operations until disposal resulting from the
accounting requirements for recontinuance of discontinued
operations.
Extraordinary losses for the nine months ended September 30,
1999 of $1.7 million, after a tax benefit of $.9 million, (see
Note C of Notes to Interim Consolidated Financial Statements) and
for the nine months ended September 30, 1998 of $22.0 million,
after a tax benefit of $11.9 million, are both due to the
extinguishment of prior debt obligations in connection with the
issuance of new debt obligations.
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED
TO THREE MONTHS ENDED SEPTEMBER 30, 1998
The Company's net loss for the three months ended September
30, 1999 was $22.4 million ($.18 loss per diluted share after
preferred stock dividends and accretion of $12.1 million)
compared with a net loss of $20.5 million ($.12 loss per diluted
share) for the same period of 1998.
Operating revenues are primarily a function of dayrates and
utilization. Operating revenues decreased for the three months
ended September 30, 1999 compared to the same period in 1998
despite a $62.0 million revenue increase generated from the
purchase of Cliffs Drilling in December 1998. The revenue
decrease is primarily due to lower utilization and dayrates in
the shallow water and inland water segments. For the three months
ended September 30, 1999, revenues from one customer in Venezuela
(PDVSA Exploration and Production) of $38.5 million, reported in
the engineering services and land operations segment, accounted
for 18.0% of the Company's total operating revenues. See
Liquidity and Capital Resources - Other below.
Operating expenses do not necessarily fluctuate in
proportion to changes in operating revenues due to the
continuation of personnel on board and equipment maintenance when
the Company's units are stacked. It is only during prolonged
stacked periods that the Company is able to significantly reduce
labor costs and equipment maintenance expense. Additionally,
labor costs fluctuate due to the geographic diversification of
the Company's units and the mix of labor between expatriates and
nationals as stipulated in the contracts. In general, labor
costs increase primarily due to higher salary levels and
inflation. Equipment maintenance expenses fluctuate depending
upon the type of activity the unit is performing and the age and
condition of the equipment. Scheduled maintenance and overhauls
of equipment are performed on the basis of number of hours
operated in accordance with the Company's preventive maintenance
program. Operating expenses for a unit are typically deferred or
capitalized as appropriate during periods of mobilization,
contract preparation, major upgrades or conversions unless
corresponding revenue is recognized, in which case such costs are
expensed as incurred.
The decrease in operating expenses for the three months
ended September 30, 1999 as compared to the same period in 1998
is primarily due to lower operating expenses fleet wide due to
lower utilization and the cold stacking of some units, partially
offset by the purchase of Cliffs Drilling in December 1998. Also
included as a reduction in operating expenses for the three
months ended September 30, 1999 is a gain of $16.1 million in the
inland water segment due to the total loss of a drilling barge as
a result of a blowout and fire.
Cancellation of conversion projects expense of $31.7 million
for the three months ended September 30,1999 consisted of the
write-down of $25.6 million of surplus equipment relating to the
four drillship conversion projects which the Company had
cancelled in 1998 and a $6.1 million loss on the sale of the
Peregrine X.
Depreciation and amortization expense increased for the
three months ended September 30, 1999 as compared to the same
period in 1998. Such increase is primarily due to the purchase of
Cliffs Drilling in December 1998 and the purchase and/or
significant upgrades of offshore and inland marine vessels during
1998.
General & administrative expense decreased for the three
months ended September 30, 1999 as compared to the same period in
1998. Such decrease is primarily due to higher employee incentive
expense in 1998.
Interest expense increased for the three months ended
September 30, 1999 as compared to the same period in 1998
primarily due to increased average debt balances outstanding and
increased average interest rates, partially offset by increased
capitalized interest related to significant upgrade and new build
projects.
Interest income increased for the three months ended
September 30, 1999 as compared to the same period in 1998 due to
increased cash and short-term investment balances during the
period.
Income from equity investees plus related income increased
for the three months ended September 30, 1999 as compared to the
same period in 1998 due to the Deepwater Pathfinder and the
Deepwater Frontier both of which commenced operations in the
latter part of the first quarter of 1999.
Income tax benefit increased for the three months ended
September 30, 1999 as compared to the same period in 1998 despite
a decrease in the Company's pretax loss primarily due to the
Company recording the tax benefit of the current losses at full
statutory rates.
Income from discontinued operations for the three months
ended September 30, 1998 was the reversal of accrued estimated
losses from operations until disposal resulting from the
accounting requirements for recontinuance of discontinued
operations.
Liquidity and Capital Resources
Cash Flows
Net cash provided by operating activities was $120.4 million
for the nine months ended September 30, 1999 compared to $236.0
million for the same period in 1998. The decrease is primarily
due to the decrease in net income as a result of lower dayrates
and utilization, offset by the changes in the components of
working capital.
Net cash used in investing activities was $880.3 million for
the nine months ended September 30, 1999 compared to $878.8
million for the same period in 1998. The increase is due to
capital expenditures, primarily related to the significant
capital projects involving the construction or upgrade of
drilling units, the increase in cash dedicated to capital
projects which will primarily be used for capital expenditures
and principal and interest payments (see Note A of Notes to
Interim Consolidated Financial Statements), the purchase of short-
term investments, and investments made in joint venture projects.
During the nine months ended September 30, 1999, the Company made
advances to the joint venture that operates the Deepwater
Frontier of $146.7 million of which $123.3 million was repaid
from proceeds from project financing. See Project Financings
below.
Net cash provided by financing activities was $1,228.3
million for the nine months ended September 30, 1999 compared to
$655.0 million for the same period in 1998. The increase is due
to proceeds received from the $1.0 billion debt offering, $300.0
million preferred stock offering and the $250.0 million financing
for the construction of the Deepwater Nautilus, offset by the
repayment of certain existing debt obligations (see below).
Debt Issuance
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 offering 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. See Note C of Notes to Interim
Consolidated Financial Statements.
Preferred Stock Issuance
On April 22, 1999, the Company issued 300,000 shares of
13.875% Senior Cumulative Redeemable Preferred Stock (the
"Preferred Stock") and warrants to purchase 10,500,000 shares of
the Company's common stock at an exercise price of $9.50 per
share (the "Warrants"). The Company received net proceeds of
approximately $288.8 million from the issuance of the Preferred
Stock and Warrants. Each share of Preferred Stock has a
liquidation preference of $1,000 per share and one Warrant to
purchase 35 shares of the Company's common stock. The Warrants
became exercisable on July 7, 1999, the date in which the
registration of the Preferred Stock with the Securities and
Exchange Commission was declared effective. The Warrants expire
on, and the Preferred Stock must be redeemed by, May 1, 2009.
Dividends are to be paid quarterly commencing on August 1,
1999 and at the Company's option may be paid in cash or, on or
before May 1, 2004, in additional shares of Preferred Stock.
Dividends paid through September 30, 1999 were $11.4 million and
were paid by the issuance of additional shares of Preferred
Stock. Dividends accrued during the three and nine month periods
ended September 30, 1999 were $10.7 million and $18.7 million,
respectively. The Warrants' initial fair value of $159.95 per
Warrant, or approximately $48.0 million in total, was recorded as
a discount to the Preferred Stock and an addition to capital in
excess of par. The Warrants' initial fair value and Preferred
Stock offering expenses of $9.7 million are being amortized on a
straight line basis over the Warrants' ten year term.
Amortization expense for the three and nine month periods ended
September 30, 1999 was $1.4 million and $2.5 million,
respectively. Preferred Stock dividends and the amortization of
the Warrants' initial value and Preferred Stock offering expenses
are deducted from net income to arrive at net income applicable
to common stockholders.
The Company may redeem the Preferred Stock beginning May 1,
2004. The initial redemption price is 106.938% of the liquidation
preference, declining thereafter to 100% on or after May 1, 2007,
in each case plus accrued and unpaid dividends to the redemption
date. In addition, on or before May 1, 2002, the Company may
redeem shares of the Preferred Stock having an aggregate
liquidation preference of up to $105.0 million at a price equal
to 113.875% of its liquidation preference, plus accrued and
unpaid dividends to the redemption date, with proceeds from one
or more public equity offerings.
Project Financings
In August 1999, the Company completed a $250.0 million
project financing for the construction the Deepwater Nautilus in
which the Company received net proceeds of approximately $245.5
million. The financing consists of two five-year notes. The
first note is for $200.0 million and bears interest at 7.31%,
with monthly interest payments, which commenced in September
1999, and monthly principal payments commencing in June 2000.
The second note is for $50.0 million and bears interest at 9.41%,
with monthly interest payments, which commenced in September
1999, and a balloon principal payment which is due at maturity of
the loan in May 2005. Both notes are collateralized by the
Deepwater Nautilus and drilling contract revenues from such rig.
In September 1999, the limited liability company which
operates the Deepwater Frontier, which is owned 60% by the
Company and 40% by Conoco completed a $270.0 million project
financing in the form of a synthetic lease. The synthetic lease
is collateralized by the drillship Deepwater Frontier, drilling
contract revenues from such drillship and a $50.0 million letter
of credit which was secured by the Company (see Note A of Notes
to Interim Consolidated Financial Statements). Proceeds of such
financing were used in part to repay advances of approximately
$123.3 million which the Company had made to the limited
liability company.
Capital Expenditure Commitments
The Company has numerous projects completed or under way
involving the construction or upgrade of drilling units. The
following is a list of such projects:
Water Expenditures
Depth Estimated Contract Through
Capability Delivery Term Estimated September 30,
(feet) Date (years) Cost 1999
------ --------- ------- --------- ------------
Drillships: (in millions)
DEEPWATER PATHFINDER (1) 10,000 Delivered 5 $ 280.0 $ 271.8
DEEPWATER FRONTIER (2) 10,000 Delivered 2.5 265.0 254.8
DEEPWATER MILLENNIUM 10,000 Delivered 4 (3) 280.0 269.0
DEEPWATER DISCOVERY 10,000 3rd quarter 2000 3 305.0 130.6
DEEPWATER EXPEDITION 10,000 Delivered 6 230.0 218.4
(formerly PEREGRINE IV)
PEREGRINE VII (4) 7,200 4th quarter 1999 - 305.0 268.8
Semisubmersibles:
FALCON 100 (5) 2,400 Delivered - 125.0 124.1
DEEPWATER NAUTILUS 8,000 4th quarter 1999 5 335.0 228.4
(formerly RBS8M)
DEEPWATER HORIZON 10,000 4th quarter 2000 3 335.0 40.2
(formerly RBS8D) --------- ---------
$ 2,460.0 $ 1,806.1
========= =========
- -------------------
(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. Both Conoco and the
Company have used the rig to drill a well and the Company
has contracted with Petrobras for a two-year contract for
the rig offshore Brazil.
(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) On April 15, 1999, BP Amoco cancelled its contract with
the Company for this drillship in accordance with the
contract's terms because the drillship had not been
delivered on time. The Company is currently marketing this
rig for work.
(5) In May 1999, Petrobras cancelled the drilling contract for
the Falcon 100 based on its interpretation of the
cancellation provisions of the contract. The Company does
not believe that Petrobras has the right to cancel such
contract. The Company has engaged Brazilian counsel to
evaluate the Company's rights under the contract. The
Company is currently marketing this rig for work.
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, certain of the long-term
contracts under which the Company plans to operate these rigs.
Liquidity
During the first nine months of 1999, the Company received
net proceeds of approximately $1.5 billion from the issuance of
the Senior Notes, Preferred Stock and the project financing for
the construction of the Deepwater Nautilus. 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. Also, the Company is considering certain asset sales,
including the Seillean and Iolair. As of September 30, 1999, the
Company had $862.8 million of cash, cash equivalents, short-term
investments and cash dedicated to capital projects.
The Company has substantially completed or is currently
constructing or significantly upgrading nine deepwater drilling
rigs. The Company estimates its capital expenditure commitments
on these projects and its other routine capital expenditures for
the remainder of 1999 and 2000 to total approximately $663.0
million.
The Company believes its projected level of cash flows from
operations, which assumes an industry recovery in 2000, cash on
hand and potential asset sales will be sufficient to satisfy the
Company's short-term and long-term working capital needs, planned
investments, capital expenditures, debt, lease and other payment
obligations. If the Company were to build excess cash balances,
it will most likely use a portion of the excess to retire debt
obligations.
Other
In December 1998, Mobil North Sea Limited ("Mobil")
purportedly terminated its contract for use of the Company's Jack
Bates semisubmersible rig based on failure of two mooring lines
while anchor recovery operations at a Mobil well location had
been suspended during heavy weather. 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 recontracted the Jack
Bates to Mobil for one well at a dayrate of $156,000 and for
another well at a dayrate of $69,000. These contracts are without
prejudice to either party's rights in the dispute over the
termination of the original contract. The Company has filed a
request for arbitration with the London Court of International
Arbitration.
In April 1998, Cliffs Drilling was awarded a contract from
PDVSA Exploration and Production ("PDVSA") to drill 60 turnkey
wells in Venezuela. The drilling program commenced in March 1998
and the program was expected to extend over approximately three
and one-half years and was expected to utilize 7 of the Company's
land drilling rigs in Venezuela. However, during the first
quarter of 1999, in response to the downturn in the market, PDVSA
and the Company renegotiated prices for the next 14 wells to be
drilled under this program. In the fourth quarter of 1999,
negotiations were completed for the following seven wells to be
drilled under this program at further reduced margins. As of
September 30, 1999, the Company had completed 24 wells with 11
wells remaining to be completed. Such remaining wells are
expected to be completed by the end of the first quarter in 2000.
In regards to the remaining 25 of the original 60 wells, a
contractual commitment no longer exists and no assurance can be
given that such wells will ultimately be drilled.
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
completed its investigation and evaluation of these systems and
has substantially completed 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 $2.3 million, the majority of which was
capitalized. Software replacements in Cliffs Drilling's foreign
offices have been completed during 1999 at a total cost of
approximately $.2 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 phased out.
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, the
Company completed on site testing and received confirmation of
Y2K compliance 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 was completed in the second quarter of 1999. The
equipment evaluated did not demonstrate any equipment failures or
other significant Y2K compliance issues. Based on these
evaluations, 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 its
electrical and electronic contractors in August 1998 and has
received information from 85% 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
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 were 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 having 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.
Other
On April 7, 1999, the Company announced that Mr. Steven
Webster, the Company's president and chief executive officer, had
agreed to resign from these officer positions effective May 31,
1999. On May 19, 1999, Mr. Paul B. Loyd, Jr., the Company's
chairman of the board, was elected as the Company's chief
executive officer, and Mr. Andrew Bakonyi was elected as
president and chief operating officer. Mr. Webster remains a
director of the Company.
As a result of Mr. Webster's resignation and the termination
of certain other executive officers, the Company incurred $6.6
million of expense in the second quarter of 1999. Such expense
is reported as general and administrative expense in the
Company's Consolidated Statement of Operations. See Results of
Operations above.
In June 1999, one of the Company's inland drilling barges
was declared a total loss as a result of a blowout and fire at a
location in inland waters approximately two miles southeast of
Amelia, Louisiana. No injuries of personnel were sustained. The
Company's physical damage insurance covered the loss of the barge
and as a result the Company recorded a gain of approximately
$16.1 million in the third quarter of 1999. See Results of
Operations above.
In 1998, the Company cancelled four drillship conversion
projects in which the Company had purchased or committed to
purchase drilling equipment for such projects. The Company had
expected to use some of the surplus equipment on other
construction and/or upgrade projects and to maintain the balance
as inventory. A majority of the equipment originally ordered was
directed to other construction projects. However, the Company has
determined that a portion of such surplus equipment is not usable
for other projects or as spare parts and as a result the Company
expensed $25.6 million in the third quarter of 1999. As of
September 30, 1999, the Company had approximately $55.4 million
remaining of such surplus drilling equipment. The Company is
continually reviewing the value and utility of such equipment and
if in the future it is determined the Company cannot realize the
recorded value of the surplus equipment, the Company could incur
additional write-offs or write-downs of such equipment. See
Results of Operations above.
In September 1999, the Company sold the Peregrine X (with
the hull being the primary remaining asset) for approximately
$5.8 million. As a result of the sale, the Company recorded a
loss of $6.1 million that has been included in the cancellation
of conversion projects in the Consolidated Statement of
operations. See Results of Operations above.
In October 1999, the drillship Deepwater Pathfinder
sustained damage when 20 joints of the vessel's riser and its
blowout prevention equipment fell to the seabed in approximately
7,000 feet of water while preparing to continue drilling
operations in the Gulf of Mexico offshore Louisiana. None of the
personnel aboard the drillship sustained any injury. The
drillship's top drive and travelling equipment sustained damage,
and an investigation is underway to ascertain the full extent of
damages sustained. The marine integrity of the drillship was not
affected. No environmental damage resulted from the incident.
The Company believes that the physical damage insurance coverage
and business interruption insurance maintained by Deepwater
Drilling L.L.C. on the drillship is adequate and that the damages
resulting from such loss will not have a material adverse impact
on the Company's business or financial condition.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
The Company is exposed to changes in interest rates with
respect to its debt obligations. The following table sets forth
the average interest rate for the scheduled maturity of the
Company's debt obligations as of September 30, 1999 (dollars in
millions):
Estimated
Fair
Value at
September 30,
1999 2000 2001 2002 2003 Thereafter Total 1999
------ ------ ------ ------ ------- ---------- --------- ---------
Fixed
Rate Debt:
Amount $ - $ 21.3 $ 41.1 $ 38.6 $ 591.6 $ 2,264.2 $ 2,956.8 $ 2,834.3
Average
interest
rate - 7.359% 7.619% 7.310% 8.268% 9.334% 9.056%
Variable
Rate Debt:
Amount $ 1.4 $ - $ - $ - $ - $ - $ 1.4 $ 1.4
Average
interest
rate 7.000% - - - - - -
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal actions arising in
the normal course of business. After taking into consideration
the evaluation of such actions by counsel for the Company,
management is of the opinion that 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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4 - Form of Registrant's 13-7/8% Senior Cumulative
Redeemable Preferred Stock Certificate.
10.1 - Construction Supervisory Agreement dated as of
August 12, 1999 among RBF Exploration Co.,
as Owner and RBF Exploration II Inc., as
Construction Supervisor.
10.2 - Note Purchase Agreement, Deepwater Nautilus, dated
as of August 12, 1999, RBF Exploration Co.
10.3 - Operation and Maintenance Agreement executed as of
August 12, 1999 by and between R&B Falcon
Corporation and RBF Exploration Co.
10.4 - Performance Guarantee dated as of August 12, 1999
made by R&B Falcon Corporation in favor of RBF
Exploration Co., Travelers Casualty and Surety
Company of America, American Home Assurance
Company, and Chase Bank of Texas, National
Association, as Trustee.
10.5 - First Preferred Ship Mortgage, Deepwater Nautilus,
made by RBF Exploration Co. in favor of Chase
Bank of Texas, National Association, as Indenture
Trustee.
10.6 - Trust Indenture and Security Agreement dated as
of August 12, 1999, between RBF Exploration Co.,
a Nevada corporation, and Chase Bank of Texas,
National Association as Trustee.
10.7 - Assignment of Drilling Contract dated as of August
12, 1999, by RBF Exploration Co. to Chase Bank
of Texas, National Association, as trustee.
10.8 - R&B Falcon Guaranty from R&B Falcon Corporation
dated as of August 31, 1999.
10.9 - Participation Agreement dated as of August 31,
1999 among Deepwater Drilling II L.L.C., Deepwater
Investment Trust 1999-A, Wilmington Trust FSB,
Wilmington Trust Company, BA Leasing & Capital
Corporation, and other Financial Institutions, as
Certified Purchasers, solely with respect to
Section 2.15, 6.9, 9.4(a) and 12.13(b) R&B Falcon
Corporation and Conoco Inc., and solely with
respect to Sections 5.2 and 6.4, RBF Deepwater
Exploration II Inc. and Conoco Development II Inc.
10.10 - Appendix 1 to Participation Agreement dated as of
August 31, 1999.
10.11 - Bank One Application and Agreement for Irrevocable
Standby Letter of Credit dated August 30, 1999.
10.12 - Pledge Agreement dated as of August 30, 1999, by
R&B Falcon Corporation in favor of Bank One,
Louisiana, National Association.
10.13 - Employment and Change of Control Agreement dated
August 25, 1999 between R&B Falcon Corporation and
Paul B. Loyd, Jr.
10.14 - Employment and Change of Control Agreement dated
August 25, 1999 between R&B Falcon Corporation and
Charles R. Ofner.
10.15 - Employment and Change of Control Agreement dated
August 25, 1999 between R&B Falcon Corporation and
Ron Toufeeq.
10.16 - Employment and Change of Control Agreement dated
August 25, 1999 between R&B Falcon Corporation and
Bernie W. Stewart.
10.17 - Employment and Change of Control Agreement dated
August 25, 1999 between R&B Falcon Corporation and
Wayne K. Hillin.
10.18 - Employment and Change of Control Agreement dated
August 25, 1999 between R&B Falcon Corporation and
Andrew Bakonyi.
15 - Letter regarding unaudited interim financial
information.
27 - Financial Data Schedule. (Exhibit 27 is being
submitted as an exhibit only in the electronic
format of this Quarterly Report on Form 10-Q
being submitted to the Securities and Exchange
Commission.)
(b) Reports on Form 8-K
There were no Current Reports on Form 8-K filed during
the three months ended September 30, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
R&B FALCON CORPORATION
Date: November 12, 1999 By /s/T. W. Nagle
----------------------
T. W. Nagle
Executive Vice
President and
Chief Financial Officer
EXHIBIT 4
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
Global Certificate No._________ CUSIP No. 74912E309
R&B Falcon Corporation
13-7/8% Senior Cumulative Redeemable Preferred Stock
Liquidation Preference $1,000 Per Share - Par Value $.01 Per Share
This Certifies that __________ is the owner of ***_________*** fully paid
and non-assessable Shares of the above Corporation transferable only on the
books of the Corporation by the holder hereof in person or by duly
authorized Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and to be sealed with the Seal
of the Corporation.
Dated:
_________________________ SEAL _________________________
W. K. Hillin, Secretary Paul B. Loyd, Jr.,
Chairman
and Chief Executive
Officer
EXHIBIT 10.1
Execution Copy
===========================================================================
CONSTRUCTION SUPERVISORY AGREEMENT
dated as of August 12, 1999
among
RBF EXPLORATION CO.,
as Owner
and
RBF EXPLORATION II INC.,
as Construction Supervisor
============================================================================
CONSTRUCTION SUPERVISORY AGREEMENT
This CONSTRUCTION SUPERVISORY AGREEMENT, dated as of August 12,
1999 (as amended, supplemented or otherwise modified from time to
time, this "Agreement") among RBF EXPLORATION CO., a Nevada
corporation, as owner ("Owner"), and RBF EXPLORATION II INC., a Nevada
corporation, as construction supervisor ("Construction Supervisor").
PRELIMINARY STATEMENT
A. Owner is a party to that certain Contract for the
Construction and Sale of Vessel (Hull No. HRBS6) with Hyundai Heavy
Industries Co., Ltd. and Hyundai Corporation (each, a "Builder"),
dated November 14, 1997 (as amended, supplemented or otherwise
modified from time to time with the consent of Construction
Supervisor, Indenture Trustee and the Surety, the Construction
Contract ) with respect to the construction of a semi-submersible
drilling vessel as described in the specifications to the Construction
Contract (the Drilling Rig ).
B. Owner and Shell Deepwater Development, Inc. ("SDDI"), have
entered into that certain Offshore Daywork Drilling Contract, with an
effective date of August 12, 1998 (as amended, supplemented or otherwise
modified from time to time with the consent of Construction Supervisor,
Indenture Trustee and the Surety, the "SDDI Contract").
C. Subject to the terms and conditions hereof, Owner desires
to appoint Construction Supervisor as Owner's sole and exclusive agent
to supervise the design and construction of the Drilling Rig in
accordance with the Construction Contract, the acquisition and
assembly of the equipment to be used thereon, and the delivery of the
Drilling Rig to SDDI in accordance with the SDDI Contract, and
Construction Supervisor desires to accept such appointment.
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto covenant and agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Defined Terms. Capitalized terms used but not
otherwise defined in this Agreement have the meanings set forth below:
"Advance Payment Refund Amount" - at any time, the aggregate of
all payments, advances or reimbursements theretofore made by Owner or
Indenture Trustee on account of the Cost of the Project to the
Builders, any vendor of Owner s Supplies or any other equipment,
Construction Supervisor or any other person, under the Construction
Contract or any other contract or agreement with respect to the
provision of any goods or services or for other purposes relating to
the Project, including, without limitation, amounts advanced or
incurred pursuant to Section 6.3 hereof, as set forth in a certificate
of Owner (or the Indenture Trustee as Owner s assignee), which
certificate shall be conclusive and binding upon Construction
Supervisor.
"Anticipated Delivery Date" - May 1, 2000.
"Business Day" - has the meaning set forth in the Trust
Indenture.
"Certificate of Requisition" - as defined in Section 3.2.
"Commencement Date" - the date and hour that the last of the
following conditions has been satisfied: (i) Owner s full crew is
aboard, (ii) the Drilling Rig has cleared customs and other
formalities as contemplated by the SDDI Contract, (iii) SDDI has
inspected and accepted the Drilling Rig and Owner s personnel to
perform the Work, (iv) the Drilling Rig and Owner s full crew are in
all respects ready to commence and sustain continued drilling
operations at the rated specifications of Appendix A to the SDDI
Contract during the term of the SDDI Contract, and (v) the Drilling
Rig has departed a mutually agreed (by Owner and SDDI) U.S. Gulf of
Mexico port or location after loading SDDI s drilling equipment and
materials and is en route to SDDI s first drilling or well location
under the SDDI Contract (or would have departed in the event of SDDI s
failure to designate such location in a timely manner).
Notwithstanding the foregoing, however, SDDI may require or allow the
Drilling Rig to commence work at an earlier date in which case such
earlier date shall be the Commencement Date and any of the above
requirements for the Commencement Date which have not been met shall
be deemed waived.
"Complete" or "Completion" - with respect the Project, means that
(i) the Drilling Rig (a) has been completed and delivered to Owner
under the Construction Contract substantially in accordance with the
Specifications, (b) has been completed and equipped in all material
respects in accordance with the requirements of SDDI Contract and the
specifications set forth therein and is fully capable of performing
the Work in accordance with the requirements and specifications of the
SDDI Contract, (c) has been delivered to and unconditionally accepted
by SDDI under the SDDI Contract without waiver of any material
requirement of the SDDI Contract without the consent of Indenture
Trustee, and (d) is free and clear of liens except as permitted by the
Project Documents, and (ii) the Commencement Date has occurred.
"Cost of the Project" - the total cost of design, construction,
equipping, testing and delivering the Drilling Rig including all
costs of any nature whatsoever relating thereto and causing acceptance
of the Drilling Rig by SDDI under and in accordance with the SDDI
Contract.
"Default" - any event or circumstance which with the giving of
notice, passage of time or both would constitute an Event of Default.
"Environmental Laws" - any and all Governmental Requirements
pertaining to health, safety or the environment or the regulation of
hazardous substances or pollutants in effect in any and all
jurisdictions in which Owner is conducting or at any time has
conducted business, or where any Property of Owner is located,
including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation , and Liability Act of 1980 ("CERCLA"), as
amended, the Federal Water Pollution Control Act, as amended, the
Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Safe
Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and
any other international, federal, local or state environmental
conservation or protection laws. The terms "oil" and "discharge"
shall have the meanings specified in OPA, the terms "hazardous
substance" and "release" (or "threatened release") have the meanings
specified in CERCLA, except that "hazardous substance" shall also
include petroleum and any fraction thereof, and the terms "solid
waste" and "disposal" (or "disposed") have the meanings specified in
RCRA; provided, however, that (i) in the event either OPA, CERCLA or
RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective
date of such amendment and (ii) to the extent the laws of the state
in which any Property of the Issuer is located establish a meaning for
"oil," "discharge," "hazardous substance," "release," "solid waste" or
"disposal" which is broader than that specified in either OPA, CERCLA
or RCRA, such broader meaning shall apply.
"Event of Default" - as defined in Section 6.1.
"Excess Costs" - the full amount of the Cost of the Project in
excess of $315,000,000.
"Governmental Authority" - the country, the state, county, city
and political subdivisions in which any Person or such Person's
Property is located or which exercises jurisdiction over any such
Person or such Person's Property, and any court, agency department,
commission, board, body, bureau of instrumentality of any of them
including monetary authorities which exercises jurisdiction over any
such Person or such Person's Property. Unless otherwise specified,
all references to Governmental Authority herein shall mean a
Governmental Authority having jurisdiction over Owner or any of its
Property.
"Governmental Requirements" - any law, statute, code, ordinance,
order, determination, rule, regulation, publication, judgment, decree,
injunction, franchise, permit, registration, consent, approval,
certificate, license, authorization or other directive or requirement
(whether or not having the force of law), including, without
limitation, Environmental Laws, energy regulations and occupational,
safety and health standards or controls, of any Governmental
Authority.
"Indemnified Parties" - Owner, Indenture Trustee and any other
holder of any mortgage or security interest in the Drilling Rig, any
party providing financing to Owner in connection with the Project
(including, without limitation, all Credit Support Parties, as defined
in the Trust Indenture), the Surety and their respective directors,
officers, shareholders, partners, employees, attorneys, agents and
licensees and the successors and assigns of any of the foregoing.
"Indenture Trustee" - the trustee under the Trust Indenture.
"Initial Acceptance" - with respect to the Drilling Rig, means
that (i) the Drilling Rig has been completed in accordance with the
Specifications and tendered to Owner under the Construction Contract,
(ii) all trials contemplated by the Construction Contract have been
completed, and (iii) Owner has accepted the Drilling Rig under the
Construction Contract.
"Initial Acceptance Date" - June 28, 2000.
"Liquidated Damages" - liquidated damages in the amount of
$65,767,852, which amount shall be payable in addition to, and not to
the exclusion of, the Advance Payment Refund Amount as set forth in
this Agreement.
"Note Holder" - has the meaning set forth in the Trust Indenture.
"Outside Date" - September 30, 2000 (unless the Indenture Trustee
is deemed to have consented to an extension of the Outside Date as
provided in the penultimate Provided, However paragraph of the
Performance Bond in which event the Outside Date shall be extended
accordingly).
"Owner s Supplies" - all of the items to be furnished by Owner
for the Drilling Rig as specified in the Specifications.
"Performance Bond" - as defined in Section 2.6.
"Person" - an individual, partnership, corporation, limited
liability company, trust, unincorporated association or organization,
government, governmental agency or governmental subdivision.
"Project" - the design, construction, equipping and testing of
the Drilling Rig and causing its delivery to and acceptance by SDDI,
all as contemplated by and in accordance with this Agreement, the
Construction Contract and the SDDI Contract.
"Property" - any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"Project Documents" - has the meaning set forth in the Trust
Indenture.
"Specifications" - the specifications and other information set
forth in Exhibits 1 through 4, inclusive, of the Construction
Contract, as the same may be modified from time to time in accordance
with the terms of the Construction Contract and with the consent of
Construction Supervisor, Indenture Trustee and the Surety.
"Surety" - collectively, the providers of the Performance
Bond.
"Termination Date" - as defined in Section 4.2.
"Trust Indenture" - the Trust Indenture and Security Agreement
dated as of August 12, 1999, between RBF Exploration Co. and Chase
Bank of Texas, National Association, as from time to time amended,
supplemented or modified.
"Work" - the drilling, deepening, sidetracking, workover,
testing, completing and/or plugging and abandonment operations
required by SDDI on SDDI s well(s) or wells for others as designated
by SDDI, together with ancillary services such as soil survey boring,
environmental data collection, fishing and retrieval (both down-hole
and on the sea floor), other services and subsea activities required
by SDDI for which the Drilling Rig is fit, and the moving of the
Drilling Rig between locations.
ARTICLE II
AGENCY
SECTION 2.1. Appointment of Construction Supervisor. (a)
Pursuant to and subject to the terms and conditions set forth herein,
Owner hereby irrevocably designates and appoints Construction
Supervisor as its exclusive agent to design, construct, acquire, equip
and test the Drilling Rig in accordance with the terms, conditions and
requirements of the Construction Contract and the SDDI Contract and
to deliver the Drilling Rig to, and cause acceptance of the Drilling
Rig by, SDDI in accordance with the requirements of the SDDI Contract.
In connection with the foregoing, Owner expressly authorizes
Construction Supervisor, or any agent or contractor of Construction
Supervisor, and the Construction Supervisor agrees, to take all action
necessary or desirable for the performance and satisfaction of all of
Construction Supervisor's obligations hereunder.
(b) Subject to the terms and conditions of this Agreement,
Construction Supervisor shall have sole management and control over
the construction means, methods, sequences and procedures with respect
to the construction and equipping of the Drilling Rig.
(c) Construction Supervisor shall undertake to perform the
Project in accordance with the provisions of this Agreement including,
without limitation, the provisions of Section 2.5, and, subject to the
provisions hereof, shall pay for the Cost of the Project.
Construction Supervisor shall make all commercially reasonable efforts
to cause the Project to be Complete on or before the Anticipated
Delivery Date and shall, in any event, cause the Project to be
Complete on or before the Outside Date. Construction Supervisor shall
pay for the Cost of the Project using (i) the proceeds of advances
under Article III hereof and (ii) its own funds to the extent of all
Excess Costs. Construction Supervisor shall be solely responsible for
payment of all Excess Costs. If, for any reason, the proceeds of
advances under Article III hereof are insufficient to pay the entire
Cost of the Project, Construction Supervisor shall, nonetheless, be
bound and required to fulfill its obligations hereunder and pay the
entire Cost of the Project, and, under no circumstances, shall the
insufficiency of the funds available to Construction Supervisor
reduce or release Construction Supervisor from any of its obligations
hereunder.
SECTION 2.2. Acceptance. Construction Supervisor hereby
unconditionally and irrevocably accepts the designation and
appointment as Owner's agent in accordance with the terms hereof.
SECTION 2.3. Termination of Authority. Construction
Supervisor s authority under this Agreement shall terminate on the
earlier to occur of (i) Completion of the Project in accordance with
the terms and conditions of this Agreement and satisfaction of the
other terms and provisions hereof, or (ii) termination by Owner
pursuant to Article VI hereof.
SECTION 2.4. Sub-Contracts and Delegation. Construction
Supervisor may execute any of its duties under this Agreement by or
through agents, contractors, employees or attorneys-in-fact, and
Construction Supervisor shall enter into such agreements in addition
to the Construction Contract that Construction Supervisor deems
necessary or desirable in connection with the Project and performance
of all of its other duties hereunder. No such delegation shall limit
or reduce in any way Construction Supervisor's duties and obligations
under this Agreement, and Construction Supervisor shall be and remain
fully liable and responsible therefor.
SECTION 2.5 Covenants of the Construction Supervisor. In
addition to, and without limitation of, the Construction Supervisor s
covenants elsewhere herein, the Construction Supervisor hereby
covenants and agrees that it will:
(a) monitor, supervise and approve in all respects the design,
construction, equipping and testing of the Drilling Rig and the
procurement, delivery and installation of all parts, materials,
equipment and supplies to be installed and/or otherwise used thereon,
including, without limitation, all Owner's Supplies (as defined in the
Construction Contract), all in accordance with the provisions of the
Construction Contract and the SDDI Contract and in connection
therewith to exercise all rights and perform all obligations of Owner
under the Construction Contract and the SDDI Contract in such manner
to ensure that the Drilling Rig will be so constructed, completed,
delivered and accepted;
(b) approve or disapprove in a timely manner all plans and
drawings as Construction Supervisor shall deem to be in the best
interests of Owner and to comply with the SDDI Contract;
(c) attend tests and trials of the Drilling Rig and all major
items of Owner's Supplies;
(d) comply with all obligations of the Owner under the
Construction Contract in order to maintain the Construction Contract
in full force and effect so as to preserve fully the rights of the
Owner thereunder;
(e) agree to any amendment, modification or change in the
Construction Contract, the Specifications, Owner's Supplies and the
plans and specifications, as Construction Supervisor deems in its sole
discretion to be necessary for the completion of the Drilling Rig as
necessary for complete performance of the Project; provided, that (i)
no such amendment or modification shall result in a delay of
Completion beyond the Outside Date and (ii) the aggregate effect of
any amendment or modification, when taken together with any previous
or contemporaneous amendments or modifications, will not have a
material adverse effect on the soundness, structural integrity,
classification, value, utility, operation or useful life of the
Drilling Rig;
(f) appoint in the name of Owner any and all arbitrators
required or permitted to be appointed by Owner under the Construction
Contract and conduct any and all arbitrations required or permitted
to be conducted under or pursuant to the Construction Contract in
connection with any disputes arising thereunder;
(g) take all such other actions with respect to the Drilling
Rig or Construction Contract as Construction Supervisor shall deem to
be in the best interests of Owner;
(h) identify and assist with the acquisition of Owner's
Supplies in accordance with the terms and conditions of the
Construction Contract and the SDDI Contract;
(i) perform all engineering work and all design and
supervisory functions relating to the Project;
(j) negotiate and enter into all contracts or arrangements to
procure Owner's Supplies and services necessary to construct the
Drilling Rig on such terms and conditions as are customary and
reasonable in light of local standards and practices and prudent
industry practices;
(k) obtain all necessary licenses, permits, authorizations and
other rights (including, without limitation, the issuance of a
certificate of classification of the Drilling Rig by the American
Bureau of Shipping as A1 M, Column Stabilized Drilling Unit ,
CDS, P, PAS, and accompanied by a statement of fact from ABS for
UK/Den/HSE compliance and Drilling System Compliance) required under
all applicable laws, rules and regulations from all governmental
authorities in connection with the development and construction of the
Drilling Rig in accordance with the Construction Contract and the
transportation thereof to the appropriate port in the U.S. Gulf of
Mexico;
(l) maintain all books and records with respect to the
construction, transportation and delivery of the Drilling Rig;
(m) move the Drilling Rig to the appropriate port or other
location in the U.S. Gulf of Mexico and to cause the Drilling Rig to
be delivered to and accepted by SDDI and the Commencement Date to
occur under the SDDI Contract;
(n) cause construction of the Drilling Rig to be pursued
diligently and without undue interruption in accordance with the
Construction Contract and in compliance with all Governmental
Requirements;
(o) make all commercially reasonable efforts to cause the
Project to be Complete on or before the Anticipated Delivery Date and
shall, in any event, cause the Project to be Complete no later than
the Outside Date;
(p) enforce all of the obligations of Builders under the
Construction Contract;
(q) (i) until delivery of the Drilling Rig to Owner under the
Construction Contract, maintain insurance on Owner's Supplies in
accordance with the requirements of the Construction Contract and the
Trust Indenture, and (ii) from and after delivery of the Drilling Rig
to Owner under the Construction Contract and through the date of
Completion, maintain or cause to be maintained insurance on the
Drilling Rig at all times in accordance with the requirements set
forth on Schedule A hereto;
(r) immediately upon acceptance of the Drilling Rig by Owner
under the Construction Contract, cause the Drilling Rig to be (i)
documented and registered in the name of Owner under the laws of the
United States of America with no other filing, recordation or
registration of any other document or instrument necessary in order
to establish Owner's good and valid title thereto and (ii) covered by
a mortgage in favor of the Indenture Trustee which shall have been
duly filed with the U.S. Coast Guard National Vessel Documentation
Center and be a first preferred ship mortgage under United States law
effective as against creditors of and purchasers from Owner;
(s) provide all personnel required in order to perform
Construction Supervisor's obligations hereunder, including, without
limitation, those personnel necessary to move the Drilling Rig to a
port in the U.S. Gulf of Mexico, deliver the Drilling Rig to SDDI and
cause acceptance of the Drilling Rig by SDDI in accordance with the
SDDI Contract, such personnel to have the qualifications necessary to
comply with Construction Supervisor's obligations hereunder and any
qualifications imposed by applicable law, rules and regulations, and
such personnel to be made available at such locations and in such
numbers as may be required in order to comply with the foregoing;
(t) provide such administrative, engineering and other
technical support services as may be needed by the personnel provided
pursuant to the foregoing item (s) in order for Construction
Supervisor to perform its obligations hereunder, including, without
limitation, accounting, data processing, legal, tax, project
management, contract administration, transportation, communications,
payroll, purchasing, shipping and personnel administration services;
and
(u) provide such equipment, materials, spare parts, supplies
and related property as the personnel provided pursuant to the
foregoing item (s) and the personnel providing the services described
in the foregoing item (t) may require in order for Construction
Supervisor to perform its obligations hereunder, such equipment,
materials, spare parts, supplies and related property to be provided
as such locations and in such quantities as may be required to such
performance.
SECTION 2.6. Performance Bond. Construction Supervisor shall
obtain and maintain at its sole cost and expense in full force and
effect at all times a performance bond in the form attached hereto as
Exhibit A, naming Owner and Indenture Trustee as dual obligees (such
bond, the "Performance Bond").
SECTION 2.7. Casualty and Construction Period Event of Loss.
If at any time before Completion of the Project there occurs any loss
or damage to the Drilling Rig from fire or other casualty,
Construction Supervisor shall promptly cause such loss or damage to
be repaired and the Project to be completed in accordance with the
terms hereof and all appropriate insurance claims to be made in
respect thereof, so as to cause the Commencement Date to occur on or
before the Outside Date. Construction Supervisor shall notify Owner
of any such loss or damage that Construction Supervisor reasonably
believes will cost more than $1,000,000 to repair or which gives rise
to a claim of more than $1,000,000 under the insurance policies then
in effect with respect to the Drilling Rig.
ARTICLE III
FUNDING OF CONSTRUCTION COSTS
SECTION 3.1. Funding of Construction Costs. Subject to the
terms and conditions of this Agreement, Owner agrees to pay or
reimburse Construction Supervisor for the Cost of the Project up to
a maximum of $315,000,000.
SECTION 3.2. Requisitions and Payments. (a) Subject to the
terms and conditions hereof and so long as there is no Default or
Event of Default continuing hereunder, Owner shall make or cause to
be made payments to Construction Supervisor or its order upon
Construction Supervisor s written request from time to time no more
frequently than monthly on account of the Cost of the Project. Each
such payment shall be made upon Construction Supervisor s delivery of
a requisition in the form attached to the Trust Indenture as Annex H
("Certificate of Requisition"), copies of which shall be provided to
Indenture Trustee and the Surety upon submission to Owner. All
payments will be made directly to Builders, other vendors of Owner s
Supplies or other equipment or to any other party on account of the
Cost of the Project or as reimbursement to Construction Supervisor
only upon receipt of proper evidence that Construction Supervisor has
paid any such amount to Builders, such other vendor or such other
party.
(b) The aggregate of all payments by Owner made under this
Agreement on account of the Cost of the Project shall not exceed
$315,000,000, and Construction Supervisor shall be solely responsible
for all Excess Costs.
(c) Nothing in this Article III or elsewhere in this Agreement
shall have the effect of limiting Construction Supervisor's
obligations hereunder or making such obligations conditional on the
availability of funds from Owner. Construction Supervisor s
obligations hereunder with respect to the performance of the Project
and the payment therefor are absolute and unconditional, and
Construction Supervisor shall pay and perform its obligations
hereunder notwithstanding any breach or default by Owner hereunder or
any other circumstance whatsoever.
ARTICLE IV
EXTRAORDINARY PAYMENTS; CONDITIONAL DEMAND
SECTION 4.1. Certain Periodic Payments. In the event that
Completion of the Project does not occur on or before the Anticipated
Delivery Date, then Construction Supervisor shall thereafter make
periodic payments to Owner in the amount of $150,000 for each day from
and after the Anticipated Delivery Date through the date specified in
the following sentence to compensate Owner for losses incurred in
connection with such late delivery. Construction Supervisor shall
make such payments through the earliest to occur of (i) the date of
Completion, (ii) the Termination Date (as defined in Section 4.2 if
the rescission or termination contemplated by Section 4.2 has
occurred), and (iii) the date of payment in full of the amounts
required by Section 6.1 following a demand therefor by reason of an
Event of Default. Such payments shall be made from time to time on
demand by Owner and in any event all such accrued and unpaid payments
shall be made not less than monthly on the last day of each month (or
the next succeeding Business Day, if such day is not a Business Day).
SECTION 4.2. Lump Sum Payment. In the event that (i) Owner
(or Construction Supervisor on behalf of Owner) rescinds the
Construction Contract pursuant to Article X thereof, or (ii) SDDI
terminates the SDDI Contract pursuant to section 2.2.1.2 thereof, then
in either case Construction Supervisor shall on the earliest to occur
of (a) the Outside Date, (b) within six months following the effective
date of the earlier to occur of such rescission or termination (the
earlier to occur of the date of such rescission or termination, the
"Termination Date"), or (c) if the conditional demand contemplated by
Section 4.3(a) has been made, the date on which payment would be due
pursuant to such demand, pay to Owner the Advance Payment Refund
Amount together with the Liquidated Damages, for losses incurred by
Owner as a result of such rescission or termination. Construction
Supervisor shall also make periodic payments to Owner on demand in the
amount of $150,000 for each day from and after the Termination Date
through the date of payment by Construction Supervisor of the Advance
Payment Refund Amount plus Liquidated Damages, to compensate Owner for
losses incurred in connection with delay in such payment. Such
payments shall be made from time to time on demand by Owner and in any
event all such accrued and unpaid payments shall be made not less than
monthly on the last Business Day of each month.
SECTION 4.3. Conditional Demands. (a) In the event that
Initial Acceptance of the Drilling Rig does not occur on or before the
Anticipated Delivery Date and the rescission or termination
contemplated by Section 4.2 has not occurred, then Owner may make
demand on Construction Supervisor for payment of the amount required
by Section 6.1. Such demand shall be upon the condition that if
Initial Acceptance of the Drilling Rig does occur on or before the
Initial Acceptance Date, then such demand is void. If Initial
Acceptance of the Drilling Rig does not occur on or before the Initial
Acceptance Date, then Construction Supervisor shall pay in full the
amounts required by Section 6.1 on or before the date specified in
such demand which date shall be no earlier than the later to occur of
(i) Initial Acceptance Date, or (ii) 50 days after the making of the
demand contemplated by this Section 4.3(a). The Owner may provide a
copy of the notice of such demand to the Surety.
(b) In the event that Completion of the Project does not occur
on or before July 31, 2000 and the rescission or termination
contemplated by Section 4.2 has not occurred, then Owner may make
demand on Construction Supervisor for payment of the amount required
by Section 6.1. Such demand shall be upon the condition that if
Completion of the Project does occur on or before the Outside Date,
then such demand is void. If the Completion of the Project does not
occur on or before the Outside Date, then Construction Supervisor
shall pay in full the amounts required by Section 6.1 on or before the
date specified in such demand which date shall be no earlier than the
later to occur of (i) the Outside Date, or (ii) 50 days after the
making of the demand contemplated by this Section 4.3(b). The Owner
may provide a copy of the notice of such demand to the Surety.
ARTICLE V
REPRESENTATION AND WARRANTIES
Construction Supervisor represents and warrants to Owner as
follows:
SECTION 5.1 Organization and Power. Construction Supervisor (i)
is a corporation duly formed, validly existing and in good standing
under the laws of the State of Nevada and is duly qualified as a
foreign corporation and in good standing in all jurisdictions in which
such qualification is required in order for Construction Supervisor
to carry on its business as now conducted; and (ii) has the full
corporate power, authority and legal right to carry on its business
as now conducted and to execute, deliver and perform this Agreement.
SECTION 5.2 No Violation. Neither the execution, delivery or
performance by Construction Supervisor of this Agreement nor
compliance herewith (i) conflicts or will conflict with or results or
will result in a breach of or constitutes or will constitute a default
under (A) any law in effect as of the date hereof binding upon
Construction Supervisor or the Drilling Rig or (B) any order, writ,
injunction or decree of any court or other governmental authority
binding upon Construction Supervisor or the Drilling Rig, or (ii)
results or will result in the creation or imposition of any lien,
charge or encumbrance upon its property pursuant to such agreement or
instrument. Neither the execution, delivery or performance by the
Construction Supervisor of this Agreement nor compliance by
Construction Supervisor herewith conflicts or will conflict with or
results or will result in a breach of or constitutes or will
constitute a default under (i) the certificate of incorporation or by-
laws of Construction Supervisor or (ii) any agreement or instrument
to which Construction Supervisor is a party or by which it is bound.
SECTION 5.3 Agreement is Legal and Authorized. This Agreement
has been duly authorized by Construction Supervisor by all necessary
corporate action (including any necessary action by its shareholders)
and duly executed and delivered by it, and, assuming the due
authorization, execution and delivery thereof by Owner, is a legal,
valid and binding obligation of Construction Supervisor enforceable
against it in accordance with its terms, except as certain rights and
remedies as set forth herein may be limited by (a) bankruptcy,
reorganization and similar laws of general application relating to or
affecting the enforcement of creditors' rights and (b) general
principles of equity.
SECTION 5.4 Consents. No consent, license, approval or
authorization of, or filing, registration or declaration with, or
exemption or other action by, any governmental or public body,
authority, bureau or agency (including courts) under the laws of the
United States of America, the State of Delaware or of any other state
is required in connection with the execution and delivery or
performance by Construction Supervisor of this Agreement.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1 Events of Default. If any one or more of the
following events (each an "Event of Default") shall occur:
(a) Construction Supervisor shall fail to make any payment
required by the terms of this Agreement, including, without
limitation, any payment required on account of Excess Costs or any
payment required pursuant to Article IV hereof and such failure shall
continue for two (2) Business Days;
(b) the Performance Bond shall be rescinded, terminated or
cease to be in full force and effect or either Surety shall assert,
claim or take the position that the Performance Bond is rescinded,
terminated or not in full force and effect or otherwise take any steps
to rescind or terminate the Performance Bond or cause it not to be in
full force and effect;
(c) Construction Supervisor shall fail to observe or perform
any term, covenant or condition (other than any covenant or condition
as to which provision is otherwise made in this Section 6.1) of this
Agreement and such failure shall remain uncured for a period of 30
days after the earlier of actual knowledge thereof by Construction
Supervisor or the giving of written notice thereof by Owner; provided,
however, no Event of Default shall be deemed to occur if such failure
or breach remains capable of cure and Construction Supervisor shall
have promptly commenced the cure of such failure or breach and
continues to act with diligence to cure such failure or breach and
such failure or breach is in fact cured no later than Completion of
the Project;
(d) any representation or warranty made by Construction
Supervisor in this Agreement (or in any certificate or instrument
executed in connection therewith) shall be untrue, inaccurate or
misleading in any material respect;
(e) Construction Supervisor shall generally fail to pay, or
admit in writing its inability to pay, its debts as they become due,
or shall voluntarily commence any case or proceeding or file any
petition under any bankruptcy, insolvency or similar law or seeking
dissolution, liquidation or reorganization or the appointment of a
receiver, agent, custodian, liquidator or similar person for itself
or a substantial portion of its property, assets or business or to
effect a plan or other arrangement with its creditors, or shall file
any answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition filed against it in any
bankruptcy, insolvency or similar case or proceeding, or shall be
adjudicated bankrupt, or shall make a general assignment for the
benefit of creditors, or shall consent to, or acquiesce in the
appointment of, a receiver, agent, custodian, liquidator or similar
person for itself or a substantial portion of its property, assets or
business, or action shall be taken by Construction Supervisor for the
purpose of effectuating, authorizing or furthering any of the
foregoing;
(f) involuntary proceedings or an involuntary petition shall
be commenced or filed against Construction Supervisor under any
bankruptcy, insolvency or similar law or seeking the dissolution,
liquidation or reorganization of such person or the appointment of a
receiver, agent, custodian, liquidator or similar person for
Construction Supervisor or of a substantial part of its property,
assets or business, or any writ, judgment, warrant of attachment,
execution or similar process shall be issued or levied against a
substantial part of its property, assets or business, and such
proceedings or petition shall not be dismissed or stayed, or such
writ, judgment, warrant of attachment, execution or similar process
shall not be released, vacated or fully bonded, within 60 days after
commencement, filing or levy, as the case may be;
(g) any of the events set forth in the foregoing clauses (e)
and (f) shall occur with respect to either of Builders and such event
shall, in the reasonable judgement of Owner, materially and adversely
affect the ability of either Builder to perform its obligations under
the Construction Contract;
(h) a material default by Builder occurs and is continuing
under the Construction Contract and Construction Supervisor is not
diligently pursuing the cure thereof or the Owner determines in its
reasonable discretion that such default is of a nature that it cannot
be cured for Completion on or before the Outside Date;
(i) Initial Acceptance of the Drilling Rig has not occurred
on or before June 28, 2000; or
(j) Completion of the Project has not occurred on or before
the Outside Date;
then in any such event, Owner may, in addition to the other rights and
remedies provided for in this Article immediately terminate the rights
of the Construction Supervisor under this Agreement by giving
Construction Supervisor written notice of such termination, and upon
the giving of such notice, this Agreement shall terminate as to the
rights of Construction Supervisor. The Owner may provide a copy of
such notice to the Surety. If the Owner has not made either of the
conditional demands contemplated by Section 4.3, the Owner may demand
in such notice that Construction Supervisor pay to Owner, within
thirty (30) days after the date of receipt of such notice, all accrued
and unpaid amounts due pursuant to Section 4.1 and the second sentence
of Section 4.2 and, to the extent not paid pursuant to Section 4.2,
an amount equal to the Advance Payment Refund Amount together with the
Liquidated Damages. In the event that Owner has made either of the
conditional demands contemplated by Section 4.3, Construction
Supervisor shall pay the amounts described in the preceding sentence
on the date specified in such demand consistent with Section 4.3.
SECTION 6.2 Additional Remedies. (a) If an Event of Default
shall have occurred and be continuing, Owner shall have all rights and
remedies available at law, equity or otherwise.
(b) No failure to exercise and no delay in exercising any
right, remedy, power or privilege under this Agreement shall operate
as a waiver thereof; nor shall any single or partial exercise of any
right, remedy or power or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and
privileges provided in this Agreement are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
SECTION 6.3 Owner s Right to Cure Event of Default. Owner,
without waiving or releasing any obligation owed to it or any Event
of Default may (but shall be under no obligation to) remedy any Event
of Default for the account of and at the sole cost and expense of
Construction Supervisor. All funds advanced or out-of-pocket costs
and expenses incurred in connection with such remedy, together with
interest thereon at an annual rate of 12% from the date on which such
sums or expenses are paid by Owner, shall be paid by Construction
Supervisor to the Owner on demand.
ARTICLE VII
INDEMNIFICATION
Construction Supervisor hereby assumes all liability for its
services to be performed hereunder and the Project including payment
of all fees for permits, studies and variances, whether performed by
Construction Supervisor, by any contractor or subcontractor or any
other entity performing the Project directly or indirectly for or
under Construction Supervisor or any contractor or subcontractor, and
shall protect, defend and indemnify the Indemnified Parties and hold
harmless the Indemnified Parties (a) from any and all claims arising
out of Construction Supervisor s actions or omissions on behalf of
Owner whether with or without authority hereunder and (b) from any and
all liabilities, losses, damages, costs, expenses (including
reasonable attorneys' fees and expenses), fines, penalties, suits and
causes of action, including, without limitation, court costs and any
other out-of-pocket costs of litigation related thereto or to this
Agreement (the foregoing collectively, "Losses"), arising out of this
Agreement, the performance of the Project or ownership or operation
of the Drilling Rig except, with respect to an Indemnified Party, to
the extent such Losses are the result of such Indemnified Party s
gross negligence or willful misconduct. In any and all claims against
any Indemnified Party by any employee of Construction Supervisor, any
contractor, any subcontractor, anyone directly or indirectly employed
by any of them or anyone for whose acts any of them may be liable, the
indemnification obligation under this Article VII shall not be limited
in any way by any limitation on the amount or type of damages,
compensation or benefits payable by or for Construction Supervisor or
any subcontractor under workers' compensation acts, disability benefit
acts or other employee benefit acts. Construction Supervisor shall
promptly remedy damage or loss to any property referred to herein
caused in whole or in part by Construction Supervisor, any contractor,
any subcontractor or anyone directly or indirectly employed by any of
them, or by anyone for whose acts any of them is liable and for which
Construction Supervisor is responsible hereunder.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. All notices, consents, directions,
approvals, instructions, requests, demands and other communications
required or permitted by the terms hereof to be given to any person
(collectively Notices ) shall be given in writing in and any such
Notice shall be deemed given (i) when personally delivered, or (ii)
three days after the date deposited in the United States mails, with
proper postage prepaid, for first class certified mail, return receipt
requested, or (iii) when signed for by the recipient, if delivered by
overnight courier or express mail service, addressed as follows:
if to Owner:
RBF Exploration Co.
901 Threadneedle, Suite 200
Houston, TX 77079
Attn: President
if to Construction Supervisor
RBF Exploration II Inc.
901 Threadneedle, Suite 200
Houston, TX 77079
Attn: President
and in any case with a copy to the Surety at its address specified in
the Performance Bond, or at such other address as either party hereto
may from time to time designate by Notice duly given in accordance
with the provisions of this Section 8.1 to the other party. No Notice
shall be deemed effective until given to the Surety.
SECTION 8.2 Successors and Assign; Third Party Beneficiaries.
(a) This Agreement shall be binding upon and inure to the benefit of
Owner, Construction Supervisor and their respective legal
representatives, successors and permitted assigns. The Owner may
assign its rights hereunder to the Indenture Trustee pursuant to the
Trust Indenture, and the Indenture Trustee may assign such rights to
the Surety in the circumstances contemplated by the Performance Bond.
Except in connection with the exercise by the Surety of its rights to
perform on behalf of Construction Supervisor pursuant to the
Performance Bond, Construction Supervisor shall not assign its rights
or obligations hereunder without the prior written consent of Owner,
Indenture Trustee and the Surety.
(b) Indenture Trustee, each party providing financing to Owner
in connection with the Project (including, without limitation, each
Note Holder and Credit Support Party, as such terms are defined in the
Trust Indenture) and Surety is an intended third party beneficiary of
this Agreement. Indenture Trustee shall have the right, but not the
obligation, in its sole judgment and discretion, from time to time,
but subject to the terms of this Agreement, to make demand for
performance and to proceed against Construction Supervisor for the
performance of any of its obligations hereunder, and/or to proceed
from time to time against Owner for the performance of any such
obligations, as Indenture Trustee, in its sole discretion, may
determine.
SECTION 8.3 GOVERNING LAW. (a) THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT (INCLUDING ALL MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE) SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW, BUT EXCLUDING (TO THE MAXIMUM EXTENT
PERMITTED BY LAW) ALL OTHER RULES RELATING TO CHOICE OF LAW, CHOICE
OF FORUM OR CONFLICT OF LAWS).
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN NEW
YORK COUNTY, OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH
OF OWNER AND CONSTRUCTION SUPERVISOR HEREBY ACCEPTS FOR ITSELF AND (TO
THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF
OWNER AND CONSTRUCTION SUPERVISOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING
IN SUCH RESPECTIVE JURISDICTIONS. THE SUBMISSION TO JURISDICTION IS
NON-EXCLUSIVE AND DOES NOT PRECLUDE ANY PERSON FROM OBTAINING
JURISDICTION OVER OTHER PARTIES IN ANY COURT OTHERWISE HAVING
JURISDICTION.
(c) EACH OF OWNER AND CONSTRUCTION SUPERVISOR HEREBY IRREVOCABLY
DESIGNATES CAPITOL SERVICES, INC. LOCATED AT 40 COLVIN STREET, SUITE
200, ALBANY, NEW YORK 12206, AS ITS DESIGNEE, APPOINTEE AND AGENT TO
RECEIVE, FOR AND ON ITS BEHALF, SERVICE OF PROCESS IN SUCH
JURISDICTION IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON
SUCH AGENT WILL BE PROMPTLY FORWARDED BY OVERNIGHT COURIER TO OWNER
AND CONSTRUCTION SUPERVISOR AT ITS ADDRESS SET FORTH HEREIN, BUT THE
FAILURE OF TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE
SERVICE OF SUCH PROCESS. EACH OF OWNER AND CONSTRUCTION SUPERVISOR
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO CONSTRUCTION SUPERVISOR AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME
EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF OWNER OR INDENTURE
TRUSTEE OR ANY OTHER PERSON TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST CONSTRUCTION SUPERVISOR IN ANY OTHER JURISDICTION.
(e) OWNER AND CONSTRUCTION SUPERVISOR EACH HEREBY (I) IRREVOCABLY
AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN; (II) IRREVOCABLY WAIVES,
TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; (III) CERTIFIES THAT NO PARTY HERETO NOR
ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS, AND (IV) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT, AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN
THIS SECTION.
SECTION 8.4 No Waiver; Amendments. No failure on the part of
Owner or Indenture Trustee or any of their respective agents to
exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by Owner or
Indenture Trustee or any of their respective agents of any right,
power, or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power, or remedy. This
Agreement may not be amended, modified or any material terms hereof
waived without the express written consent of the Indenture Trustee
and the Surety.
SECTION 8.5 Counterparts. This Agreement may be executed in any
number of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same agreement.
SECTION 8.6 Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 8.7 Headings and Table of Contents. The headings and
table of contents contained in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning
hereof.
SECTION 8.8 Non-Petition Covenant. Construction Supervisor
hereby agrees that until the 368th day following payment in full of
any and all Notes (as defined in the Trust Indenture), Construction
Supervisor will not institute, and will not join with others in
instituting, any involuntary bankruptcy or analogous proceeding
against Owner under any bankruptcy, reorganization, receivership or
similar law, domestic or foreign, as now or hereafter in effect.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
RBF EXPLORATION CO.
By:_________________________
Name:
Title:
RBF EXPLORATION II INC.
By:_________________________
Name:
Title:
SCHEDULE A
Insurance Requirements
(a) All Risk Property Insurance. Upon delivery to Owner
of the Drilling Rig under the Construction Contract, Construction
Supervisor shall, on behalf of Owner, keep the Drilling Rig insured,
in lawful money of the United States, against all such risks
(including without limitation, hull and machinery/increased value,
protection and indemnity risk, pollution liability, war risks (when
available) and, when laid up, port risk insurance, as well as such
excess policies over and above protection and indemnity and general
liability coverage which shall represent collective limits of not less
than $400,000,000), in such form and with such insurance companies or
underwriters as required under paragraph (c) as shall be at least as
protective as insurance maintained by prudent owners of vessels and
equipment similar to the Drilling Rig, engaged in international
contract offshore oil and gas operations, and in any event all as
reasonably acceptable to Indenture Trustee and, so long as the
Performance Bond is outstanding or amounts are due to the Surety as
a result of payments made by it thereunder, the Surety and in
compliance with the SDDI Contract. Without limiting the generality
of the foregoing, with respect to hull and machinery/increased value
insurance, including war risk (when available), the Construction
Supervisor shall insure the Drilling Rig for an amount which is at
least equal to the actual value of the Drilling Rig, but in no event
less than $275,000,000. Such insurance shall cover marine and war
risk perils, on hull and machinery, with per occurrence deductibles
not in excess of $1,000,000 and shall be maintained in the broadest
forms reasonably available in the American and British insurance
markets. The Construction Supervisor shall on behalf of Owner
maintain protection and indemnity (or its equivalent) insurance,
including war risk protection and indemnity (or its equivalent)
coverage and coverage against pollution liability in an amount not
less than $400,000,000 (or such greater amount as may be required from
time to time under Oil Pollution Act of 1990 or other environmental
laws). All of the foregoing insurance shall have a per occurrence
deductible not to exceed $1,000,000 and be placed through such
underwriters or associations as specified in clause (d) below. The
Drilling Rig shall not operate in or proceed into any area then
excluded by trading warranties under its marine or war risk policies
(including protection indemnity or its equivalent) without satisfying
the conditions of the relevant policies, evidence of which shall be
furnished to Indenture Trustee and, so long as the Performance Bond
is outstanding or amounts are due to the Surety as a result of
payments made by it thereunder, the Surety.
(b) Liability; Workers' Compensation. Construction
Supervisor on behalf of Owner shall maintain at all times such
worker's compensation, employer's liability, and longshoreman and
harbor worker's insurance as shall be required by applicable law.
Such policies shall provide that any loss under such insurance may be
paid directly to the entity to whom any liability covered by such
policies has been incurred.
(c) Payment Provisions. All payments made under policies
of insurance maintained under this Section shall be applied as set
forth in Section 5.2 of the Trust Indenture.
(d) Insurers. All insurance required under this Schedule
A shall be placed and kept with such insurance companies, Lloyd s
Syndicates, underwriters' associations, protection and indemnity clubs
or underwriting funds as are reputable, generally recognized within
the industry, and (i) in the case of hull and machinery insurance,
rated by either Standard & Poors Rating Services, a division of the
McGraw Hill Companies, Inc. ("S&P"), Moody's Investors Services, Inc.
("Moody's) or Duff & Phelps Credit Rating Co. ("Duff") with at least
the equivalent to an S&P rating of BBB (and with at least 75% of the
companies, determined by dollar amount of policy coverage, rated by
S&P, Duff or Moody's with at least the equivalent to an S&P rating of
A) or, if not rated by S&P, Duff or Moody's then rated "excellent" or
better by A.M. Best, and (ii) in the case of protection and indemnity
risk insurance, rated by either S&P, Duff or Moody's with at least the
equivalent to an S&P rating of BBB.
(e) Taking by United States. During the continuance of
a taking, requisition or charter of the use of the Drilling Rig by any
governmental body of the United States of America, the provisions of
this Schedule A shall be deemed to have been complied with in all
respects as to the Drilling Rig if the United States Government or any
such governmental body shall have agreed (i) to reimburse Owner and
Indenture Trustee for loss or damage resulting from the risks
indicated in paragraphs (a) and (b) of this Schedule A, or (ii) that
Owner and Indenture Trustee shall be entitled to just compensation
therefor. In the event of any taking, requisition, charter or loss
of the Drilling Rig contemplated by this paragraph (e), Construction
Supervisor shall promptly furnish to Indenture Trustee a sworn
certificate of an officer of Construction Supervisor stating that such
taking, requisition, charter or loss has occurred and, if there shall
have been a taking, requisition or charter of the Drilling Rig, that
the United States Government or governmental body has agreed (i) to
reimburse Owner for loss or damage resulting from the risks indicated
in the above-mentioned paragraphs (a) and (b) or (ii) that Indenture
Trustee or Owner, as the case may be, is entitled to just compensation
therefor.
(f) Mortgage Provisions. All insurance required under this
Schedule A shall be taken out in the name of Owner or on its behalf
by an Affiliate of Construction Supervisor the Indenture Trustee and
each Note Holder and the Sureties shall be named as an additional
insured under all liability policies (other than workers' compensation
and similar insurance), and the Indenture Trustee and, so long as the
Performance Bond is outstanding or amounts are due to the Surety as
a result of payments made by it thereunder, the Surety shall be named
as the loss payees, as their interests may appear, under all physical
damage policies with respect to the Drilling Rig for any loss in
excess of $5,000,000 or, after the occurrence and during the
continuation of any Event of Default, any loss. All policies for such
insurance shall also provide that (i) there shall be no recourse
against Owner (or its assignee), the Indenture Trustee or any Note
Holder or any loss payee or additional insured for the payment of
premiums or commissions, (ii) if such policies provide for the payment
of club calls, assessments or advances, there shall be no recourse
against Owner (or its assignee), the Indenture Trustee or any Note
Holder or any loss payee or additional insured for the payment
thereof. All policies shall provide that the insurers shall provide
to Owner (or its assignee), the Indenture Trustee and each Note Holder
and any loss payee and additional insured, as the case may be, 30 days
prior notice of any material change in the coverage of such insurance
as well as ten (10) days prior written notice of any cancellation of
such insurance in the event of non-payment of premiums and seven (7)
days prior written notice of any cancellation of such insurance for
war risk.
(g) Compliance. Construction Supervisor shall not do
any act, nor permit any act to be done, whereby any insurance
required by this Schedule A shall or may be suspended, impaired or
defeated, or permit the Drilling Rig to engage in any voyage, to
engage in any activity or to carry any cargo not permitted under
the policies of insurance then in effect without first procuring
comparable insurance for such voyage, activity or the carriage of
such cargo.
(h) Policies. Construction Supervisor, upon execution
of this Agreement, shall deliver to Owner, Indenture Trustee and
Surety certificates of insurance, evidencing the insurance
maintained under this Schedule A. Construction Supervisor, upon
the request of Owner or the Indenture Trustee, will promptly
deliver to Owner or the Indenture Trustee true copies of such
policies.
(i) Opinion and Certificates. On the date hereof, and on
each anniversary and each material change in coverage, Construction
Supervisor shall promptly furnish or cause to be furnished to
Indenture Trustee and, at all time on and after the date hereof when
the Performance Bond is outstanding or amounts are due to the Surety
as a result of payments made by it thereunder, the Surety, a detailed
certificate or opinion (signed by a reputable insurance broker) as to
the insurance maintained by Construction Supervisor pursuant to this
Schedule A, specifying the respective policies of insurance covering
the same and attaching certificates of confirmation evidencing the
same and stating with regard to the insurance maintained by
Construction Supervisor pursuant to this Schedule A the amounts,
deductibles, and the risks against which such insurance is issued.
(j) Obligation to Collect. Construction Supervisor shall,
at no cost or expense to Owner, have the duty and responsibility to
make all proofs of loss and take any and all other steps necessary
as a prudent owner or as reasonably directed by Owner to effect
collections from underwriters for any loss under any insurance on or
in respect of the Drilling Rig or the operation thereof.
(k) Mortgage. The rights and obligations of Construction
Supervisor and Owner with respect to insurance shall be subject to
such other terms and conditions as shall be contained in the mortgage
described in Section 2.5(r)(ii) hereof, and in the event of any
inconsistency between the terms of this Exhibit A and the terms of
such mortgage, the terms of such mortgage shall take precedence.
EXHIBIT A
Form of Performance Bond
EXHIBIT 10.2
===========================================================================
Execution Copy
RBF EXPLORATION CO.
$200,000,000 Senior Secured Class A1 Notes
$50,000,000 Senior Secured Class A2 Notes
______________________________________
NOTE PURCHASE AGREEMENT
(DEEPWATER NAUTILUS)
_______________________________________
Dated as of August 12, 1999
============================================================================
TABLE OF CONTENTS
Page
1. AUTHORIZATION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . .1
2. SALE AND PURCHASE OF NOTES . . . . . . . . . . . . . . . . . . . . . .2
3. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
4. CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . . . . . . . .3
4.1. Representations and Warranties. . . . . . . . . . . . . . . . . .3
4.2. Performance; No Default . . . . . . . . . . . . . . . . . . . . .3
4.3. Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . .3
4.4. Drilling Rig. . . . . . . . . . . . . . . . . . . . . . . . . . .4
4.5. The Parent. . . . . . . . . . . . . . . . . . . . . . . . . . . .4
4.7. SDDI and the SDDI Contract. . . . . . . . . . . . . . . . . . . .5
4.8. Certain Other Documents . . . . . . . . . . . . . . . . . . . . .5
4.9. Compliance Certificates . . . . . . . . . . . . . . . . . . . . .5
4.10. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . .6
4.11. Purchase Permitted by Applicable Law, etc.. . . . . . . . . . . .6
4.12. Sale of Other Notes . . . . . . . . . . . . . . . . . . . . . . .6
4.13. Payment of Special Counsel Fees . . . . . . . . . . . . . . . . .7
4.14. Private Placement Number. . . . . . . . . . . . . . . . . . . . .7
4.15. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4.17. Material Adverse Change . . . . . . . . . . . . . . . . . . . . .7
4.18. Changes in Corporate Structure. . . . . . . . . . . . . . . . . .7
4.19. Proceedings and Documents . . . . . . . . . . . . . . . . . . . .8
4.20. Trustee.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.21. Agent for Service of Process. . . . . . . . . . . . . . . . . . .8
4.22. Filing of Documents.. . . . . . . . . . . . . . . . . . . . . . .8
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . . . .8
5.1. Organization; Power and Authority . . . . . . . . . . . . . . . .8
5.2. Authorization, etc. . . . . . . . . . . . . . . . . . . . . . . .9
5.3. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
5.4. Organization and Ownership of Company.. . . . . . . . . . . . . .9
5.5. Financial Statements. . . . . . . . . . . . . . . . . . . . . . .9
5.6. Compliance with Laws, Other Instruments, etc. . . . . . . . . . 10
5.7. Governmental Authorizations, etc. . . . . . . . . . . . . . . . 10
5.8. Litigation; Observance of Statutes and Orders . . . . . . . . . 10
5.9. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.10. Title to Property . . . . . . . . . . . . . . . . . . . . . . . 11
5.11. Licenses, Permits, etc. . . . . . . . . . . . . . . . . . . . . 11
5.12. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . 11
5.13. Private Offering by the Company.. . . . . . . . . . . . . . . . 12
5.14. Use of Proceeds; Margin Regulations.. . . . . . . . . . . . . . 12
5.15. Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.16. Foreign Assets Control Regulations, etc.. . . . . . . . . . . . 13
5.17. Status under Certain Statutes.. . . . . . . . . . . . . . . . . 13
5.18. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.19. Nature of Business and Location of Business and Offices.. . . . 14
5.20. Environmental Matters.. . . . . . . . . . . . . . . . . . . . . 14
5.21. Construction Contract, SDDI Contract, Performance Bond,
Construction Supervisory Agreement and Refundment
Guarantee.. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.22. No Indenture Defaults.. . . . . . . . . . . . . . . . . . . . . 15
5.23. Rig Classification. . . . . . . . . . . . . . . . . . . . . . . 15
5.24. Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.25. Security Interests. . . . . . . . . . . . . . . . . . . . . . . 16
5.26. Year 2000.. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6. REPRESENTATIONS OF THE PURCHASER.. . . . . . . . . . . . . . . . . . 16
6.1. Purchase for Investment.. . . . . . . . . . . . . . . . . . . . 16
6.2. Source of Funds. . . . . . . . . . . . . . . . . . . . . . . . 17
7. EXPENSES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1. Transaction Expenses. . . . . . . . . . . . . . . . . . . . . . 18
7.2. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.. . . . . . . . . . . . . 19
9. AMENDMENT AND WAIVER.. . . . . . . . . . . . . . . . . . . . . . . . 19
9.1. Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.2. Solicitation of Holders of Notes. . . . . . . . . . . . . . . . 19
9.3. Binding Effect, etc.. . . . . . . . . . . . . . . . . . . . . . 20
9.4. Notes held by Company, etc. . . . . . . . . . . . . . . . . . . 20
10. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
11. REPRODUCTION OF DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . 21
12. CONFIDENTIAL INFORMATION.. . . . . . . . . . . . . . . . . . . . . . 21
13. SUBSTITUTION OF PURCHASER. . . . . . . . . . . . . . . . . . . . . . 22
14. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.1. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 22
14.2. Payments Due on Non-Business Days.. . . . . . . . . . . . . . . 23
14.3. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.4. Construction. . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.5. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.6. Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . . 23
14.7. Obligations of Bankers Trust Company. . . . . . . . . . . . . . 23
14.8. Non Recourse Persons. . . . . . . . . . . . . . . . . . . . . . 24
14.9. Final Agreement.. . . . . . . . . . . . . . . . . . . . . . . . 24
SCHEDULE A -- INFORMATION RELATING TO PURCHASERS
SCHEDULE B -- DEFINED TERMS
SCHEDULE 4.18 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.7 -- Governmental Authorizations
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Patents, Permits, etc.
EXHIBIT 1 -- Trust Indenture and Security Agreement
EXHIBIT 2 -- Construction Supervisory Agreement
EXHIBIT 3 -- Operation and Maintenance Agreement
EXHIBIT 4 -- First Preferred Ship Mortgage
EXHIBIT 5 -- Assignment of Drilling Contract
EXHIBIT 6 -- Issuer/SDDI Notice Letter
EXHIBIT 7 -- SDDI Acknowledgment and Consent
EXHIBIT 8 -- Performance Bond
EXHIBIT 9 -- Opinion of Gardere Wynn Sewell & Riggs LLP
(General Enforceability)
EXHIBIT 10 -- Opinion of Gardere Wynn Sewell & Riggs LLP
(Non-Consolidation)
EXHIBIT 11 -- Opinion of Jackson Walker LLP
EXHIBIT 12 -- Opinion of General Counsel and Internal Counsel
to Sureties
RBF EXPLORATION CO.
901 Threadneedle
Houston, Texas 77079
Senior Secured Class A1 Notes
Senior Secured Class A2 Notes
August 12, 1999
TO THE PURCHASER LISTED IN THE ATTACHED
SCHEDULE A WHICH IS A SIGNATORY HERETO:
Ladies and Gentlemen:
RBF Exploration Co., a Nevada corporation (the "Company"), agrees
with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of its promissory
notes described as follows:
(a) $200,000,000 aggregate principal amount of Senior Secured
Class A1 Notes, payable in installments with final installment
due on the Maturity Date (the "Class A1 Notes", such term to
include any such notes issued in substitution therefor
pursuant to the Trust Indenture (hereinafter defined)). The
Class A1 Notes shall have the terms (including interest rate)
and provisions and be substantially in form attached as Annex
A-1 of the Trust Indenture;
(b) $50,000,000 aggregate principal amount of Senior Secured Class
A2 Notes, payable on the Maturity Date (the "Class A2 Notes",
such term to include any such notes issued in substitution
therefor pursuant to the Trust Indenture). The Class A2 Notes
shall have the terms (including interest rate) and provisions
and be substantially in form attached as Annex A-2 to the
Trust Indenture;
(c) All of the Class A1 Notes and the Class A2 Notes (all such
Notes are herein collectively called the "Notes") shall be
issued on the Purchase Date under and pursuant to the Trust
Indenture and be subject to the terms and provisions thereof.
Certain capitalized terms used in this Agreement are defined
in Schedule B; references to a "Schedule" or an "Exhibit" are,
unless otherwise specified, to a Schedule or an Exhibit
attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to you and you will purchase from the Company, at
the Closing provided for in Section 3, Notes of the Class and in the
principal amount specified opposite your name in Schedule A at the
purchase price of 100% of the principal amount thereof.
Contemporaneously with entering into this Agreement, the Company is
entering into separate Note Purchase Agreements (the "Other
Agreements") identical with this Agreement with each of the other
purchasers named in Schedule A (the "Other Purchasers"), providing for
the sale at such Closing to each of the Other Purchasers of Notes of
the Class and in the principal amount specified opposite its name in
Schedule A. Your obligation hereunder and the obligations of the
Other Purchasers under the Other Agreements are several and not joint
obligations and you shall have no obligation under any Other Agreement
and no liability to any Person for the performance or non-performance
by any Other Purchaser thereunder.
If the Purchase Date and the Closing have failed to occur prior to
September 30, 1999 (the "Commitment Termination Date"), your
obligation to purchase Notes hereunder shall terminate.
If the Purchase Date has not occurred and the Closing has not been
consummated on or before the Commitment Termination Date, the Company
will pay to you on the Commitment Termination Date a make-whole fee
in the amount of the "Make-Whole Amount." The "Make-Whole Amount"
shall be determined as provided in Section 3.8 of the Trust Indenture;
provided that for purposes hereof such determination shall be made as
if the Notes had been issued to you as provided in this Agreement on
the Commitment Termination Date, the full principal balance thereof
repaid on such date (being the "Settlement Date" for such
determination) and the words ".50% (with respect to the Class A1 Notes
) and .50% (with respect to the Class A2 Notes ) over the yield to
maturity" used in the definition of the "Reinvestment Yield," for
purposes of such determination, shall be deemed to read .50% over the
yield to maturity," "maturity" being the maturity that said Notes
would have had they been issued on said Commitment Termination Date.
In addition, to the extent not covered by amounts paid pursuant to the
preceding, the Company shall pay to the Purchaser the amount of any
loss incurred by it under any Hedging Agreements entered into by it
in respect of the Notes.
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the
Other Purchasers shall occur at the offices of Vinson & Elkins L.L.P.,
35th Floor, First City Tower, 1001 Fannin, Houston, Texas 77002, at
9:00 a.m., Central time, at a closing (the "Closing") on the Purchase
Date or on such other Business Day thereafter on or prior to the
Commitment Termination Date as may be agreed upon by the Company and
you and the Other Purchasers. At the Closing the Company will deliver
to you the Notes to be purchased by you in the form of a single Note
(or such greater number of Notes in denominations of at least $500,000
as you may request) dated the date of the Closing and registered in
your name (or in the name of your nominee), against delivery by you
to the Company or its order of immediately available funds in the
amount of the purchase price therefor by wire transfer of immediately
available funds to the Trustee (hereinafter defined) for application
as provided in the Trust Indenture as follows:
Chase Bank of Texas, National Association
ABA # 113000609
Trust Clearing Account: #00101606276
For Credit to the Construction Account: #55-03-001-2074902
Attn: Mauri ext 6-6686
F/B/O R & B Falcon
If at the Closing the Company shall fail to tender such Notes as
provided above in this Section 3, or any of the conditions specified
in Section 4 shall not have been fulfilled to your satisfaction, you
shall, at your election, be relieved of all further obligations under
this Agreement, without thereby waiving any rights you may have by
reason of such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you
at the Closing is subject to the fulfillment to your satisfaction,
prior to or at the Closing, of the following conditions:
4.1. Representations and Warranties.
The representations and warranties of each of the RBF Parties in
this Agreement and the other Project Documents shall be correct in all
material respects when made and at the time of the Closing.
4.2. Performance; No Default.
Each of the RBF Parties shall have performed and complied with and
shall continue to be in compliance with all agreements and conditions
contained in this Agreement, the Trust Indenture and the other Project
Documents required to be performed or complied with by it prior to or
at the Closing and after giving effect to the issue and sale of the
Notes (and the application of the proceeds thereof as contemplated by
Section 5.14) no Indenture Default or Indenture Event of Default shall
have occurred and be continuing.
4.3. Trust Indenture.
The Company and the Trustee shall have entered into the Trust
Indenture and Security Agreement (the "Trust Indenture"), which shall
be to the effect and substantially in the form of Exhibit 1 hereto,
and the Notes shall have been duly issued and executed by the Company
and duly authenticated and delivered by the Trustee as provided in the
Trust Indenture. The Trustee shall have a valid and enforceable
perfected first priority security interest in the collateral described
in the Trust Indenture except as such enforceability may be limited
by (i) applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights
generally and (ii) general principals of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
4.4. Drilling Rig.
You shall have received a copy of the Rig Appraisal and Engineering
Report addressed to you or accompanied by a letter permitting you and
Duff & Phelps Credit Rating Co. to rely thereon.
4.5. The Parent.
(a) The RBF Parties shall have executed and delivered to the
Trustee, with a copy to you, the following agreements, each of
which shall be in full force and effect:
(i) Construction Supervisory Agreement;
(ii) Operation and Maintenance Agreement; and
(iii) Performance Guarantee.
(b) The Parent shall have executed and delivered to the
Trustee, the Sureties and you a letter (i) certifying that the
unaudited consolidated financial statements of the Parent referred
to in Section 5.5 hereof fairly present in all material respects
the consolidated financial position and results of operations of
the Parent and its Subsidiaries for each of the years and at each
of the dates set forth therein, (ii) certifying that since June 30,
1999, there has been no change in the financial condition,
operations, business or properties of the Parent and its
Subsidiaries except changes that individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect
and (iii) covenanting to maintain direct or indirect ownership of
all of the outstanding shares of capital stock of the Company so
long as any Notes are outstanding. Such letter shall provide that
the Credit Support Parties shall be third party beneficiaries of
the covenant described in clause (iii).
4.6. Construction Contract.
(a) The Construction Contract shall be in full force and
effect without amendment, modification or waiver except as would be
permitted by Section 8.3(c) of the Trust Indenture, no defaults or
events which with the lapse of time or the giving of notice will
create a default shall have occurred and be continuing thereunder
and you shall have received a certified copy of the Construction
Contract, and all amendments thereto.
(b) The Trustee shall have received the Refundment Guarantee
issued by Korea Exchange Bank in the form of Exhibit "A" to the
Construction Contract and issued pursuant to Article X, Section 2
of the Construction Contract duly and legally assigned to and
enforceable by the Trustee.
(c) The Trustee shall have received a valid and enforceable
security interest in the Construction Contract duly and legally
consented to by the Builders.
(d) The Trustee shall have received evidence, satisfactory to
you, of maintenance of all insurance required pursuant to the Trust
Indenture and the Construction Contract.
4.7. SDDI and the SDDI Contract.
(a) The SDDI Contract shall be in full force and effect
without amendment, modification or waiver except as would be
permitted by Section 8.3(f)(ii) of the Trust Indenture and no
defaults or events which with the lapse of time or the giving of
notice will create a default shall have occurred and be continuing
thereunder.
(b) SDDI shall be 100% owned directly or indirectly by Royal
Dutch Shell.
(c) The Issuer shall have delivered the Issuer/SDDI Notice
Letter to SDDI.
(d) You shall have received copies of the following: (i) the
SDDI Contract, and all amendments thereto; and (ii) the SDDI
Acknowledgment and Consent.
(e) You shall have received evidence satisfactory to you that
the Parent has contributed at least $65,000,000 equity into the
Company and that substantially all of such equity has been paid by
the Company to the Builders in satisfaction of payment obligations
to date hereof under the Construction Contract.
4.8. Certain Other Documents.
The Company shall have executed and delivered to the Trustee, with
a copy to you, the following:
(i) Assignment of Drilling Contract;
(ii) appropriate Financing Statements and other filing and
recording documents as necessary to properly perfect the liens and
security interests evidenced by the Trust Indenture and the
Assignment of Drilling Contract;
(iii) the Performance Bond together with the executed
Schedule A attached thereto (the Sureties shall be rated at least
AA by Standard and Poor s Ratings Services, a division of The
McGraw Hill Companies, Inc. and no lower than Aa2 by Moody s
Investors Service, Inc.);
(iv) all other Project Documents to which the Company is a
party; and
(v) a copy of the Refundment Guarantee.
4.9. Compliance Certificates.
(a) The Company shall have delivered to you, the Sureties and
the Trustee an Officer's Certificate dated the date of the Closing,
certifying that the conditions specified in Section 4 have been
fulfilled.
(b) The Parent shall have delivered to you, the Sureties and
the Trustee an Officer's Certificate dated the date of the Closing,
certifying that the conditions specified in Section 4 hereof with
respect to it have been fulfilled.
(c) Each of the RBF Parties shall have delivered to you, the
Sureties and the Trustee (i) a certified copy of its certificate of
incorporation, (ii) a certificate of its secretary or an assistant
secretary certifying (A) the absence of any amendments to its
certificate of incorporation since the date of such certified copy,
(B) its bylaws, (C) the due adoption or approval by its board of
directors of resolutions attached to such certificate relating to
the transactions contemplated hereby and (D) the incumbency of each
of its officers who has executed any of the Project Documents, and
(iii) a good standing certificate from its state of incorporation.
4.10. Opinions of Counsel.
You shall have received opinions dated the date of the Closing
(a) from Gardere Wynne Sewell & Riggs, L.L.P., counsel for the RBF
Parties substantially in the form of Exhibits 9 and 10 hereto,
(b) from Jackson Walker, L.L.P., counsel to the Trustee, substantially
in the form of Exhibit 11 hereto and (c) from the general counsel and
internal counsel for each of the Sureties substantially in the form
of Exhibit 12 hereto.
4.11. Purchase Permitted by Applicable Law, etc.
On the date of the Closing your purchase of Notes shall (i) be
permitted by the laws and regulations of each jurisdiction to which
you are subject, without recourse to provisions (such as
Section 1405(a)(8) of the New York Insurance Law) permitting limited
investments by insurance companies without restriction as to the
character of the particular investment, (ii) not violate any
applicable law or regulation (including, without limitation,
Regulation T, U or X of the Board of Governors of the Federal Reserve
System) and (iii) not subject you to any tax, penalty or liability
under or pursuant to any applicable law or regulation, which law or
regulation was not in effect on the date hereof, and there shall be
no legal impediment to the consummation of the transactions
contemplated by this Agreement and the Credit Agreements. If
requested by you, you shall have received an Officer's Certificate
certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
4.12. Sale of Other Notes.
Contemporaneously with the Closing the Company shall sell to the
Other Purchasers and the Other Purchasers shall purchase the Notes to
be purchased by them at the Closing as specified in Schedule A.
4.13. Payment of Special Counsel Fees.
Without limiting the provisions of Section 7.1, the Company shall
have paid on or before the Closing the reasonable fees, charges and
disbursements of special counsel to each of the Class A1 Noteholders,
Class A2 Noteholders, Credit Support Parties and Trustees; provided
that the Class A1 Noteholders shall all use the same counsel, the
Class A2 Noteholders shall all use the same counsel, the Credit
Support Parties shall all use the same counsel and the Trustees shall
use the same counsel, and to the extent reflected in a statement of
each such counsel rendered to the Company at least one Business Day
prior to the Closing.
4.14. Private Placement Number.
A Private Placement number issued by Standard & Poor's CUSIP
Service Bureau (in cooperation with the Securities Valuation Office
of the National Association of Insurance Commissioners) shall have
been obtained for each series of Notes.
4.15. Notes - Rating.
The Class A1 Notes shall have been rated no lower than AA by
Standard and Poor s Ratings Services, a division of The McGraw Hill
Companies, Inc. and no lower than AA by Duff & Phelps Credit Rating
Co. and the Class A2 Notes shall have been rated no lower than BBB+
by Duff & Phelps Credit Rating Co.
4.16. Debt Service Reserve Account; Construction Account.
Each of the Payment Reserve Account and Construction Account shall
have been established with the Trustee and, simultaneously with the
funding of the purchase price of the Notes, funded pursuant to the
Trust Indenture.
4.17. Material Adverse Change.
No event or condition shall have occurred which reasonably may be
expected to cause a Material Adverse Effect with respect to any of the
RBF Parties nor shall have any event or condition have occurred with
respect to Royal Dutch Shell, SDDI or either Builder which reasonably
may be expected to have a material adverse effect on any of their
business, operations, affairs, financial condition or properties.
4.18. Changes in Corporate Structure.
Except as specified in Schedule 4.18, neither the Company nor the
Parent shall have changed its jurisdiction of incorporation or been
a party to any merger or consolidation nor otherwise materially
changed its corporate structure, at any time following the date of the
most recent financial statements referred to in Section 5.5.
4.19. Proceedings and Documents.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be reasonably
satisfactory to you and your special counsel, and you and your special
counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may
reasonably request.
4.20. Trustee.
The Company shall have designated Chase Bank of Texas, National
Association (or other U.S. bank or trust company reasonably acceptable
to you) to act as Trustee pursuant to the Trust Indenture and, Chase
Bank of Texas, National Association (or other U.S. bank or trust
company reasonably acceptable to you) shall have accepted such
appointment, and said Trustee shall have delivered to you (a) a
certificate of its vice president, secretary or an assistant secretary
certifying as to its articles of association and bylaws, resolutions
or other authority to act as Trustee and the incumbency of officers,
and (b) a good standing certificate from the Comptroller of the
Currency.
4.21. Agent for Service of Process.
You shall have received, in form and substance satisfactory to you,
evidence of the consent of Capitol Services, Inc. located in Albany,
New York, to the appointment and designation as Agent for service of
process for each of the RBF Parties in accordance with the Project
Documents, such evidence in the case of the Parent to be as of the
date hereof, and such evidence to be for the period from the Closing
through July 31, 2010.
4.22. Filing of Documents.
On or before the Purchase Date, Uniform Commercial Code financing
statements reflecting the Company as debtor and the Trustee as secured
party shall have been filed in the appropriate public offices.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you and the Sureties that:
5.1. Organization; Power and Authority.
Each of the RBF Parties is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and is duly qualified as a foreign corporation and is
in good standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect. Each of the RBF Parties has the corporate power and authority
to own or hold under lease the properties it purports to own or hold
under lease, to transact the business it transacts and proposes to
transact, to execute and deliver this Agreement and the Other
Agreements, the Notes and the other Project Documents to which it is
a party and to perform the provisions hereof and thereof.
5.2. Authorization, etc.
This Agreement and the Other Agreements, the Notes and the other
Project Documents have been duly authorized by all necessary corporate
action on the part of the RBF Parties, and this Agreement and the
other Project Documents constitute, and upon execution and delivery
thereof each Note will constitute, a legal, valid and binding
obligation of the Company and/or the other RBF Parties party thereto
enforceable against the Company and/or the other RBF Parties party
thereto in accordance with its terms, except as such enforceability
may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles
of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
5.3. Disclosure.
The Company, through its agent, BTM Financial Services, Inc., has
delivered to you and each Other Purchaser a copy of a Confidential
Offering Memorandum, dated May 1999 (the "Memorandum"), relating to
the transactions contemplated hereby. Except as disclosed in
Schedule 5.3, this Agreement, the Memorandum, the documents,
certificates or other writings identified in Schedule 5.3 and the
financial statements referred to in Section 5.5, and each other
statement by the Company taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light of
the circumstances under which they were made. Except as disclosed in
the Memorandum or as expressly described in Schedule 5.3, or in one
of the documents, certificates or other writings identified therein,
or in the financial statements referred to in Section 5.5, since June
30, 1999, there has been no change in the financial condition,
operations, business or properties of the RBF Parties except changes
that individually or in the aggregate would not reasonably be expected
to have a Material Adverse Effect.
5.4. Organization and Ownership of Company.
The Company is a special purpose, directly or indirectly
wholly-owned subsidiary of the Parent.
5.5. Financial Statements.
(a) The audited consolidated balance sheets as of December 31,
1994, 1995, 1996, 1997 and 1998 and the audited consolidated
statements of operations for each of the years in the five-year period
ended June 30, 1999 of the Parent and its Subsidiaries, copies of
which are contained in Exhibit F to the Memorandum, fairly present in
all material respects the consolidated financial position of the
Parent and its Subsidiaries as of such dates and for the periods
indicated and the consolidated results of their operations for such
years and have been prepared in accordance with GAAP (exclusive of
footnotes) consistently applied throughout the periods involved. The
financial statements described above are true, accurate and complete,
and since June 30, 1999, there has been no event which has had a
Material Adverse Effect or would materially change such financial
statements. As of the Purchase Date, there exists no material
contingent liabilities or obligations of the Parent and its
Subsidiaries which are not fairly disclosed in such financial
statements or which have not been disclosed in writing to the
Purchasers.
(b) The unaudited proforma statements of cash flow of the Company
contained in Exhibit J to the Memorandum have been prepared on a
reasonable basis.
5.6. Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance by the Company of this
Agreement, the Notes and the other Project Documents to which it is
a party and by each of the other RBF Parties of the Project Documents
to which it is a party will not (i) contravene, result in any breach
of, or constitute a default under, or result in the creation of any
Lien in respect of any property of any RBF Party or any Subsidiary
under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, corporate charter or by-laws, or any other
Material agreement or instrument to which any RBF Party or any
Subsidiary is bound or by which any RBF Party or any Subsidiary or any
of their respective properties may be bound or affected, (ii) conflict
with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to any RBF Party or
any Subsidiary or (iii) violate any provision of any statute or other
rule or regulation of any Governmental Authority applicable to any RBF
Party or any Subsidiary.
5.7. Governmental Authorizations, etc.
Except as specified in Schedule 5.7, no consent, approval or
authorization of, or registration, filing or declaration with, any
Governmental Authority is required in connection with the execution,
delivery or performance by any RBF Party of this Agreement, the Notes
or the other Project Documents except for those consents, filing
approvals, and authorizations required in the ordinary course of the
operation of the Vessel.
5.8. Litigation; Observance of Statutes and Orders.
(a) Except as disclosed in Schedule 5.8, there are no actions,
suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting any RBF Party or any Subsidiary or any
property of any RBF Party or any Subsidiary in any court or before any
arbitrator of any kind or before or by any Governmental Authority
that, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect.
(b) Neither the Company nor any RBF Party nor any Subsidiary is in
default under any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority or is in violation of any
applicable law, ordinance, rule or regulation (including without
limitation Environmental Laws) of any Governmental Authority, which
default or violation, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
5.9. Taxes.
The Parent has filed all income tax returns that are required to
have been filed in any jurisdiction, and paid all taxes shown to be
due and payable on such returns and all other taxes and assessments
payable by it, to the extent such taxes and assessments have become
due and payable and before they have become delinquent, except for any
taxes and assessments the amount of which is not individually or in
the aggregate Material to the Parent and its Subsidiaries on a
consolidated basis or the Company individually, as the case may be,
and to the extent assessed against the Parent or any of its
Subsidiaries, Material to the Parent and its Subsidiaries on a
consolidated basis or the amount, applicability or validity of which
is currently being Contested in Good Faith by appropriate proceedings
and with respect to which the Parent and its Subsidiaries, on a
consolidated basis or the Company individually, as the case may be,
has established adequate reserves including but not limited to those
required in accordance with GAAP.
5.10. Title to Property.
Each RBF Party and each Subsidiary has good and valid title to
their respective Material properties, including all such properties
reflected in the most recent balance sheet referred to in Section 5.5
or purported to have been acquired after said date (except as sold or
otherwise disposed of in the ordinary course of business) including,
without limitation the Construction Contract, in each case free and
clear of Liens other than Excepted Liens. All Material leases are
valid and subsisting and are in full force and effect in all Material
respects.
5.11. Licenses, Permits, etc.
(a) Except as disclosed in Schedule 5.11, the Company and the
Parent own or possess all licenses, permits, franchises,
authorizations, patents, copyrights, service marks, trademarks and
trade names, or rights thereto, that are Material, without known
conflict with the rights of others.
(b) The Company owns or possesses all licenses, permits,
franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, without any known
conflict with the rights of others, necessary to own and operate the
Drilling Rig and perform the SDDI Contract as contemplated therein.
5.12. Compliance with ERISA.
(a) Company has no Plan and makes no contributions to any Plan.
(b) The Parent and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except
for such instances of noncompliance as have not resulted in and could
not reasonably be expected to result in a Material Adverse Effect.
Neither the Parent nor any ERISA Affiliate has incurred any liability
pursuant to Title I or IV of ERISA (except for required contributions)
or the penalty or excise tax provisions of the Code relating to
employee benefit plans (as defined in Section 3 of ERISA), and no
event, transaction or condition has occurred or exists that would
reasonably be expected to result in the incurrence of any such
liability by the Parent or any ERISA Affiliate (except for required
contributions), or in the imposition of any Lien on any of the rights,
properties or assets of the Parent or any ERISA Affiliate, in either
case pursuant to Title I or IV of ERISA or to such penalty or excise
tax provisions or to Section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not be individually or in the
aggregate Material.
(c) The present value of the aggregate benefit liabilities under
each of the Plans (other than Multiemployer Plans), determined as of
the end of such Plan's most recently ended plan year on the basis of
the actuarial assumptions specified for funding purposes in such
Plan's most recent actuarial valuation report, did not exceed the
aggregate current value of the assets of such Plan allocable to such
benefit liabilities. The term "benefit liabilities" has the meaning
specified in section 4001 of ERISA and the terms "current value" and
"present value" have the meaning specified in section 3 of ERISA.
(d) The Parent and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate are
Material.
(e) The expected postretirement benefit obligation (determined as
of the last day of the Parent's most recently ended fiscal year in
accordance with Financial Accounting Standards Board Statement
No. 106, without regard to liabilities attributable to continuation
coverage mandated by section 4980B of the Code) of the Parent and its
Subsidiaries is not Material.
(f) The execution and delivery of this Agreement and the other
Project Documents and the issuance and sale of the Notes hereunder
will not involve any transaction that is subject to the prohibitions
of section 406 of ERISA or in connection with which a tax could be
imposed pursuant to sections 4975(c)(1)(A)-(D) of the Code. The
representation by the Company in the first sentence of this
Section 5.12(f) is made in reliance upon and subject to the accuracy
of your representation in Section 6.2 as to the sources of the funds
to be used to pay the purchase price of the Notes to be purchased by
you.
5.13. Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer
to buy any of the same from, or otherwise approached or negotiated in
respect thereof with, any person other than you, the Other Purchasers
and not more than 35 other Institutional Investors, each of which has
been offered the Notes at a private sale for investment. Neither the
Company nor anyone acting on its behalf has taken, or will take, any
action that would subject the issuance or sale of the Notes to the
registration requirements of Section 5 of the Securities Act.
5.14. Use of Proceeds; Margin Regulations.
The Company will apply the proceeds of the sale of the Notes to (i)
fund the Payment Reserve Account, (ii) fund the Construction Account,
and (iii) to fund the costs of the Construction Contract and the
purchase of the Owner's Supplies. No part of the proceeds from the
sale of the Notes hereunder will be used, directly or indirectly, for
the purpose of buying or carrying any margin stock within the meaning
of Regulation U of the Board of Governors of the Federal Reserve
System (12 CFR 221), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the
Company or the Parent or any of its Subsidiaries in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or
dealer in a violation of Regulation T of said Board (12 CFR 220). As
used in this Section, the terms "margin stock" and "purpose of buying
or carrying" shall have the meanings assigned to them in said
Regulation U. The Company does not own and will not acquire any
margin stock.
5.15. Debt.
(a) The Company has no Debt as of the date hereof and it will have
no Debt (other than Debt represented by the Notes) on the date of
Closing.
(b) Since June 30, 1999 there has been no Material change in the
amounts, interest rates, sinking funds, installment payments or
maturities of the Debt reflected on the financial statements of the
Parent as of such date (copies of which have been delivered to you).
Neither the Parent nor any Subsidiary is in default and no waiver of
default is currently in effect, in the payment of any principal or
interest on any Debt of the Parent or such Subsidiary. No event or
condition exists with respect to any Debt of the Parent or any
Subsidiary that would permit (or that with notice or the lapse of
time, or both, would permit) one or more Persons to cause such Debt
to become due and payable before its stated maturity or before its
regularly scheduled dates of payment.
5.16. Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Company hereunder nor its use
of the proceeds thereof will violate the Trading with the Enemy Act,
as amended, or any of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) or any enabling legislation or executive order relating
thereto.
5.17. Status under Certain Statutes.
Neither the Company nor any Affiliate thereof is subject to
regulation under the Investment Company Act of 1940, as amended, the
Public Utility Holding Company Act of 1935, as amended, the Interstate
Commerce Act, as amended, or the Federal Power Act, as amended.
5.18. Subsidiaries.
The Company has no Subsidiaries.
5.19. Nature of Business and Location of Business and Offices.
The Company is organized for the single purpose of owning and
operating the Drilling Rig and does not engage directly or indirectly
in any other business. The Company's principal place of business and
chief executive offices are located at the address stated for the
Company at the beginning of this Agreement.
5.20. Environmental Matters.
Except (i) as provided in Schedule 5.20 or (ii) as could not have
a Material Adverse Effect (or with respect to (c), (d) and (e) below,
where the failure to take such actions would not have a Material
Adverse Effect):
(a) Neither any Property of the Company nor the Parent nor
any Subsidiary nor the operations conducted thereon violate any
order or requirement of any court or Governmental Authority or any
Environmental Laws;
(b) Without limitation of clause (a) above, no Property of
the Company, the Parent or any Subsidiary nor the operations
currently conducted thereon or, to the knowledge of the Company, by
any prior owner or operator of such Property or operation, are in
violation of or subject to any existing, pending or threatened
action, suit, investigation, inquiry or proceeding by or before any
court or Governmental Authority or to any remedial obligations
under Environmental Laws;
(c) All notices, permits, licenses or similar authorizations,
if any, required to be obtained or filed in connection with the
operation or use of any and all Property of the Company, the Parent
and each Subsidiary, including without limitation past or present
treatment, storage, disposal or release of a hazardous substance or
solid waste into the environment, have been duly obtained or filed,
and the Company, the Parent and each Subsidiary are in compliance
with the terms and conditions of all such notices, permits,
licenses and similar authorizations;
(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and all
Property owned or leased by the Company, the Parent or any
Subsidiary have in the past been transported, treated and disposed
of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare
or the environment, and, to the knowledge of the Company, all such
transport carriers and treatment and disposal facilities have been
and are operating in compliance with Environmental Laws and so as
not to pose an imminent and substantial endangerment to public
health or welfare or the environment, and are not the subject of
any existing, pending or threatened action, investigation or
inquiry by any Governmental Authority in connection with any
Environmental Laws;
(e) Each of the RBF Parties have taken all steps reasonably
necessary to determine and has determined that no hazardous
substances, solid waste, or oil and gas exploration and production
wastes, have been disposed of or otherwise released and there has
been no threatened release of any hazardous substances on or to any
Property of the Company, RBF II, the Parent or any Subsidiary
except in compliance with Environmental Laws and so as not to pose
an imminent and substantial endangerment to public health or
welfare or the environment;
(f) To the extent applicable, all Property of the Company,
RBF II, the Parent and each Subsidiary currently satisfies all
design, operation, and equipment requirements imposed by the OPA or
scheduled as of the date of the Closing to be imposed by OPA during
the term of this Agreement, and the Company does not have any
reason to believe that such Property, to the extent subject to OPA,
will not be able to maintain compliance with the OPA requirements
during the term of this Agreement; and
(g) Neither the Company, RBF II, the Parent nor any
Subsidiary has any known contingent liability in connection with
any release or threatened release of any oil, hazardous substance
or solid waste into the environment.
5.21. Construction Contract, SDDI Contract, Performance Bond,
Construction Supervisory Agreement and Refundment Guarantee.
The copies of the Construction Contract, Performance Bond,
Construction Supervisory Agreement, Refundment Guarantee and the SDDI
Contract previously delivered by the Company to you are complete and
accurate and have not been amended or modified in any manner except,
with respect to the Construction Contract and the SDDI Contract, as
permitted by Section 8.3(c) and Section 8.3(f)(ii) of the Trust
Indenture. All such documents in the preceding sentence are valid,
binding and enforceable against the parties thereto.
5.22. No Indenture Defaults.
No event has occurred and is continuing and no condition exists
which, upon the issuance of the Notes, would constitute an Indenture
Default or an Indenture Event of Default. Neither the Company, RBF
II nor the Parent is in violation in any respect of any term of its
certificate of incorporation or bylaws, and neither the Company, RBF
II nor the Parent is in violation of any material term in any Material
agreement or other Material instrument to which it is a party or by
which it or any of its Property may be bound. Except for the Project
Documents, the Construction Contract and the SDDI Contract, there are
no Material agreements or Material instruments to which the Company
is a party or by which it or any of its Property is bound. Each
representation made or deemed made by any RBF Party in any Project
Document is true and correct.
5.23. Rig Classification.
As of the Rig Acceptance Date, the Drilling Rig will be classified
in the highest class available for rigs of its age and type with the
American Bureau of Shipping, free of any material requirements or
recommendations.
5.24. Insurance.
As of the Rig Acceptance Date, the Drilling Rig will be covered by
the insurance required by Section 2.13 of the First Preferred Ship
Mortgage and the other Project Documents and such insurance will be
in full force and effect and all premiums due in respect of such
insurance will have been paid.
5.25. Security Interests.
(a) On the Purchase Date, all filings necessary or desirable to
perfect the first Lien and security interest of the Trustee under the
Trust Indenture in the Trust Estate (which shall include the
Construction Contract but shall not include the Drilling Rig) as
against creditors and purchasers from the Company will have been duly
made, and the Trust Indenture will create a valid and perfected first
priority lien and security interest in said Trust Estate, effective
against creditors of and purchasers from the Company, securing all
obligations secured thereby.
(b) On the Rig Acceptance Date, (a) the Drilling Rig will be duly
documented in the name of the Company under the laws of the United
States of America, and no other filing, recordation or registration
of any other document or instrument will be necessary in order to
establish the Company's good and valid title to the Drilling Rig, and
(b) all filings necessary or desirable to perfect the first Lien and
security interest of the Trustee under the Trust Indenture and the
First Preferred Ship Mortgage in the Trust Estate as against creditors
of and purchasers from the Company will have been duly made, and the
Trust Indenture and the First Preferred Ship Mortgage will create
valid and perfected first priority liens and security interests in the
Trust Estate, effective as against creditors of and purchasers from
the Company, securing all obligations secured thereby.
5.26. Year 2000.
The representations contained in the Year 2000 Schedule attached as
Annex H to the Trust Indenture are true and correct.
6. REPRESENTATIONS OF THE PURCHASER.
6.1. Purchase for Investment.
You represent that you are purchasing the Notes for your own
account or for one or more separate accounts maintained by you or for
the account of one or more pension or trust funds and not with a view
to the distribution thereof, provided that the disposition of your or
their property shall at all times be within your or their control.
You understand that the Notes have not been registered under the
Securities Act and may be resold only if registered pursuant to the
provisions of the Securities Act or if an exemption from registration
is available and that the Company is not required to register the
Notes.
6.2. Source of Funds.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be
used by you to pay the purchase price of the Notes to be purchased by
you hereunder:
(a) if you are an insurance company, the Source does not
include assets allocated to any separate account maintained by you
in which any employee benefit plan (or its related trust) has any
interest, other than a separate account that is maintained solely
in connection with your fixed contractual obligations under which
the amounts payable, or credited, to such plan and to any
participant or beneficiary of such plan (including any annuitant)
are not affected in any manner by the investment performance of the
separate account; or
(b) if you are an insurance company, to the extent that the
Source constitutes assets allocated to any general account
maintained by you, there is no employee benefit plan with respect
to which the amount, if any, of such general account's reserves and
liabilities for all contracts held by or on behalf of such plan and
all other plans maintained by the same employer or its affiliates
or by the same employee organization exceeds 10% of the total of
all reserves and liabilities of such general account at the date of
purchase (all as determined under Prohibited Transaction Class
Exemption ("PTE") 95-60 (issued July 12, 1995)); or
(c) the Source is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued
January 29, 1990), or (ii) a bank collective investment fund,
within the meaning of the PTE 91-38 (issued July 12, 1991) and,
except as you have disclosed to the Company in writing pursuant to
this paragraph (c), no employee benefit plan or group of plans
maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such
pooled separate account or collective investment fund; or
(d) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the
meaning of Part V of the QPAM Exemption), no employee benefit
plan's assets that are included in such investment fund, when
combined with the assets of all other employee benefit plans
established or maintained by the same employer or by an affiliate
(within the meaning of Section V(c)(1) of the QPAM Exemption) of
such employer or by the same employee organization and managed by
such QPAM, exceed 20% of the total client assets managed by such
QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled
by the QPAM (applying the definition of "control" in Section V(e)
of the QPAM Exemption) owns a 5% or more interest in the Company
and (i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such investment
fund have been disclosed to the Company in writing pursuant to this
paragraph (d); or
(e) the Source is a governmental plan; or
(f) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA;
or
(g) the Source is one or more employee benefit plans, or a
separate account, general account or trust fund comprised of one or
more employee benefit plans, each of which has been identified to
the Company in writing pursuant to this paragraph (g).
As used in this Section 6.2, the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall
have the respective meanings assigned to such terms in Section 3 of
ERISA.
7. EXPENSES, ETC.
7.1. Transaction Expenses.
Whether or not the transactions contemplated hereby are
consummated, the Company will pay all costs and expenses, including
the cost of obtaining the Private Placement Number, the reasonable
fees and disbursements of external counsel for the Trustees and the
reasonable fees, charges and disbursements of special counsel to each
of the Class A1 Noteholders, Class A2 Noteholders and Credit Support
Parties; provided that the Class A1 Noteholders shall all use the same
counsel, the Class A2 Noteholders shall all use the same counsel and
the Credit Support Parties shall all use the same counsel and, if
reasonably required, local or other counsel incurred by you and each
Other Purchaser or holder of a Note in connection with such
transactions and in connection with any amendments, waivers or
consents under or in respect of this Agreement, the Notes and the
other Project Documents (whether or not such amendment, waiver or
consent becomes effective), including, without limitation: (a) the
costs and expenses incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights under this Agreement,
the Notes or the other Project Documents or in responding to any
subpoena or other legal process or informal investigative demand
issued in connection with this Agreement, the Notes or the other
Project Documents, or by reason of being a holder of any Note, and (b)
the reasonable costs and expenses, including financial advisors' fees,
incurred in connection with the insolvency or bankruptcy of any RBF
Party or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes and the other
Project Documents. The Company will pay, and will save you and each
other holder of a Note harmless from, all claims in respect of any
fees, costs or expenses of (a) the arranger, BTM Financial Services,
Inc., (b) the structuring agent, BTM Capital Corporation, and (c) any
other brokers and finders (other than those retained by you or the
other Purchasers).
7.2. Survival.
The obligations of the Company under this Section 7 will survive
the payment or transfer of any Note, the enforcement, amendment or
waiver of any provision of this Agreement, the Notes or the other
Project Documents, and the termination of this Agreement.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties contained herein and in the
other Project Documents shall survive the execution and delivery of
this Agreement, the Notes and the other Project Documents, the
purchase or transfer by you of any Note or portion thereof or interest
therein and the payment of any Note, and may be relied upon by any
subsequent holder of a Note, regardless of any investigation made at
any time by or on behalf of you or any other holder of a Note. All
statements contained in any certificate or other instrument delivered
by or on behalf of any RBF Party pursuant to this Agreement shall be
deemed representations and warranties of the Company under this
Agreement.
9. AMENDMENT AND WAIVER.
9.1. Requirements.
Subject to the provisions of the Trust Indenture, this Agreement
and the Notes may be amended, and the observance of any term hereof
or of the Notes may be waived (either retroactively or prospectively),
with (and only with) the written consent of the Company, the Required
Holders, the Trustee and, so long as the Performance Bond is
outstanding or amounts are due to the Sureties as a result of payments
made by them thereunder, the Sureties, except that (a) no amendment
or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 13
hereof, or any defined term (as it is used therein), will be effective
as to you unless consented to by you in writing, and (b) no such
amendment or waiver may, without the written consent of the holder of
each Note at the time outstanding affected thereby, (i) change the
amount or time of any prepayment or payment of principal of, or reduce
the rate or change the time of payment or method of computation of
interest, Make-Whole Amount, Yield Protection Amount or the Special
Yield Protection Amount on, the Notes, (ii) change the percentage of
the principal amount of the Notes the holders of which are required
to consent to any such amendment or waiver, or (iii) amend either
Section 9 or 12. Without limiting the Purchaser s discretion as
between the Purchaser and the Issuer (or any other RBF Party) to give
or withhold any consent, notice, directive or request pursuant to the
Trust Indenture or any Project Document, the Purchaser may give or
withhold any of the foregoing pursuant to any contractual arrangement
at any time entered into between the Purchaser and any Credit Support
Party.
9.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the
Notes (irrespective of the amount of Notes then owned by it) with
sufficient information, fifteen (15) Business Days in advance of the
date a decision is required, to enable such holder to make an
informed and considered decision, if required, with respect to any
proposed amendment, waiver or consent in respect of any of the
provisions hereof or of the Notes or any other Project Document. The
Company will deliver executed or true and correct copies of each
amendment, waiver or consent to each holder of outstanding Notes
promptly following the date on which it is executed and delivered by,
or receives the consent or approval, if required, of, the requisite
holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any
holder of Notes as consideration for or as an inducement to the
entering into by any holder of Notes of any waiver or amendment of any
of the terms and provisions hereof unless such remuneration is
concurrently offered to be paid, or additional security is
concurrently offered to be granted, on the same terms, ratably to each
holder of Notes then outstanding even if such holder did not consent
to such waiver or amendment.
9.3. Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 9
or effected pursuant to Article 10 of the Trust Indenture applies
equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to
whether such Note has been marked to indicate such amendment or
waiver. No such amendment or waiver will extend to or affect any
obligation, covenant, agreement, Indenture Default or Indenture Event
of Default not expressly amended or waived or impair any right
consequent thereon. No course of dealing between the Company and the
holder of any Note nor any delay in exercising any rights hereunder,
under any Note or any other Project Document shall operate as a waiver
of any rights of any holder of such Note. As used herein, the term
"this Agreement" and references thereto shall mean this agreement as
it may from time to time be amended or supplemented.
9.4. Notes held by Company, etc.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then
outstanding approved or consented to any amendment, waiver or consent
to be given under this Agreement, the Notes or any other Project
Document, or have directed the taking of any action provided herein
or in the Notes or in any other Project Document to be taken upon the
direction of the holders of a specified percentage of the aggregate
principal amount of Notes then outstanding, Notes directly or
indirectly owned by the Company or any of its Affiliates shall be
deemed not to be outstanding.
10. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by facsimile (with a copy sent by registered or
certified mail on the same date), or (b) by registered or certified
mail with return receipt requested (postage prepaid), or (c) by a
recognized overnight delivery service (with charges prepaid). Any
such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other
address as you or it shall have specified to the Company in
writing,
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the
Company in writing,
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of President, or at
such other address as the Company shall have specified to the
holder of each Note in writing,
(iv) if to the Trustee, as set forth in the Indenture, or
(v) if to the Sureties, as set forth in the Performance Bond.
Notices under this Section 10 will be deemed given only when
actually received. All notices, reports, information and other
materials furnished to the Purchaser pursuant to this Agreement or any
other Project Documents shall be sent with a copy as follows:
BTM Capital Corporation
125 Summer Street
Boston, MA 02110
Attn: Credit Department
Tel 617 345-5865
Fax 617 345-1695
11. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may
hereafter be executed, (b) documents received by you at the Closing
(except the Notes themselves), and (c) financial statements,
certificates and other information previously or hereafter furnished
to you, may be reproduced by you by any photographic, photostatic,
microfilm, microcard, miniature photographic or other similar process
and you may destroy any original document so reproduced. The Company
agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding (whether or not
the original is in existence and whether or not such reproduction was
made by you in the regular course of business) and any enlargement,
facsimile or further reproduction of such reproduction shall likewise
be admissible in evidence. This Section 11 shall not prohibit the
Company or any other holder of Notes from contesting any such
reproduction to the same extent that it could contest the original,
or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
12. CONFIDENTIAL INFORMATION.
For the purposes of this Section 12, "Confidential Information"
means written information delivered to you by or on behalf of the
Company, RBF II or the Parent in connection with the transactions
contemplated by or otherwise pursuant to this Agreement that is
proprietary in nature and that was clearly marked or labeled or
otherwise adequately identified when received by you as being
confidential information of the Company, RBF II or the Parent, or was
known by you as being confidential information, provided that such
term does not include information that (a) was publicly known or
otherwise known to you prior to the time of such disclosure, (b)
subsequently becomes publicly known through no act or omission by you
or any person acting on your behalf, (c) otherwise becomes known to
you other than through disclosure by the Company, RBF II or the Parent
or by violation by you of the provisions of this Section 12 or (d)
constitutes financial statements delivered to you under the provisions
of this Agreement or the Trust Indenture that are otherwise publicly
available. You will maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by you in good faith
and pursuant to prudent business practices to protect confidential
information of third parties delivered to you, provided that you may
deliver or disclose Confidential Information to (i) your directors,
officers, employees, agents, attorneys and Affiliates (to the extent
such disclosure reasonably relates to the administration of the
investment represented by your Notes), (ii) your financial advisors
and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms
of this Section 12, (iii) any other holder of any Note, (iv) any
Institutional Investor to which you sell or offer to sell such Note
or any part thereof or any participation therein (if such Person has
agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 12), (v) any
Person from which you offer to purchase any security of the Company
(if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this
Section 12), (vi) any federal or state regulatory authority having
jurisdiction over you, (vii) the National Association of Insurance
Commissioners or any similar organization, or any nationally
recognized rating agency that requires access to information about
your investment portfolio, (viii) any Credit Support Party or (ix) any
other Person to which such delivery or disclosure may be necessary or
appropriate (w) to effect compliance with any law, rule, regulation
or order applicable to you, (x) in response to any subpoena or other
legal process, (y) in connection with any litigation to which you are
a party or (z) if an Indenture Event of Default has occurred and is
continuing, to the extent you may reasonably determine such delivery
and disclosure to be necessary or appropriate in the enforcement or
for the protection of the rights and remedies under your Notes, this
Agreement and the other Project Documents. Each holder of a Note, by
its acceptance of a Note, will be deemed to have agreed to be bound
by and to be entitled to the benefits of this Section 12 as though it
were a party to this Agreement. On reasonable written request by the
Company, in connection with the delivery to any holder of a Note of
information required to be delivered to such holder under this
Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into
an agreement with the Company embodying the provisions of this
Section 12.
13. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates
(or any Credit Support Party) as the purchaser of the Notes that you
have agreed to purchase hereunder, by written notice to the Company,
which notice shall be signed by both you and such Affiliate (or Credit
Support Party), shall contain such Affiliate's (or Credit Support
Party s) agreement to be bound by this Agreement expressly including
Section 12 hereof and shall contain a confirmation by such Affiliate
(or Credit Support Party) of the accuracy with respect to it of the
representations set forth in Section 6. Upon receipt of such notice,
wherever the word "you" is used in this Agreement (other than in this
Section 13), such word shall be deemed to refer to such Affiliate (or
Credit Support Party) in lieu of you. In the event that such
Affiliate (or Credit Support Party) is so substituted as a purchaser
hereunder and such Affiliate (or Credit Support Party) thereafter
transfers to you all of the Notes then held by such Affiliate (or
Credit Support Party), upon receipt by the Company of notice of such
transfer, wherever the word "you" is used in this Agreement (other
than in this Section 13), such word shall no longer be deemed to refer
to such Affiliate (or Credit Support Party), but shall refer to you,
and you shall have all the rights of an original holder of the Notes
under this Agreement. Each Credit Support Party shall be entitled to
rely on and be the beneficiary of the warranties, representations and
covenants of the Company under this Agreement and shall be an express
third party beneficiary thereof.
14. MISCELLANEOUS.
14.1. Successors and Assigns.
Whenever any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party;
and all the covenants, promises and agreements in this Agreement
contained by or on behalf of the Company or by or on behalf of you,
shall bind and inure to the benefit of the respective successors and
assigns of such parties whether so expressed or not; provided;
however, that the Company shall not assign or transfer any of its
rights or delegate any of its duties or obligations hereunder without
the prior written consent of all of the holders of the Notes.
14.2. Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of, Make-Whole Amount, Yield
Protection Amount, Special Yield Protection Amount, or interest on any
Note that is due on a date other than a Business Day shall be made on
the next succeeding Business Day without including the additional days
elapsed in the computation of the interest payable on such next
succeeding Business Day (interest for such additional days to accrue
and be payable on the next regularly scheduled payment date).
14.3. Severability.
Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall (to the full extent
permitted by law) not invalidate or render unenforceable such
provision in any other jurisdiction.
14.4. Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant
contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers
to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether
such action is taken directly or indirectly by such Person.
14.5. Counterparts.
This Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number
of copies hereof, each signed by less than all, but together signed
by all, of the parties hereto.
14.6. Governing Law.
This Agreement (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 conflict of laws rules
thereof that would require the application of the laws of a jurisdiction
other than such state.
14.7. Obligations of Bankers Trust Company.
The parties to this Agreement agree that Bankers Trust Company
shall have no obligation, in its capacity as program administrator for
Victory Receivables Corporation or otherwise, to take any actions
under the Project Documents if Bankers Trust Company is relieved of
its obligations as program administrator for Victory Receivables
Corporation.
14.8. Non Recourse Persons.
No recourse shall be had for the payment of any amount owing in
respect of any obligation or claim hereunder, or in connection
herewith against, any stockholder, employee, officer, director, member
or incorporator of the Purchaser (or of any member of the Purchaser),
any Credit Support Party or J H Management Corporation; provided,
however, that the foregoing shall not relieve any such person or
entity from any liability they might otherwise have arising from his,
her or its gross negligence, willful misconduct or intentional
misrepresentation.
14.9. Final Agreement.
This Agreement and the other Project Documents embody the entire
agreement and understanding between the parties and supersede all other
agreements and understandings between such parties relating to the subject
matter hereof and thereof. The Project 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.
* * * * *
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return
it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Company.
Very truly yours,
RBF EXPLORATION CO.
By:
[ ]
Senior Vice President
The foregoing is hereby
agreed to as of the date
thereof.
[ ]
By:
Name:
- --------------------------------------------------------------------------
SCHEDULE A
Name and Address Principal Amount
of Purchaser of Class A1 Notes
To Be Purchased
Victory Receivables Corporation $200,000,000.00
C/o The Bank of Tokyo-Mitsubishi, Ltd. R&B Falcon Senior Notes
1251 Avenue of the Americas
10th Floor
New York, NY 10020
Attention: William Aguiar/Matthew Croghan
Telephone: (212) 782-4913/(212) 782-6974
Facsimile: (212) 782-6998
All payments on or in respect to the Notes to be by bank wire transfer
of Federal or other immediately available funds (identifying each
payment as "[SELLER NAME], [DESCRIPTION OF NOTE BY SERIES #, INTEREST
RATE, MATURITY DATE, PRINCIPAL AMOUNT, PREMIUM OR INTEREST] to:
Bankers Trust Company
4 Albany Street
New York, NY 10006
ABA #: 021001033
Account #: 01419647
For credit to: Corporate Trust & Agency Services
Attention: Victory
All notices and communications to be addressed as first provided
above.
The delivery of Securities to Bankers Trust Company, as Collateral
Agent as follows:
Bankers Trust Company
16 Wall Street
4th Floor, Window 43
Reference: A/C # 098985
Corporate Trust & Agency Services
Ref: Acct# 28194 RB Falcon
- --------------------------------------------------------------------------
Name and Address Principal Amount
of Purchaser of Class A2 Notes
To Be Purchased
Anchor National Life Insurance Company $10,000,000.00
R&B Falcon Senior Notes
(1) All payments on or in respect of the Notes shall be by wire
transfer of Federal or other immediately available funds to:
Bankers Trust Company
ABA # 021-001-033
Account # 99-911-145
For further credit to acct. #099527
Ref. R&B Falcon
CUSIP#___________, P$___________, I$___________
(2) Address for all notices in respect of payment:
SunAmerica Investments
1 SunAmerica Center
Los Angeles, CA 90067-6022
Attn: Investment Accounting, 36th Floor
Telephone: 310-772-6342
Fax: 310-772-6596
(3) Address for all other communications:
SunAmerica Corporate Finance
700 Louisiana Suite 3905
Houston, TX 77002
Attn: Chris Ochs
Telephone: 713-546-1115
Fax: 713-222-1402
(4) Please issue Notes in the nominee name "OKGBD & Co."
Tax ID# 13-3020293
Tax ID# for Anchor National Life Insurance Company: 86-0198983
(5) Physical Delivery Instructions:
Bankers Trust Company
14 Wall Street
New York, NY 10005
4th Floor, Window 44
Reference: Anchor National Life/Main
Account #099527
(6) DTC Participant #0903
Agent Bank ID #20903
Institution ID #26540
Ref: Anchor National/MAIN
Account #099527
- --------------------------------------------------------------------------
Name and Address Principal Amount
of Purchaser of Class A2 Notes
To Be Purchased
First SunAmerica Life Insurance Company $5,000,000.00
R&B Falcon Senior Notes
(1) All payments on or in respect of the Notes shall be by wire
transfer of Federal or other immediately available funds to:
Bankers Trust Company
ABA #021-001-033
Account #99-911-145
For further credit to acct. #099537
Ref. R&B Falcon
PPN#__________, P$___________, I$__________
(2) Address for all notices in respect of payment
SunAmerica Investments
1 Sun America Center
Los Angeles, CA 90067-6022
Attn: Investment Accounting, 36th Floor
Telephone: 310-772-6342
Fax: 310-772-6596
(3) Address for all other communications:
SunAmerica Corporate Finance
700 Louisiana, Suite 3905
Houston, TX 77002
Attn: Chris Ochs
Telephone: 713-546-1115
Fax: 713-222-1402
(4) Please issue notes in the nominee name "OKGBD & Co."
Tax ID# 13-3020293
Tax ID# for First SunAmerica Life Insurance Company: 06-0992729
(5) Physical Delivery Instructions:
Bankers Trust Company
14 Wall Street
New York, NY 10005
4th Floor, Window 44
Account #099537
(6) DTC Participant #0903
Agent Bank ID #20903
Institution ID #26540
Ref: First SunAmerica Life Insurance Company/MAIN
Account #099537
- ------------------------------------------------------------------------
Name and Address Principal Amount
of Purchaser of Class A2 Notes
To Be Purchased
Parthenon Receivables Funding LLC $35,000,000.00
C/o The Bank of Tokyo-Mitsubishi, Ltd. R&B Falcon Senior Notes
1251 Avenue of the Americas
10th Floor
New York, NY 10020
Attention: William Aguiar/Matthew Croghan
Telephone: (212) 782-4913/(212) 782-6974
Facsimile: (212) 782-6998
All payments on or in respect to the Notes to be by bank wire transfer
of Federal or other immediately available funds (identifying each
payment as "[SELLER NAME], [DESCRIPTION OF NOTE BY SERIES #, INTEREST
RATE, MATURITY DATE, PRINCIPAL AMOUNT, PREMIUM OR INTEREST] to:
Bank of Tokyo-Mitsubishi Trust Company
ABA #: 026009687
Account #: 310-051-886
Account Name: Parthenon
Reference: [SELLER NAME]
All notices and communications to be addressed as first provided
above.
The delivery of Securities to Bankers Trust Company, as Collateral
Agent as follows:
Bankers Trust Company
16 Wall Street
4th Floor, Window 43
Reference: A/C # 098985
Corporate Trust & Agency Services
Ref: Acct# 28194 RB Falcon
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings
set forth below or set forth in the Section hereof following such
term:
"Affiliate" shall have the meaning set forth in the Trust
Indenture.
"Agreement" is defined in Section 9.3.
"Assignment of Drilling Contract" means the agreement substantially
in the form of Exhibit 5 to this Agreement.
"basis point" means one-hundredth of one percent per annum.
"Builder" means collectively Hyundai Heavy Industries Co., Ltd. and
Hyundai Corporation, both being corporations incorporated and existing
under the laws of the Republic of Korea.
"Business Day" shall have the meaning set forth in the Trust
Indenture.
"Capital Lease" means, at any time, a lease with respect to which
the lessee is required concurrently to recognize the acquisition of
an asset and the incurrence of a liability in accordance with GAAP.
"Class A1 Notes" is defined in Section 1.
"Class A2 Notes" is defined in Section 1.
"Closing" is defined in Section 3.
"Collection Account" shall have the meaning set forth in the Trust
Indenture.
"Code" shall have the meaning set forth in the Trust Indenture.
"Company" means RBF Exploration Co., a Nevada corporation.
"Commitment Termination Date" is defined in Section 2.
"Confidential Information" is defined in Section 12.
"Construction Contract" means that certain Contract for
Construction and Sale of Vessel (Hull No. HRBS6) between the Company
and the Builder.
"Construction Supervisory Agreement" means the agreement,
substantially in the form of Exhibit 3 to this Agreement, to be dated
on or before the Purchase Date, between RBF II and the Company.
"Contested in Good Faith" shall have the meaning set forth in the
Trust Indenture.
"Credit Support Party" shall have the meaning set forth in the
Trust Indenture.
"Debt" shall have the meaning set forth in the Trust Indenture.
"Drilling Rig" shall have the meaning set forth in the Trust
Indenture.
"Default Rate" shall have the meaning set out in the Trust
Indenture.
"Environmental Laws" shall have the meaning set out in the Trust
Indenture.
"ERISA" shall have the meaning set forth in the Trust Indenture.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the
Company under section 414 of the Code.
"Excepted Liens" shall have the meaning set out in the Trust
Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"First Preferred Ship Mortgage" means the mortgage of the Drilling
Rig, substantially in the form of Exhibit 6 to this Agreement, to be
dated on the Rig Acceptance Date, from the Company to the Trustee.
"GAAP" shall have the meaning set forth in the Trust Indenture.
"Governmental Authority" shall have the meaning set forth in the
Trust Indenture.
"Hedging Agreements" shall have the meaning set forth in the Trust
Indenture.
"Indenture Default" shall have the meaning set out in the Trust
Indenture.
"Indenture Event of Default" shall have the meaning set out in the
Trust Indenture.
"Institutional Investor" means (a) any original purchaser of a
Note, (b) any Credit Support Party and (c) any bank, trust company,
savings and loan association or other financial institution, any
pension plan, any investment company, any insurance company, any
broker or dealer, or any other similar financial institution or
entity, regardless of legal form.
"Issuer/SDDI Notice Letter" means a letter in the form of Exhibit
6 hereto.
"Lien" shall have the meaning set forth in the Trust Indenture.
"Majority Holders" shall have the meaning set forth in the Trust
Indenture.
"Make-Whole Amount" shall have the meaning set out in the Trust
Indenture.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, or properties of the Company,
RBF II or of the Parent and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, affairs, financial condition, assets or
properties of the Company, RBF II or of the Parent and its
Subsidiaries taken as a whole, or (b) the ability of the Company, RBF
II or of the Parent to perform its respective obligations under this
Agreement, the Notes or any other Project Documents, or (c) the
validity or enforceability of this Agreement or the Notes or any other
Project Documents.
"Maturity Date" means May 1, 2005.
"Memorandum" is defined in Section 5.3.
"Multiemployer Plan" means any Plan that is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
"Notes" is defined in Section 1.
"Officer's Certificate" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities
extend to the subject matter of such certificate.
"Operation and Maintenance Agreement" means the agreement,
substantially in the form of Exhibit 5 to this Agreement, to be dated
on or before the Purchase Date.
"Other Agreements" is defined in Section 2.
"Other Purchasers" is defined in Section 2.
"Owner's Supplies" shall have the meaning set forth in the Trust
Indenture.
"Parent" shall mean R&B Falcon Corporation, a Delaware corporation.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.
"Payment Reserve Account" shall have the meaning set forth in the
Trust Indenture.
"Performance Bond" means the Performance Bond dated August 12,
1999, issued by the Sureties in the form of Exhibit 8 to this
Agreement.
"Performance Guarantee" has the meaning set forth in the Trust
Indenture.
"Person" has the meaning set forth in the Trust Indenture.
"Plans" has the meaning set forth in the Trust Indenture.
"Project Documents" shall have the meaning set forth in the Trust
Indenture.
"Property" or "property" has the meaning set forth in the Trust
Indenture.
"Purchase Date" means the date on which the conditions to Closing
under Section 4 hereof have been satisfied or such other date
thereafter agreed to pursuant to Section 3 hereof.
"Purchaser" shall have the meaning set forth in the Trust
Indenture.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"RBF II" means RBF Exploration II Inc., a Nevada corporation.
"RBF Parties" means each of the Company, RBF II and the Parent.
"Refundment Guarantee" shall have the meaning set forth in the
Trust Indenture.
"Required Holders" shall have the meaning set forth in the Trust
Indenture.
"Responsible Officer" means any Senior Financial Officer and any
other officer of the Company with responsibility for the
administration of the relevant portion of this agreement.
"Rig Acceptance Date" means the date the Drilling Rig is accepted
for delivery by the Company pursuant to the Construction Contract.
"Rig Appraisal and Engineering Report" means Exhibit D to the
Memorandum.
"Royal Dutch Shell" means, collectively, Royal Dutch Petroleum
Company, a company incorporated in The Netherlands, and The "Shell"
Transport and Trading Company, plc, a public limited company
incorporated in England and Wales.
"SDDI" means Shell Deepwater Development Inc., a Delaware
corporation.
"SDDI Acknowledgment and Consent" means a letter in the form of
Exhibit 7 hereto.
"SDDI Contract" means the Deep Water Rig Contract dated as of
August 12, 1998, between SDDI and the Company.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Senior Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or controller of the Company.
"Special Yield Protection Amount" shall have the meaning set out in
the Trust Indenture.
"Subsidiary" means, as to any Person, any corporation, association
or other business entity in which such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries owns
sufficient equity or voting interests to enable it or them (as a
group) ordinarily, in the absence of contingencies, to elect a
majority of the directors (or Persons performing similar functions)
of such entity, and any partnership or joint venture if more than a
50% interest in the profits or capital thereof is owned by such Person
or one or more of its Subsidiaries or such Person and one or more of
its Subsidiaries (unless such partnership can and does ordinarily take
major business actions without the prior approval of such Person or
one or more of its Subsidiaries). Unless the context otherwise
clearly requires, any reference to a "Subsidiary" is a reference to
a Subsidiary of the Parent
"Sureties" shall have the meaning set out in the Trust Indenture.
"Trust Estate" shall have the meaning set out in the Trust
Indenture.
"Trust Indenture" is defined in Section 4.3.
"Trustee" shall have the meaning set out in the Trust Indenture.
"Year 2000 Problem" shall have the meaning set out in the Trust
Indenture.
"Yield Protection Amount" shall have the meaning set out in the
Trust Indenture.
SCHEDULE 4.18
CHANGES IN CORPORATE STRUCTURE
(as to Company and Parent)
None.
SCHEDULE 5.3
DISCLOSURE MATERIALS
1. Parent's SEC Form 10-Q for the quarter ended June 30, 1999
filed on August [10], 1999.
2. Cliffs Drilling Company's SEC Form 10-Q for the quarter ended
June 30, 1999 filed on August [10], 1999.
3. RBF Finance Co.'s SEC Form 10-Q for the quarter ended June 30,
1999 filed on August [12], 1999.
SCHEDULE 5.7
GOVERNMENTAL AUTHORIZATIONS
None.
SCHEDULE 5.8
LITIGATION
1. In the Matter of an Arbitration between R&B Falcon (U.K.)
Limited and Mobil North Sea Limited and Mobil North Sea
Limited, Arbitration No. 9152, London Court of International
Arbitration.
2. In the Matter of an Arbitration between Lisnave Estaleiros
Navais, S.A. v. R&B Falcon Corporation under English
Arbitration Act.
3. F. Richard Manson v. Cliffs Drilling Company, Douglas E.
Swanson, M.M. Cone, H. Robert Hirsch, Robert M. McInnes,
Joseph E. Reid and John D. Weil, C. A. No. 16585-NG, Court of
Chancery, New Castle County, Delaware.
4. Mobil Exploration & Producing U.S. Inc., et al vs. Cliffs
Drilling Company, et al, Docket No. 99091 "E", 16th Judicial
District Court, Parish of St. Mary, Louisiana.
SCHEDULE 5.11
PATENTS, PERMITS, ETC.
None.
EXHIBIT 6
[Issuer/SDDI Notice Letter]
[Letterhead of RBF Exploration Co.]
August 9, 1999
Shell Deepwater Development Inc.
P.O. Box 60833
New Orleans, Louisiana 70160
Re: Offshore Daywork Drilling Contract
Contract No. RBS6-1
Dated and effective August 12, 1998
Gentlemen:
Reference is made to that certain Offshore Daywork Drilling
Contract, Contract No. RBS6-1, between Shell Deepwater Development
Inc. ("SDDI") and RBF Exploration Co. ("Contractor"), dated and
effective August 12, 1998 (the "Drilling Contract"). Unless otherwise
specified, capitalized terms used herein have the meanings set forth
in the Drilling Contract.
Contractor has entered into a Trust Indenture and Security
Agreement with Chase Bank of Texas, National Association, as Trustee
(together with its successors and assigns, "Indenture Trustee"), dated
as of August 12, 1999 (as amended, supplemented and otherwise modified
from time to time, the "Trust Indenture"), pursuant to which
Contractor has issued $200,000,000 in principal amount of its Class
A1 Senior Secured Notes and $50,000,000 in principal amount of its
Class A2 Senior Secured Notes (collectively, the "Notes").
Pursuant to Section 12.2 of the Drilling Contract, Contractor
hereby notifies SDDI that Contractor has assigned the Drilling
Contract and all of its rights thereunder, relating to all payments
pursuant to Article 3 of the Drilling Contract, to Indenture Trustee
as security for repayment of the Notes and full and faithful payment
and performance of all of Contractor's obligations under the Trust
Indenture and the other Project Documents (as defined therein).
Contractor also hereby notifies you that it has granted to Indenture
Trustee a first preferred ship mortgage on the Rig. From and after
date hereof, you are hereby directed to make all payments due under
the Drilling Contract by wire transfer of immediately available funds
on the date due to Chase Bank of Texas, National Association, ABA No.
113000609, Credit Trust Clearing Account No. 00101606276 for the
account of RBF Exploration Co., Account No. 2074900, Attention: Mauri
J. Cowen, Vice President, or to such other account as Indenture
Trustee shall direct in writing. The foregoing direction may not be
revoked or amended except by written direction from Indenture Trustee.
Very truly yours,
RBF EXPLORATION CO.
By:___________________
Name:
Title:
EXHIBIT 7
SDDI Acknowledgment and Consent
[Letterhead of Shell Deepwater Development Inc.]
_______________, 1999
RBF Exploration Co.
901 Threadneedle, Suite 200
Houston, TX 77079
Chase Bank of Texas, National Association
1150 Chase Tower
600 Travis Street
Houston, Texas 77002
Attn: Mauri J. Cowen, Vice President
Re: Offshore Daywork Drilling Contract
Contract No. RBS6-1
Dated and effective August 12, 1998
Gentlemen:
Reference is made to that certain Offshore Daywork Drilling
Contract, Contract No. RBS6-1, between Shell Deepwater Development
Inc. ("SDDI") and RBF Exploration Co. ("Contractor"), dated and
effective August 12, 1998 (the "Drilling Contract"). Unless otherwise
specified, capitalized terms used herein have the meanings set forth
in the Drilling Contract.
SDDI understands that Contractor has entered into a Trust Indenture
and Security Agreement with Chase Bank of Texas, National Association,
as Trustee (together with its successors and assigns, "Indenture
Trustee"), dated as of August 12, 1999 (as amended, supplemented and
otherwise modified from time to time, the "Trust Indenture"), pursuant
to which Contractor has issued $200,000,000 in principal amount of its
Class A1 Senior Secured Notes and $50,000,000 in principal amount of
its Class A2 Senior Secured Notes (collectively, the Notes ).
By notice dated August 9, 1999 (the "Notice"), Contractor has
informed SDDI that Contractor has, pursuant to the Indenture and an
Assignment of Drilling Contract, dated as of August 12, 1999 (as
amended, supplemented and otherwise modified from time to time, the
"Assignment"), assigned the Drilling Contract and all of its rights
thereunder, relating to all payments pursuant to Article 3 of the
Drilling Contract (the "Assigned Payments"), to Indenture Trustee as
security for repayment of the Notes and full and faithful payment and
performance of all of Contractor s obligations under the Trust
Indenture and the other Project Documents (as defined therein).
Pursuant to Section 12.2 of the Drilling Contract, SDDI hereby
acknowledges and consents to the assignment of the Drilling Contract
and all of Contractor s rights thereunder, including the rights to the
Assigned Payments.
SDDI hereby further agrees, in accordance with the direction set
forth in the Notice, until further direction to the contrary from
Indenture Trustee, to make all Assigned Payments to Indenture Trustee
by wire transfer in accordance with the payment terms set forth in
Section 3.8 ("Time and Manner of Payment; Dispute and Adjustment") of
the Drilling Contract to Chase Bank of Texas, National Association,
ABA No. 113000609, Credit Trust Clearing Account No. 00101606276 for
the account of RBF Exploration Co., Account No. 2074900, Attention:
Mauri J. Cowen, Vice President, or to such other account as Indenture
Trustee shall direct in writing.
The Assignment shall in no way affect the underlying terms of the
Drilling Contract as between Contractor and SDDI in connection with
the rights of SDDI thereunder, including but not limited to rights
with respect to repaid days set forth in Section 3.2.7 of the Drilling
Contract.
Very truly yours,
SHELL DEEPWATER DEVELOPMENT INC.
By:__________________________
Name:
Title:
EXHIBIT 12
Opinion of General Counsel and Internal Counsel of Sureties
[Opinions of each Surety]
1. The Surety is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
____________, and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the
ownership of its properties or the nature of its activities makes
such qualification necessary.
2. The Surety has the corporate power and authority to enter
into and perform its obligations under the Performance Bond. The
Surety's execution and delivery of the Performance Bond have been
duly authorized by all requisite corporate action.
3. The Performance Bond constitutes the legal, valid and
binding obligations of Surety, enforceable against Surety in
accordance with its terms.
4. The execution and delivery of the Performance Bond, the
consummation of the transactions therein contemplated, and the
fulfillment of and compliance with the terms, conditions and
provisions thereof or of any instruments required thereby, will not
violate Surety's Certificate/Articles of Incorporation or Bylaws,
and will not conflict with, violate or result in a breach of (a)
any law or statute or any regulation of any administrative or
governmental instrumentality applicable to Surety or, (b) to the
best of our knowledge, any order, writ, injunction or decree of any
court applicable to Surety.
5. No registration with or authorization, consent, order or
approval of any federal or state agency or department is required
with respect to Surety in connection with the execution and
delivery by Surety of the Performance Bond, or the performance by
Surety of its obligations thereunder.
[Add Assumptions and Qualifications]
EXHIBIT 10.3
Execution Copy
OPERATION AND MAINTENANCE AGREEMENT
This OPERATION AND MAINTENANCE AGREEMENT (this "Agreement") is
executed as of August 12, 1999 (the "Effective Date"), by and between
R&B Falcon Corporation, a Delaware corporation ("Manager") and RBF
Exploration Co., a Nevada corporation ("Owner").
WHEREAS, under that certain Offshore Daywork Drilling Contract
between Shell Deepwater Development Inc. ("SDDI") and Owner dated
effective August 12, 1998 (as from time to time hereafter amended or
modified as permitted by the Trust Indenture, hereinafter defined,
the "Shell Contract"), SDDI and Owner agreed to certain terms and
conditions for Owner's provision of certain drilling services
utilizing a certain semisubmersible drilling rig (being the 'Rig'
defined in the Shell Contract, hereinafter called the "Drilling Rig");
and
WHEREAS, Owner and Chase Bank of Texas, National Association
(together with its successors and assigns, the "Indenture Trustee")
have entered into a certain Trust Indenture and Security Agreement
dated August 12, 1999, (the "Trust Indenture") which provides for,
among other things, the pledge of certain collateral and the issuance
of $200,000,000 Class A1 Senior Secured Notes and the issuance of
$50,000,000 Class A2 Senior Secured Notes (collectively, the "Notes"),
subject to the terms and conditions contained therein; and
WHEREAS, in connection with the sale of the Notes, Owner has
entered into certain Note Purchase Agreements dated August 12, 1999,
(the "Note Purchase Agreements") with various Note purchasers
(together with their successors and assigns as holders of any of the
Notes the "Note Holders"); and
WHEREAS, the Owner desires to contract with Manager and, in
consideration of the purchase of the Notes pursuant to the Note
Purchase Agreements, the Note Holders have required that Manager enter
into this Agreement relating to the operation, maintenance and repair
of the Drilling Rig and certain other matters as set forth herein; and
WHEREAS, Manager by virtue of its indirect ownership of Owner
reasonably expects to benefit from Owner's performance of its
obligations under the SDDI Contract and the maintenance of the
Drilling Rig;
NOW, THEREFORE, in consideration of the premises set forth herein
and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Manager covenants and agrees with
Owner as follows:
ARTICLE 1 - DEFINITIONS
Unless otherwise defined herein, all capitalized terms used herein
shall have the respective meanings assigned to such terms in the Trust
Indenture. The following terms shall have the respective meanings:
"Prudent Engineering and Operating Practices" -- The practices
generally prevailing in the offshore oil and gas drilling industry
but, at a particular time, in the exercise of reasonable judgment
in light of the facts known or that should have been known to the
Manager at the time a decision was made, could have been expected
to accomplish the desired result at a reasonable cost in a manner
consistent with law, reliability, safety, security, environmental
protection and expedition. Prudent Engineering and Operating
Practices include, but are not limited to, insuring that:
(a) adequate materials, resources, supplies and fuel are
available to meet the Owner's performance requirements
under the SDDI Contract,
(b) sufficient operating personnel are available and are
adequately experienced and trained to operate the
Drilling Rig properly and efficiently and are
knowledgeable about responding to normal, abnormal and
emergency conditions,
(c) preventive, routine and non-routine maintenance and
repairs are performed on a basis that (i) promotes
reliable long-term and safe operation of the Drilling
Rig, (ii) are performed by knowledgeable, trained and
experienced personnel utilizing proper equipment and
tools, and (iii) meets or exceeds any requirements and
recommendations set forth in all applicable equipment
manuals,
(d) appropriate monitoring and testing is done (i) to
determine equipment is functioning as designed, (ii) to
provide reasonable assurance that equipment will function
properly under normal, abnormal and emergency conditions,
and (iii) to meet or exceed any requirements and
recommendations set forth in applicable equipment
operating manuals,
(e) the Drilling Rig is not operated in a reckless manner or
without regard to applicable limitation such as
temperature, sea condition, control system limits and
other applicable operating limitations,
(f) the Drilling Rig is operated in such a manner as to
maximize revenues produced without materially decreasing
the Drilling Rig's useful life (normal wear and tear
excepted) or increasing the scheduled maintenance of the
Drilling Rig's components, and
(g) the Drilling Rig and each of its components is operated
and maintained in accordance with all applicable
manufacturer's recommendations and in such manner that
all applicable warranties shall remain in full force and
effect.
"Services" -- has the meaning set out in Article II hereof.
ARTICLE II - SERVICES
SECTION 2.1 Services. Manager agrees to operate, maintain,
repair and take all other actions required or desired by a prudent
Manager and Owner of the Drilling Rig including, without limitation,
the following (all such obligations are herein called the "Services"):
(a) to perform or cause to be performed any and all of the
obligations and responsibilities of every nature whatsoever,
expressed or implied, to be performed by Owner under the SDDI
Contract and under all documents and instruments executed and
to be executed pursuant to the SDDI Contract as and when
required to be made or performed under the SDDI Contract,
including, without limiting the generality of the foregoing,
with respect to equipping, mobilization, demobilization,
maintenance, insurance, repair, provision of crew and drilling
services, invoicing SDDI in a timely manner and performance of
all indemnities and in all respects in accordance with the
terms of the SDDI Contract and Prudent Engineering and
Operating Practices;
(b) to advise the Owner and the Indenture Trustee with respect to
any proposed amendment, modification or change in the SDDI
Contract;
(c) to maintain the Drilling Rig and all equipment used in
connection therewith in good running order, repair and first
class condition and in compliance with the SDDI Contract and
all Governmental Requirements and with the class designation
as specified in the definition of Operational Period
Conditions Precedent and, in connection therewith, present any
and all warranty claims with respect to the Drilling Rig and
to keep the Drilling Rig at all time registered as a vessel
under the laws of the United States of America and otherwise
operate or cause to be operated the Drilling Rig in accordance
with the SDDI Contract and Prudent Engineering and Operating
Practices and otherwise in a careful and efficient manner and
in compliance with all Governmental Requirements, including,
without limitation, operating the Drilling Rig in such a
manner and in compliance with all Governmental Requirements
such that SDDI shall have no right under Section 10.3 of the
SDDI Contract or otherwise to withhold any federal, state or
local income or other taxes from payments due under the SDDI
Contract, provided, however, to the extent SDDI does withhold
any such payments, the Manager shall promptly pay the Owner an
amount equal to such withheld payments, on an after-tax basis;
(d) subject to the requirements and restrictions of the Trust
Indenture, the First Preferred Ship Mortgage and the
Assignment of Drilling Contract, to take all other actions
with respect to the Drilling Rig or the SDDI Contract as the
Manager shall deem to be in the best interest of the Owner;
(e) to negotiate and enter into all contracts and arrangements to
provide services necessary to perform the Owner's obligations
under the SDDI Contract on such terms and conditions as are
customary and reasonable in light of local standards and
practices and Prudent Engineering and Operating Practices;
(f) to obtain and maintain in full force and effect all necessary
licenses, permits, authorizations and other rights required
under all applicable laws, rules and regulations from all
Governmental Authorities in connection with the ownership and
operation of the Drilling Rig pursuant to the SDDI Contract;
(g) to maintain all books and records with respect to the
operation and maintenance of the Drilling Rig and performance
of the SDDI Contract;
(h) to cause the surveys and inspections referred to in Annex D of
the Trust Indenture to be timely conducted and satisfactorily
passed with the five (5) year surveys and inspections
conducted and passed prior to the Maturity Date;
(i) in the event of any damage to the Drilling Rig from any
casualty having a repair cost in excess of $1,000,000 to give
prompt written notice thereof to the Owner and the Indenture
Trustee, which notice shall set forth in reasonable detail the
nature and extent of the damage, an estimate of the costs and
repairs and an estimate of the length of time necessary to
repair such damage. Such notice shall also state whether the
Manager considers such damage to constitute an Event of Loss,
which statement shall not, however, be determinative. With
respect to any casualty damage, regardless of whether
insurance proceeds are available, the Manager shall promptly
and diligently repair the Drilling Rig or cause the Drilling
Rig to be repaired to the same condition as it was before such
damage and in compliance with the foregoing requirements, free
and clear of all liens and encumbrances;
(j) to enforce all obligations of SDDI under the SDDI Contract;
(k) to maintain all insurance on the Drilling Rig at all times in
accordance with the requirements set forth in the Trust
Indenture;
(l) to provide all personnel required in order to perform the
Owner's obligations under the SDDI Contract , such personnel
to have the qualifications necessary to comply with the
Owner's obligations under the SDDI Contract and any
qualifications imposed by applicable laws, rules and
regulations;
(m) to provide such administrative, engineering and other
technical support services as may be needed including, without
limitation, accounting, data processing, legal, tax, project
management, contract administration, transportation,
communications, payroll, purchasing, shipping and personnel
administration services;
(n) to furnish the Owner and the Indenture Trustee, as soon as
possible, and in any event within two (2) business days after
receipt, any notice of any claim, default, violation (actual
or threatened) of any applicable laws, rules and regulations,
the SDDI Contract, or any threatened or pending litigation
with respect to or which could cause a Material Adverse Effect
on the Owner, the Drilling Rig or the SDDI Contract, together
with a written summary setting forth the details of such
notice, if any, and the action that is proposed to be taken by
the Manager with respect thereto;
(o) to operate the Drilling Rig in compliance with Environmental
Laws, and to establish and implement such procedures as may be
reasonably necessary to continuously determine and assure
that: (i) all property of the Owner including, without
limitation, the Drilling Rig, the operations conducted thereon
and other activities of the Owner are in compliance with and
do not violate the requirements of any Environmental Laws,
(ii) no oil, hazardous substances or solid wastes are disposed
of, discharged or are otherwise released except in compliance
with Environmental Laws, (iii) no hazardous substance will be
released in a quantity equal to or exceeding that quantity
which requires reporting pursuant to Section 103 of the
CERCLA, and (iv) no oil, oil exploration and production wastes
or hazardous substance is discharged or released so as to pose
an eminent and substantial endangerment to public health or
welfare or the environment which will result in damages
recoverable under OPA;
(p) to develop and implement an occupational safety plan and
submit such plan to the Owner and the Indenture Trustee; and
(q) so long as the Trust Indenture is in full force and effect to
keep the Drilling Rig at all times in United States
territorial waters in the Gulf of Mexico or in the Gulf of
Mexico on or above the outer Continental Shelf of the United
States; provided, however, if SDDI requires the Drilling Rig
to change location pursuant to the SDDI Contract, the Drilling
Rig may be moved to such location as SDDI so requires.
SECTION 2.2 Obligations Absolute. The obligations of the
Manager hereunder including, without limitation, the payment
obligations in Section 6.2(b) are absolute and unconditional and are
performable and payable without set-off, deduction or defense, and
without abatement, suspension, deferment, diminution or reduction,
free from charges, assessments, impositions, expenses or deductions
of any and every kind or nature whatsoever including, without
limitation, (i) any right the Manager may have against the Owner, SDDI
or any other party hereunder or pursuant to the SDDI Contract or
otherwise; (ii) any breach, default or misrepresentation by the Owner
or SDDI pursuant to this Agreement, the SDDI Contract or otherwise;
or (iii) any invalidity or unenforceability in whole or in part of
this Agreement or the SDDI Contract or any other document or
instrument relating thereto, or any other infirmity therein or lack
of power or authority of any party thereto. Except as expressly
provided in Article IV below, this Agreement shall not terminate and
the Manager shall not have any right to terminate this Agreement nor
shall the Manager have the right to be released or discharged from any
obligations or liabilities hereunder for any reason, including,
without limitation, any failure of the Owner to pay compensation
pursuant to Article III below or any action, omission or breach on the
part of the Owner or Shell under this Agreement or the SDDI Contract
or any other agreement between said parties; the impossibility or
illegality of performance by the Contractor, the Owner or SDDI; any
action of any court, administrative agency or governmental authority;
or any other cause, whether similar or dissimilar to the foregoing,
any present or future law notwithstanding, and the Manager will remain
obligated under this Agreement notwithstanding any bankruptcy,
insolvency, reorganization, liquidation, dissolution or other
proceeding affecting the Owner.
ARTICLE III - COMPENSATION
SECTION 3.1 Reimbursements.
All direct expenses incurred by the Manager in performance of the
Services herein will be reimbursed to the Manager by the Owner. The
Manager will provide the Owner with invoices and documentation in
sufficient detail to describe the direct expenses to be reimbursed.
To the extent it has cash available therefor, the Owner will reimburse
the Manager for such direct expenses within ten (10) days after
receipt of the invoice and documentation as aforesaid.
SECTION 3.2 Manager Fee. The Owner shall pay the Manager a
fixed amount of $2,500 per day as a fee for performing the Services
under this Agreement. Such fee shall be payable in 12 equal monthly
payments to the extent the Owner has cash available therefor.
ARTICLE IV - TERM
SECTION 4.1 Term. The term of this Agreement shall begin on the
Effective Date hereof and, unless earlier terminated as provided in
Article VI below, shall remain in full force and effect until the last
to occur of (i) termination of the SDDI Contract and (ii) payment in
full of the Notes and termination of the Trust Indenture.
ARTICLE V - REPRESENTATION AND WARRANTIES
The Manager represents and warrants to Owner as follows:
SECTION 5.1 Organization and Power. The Manager (i) is a
corporation duly formed, validly existing and in good standing under
the laws of the State of Delaware and is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which such
qualification is required in order for the Manager to carry on its
business as now conducted; and (ii) has the full corporate power,
authority and legal right to carry on its business as now conducted
and to execute, deliver and perform this Agreement.
SECTION 5.2 No Violation. Neither the execution, delivery or
performance by the Manager of this Agreement nor compliance herewith
(i) conflicts or will conflict with or results or will result in a
breach of or constitutes or will constitute a default under (A) any
law in effect as of the date hereof binding upon the Manager or the
Drilling Rig or (B) any order, writ, injunction or decree of any court
or other governmental authority binding upon the Manager or the
Drilling Rig, or (ii) results or will result in the creation or
imposition of any lien, charge or encumbrance upon its property
pursuant to such agreement or instrument. Neither the execution,
delivery or performance by the Manager of this Agreement nor
compliance by the Manager herewith conflicts or will conflict with or
results or will result in a breach of or constitutes or will
constitute a default under (i) the certificate of incorporation or by-
laws of the Manager or (ii) any agreement or instrument to which the
Manager is a party or by which it is bound.
SECTION 5.3 Agreement is Legal and Authorized. This Agreement
has been duly authorized by the Manager by all necessary corporate
action (including any necessary action by its shareholders) and duly
executed and delivered by it, and, assuming the due authorization,
execution and delivery thereof by Owner, is a legal, valid and binding
obligation of the Manager enforceable against it in accordance with
its terms, except as certain rights and remedies as set forth herein
may be limited by (a) bankruptcy, reorganization and similar laws of
general application relating to or affecting the enforcement of
creditors' rights and (b) general principles of equity.
SECTION 5.4 Consents. No consent, license, approval or
authorization of, or filing, registration or declaration with, or
exemption or other action by, any Governmental Authority is required
in connection with the execution and delivery or performance by the
Manager of this Agreement.
SECTION 5.5 Standards of Performance. The Manager represents
that (a) it has substantial knowledge, experience and expertise with
respect to the offshore drilling industry and has required expertise
covering resources experience, qualifications and capabilities in
connection with the operation and maintenance of the Drilling Rig, (b)
it shall execute its responsibilities under this Agreement in a manner
that is consistent with Prudent Engineering and Operating Practices
and is qualified to do so, (c) it will utilize personnel that are
qualified, experienced and capable, and (d) it will correctly install
any equipment or materials requiring installation by the Owner.
SECTION 5.6 Permits. The Manager represents that all
governmental consents, licenses and permits required for it to perform
the Services have been or will be obtained by it on or before the time
required by any applicable laws.
SECTION 5.7 No Violation of Law. Neither the Manager nor any
affiliate of the Manager is in violation of any applicable laws,
statutes, orders, rules or regulations promulgated or judgments
entered by any Governmental Authority, which violations, individually
or in the aggregate, would adversely affect Manager's ability to
perform its obligations hereunder.
SECTION 5.8 Litigation. Neither the Manager nor any affiliate
of the Manager is a party to or is threatened with any legal,
administrative, arbitral, investigative, arbitral or other proceedings
("Proceedings"), which Proceedings, individually or in the aggregate,
would materially and adversely affect the Manager's ability to perform
its obligations under this Agreement.
ARTICLE VI - EVENTS OF DEFAULT
SECTION 6.1 Events of Default. The occurrence of any one or more
of the following events shall be an "Event of Default" hereunder:
(a) The Manager shall fail to observe or perform any term,
covenant or condition of this Agreement and such failure shall either
(i) cause a default under the SDDI Contract or (ii) remain uncured for
a period of 30 days after the earlier of actual knowledge thereof by
the Manager or the giving of written notice thereof by Owner or the
Indenture Trustee;
(b) any representation or warranty made by the Manager in this
Agreement (or in any certificate or instrument executed in connection
therewith) shall be untrue, inaccurate or misleading in any material
respect;
(c) The Manager shall generally fail to pay, or admit in
writing its inability to pay, its debts as they become due, or shall
voluntarily commence any case or proceeding or file any petition under
any bankruptcy, insolvency or similar law or seeking dissolution,
liquidation or reorganization or the appointment of a receiver, agent,
custodian, liquidator or similar person for itself or a substantial
portion of its property, assets or business or to effect a plan or
other arrangement with its creditors, or shall file any answer
admitting the jurisdiction of the court and the material allegations
of any involuntary petition filed against it in any bankruptcy,
insolvency or similar case or proceeding, or shall be adjudicated
bankrupt, or shall make a general assignment for the benefit of
creditors, or shall consent to, or acquiesce in the appointment of,
a receiver, agent, custodian, liquidator or similar person for itself
or a substantial portion of its property, assets or business, or
action shall be taken by the Manager, for the purpose of effectuating,
authorizing or furthering any of the foregoing;
(d) involuntary proceedings or an involuntary petition shall
be commenced or filed against the Manager under any bankruptcy,
insolvency or similar law or seeking the dissolution, liquidation or
reorganization of such person or the appointment of a receiver, agent,
custodian, liquidator or similar person for the Manager or of a
substantial part of its property, assets or business, or any writ,
judgment, warrant of attachment, execution or similar process shall
be issued or levied against a substantial part of its property, assets
or business, and such proceedings or petition shall not be dismissed
or stayed, or such writ, judgment, warrant of attachment, execution
or similar process shall not be released, vacated or fully bonded,
within 60 days after commencement, filing or levy, as the case may be;
(e) an Owner default occurs and is continuing under the SDDI
Contract and the Manager is not diligently pursuing the cure thereof;
(f) the SDDI Contract shall for any reason be terminated or
cease to be in full force and effect; or
(g) SDDI, for any reason, becomes entitled to a material
off-set, deduction or abatement in payment of the day rate under and
pursuant to the SDDI Contract.
SECTION 6.2 Remedies.
(a) If an Event of Default shall have occurred and be
continuing, Owner and the Indenture Trustee shall have all rights and
remedies available at law, equity or otherwise.
(b) In addition to the remedies provided in Section 6.2(a)
above, and in furtherance thereof, if an Event of Default shall have
occurred and be continuing and as a result thereof SDDI has
discontinued or reduced payments of the Operating Rate (as defined in
the SDDI Contract) during the Primary Period (as defined in the SDDI
Contract) or has terminated the SDDI Contract (any such discontinuance
or reduction or termination being referred to as an "SDDI Event"), the
Owner and/or the Indenture Trustee shall be entitled to, and the
Manager shall pay as liquidated damages to the Indenture Trustee for
the account of the Owner on demand of the Indenture Trustee, the
following:
(i) so long as the SDDI Contract is still in force and
effect and the Operating Rate payments have been discontinued or
reduced, the Manager shall pay on each date that the Operating
Rate is payable pursuant to the SDDI Contract an amount equal to
the difference between the portion of each Operating Rate
payment, if any, timely received by the Owner and the full
amount of the Operating Rate payment that would have been due on
such date but for such Event of Default; and
(ii) in the event the SDDI Contract is terminated the
Manager shall pay on demand, as aforesaid, the discounted
present value of the Operating Rate payments which SDDI would
have been required to pay for the period from the date of
termination to the end of the Primary Period using a discount
rate of 7.35%.
(c) The Parties acknowledge and agree that because of the
unique nature of the SDDI Contract and the unavailability of a timely
and practical substitute contract, it is difficult or impossible to
determine with precision the amount of damages that would or might be
incurred by Owner and/or Indenture Trustee as a result of an SDDI
Event. Accordingly, it is understood and agreed by the Parties that
(i) Owner shall be damaged by the occurrence of an SDDI Event, (ii) it
would be impracticable or extremely difficult to fix the actual
damages resulting therefrom, (iii) any sums that would be payable
under Section 6.2(b) are in the nature of liquidated damages, and not
penalties, and are fair and reasonable, and (iv) such payment
represents a reasonable estimate of fair compensation for the losses
that may reasonably be anticipated from such SDDI Event, and shall,
without duplication, be the sole and exclusive measure of damages with
respect to the SDDI Event. In addition to the foregoing, the Owner
shall be entitled to any and all other damages that Owner may sustain
due to an Event of Default from a cause other than an SDDI Event.
(d) If the SDDI Contract is terminated, in addition to, but
not in lieu of, the payment obligation in Section 6.2(b)(ii), the
Manager shall use its best efforts to find alternative employment for
the Drilling Rig acceptable to the Owner and, provided the Indenture
Trustee has any further interest under the Trust Indenture, the
Indenture Trustee. If such employment is found, the Owner shall pay
to the Manager any amounts received by it as a result of such
employment until the earlier to occur of:
(i) an amount equal to that paid by the Manager to the
Indenture Trustee for the account of the Owner pursuant
to Section 6.2(b)(ii) above has been paid to the Manager;
or
(ii) the date on which the Primary Period (as defined in the
SDDI Contract) would have expired.
(e) No failure to exercise and no delay in exercising any
right, remedy, power or privilege under this Agreement shall operate
as a waiver thereof; nor shall any single or partial exercise of any
right, remedy or power or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and
privileges provided in this Agreement are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
(f) If an Indenture Event of Default or an Event of Default
hereunder shall have occurred and be continuing, Manager irrevocably
and unconditionally covenants and agrees that Manager shall, upon
demand of the Indenture Trustee, immediately move the Drilling Rig to
such United States port or other location within the territorial
waters of the United States subject to the in rem admiralty
jurisdiction of the United States federal courts as Indenture Trustee
may designate in writing in its sole and absolute discretion. Manager
is authorized and directed to move the Drilling Rig as aforesaid upon
written notice from the Indenture Trustee, and Manager agrees to so
move the Drilling Rig at the direction of the Indenture Trustee,
notwithstanding any contrary or conflicting instructions or advice
from the Owner, and Manager shall not be required to make inquiry as
to the truth or accuracy of such notice from the Indenture Trustee or
the right of the Indenture Trustee to act as aforesaid and shall have
no liability or obligations to the Owner in connection therewith. The
rights of the Indenture Trustee hereunder are conditioned only upon
its delivery of the notice aforesaid and may be exercised by the
Indenture Trustee either with or without taking possession of the
Drilling Rig or any other Collateral and either before or after taking
possession of any such Collateral, and without instituting any legal
or foreclosure proceedings whatsoever. Any cost or expense incurred
by Manager in connection with the foregoing shall be reimbursed by the
Owner as set forth in Section 3.1 hereof, and shall in no event be
paid by the Indenture Trustee. The obligation of Manager under this
subsection (f), to the maximum extent permitted by law, is absolute
and unconditional, irrespective of any breach or default by the Owner
hereunder, the insolvency, bankruptcy, reorganization, dissolution or
liquidation of the Owner, any change in ownership of the Owner or any
other circumstance whatsoever which might otherwise constitute a legal
or equitable discharge or defense of Manager with respect to the
foregoing obligation to move the Drilling Rig.
SECTION 6.3 Owner's and Indenture Trustee's Right to Cure Event
of Default. Owner or the Indenture Trustee, without waiving or
releasing any obligation owed to it or any Event of Default may (but
shall be under no obligation to) remedy any Event of Default for the
account of and at the sole cost and expense of the Manager. All funds
advanced or out-of-pocket costs and expenses incurred in connection
with such remedy, together with interest thereon at the Default Rate
from the date on which such sums or expenses are paid by Owner or the
Indenture Trustee, shall be paid by the Manager to the Owner or the
Indenture Trustee, as appropriate, on demand.
ARTICLE VII - INDEMNIFICATION
SECTION 7.1 The Manager agrees to pay all reasonable expenses of
the Owner, the Indenture Trustee and the Note Holders (including
advice of external counsel as to the rights and duties of the Owner,
the Indenture Trustee and the Note Holders with respect thereto) in
the administration of, and in connection with the preservation of
rights under and enforcement of this Agreement (including, without
limitation, travel, photocopy, mailing, courier, telephone and other
similar expenses of the Owner, the Indenture Trustee and the Note
Holders) and the reasonable fees and disbursements of external counsel
and other outside consultants; and promptly reimburse the Owner, the
Indenture Trustee and the Note Holders for all amounts expended,
advanced or incurred by any of them to satisfy any obligation of the
Manager hereunder.
SECTION 7.2 The Manager agrees to indemnify the Owner, the Indenture
Trustee and each Note Holder, each Credit Support Party and each of their
Affiliates and each of their officers, directors, employees, representatives,
agents, attorneys, accountants and experts ("Indemnified Parties") from,
hold each of them harmless against and promptly upon demand pay or reimburse
each of them for, the Indemnity Matters which may be incurred by or asserted
against or involve any of them (whether or not any of them is designated a
party thereto) to the extent as a result of, arising out of or in any way
related to (a) the condition, use, ownership, operation, maintenance,
repair and management of the Drilling Rig including, without limitation,
Indemnity matters based in whole or in part on strict or absolute tort
liability, (b) relating to the Drilling Rig and the appurtenances thereto,
the performance of the SDDI Contract and the use and occupancy of the
Drilling Rig by Manager or anyone claiming by, through or under Manager
and including, without limitation, by SDDI, or (c) arising or alleged to
arise from or in connection with any of the following events: (i) any
injury to, or the death of, any person or any damage to or loss of
property on or adjacent to the Drilling Rig or growing out of or
directly or indirectly connected with, or alleged to grow out of or be
directly or indirectly connected with, the ownership, use, nonuse,
occupancy, operation, possession, condition, construction, repair or
rebuilding of the Drilling Rig, or alleged to result, from the condition
of any thereof; (ii) any claims by third parties to the extent resulting
from any violation or alleged violation by Manager of (A) any provision of
this Agreement, or (B) any law, rule or regulations affecting the Drilling
Rig, or (C) any charter, contract (other than this Agreement) or other
agreement relating to the Drilling Rig as of the date hereof or hereafter
in effect to which Manager is a party or by which Manager is bound, or (D)
any contract or agreement to which Manager is a party, or any restriction,
law, rule or regulation, affecting the Drilling Rig or the ownership, use,
nonuse, occupancy, condition, operation, possession, construction, repair
or rebuilding thereof; (iii) any contest by Manager permitted by section
7.6; (iv) Manager's failure to pay in accordance with the terms and
provisions hereof any sums payable by Manager hereunder or under any
other document to which Manager is a party or (v) which may be imposed
upon, incurred by or asserted against any Indemnified Party in any way
relating to or arising out of this Agreement or the enforcement of any of
the terms hereof and thereof (other than by Manager), including, including,
without limitation, the reasonable fees and disbursements of external
counsel and all other expenses incurred in connection with investigating,
defending or preparing to defend any such action, suit, proceeding
(including any investigations, litigation or inquiries) or claim and
including all Indemnity Matters arising by reason of the ordinary
negligence of any Indemnified Party, but excluding all Indemnity Matters
arising solely by reason of claims between the Note Holders or any Note
Holder and a Note Holder's shareholder or by reason of the gross negligence
or willful misconduct on the part of the Relevant Indemnified Party.
SECTION 7.3 The Manager agrees to indemnify and hold harmless from time
to time each Indemnified Party from and against any and all losses, claims,
cost recovery actions, administrative orders or proceedings, damages and
liabilities to which any such Person may become subject (i) under any
Environmental Law applicable to the Manager, Owner or the operation of the
Drilling Rig, including without limitation, the treatment or disposal of
hazardous substances, (ii) as a result of the breach or non-compliance by
the Manager or the operation of the Drilling Rig with any Environmental Law
applicable to the Manager, the Owner or the operation of the Drilling Rig,
(iii) due to any past ownership or past activity on any Properties which,
though lawful and fully permissible at the time, could result in present
liability, (iv) the presence, use, release, storage, treatment or disposal of
hazardous substances on or with respect to the Drilling Rig, or (v) any other
environmental, health or safety condition in connection with the ownership,
use, operation, maintenance or repair of the Drilling Rig, provided, however,
no indemnity shall be afforded under this section in respect of any
Property for any occurrence arising solely from the acts or omissions of
the Indenture Trustee or any Note Holder during the period after which such
Person, its successors or assigns shall have obtained actual possession of
such Property to the exclusion of the Owner and Manager (whether by
foreclosure or deed in lieu of foreclosure, as mortgagee-in-possession or
otherwise) except such acts or omissions of the Indenture Trustee or any
Note Holder relating in any way to, or arising directly or indirectly out
of or resulting directly or indirectly from any circumstance or condition
in existence prior to such actual possession by the Indenture Trustee or
any Note Holder, whether or not known to, or knowable or discoverable by,
any party prior to such possession or from the failure by the Manager to
perform any of its obligations hereunder or by the Owner to perform
any of its obligations under the SDDI Contract.
SECTION 7.4 The obligations and indemnities contained in this
Article VII shall continue in full force and effect notwithstanding
the expiration or earlier termination of this Agreement. In any and
all claims against any Indemnified Party by any employee of the
Manager, any contractor, any subcontractor, anyone directly or
indirectly employed by any of them or anyone for whose acts any of
them may be liable, the indemnification obligation under this Article
VII shall not be limited in any way by any limitation on the amount
or type of damages, compensation or benefits payable by or for the
Manager or any subcontractor under workers' compensation acts,
disability benefit acts or other employee benefit acts.
SECTION 7.5 So long as no Indenture Event of Default shall have
occurred and be continuing, no Indemnified Party may settle any claim
to be indemnified without the consent of the Manager, such consent not
to be unreasonably withheld; provided, that the Manager may not
reasonably withhold consent to any settlement that an Indemnified
Party proposes, if the Manager does not have the financial ability to
pay all its obligations outstanding and asserted against the Manager
at that time, including the maximum potential claims against the
Indemnified Party to be indemnified pursuant to this Article VII.
SECTION 7.6 In the case of any indemnification hereunder, an
Indemnified Party shall give notice to the Manager of any claim or
demand being made against it; provided, however, that the failure to
give such notice shall not release the Manager from any of its
obligations, except to the extent that failure to give notice of any
action, suit or proceeding against such Indemnified Party shall have
a material adverse affect on the Manager's ability to contest such
claim or demand. Subject to the provisions of the following
paragraph, the Manager shall at its sole cost and expense be entitled
to control, and shall assume full responsibility for, the defense of
such claim or liability; provided that the Manager shall keep the
Indemnified Party which is the subject of such proceeding fully
apprised of the status of such proceeding and shall provide such
Indemnified Party with all information with respect to such proceeding
as such Indemnified Person shall reasonably request.
Notwithstanding any of the foregoing to the contrary, the Manager
shall not be entitled to control and assume responsibility for the
defense of such claim or liability if (i) an Event of Default shall
have occurred and be continuing under this Agreement, (ii) an
Indenture Event of Default shall have occurred and be continuing,
(iii) such proceeding will involve any danger of the sale, forfeiture
or loss of, or the creation of any Lien (other than an Excepted Lien
or a Lien which is adequately bonded to the satisfaction of such
Indemnified Party) on, the Trust Estate or any part thereof, (iv) in
the good faith opinion of such Indemnified Party, there exists an
actual or potential conflict of interest such that it is advisable for
such Indemnified Person to retain control of such proceeding or (v)
such claim or liability involves the possibility of criminal sanctions
or liability to such Indemnified Party. In the circumstances
described in clauses (i) - (v), the Indemnified Party shall be
entitled to control and assume responsibility for the defense of such
claim or liability at the expense of the Manager. In addition, any
Indemnified Party may participate in any proceeding controlled by the
Manager, at its own expense in respect of any such proceeding as to
which the Manager shall have acknowledged in writing its obligation
to indemnify the Indemnified Party, and at the expense of the Manager
in respect of any such proceeding as to which the Manager shall not
have so acknowledged its obligation to the Indemnified Party. The
Manager may in any event participate in all such proceedings at its
own cost. Nothing contained herein shall be deemed to require an
Indemnified Party to contest any claim or demand or to assume
responsibility for or control of any judicial proceeding with respect
thereto.
SECTION 7.7 The foregoing indemnities shall extend to the Indemnified
Parties notwithstanding the sole or concurrent negligence of every kind or
character whatsoever, whether active or passive, whether an affirmative
act or an omission, including without limitation, all types of negligent
conduct identified in the restatement (second) of torts of one or more of
the Indemnified Parties or by reason of strict liability imposed without
fault on any one or more of the Indemnified Parties. To the extent that
an Indemnified Party is found to have committed an act of gross negligence
or willful misconduct, this contractual obligation of indemnification, as
to such Indemnified Party, shall continue but shall only extend to the
portion of the claim that is deemed to have occurred by reason of events
other than the gross negligence or willful misconduct of the Indemnified
Party.
SECTION 7.8 The Manager shall pay any amounts due under this
Article VII within thirty (30) days of the receipt by the Manager of
notice of the amount due.
ARTICLE VIII - MISCELLANEOUS
SECTION 8.1 Notices. All notices, consents, directions,
approvals, instructions, requests, demands and other communications
required or permitted by the terms hereof to be given to any person
shall be given in writing in and any such notice shall be deemed given
(i) when personally delivered, or (ii) three days after the date
deposited in the United States mails, with proper postage prepaid, for
first class certified mail, return receipt requested, or (iii) when
signed for by the recipient, if delivered by overnight courier or
express mail service, addressed as follows:
if to Owner:
RBF Exploration Co.
901 Threadneedle
Houston, Texas 77079
if to Manager
R & B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
if to the Indenture Trustee
Chase Bank of Texas, National Association
1150 Chase Tower
600 Travis Street
Houston, TX 77002
or at such other address as either party hereto may from time to time
designate by notice duly given in accordance with the provisions of
this Section 8.1 to the other party.
SECTION 8.2 Successors and Assigns. The Manager may not make an
assignment or other transfer of this Agreement or any interest herein
by operation of law or otherwise unless it has obtained the prior
written consent of the Indenture Trustee and the Owner to such
assignment or other transfer, which consent may be withheld,
conditioned or delayed. The Owner may assign its rights and benefits
under this Agreement, with the prior written consent of the Indenture
Trustee, to any successor or to any transferee of the Drilling Rig,
the Indenture Trustee, any Note Holder or the Surety. The Indenture
Trustee may assign its right and benefits under this Agreement to any
successor or to any Note Holder or the Surety.
SECTION 8.3 No Waiver; Amendments. No failure on the part of the
Owner or the Indenture Trustee or any of their respective agents to
exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power, or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Owner
or the Indenture Trustee or any of their respective agents of any
right, power, or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power, or remedy.
No amendment of this Agreement shall be effective unless the same
shall be in writing and signed by the Manager and the Owner and
consented to in writing by the Indenture Trustee. No waiver of any
provision of this Agreement shall be effective unless signed by the
Owner and the Indenture Trustee.
SECTION 8.4 Governing Law; Submission to Jurisdiction; Etc. (a)
This Agreement (including, but not limited to, the validity and
enforceability hereof and thereof) shall be governed by, and construed
in accordance with, the laws of the state of New York, other than conflict
of laws rules thereof that would require the application of the laws of a
jurisdiction other than such state.
(b) Any legal action or proceeding with respect to this Agreement
may be brought in the courts of the State of New York in New York County
or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Agreement, each of the Manager and
the Owner hereby accepts for itself and (to the extent permitted by law)
in respect of its Property, generally and unconditionally, the jurisdiction
of the aforesaid courts. Each of the Manager and the Owner hereby
irrevocably waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum
non conveniens, which it may now or hereafter have to the bringing of
any such action or proceeding in such respective jurisdictions. this
submission to jurisdiction is non-exclusive and does not preclude any
Person from obtaining jurisdiction over other parties in any court
otherwise having jurisdiction.
(c) Each of the Manager and the Owner hereby irrevocably designates
Capitol Services, Inc. located at 401 Colvin Street, Suite 200, Albany, New
York 12206, as its designee, appointee and agent to receive, for and on its
behalf, service of process in such jurisdiction in any legal action or
proceeding with respect to this Agreement. it is understood that a copy of
such process served on such agent will be promptly forwarded by overnight
courier to the Manager and the Owner at its address set forth herein, but
the failure of to receive such copy shall not affect in any way the
service of such process. Each of the Manager and the Owner further
irrevocably consents to the service of process of any of the aforementioned
courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to Noble US at
its said address, such service to become effective thirty (30) days after
such mailing.
(d) Nothing herein shall affect the right of the Owner or the
Indenture Trustee, any Note Holder or any other Person to serve process
in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Manager in any other jurisdiction.
(e) The Manager and the Owner each hereby (i) irrevocably and
unconditionally waives, to the fullest extent permitted by law, trial by
jury in any legal action or proceeding relating to this Agreement and for
any counterclaim therein; (ii) irrevocably waives, to the maximum extent
not prohibited by law, any right it may have to claim or recover in any
such litigation any special, exemplary, punitive or consequential damages,
or damages other than, or in addition to, actual damages; (iii) certifies
that no party hereto nor any representative or agent of counsel for any
party hereto has represented, expressly or otherwise, or implied that
such party would not, in the event of litigation, seek to enforce the
foregoing waivers, and (iv) acknowledges that it has been induced to
enter into this Agreement, and the transactions contemplated hereby and
thereby by, among other things, the waivers and certifications contained
in this section.
SECTION 8.5 Third Party Beneficiaries. The Indenture Trustee,
each of the Note Holders under the Trust Indenture, and each Credit
Support Party is an intended third party beneficiary of this
Agreement. The Indenture Trustee shall have the right, but not the
obligation, in its sole judgment and discretion, from time to time,
but subject to the terms of this Agreement, to make demand for
performance and to proceed against the Manager for the performance of
any of its obligations hereunder, and/or to proceed from time to time
against the Owner for the performance of any such obligations, as the
Indenture Trustee, in its sole discretion, may determine.
SECTION 8.6 Counterparts. This Agreement may be executed in any
number of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same agreement.
SECTION 8.7 Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 8.8 Headings and Table of Contents. The headings and
table of contents contained in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning
hereof.
SECTION 8.9 Non-Petition Covenant. So long as any indebtedness
or other obligations secured by the Trust Indenture are outstanding,
the Manager will not institute, and will not join with others in
instituting, any involuntary bankruptcy or analogous proceeding
against the Owner under any bankruptcy, reorganization, receivership
or similar law, domestic or foreign, as now or hereafter in effect.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written (the "Effective
Date").
RBF EXPLORATION CO.
By:_________________________
Name:
Title:
R&B FALCON CORPORATION
By:_________________________
Name:
Title:
EXHIBIT 10.4
Execution Copy
PERFORMANCE GUARANTEE
PERFORMANCE GUARANTEE (this "Guarantee"), dated as of August
12, 1999 made by R&B FALCON CORPORATION, a Delaware corporation
(the "Guarantor") in favor of RBF EXPLORATION CO., a Nevada
corporation (the "Owner"), TRAVELERS CASUALTY AND SURETY COMPANY OF
AMERICA, a Connecticut corporation, and AMERICAN HOME ASSURANCE
COMPANY, a New York corporation (both collectively, the
"Sureties"), and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, not in
its individual capacity but solely as Trustee under the Trust
Indenture (the "Indenture") dated as of August 12, 1999 (together
with its successors and assigns, the "Trustee").
WHEREAS, the Owner wishes to issue USD 250,000,000 of Senior
Secured Notes (the "Notes") pursuant to the Indenture to finance
the construction, outfitting and mobilization of the semi-
submersible drilling rig to be named DEEPWATER NAUTILUS (the
"Drilling Rig");
WHEREAS, pursuant to the Construction Supervisory Agreement
dated the date hereof (the "Construction Supervisory Agreement")
the Owner has engaged RBF Exploration II Inc., a Nevada
corporation, (the "Supervisor") to manage and supervise the design,
construction and outfitting of the Drilling Rig at the yard of the
Builders and its mobilization as required by the SDDI Contract;
WHEREAS, both the Owner and the Supervisor are wholly-owned
indirect subsidiaries of the Guarantor and it is to the corporate
benefit of the Guarantor that the Owner issue the Notes and that
the Supervisor manage the design, construction, outfitting and
mobilization of the Drilling Rig; and
WHEREAS, pursuant to the Indenture, the Owner has granted to
the Trustee a security interest in, among other things, its rights
in the Construction Supervisory Agreement.
NOW, THEREFORE, in consideration of the premises, the
Guarantor hereby agrees as follows:
SECTION 1. Guarantee.
The Guarantor hereby unconditionally and irrevocably
guarantees the full performance and observance by the Supervisor of
all of the terms of the Construction Supervisory Agreement (other
than the payment obligations of the Supervisor set out in Article
IV of such agreement). All of the obligations of the Supervisor
under the Construction Supervisory Agreement guaranteed by the
Guarantor pursuant to this Guarantee are referred to herein as the
"Obligations." If the Supervisor fails to perform and observe any
term or condition of the Construction Supervisory Agreement, other
than those contained in Article IV, the Guarantor undertakes to
itself perform or cause to be performed, within ten (10) days after
receipt of notice to such effect from the Owner, the Sureties or
the Trustee, any such term or condition not so performed or
observed by the Supervisor, and to indemnify and hold the Owner,
the Sureties and the Trustee harmless from and against any loss,
costs, damage, claim or expenses, other than those contained in
Article IV, which may be incurred by or asserted against them in
connection with any failure on the part of the Supervisor to
perform or observe any term or condition of the Construction
Supervisory Agreement.
SECTION 2. Guarantee Absolute.
(a) The Guarantor hereby guarantees that the Obligations will
be performed or paid strictly in accordance with the
terms of the Construction Supervisory Agreement,
regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any
such terms or the rights of the Owner, the Sureties or
the Trustee with respect thereto. The liability of the
Guarantor under this Guarantee shall be absolute and
unconditional irrespective of:
(i) any lack of validity or enforceability of the
Construction Supervisory Agreement, the
Construction Contract or any other agreement or
instrument entered into between the Owner, the
Trustee, the Builders, the Sureties and/or the
Guarantor;
(ii) any change in the time, manner or place of
performance or payment of, or in any other term of,
all or any of the Obligations, or any other
amendment or waiver of or any consent to departure
from the Construction Supervisory Agreement or the
Construction Contract;
(iii) any other circumstance which might otherwise
constitute a defense available to, or a discharge
of, the Supervisor in respect of the Obligations or
the Guarantor in respect of this Guarantee.
(b) This Guarantee shall continue to be effective or be
reinstated, as the case may be, if at any time any
performance or payment of any of the Obligations is
rescinded or must otherwise be returned by the Owner, the
Sureties or the Trustee upon the insolvency, bankruptcy
or reorganization of the Owner or otherwise, all as
though such payment had not been made.
SECTION 3. Waiver.
The Guarantor hereby waives (a) notice of acceptance hereof,
protest, demand and dishonor, presentment and demand of any kind
now or hereafter, provided by any statute or rule of law, (b)
promptness, diligence, notice of acceptance and any other notice
with respect to any of the Obligations and this Guarantee and any
requirement that the Owner, the Sureties or the Trustee or any
other person exhaust any right or take any action against the
Supervisor or any other person or entity or any collateral, (c) all
set offs and counterclaims it may have against the Owner, and (d)
any defense arising by any insolvency, lack of authority, power,
dissolution or any other defense of the Supervisor or the
Guarantor.
SECTION 4. Subrogation.
The Guarantor will not exercise any rights which it may
acquire by way of subrogation under this Guarantee, by any payment
made hereunder or otherwise, until all the Obligations and all
other obligations of the Supervisor under the Construction
Supervisory Agreement shall have been performed or paid in full.
If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when all the Obligations shall not
have been performed or paid in full, such amount shall be forthwith
paid to the Trustee for the account of the Owner to be credited and
applied against the Obligations.
SECTION 5. Payments Free and Clear of Taxes, Etc.
(a) All sums payable by the Guarantor under this Guarantee,
shall be paid in full without set-off or counterclaim and
in such amounts as may be necessary in order that all
such payments (after deduction or withholding for or on
account of any present or future taxes, levies, imposts,
duties or other charges of whatsoever nature imposed by
any Governmental Entity or taxing authority thereof,
other than any income tax or franchise tax or other tax
or fee on or measured by the gross receipts or net income
of the Owner, the Trustee, the Sureties or the Note
Holders collectively the "Taxes") shall not be less than
the amounts otherwise specified to be paid under this
Guarantee.
(b) A certificate as to any additional amounts payable to the
Owner or the Trustee under this Section 5 submitted to
the Guarantor by the Trustee shall show in reasonable
detail the amount payable and the calculations used to
determine in good faith such amount and shall be deemed
prima facie correct.
(c) With respect to each deduction or withholding for or on
account of any Taxes, the Guarantor shall promptly
furnish to the Owner and the Trustee such certificates,
receipts and other documents as may be required (in the
reasonable judgment of the Trustee) to establish any
income tax credit to which the Trustee may be entitled.
SECTION 6. APPLICABLE LAW AND JURISDICTION.
THIS GUARANTEE (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
CONFLICT OF LAWS RULES THEREOF. ANY LEGAL ACTION OR PROCEEDING
AGAINST THE GUARANTOR WITH RESPECT TO THIS GUARANTEE MAY BE BROUGHT
IN THE COURTS OF THE STATE OF NEW YORK, SITTING IN NEW YORK COUNTY,
THE U.S. DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, OR
IN THE COURTS OF ANY OTHER JURISDICTION WHERE SUCH ACTION OR
PROCEEDING MAY BE PROPERLY BROUGHT.
SECTION 7. Representations and Warranties.
The Guarantor hereby represents and warrants to the Owner, the
Sureties and the Trustee as follows:
(a) It is a corporation duly incorporated, validly
existing and in good standing under the laws of the
State of Delaware duly qualified as a foreign
corporation to do business wherever its business or
ownership of property requires it to be so
qualified and has the corporate power and authority
and the legal right to own and lease its property
and to conduct its business.
(b) The execution, delivery and performance by the
Guarantor of this Guarantee and any other documents
contemplated herein and the completion of all other
transactions herein contemplated are within the
Guarantor's authority, are in furtherance of the
Guarantor's purposes, have been duly authorized by
all necessary action and will not contravene any
applicable law or regulation nor violate the
Guarantor's Articles of Incorporation or By-Laws
nor any agreement binding on the Guarantor nor any
applicable law or regulation or order or decree of
any governmental authority or agency.
(c) This Guarantee is supported by adequate and
sufficient consideration, has been validly executed
by or on behalf of the Guarantor and represents the
valid and binding obligation of the Guarantor,
enforceable in accordance with its terms and will
not result in the Guarantor's liabilities
(including the maximum amount of liabilities that
may be reasonably expected to result from all
contingent liabilities and giving effect to rights
of contribution and subrogation) exceeding the fair
market value of its assets. The enforceability of
this Guarantee, however, is subject to all
applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the rights of
creditors generally and to general equity
principles.
(d) The legality, validity, enforceability or
admissibility of this Guarantee are not subject to
or conditional upon this Guarantee being filed,
recorded or enrolled with any governmental
authority or agency or stamped with any stamp, duty
or similar transaction tax of the State of Texas,
the State of New York or the United States of
America.
(e) There are no pending, or to the best of the
Guarantor's knowledge, any threatened actions or
proceedings affecting the Guarantor before any
court, governmental agency or arbitrator in any
country, which may materially adversely affect the
financial condition or operations of the Guarantor.
SECTION 8. The Construction Supervisory Agreement.
The Guarantor hereby acknowledges receipt of the Construction
Supervisory Agreement in execution form and hereby consents and
agrees to the Construction Supervisory Agreement and to all the
terms and provisions thereof.
SECTION 9. Amendments, Etc.
No amendment or waiver of any provision of this Guarantee nor
consent to any departure by the Guarantor therefrom shall in any
event be effective unless the same shall be in writing and signed
by the Trustee and, so long as the Performance Bond (as defined in
the Indenture) is outstanding or amounts are due to the Sureties as
a result of payments made by them thereunder, the Sureties and then
such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 10. Notices.
All notices, requests and demands shall be in writing
(including telecopier transmission) given to or made upon the
respective parties hereto as follows:
In the case of the Guarantor at:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: Chief Financial Officer
Telecopier: (281) 496-0285
In the case of the Owner at:
RBF Exploration Co.
901 Threadneedle
Houston, Texas 77079
Attention: President
Telecopier:(281) 496-0285
In the case of the Trustee, at:
Chase Bank of Texas, National Association
1150 Chase Tower
600 Travis Street
Houston, TX 77002
Attention: Mauri J. Cowen
Telecopier: (713) 216-5476
In the case of the Sureties, at:
Travelers Casualty and Surety Company of America
One Tower Square
Hartford, Connecticut 06183
Attention: Bond Claim
Telecopier: 860-277-3987
American Home Assurance Company
175 Water Street, 6th Floor
New York, New York 10038
Attention: Bond Claims
Telecopier: 212-458-1331
or to such other address as any party hereto shall designate by
written notice to the other parties hereto. All notices shall be
effective upon delivery or three (3) days after being deposited in
the United States mail with postage prepaid certified, return
receipt requested in a correctly addressed wrapper, or upon receipt
if delivered to Federal Express or similar courier company or
transmitted by telefax during normal business hours.
SECTION 11. No Waiver; Remedies.
No failure on the part of the Owner, the Sureties or the
Trustee to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 12. Continuing Guarantee.
This Guarantee is a continuing guarantee and shall (i) remain
in full force and effect until performance or payment in full of
the Obligations and payment in full of all other amounts due under
this Guarantee, (ii) be binding upon the Guarantor, its successors
or assigns, as the case may be, (iii) inure to the benefit of and
be enforceable by the Owner, the Sureties and the Trustee and their
respective successors, transferees and assigns, provided, however,
that the Guarantor may not transfer its obligations under this
Guarantee or any part of it without the prior written consent of
the Owner, the Sureties and the Trustee; and (iv) continue to be
effective, or be reinstated, as the case may be, if at any time
payment or any part thereof, of any of the Obligations is rescinded
or must be restored or returned by the Owner, the Sureties or the
Trustee upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of the Guarantor or upon the appointment of a
receiver, trustee or similar officer for the Guarantor all as
though such payment had not been made.
SECTION 13. Non-Petition Covenant.
So long as any indebtedness or other obligations secured by
the Indenture are outstanding, the Guarantor will not institute,
and will not join with others in instituting, any involuntary
bankruptcy or analogous proceeding against the Owner under any
bankruptcy, reorganization, receivership or similar law, domestic
or foreign, as now or hereafter in efffect.
Section 14. Definitions.
All capitalized terms used in this Guarantee and not defined
herein are used with the meanings given to them in the Construction
Supervisory Agreement.
IN WITNESS WHEREOF, the Guarantor has duly executed and
delivered this Guarantee, as of the date first above written.
R&B FALCON CORPORATION
By:
Name:
Title:
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, the undersigned authority, on this day personally
appeared _______________, the Vice President of R&B FALCON
CORPORATION, known to me to be the person whose name is subscribed
to the foregoing instrument and acknowledged to me that he executed
the same for the purposes and consideration therein expressed, in
the capacity stated, and as the act and deed of said corporation.
Given under my hand and seal of office this ________ day of
______________, 1999.
_________________________________
Notary Public, State of T E X A S
EXHIBIT 10.5
Execution Copy
===========================================================================
FIRST PREFERRED SHIP MORTGAGE
Made by
RBF Exploration Co.
In Favor of
Chase Bank of Texas, National Association, as Indenture Trustee
on
DEEPWATER NAUTILUS
Dated ________, ____
===========================================================================
First Preferred Ship Mortgage
Mortgagor: RBF Exploration Co.
901 Threadneedle
Houston, Texas 77079
Mortgagor's Interest in the Vessel: 100%
Mortgagee: Chase Bank of Texas, National
Association
1150 Chase Tower
600 Travis Street
Houston, TX 77002
THIS FIRST PREFERRED SHIP MORTGAGE dated the ___ day of ________,
____ (as amended, supplemented or otherwise modified from time to time,
the "Mortgage") is made and given by RBF Exploration Co., a Nevada
corporation (the "Mortgagor"), whose address is set forth above, to
Chase Bank of Texas, National Association, as Indenture Trustee (as such
term is hereinafter defined), whose address is set forth above
(hereinafter referred to, together with its successors and assigns, as
the "Mortgagee").
RECITALS
A. Of even date herewith, Mortgagor and Chase Bank of Texas,
National Association have entered into that certain Trust Indenture and
Security Agreement (as the same may be amended, supplemented, restated
or otherwise modified from time to time, the "Trust Indenture").
Pursuant to the terms and conditions contained in the Trust Indenture,
Mortgagor entered into those certain Note Purchase Agreements dated
August 12, 1999 (the "Note Purchase Agreements") wherein certain Note
Holders (as such term is defined in the Trust Indenture) have agreed to
make a term loan to Mortgagor in the aggregate principal amount of
$250,000,000.00, as evidenced by those certain Senior Secured Class A1
Notes in the original principal amount of $200,000,000 and those certain
Senior Secured Class A2 Notes in the original principal amount of
$50,000,000 (the promissory notes referred to above, as the same may be
amended, supplemented, restated or otherwise modified from time to
time, being herein collectively referred to as the "Notes"). The Trust
Indenture, Note Purchase Agreements, the Notes and certain of the
Project Documents, being the Construction Supervisory Agreement, the
Performance Bond, the Performance Guarantee, the Parent Indemnity, the
Operations and Maintenance Agreement, are attached hereto as Exhibits A,
B, C, D, E, F, G, H, I, J and K respectively, and made a part of this
Mortgage as express mortgage covenants.
B. Mortgagee has requested pursuant to the terms of the Trust
Indenture that Mortgagor execute and deliver this Mortgage, and
Mortgagor has agreed to enter into this Mortgage on the vessel
"DEEPWATER NAUTILUS", duly documented in the name of Mortgagor under the
laws and flag of the United States of America Official No. ,
(together with the Equipment, as defined below, the "Vessel").
C. Now, therefore, in consideration of the premises and of other
valuable consideration, receipt of which is hereby acknowledged,
Mortgagor hereby agrees as follows:
ARTICLE I
GRANTING CLAUSE AND DEFINITIONS
Section 1.1 Granting Clause. To secure the full and timely
payment of and the full and timely performance and discharge of the
Obligations (as hereinafter defined), Mortgagor hereby mortgages and
executes and constitutes a first preferred ship mortgage in favor of
Mortgagee, its successors and assigns, upon the whole of the Vessel,
together with its boilers, engines, machinery, masts, spars, sails,
riggings, boats, anchors, cables, chains, tackle, tools, pumps and
pumping equipment, apparel, furniture, fittings and equipment, spare
parts, capstans, outfit, tanks and tank batteries, fixtures, valves,
fittings, draw works, machinery and parts, meters, apparatus, equipment,
appliances, tools, implements, cables, wires, derricks, towers, casing,
tubing and rods, and all other appurtenances thereunto appertaining or
belonging, whether now owned or hereafter acquired, whether or not on
board the Vessel, and all additions, improvements, renewals and
replacements hereafter made in or to the Vessel or any part thereof, or
in or to any said appurtenances, to the extent Mortgagor has an
ownership interest therein (the "Equipment").
TO HAVE AND TO HOLD all and singular the above mortgaged and
described property unto Mortgagee, its successors and assigns, forever
upon the terms herein set forth;
PROVIDED, HOWEVER, and these presents are on the condition that if
the Obligations are paid and performed in accordance with the terms
thereof and this Mortgage, then these presents and the estates and
rights hereunder shall cease, terminate and be void, otherwise to be and
remain in full force and effect.
Section 1.2 Definitions. As used in this Mortgage, the terms
"Note Holder", "Mortgage", "Mortgagor", "Mortgagee", "Note Purchase
Agreements", "Notes", "Trust Indenture", and "Vessel" shall have the
meanings assigned to them in the preamble and recitals hereto. Any
capitalized term used in this Mortgage and not defined herein shall have
the meaning assigned to such term in the Trust Indenture. As used
herein, the following terms shall have the following meanings:
Dollars or $ means the lawful currency of the United States of
America.
"Equipment" shall have the meaning set forth in Section 1.1 hereof.
"Event of Loss" shall mean any one of the following events: (i)
actual total loss or destruction of the Vessel or any accident,
occurrence or event resulting in a constructive total loss or an agreed
or compromised total loss of the Vessel; or (ii) substantial damage to
the Vessel, the repair of which is uneconomical as determined in good
faith by the Mortgagor, including, but not limited to, any event
pursuant to which insurance proceeds are available which are not applied
to repair the Vessel or any other event resulting for any reason
whatsoever in the Vessel being permanently rendered unfit for normal
use; or (iii) the condemnation, confiscation, requisition, seizure,
detention, forfeiture, purchase or other taking of title to or use of
the Vessel.
"Event of Default" shall have the meaning set forth in Section 3.1
hereof.
"Obligations" shall mean (i) the payment when due of all
indebtedness evidenced by the Notes in the aggregate principal sum of
$250,000,000.00, interest (including post-petition interest) as set
forth in the Notes and the Trust Indenture, and premiums (including,
without limitation, Make-Whole Amounts), penalties and late charges
thereon, (ii) all other indebtedness and other sums (including, without
limitation, Yield Protection Amount, Special Yield Protection Amount,
Breakage, all expenses, attorneys' fees, other fees, indemnifications,
reimbursements, damages, other monetary liabilities, and other charges)
that may and shall become due hereunder or under the Notes, the Trust
Indenture or the other Project Documents, and (iii) any and all
renewals, modifications, amendments, extensions for any period,
supplements or restatements of any of the foregoing.
"Master's Wages" shall have the meaning set forth in Section 2.6
hereof.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
In order to induce Mortgagee to accept this Mortgage as collateral
security for the Obligations, Mortgagor represents and warrants to
Mortgagee and covenants and agrees with Mortgagee that:
Section 2.1 Legal Existence; Citizenship and Authorization.
Mortgagor is a corporation duly organized and validly existing under the
laws of the state of Nevada; and except as permitted by the Trust
Indenture, shall maintain its corporate existence during the term of
this Mortgage; and is duly qualified to engage in the trade in which the
Vessel operates. Mortgagor is duly authorized to mortgage the Vessel,
and all action necessary and required by law for the execution and
delivery of this Mortgage has been duly and effectively taken by it, and
this Mortgage is the valid and enforceable obligation of Mortgagor. All
necessary consents and approvals of any Governmental Authority or any
other entity to the entering into and performance of this Mortgage have
been duly obtained or given and the entering into and performance of
this Mortgage does not and will not contravene the terms of or
constitute a default under (with or without giving of notice or lapse of
time or both) any material agreement, instrument or document to which
Mortgagor is a party or by which it or its properties are bound or
affected after giving effect to the use of the proceeds of the Notes.
Section 2.2 Ownership of Vessel; Warranty and Defense of Title.
Mortgagor is the sole owner of the whole of the Vessel and is lawfully
possessed of the whole of the Vessel, free from any Lien whatsoever
other than the Lien of this Mortgage, and the Liens permitted by
Section 2.6 hereof, and Mortgagor will warrant and defend the title to
and possession of the Vessel and every part thereof for the benefit of
Mortgagee against the claims and demands of all other Persons
whomsoever, subject to the Liens and other matters permitted by the
Trust Indenture or this Mortgage.
Section 2.3 Compliance with Laws.
(a) Documentation. The Vessel is, and during the term of
this Mortgage shall continue to be, duly and lawfully registered under
the laws and flag of the United States of America, and Mortgagor will
comply with and satisfy all of the provisions of the laws of the United
States of America in order that the Vessel shall continue to be
documented pursuant to the laws of the United States of America.
(b) Laws, Treaties and Conventions. The Vessel shall, and
Mortgagor covenants that it will in the operation of the Vessel, at all
times comply in all material respects with all applicable laws, treaties
and conventions and rules and regulations issued thereunder, and shall
have on board as and when required thereby valid certificates showing
compliance therewith, except when (i) the use or title of the Vessel has
been taken, requisitioned or chartered by any Governmental Authority,
(ii) there has been an Event of Loss, or (iii) there has been any other
partial loss or damage with respect to the Vessel and Mortgagor shall be
in compliance with its obligations under Sections 5.2(b) and 8.3(e) of
the Trust Indenture.
Section 2.4 Operation of Vessel. Mortgagor will not (except
during any period when the use or title to the Vessel has been taken,
requisitioned or chartered by any Governmental Authority) cause or
permit the Vessel to be operated in any manner contrary to applicable
law or regulation, will not abandon the Vessel in any non-United States
port (unless an Event of Loss has occurred as to the Vessel or the
safety or welfare of the Master, crew and other persons on the Vessel is
endangered), will not engage in any unlawful trade, violate any law or
carry any cargo that will expose the Vessel to penalty, forfeiture or
capture and will not do, or suffer or permit to be done, anything which
can or may injuriously affect the documentation of the Vessel under the
existing federal laws and regulations of the United States of America.
Without limiting the generality of the foregoing, the Mortgagor shall
not, except as permitted by applicable laws or regulations, charter the
Vessel to, or permit the Vessel to serve under any contract with, a
person included within the definition of (i) "national" of a "designated
foreign country," or "specially designated national" of a "designated
foreign county," in the Foreign Assets Control Regulations or the Cuban
Assets Control Regulations of the United States Treasury Department, 31
C.F.R. Parts 500 and 515, in each case as amended, (ii) "Government of
Libya," "entity of the Government of Libya" or "Libyan entity" in the
Libyan Sanctions Regulations of the United States Treasury Department,
31 C.F.R. Part 550, as amended, or (iii) "Government of Iraq," "entity
of the Government of Iraq" or "Iraqi Government entity" in the Iraqi
Sanctions Regulations, 31 C.F.R. Part 575, as amended, all within the
meaning of said Regulations or of any regulations, interpretations or
rulings issued thereunder, or engage in any transaction that violates
any provision of said Regulations or that violates any provision of the
Iranian Transactions Regulations, 31 C.F.R. Part 560, as amended, the
Transaction Control Regulations, 31 C.F.R. Part 505, as amended, the
Foreign Assets Control Regulations, 31 C.F.R. Part 500, as amended, or
Executive Orders 12810 and 12831, or call at a Cuban port to load or
discharge cargo or to effect repairs on the Vessel. Furthermore, the
Mortgagor shall keep the Vessel at all times in United States
territorial waters in the Gulf of Mexico or in the Gulf of Mexico on or
above the outer Continental Shelf of the United States; provided,
however, if SDDI requires the Drilling Rig to change location pursuant
to the SDDI Contract, the Drilling Rig may be moved to such location as
SDDI so requires.
Section 2.5 Claims, Taxes, Fees. etc. Mortgagor will pay and
discharge or cause to be paid and discharged prior to delinquency, all
claims against, and fees, taxes, assessments, governmental charges,
fines and penalties imposed on, the Vessel, its cargoes or any income
therefrom; provided, that nothing in this Section 2.5 shall require
Mortgagor to pay any such claim, fee, tax, assessment, governmental
charge, fine or penalty so long as the validity thereof shall be
contested by it in good faith and by appropriate proceedings, and,
provided, further, that such contest shall not subject the Vessel, or
any part thereof, to arrest, attachment, forfeiture or loss or subject
the Mortgagee or any Note Holder to the risk of any civil or criminal
liability.
Section 2.6 Liens. Neither Mortgagor, any charterer or
subcharterer, the master of the Vessel nor any other Person has or shall
have any right, power or authority to create, incur or permit to be
placed or imposed or continued upon the Vessel, and Mortgagor shall not
permit to exist on the Vessel any Lien whatsoever other than the Lien of
this Mortgage and the following:
(i) Liens for wages of the crew (including wages of a master
to the extent provided by law, "Master's Wages"), general average and
salvage (including contract salvage) which shall not have been due and
payable for sixty (60) days after termination of employment or which
shall then be contested by Mortgagor in good faith and by appropriate
proceedings; provided that such contest shall not subject the Vessel to
arrest, attachment, forfeiture or loss or subject the Mortgagee or any
Note Holder to the risk of any civil or criminal liability;
(ii) Liens for wages of the crew (including Master's Wages)
and salvage (including contract salvage) which are either unclaimed or
covered by insurance;
(iii) Liens incident to current operations of Mortgagor in
the ordinary course of business (except for wages of the crew including
Master's Wages and salvage) or liens covered by insurance and any
deductible applicable thereto;
(iv) Liens for repairs the payment for which is either not
overdue or is being contested by Mortgagor in good faith and by
appropriate proceedings; provided that such contest shall not subject
the Vessel to arrest, attachment, forfeiture or loss or subject the
Mortgagee or any Note Holder to risk of any civil or criminal liability;
(v) Liens arising by reason of an actual or constructive
total loss or an agreed or compromised total loss of the Vessel;
(vi) Liens expressly permitted by the Trust Indenture;
provided that the Liens stated to be permitted by the foregoing
subparagraphs (i) through (iv) shall, unless they constitute a Lien for
damage arising out of maritime tort, for wages of a stevedore when
employed directly by Mortgagor, for wages of the crew (including
Master's Wages), for general average, or for salvage (including contract
salvage), be permitted only to the extent such Liens are either accrued
but not yet due or are subordinate to the Lien of this Mortgage.
Nothing contained in this Section 2.6 constitutes a waiver by Mortgagee
of Mortgagee's preferred status. If any such Lien is placed on the
Vessel which is not subordinate to the Lien of this Mortgage, Mortgagor
will promptly after becoming aware of such Lien notify Mortgagee.
Section 2.7 Notice of Mortgage. Mortgagor will at all times carry
on board the Vessel (with the ship's papers) a certified copy of this
Mortgage and any amendments and supplements hereto and any assignments
hereof, and will exhibit or cause to be exhibited the same to any Person
having business with the Vessel which might give rise to a Lien upon the
Vessel or to the sale, conveyance, mortgage or lease thereof and, on
demand, to any representative of Mortgagee. Mortgagor will also place
and keep prominently displayed on the Vessel a framed printed notice in
plain type of such size that the paragraph of reading matter shall cover
a space of not less than six inches wide by nine inches high (or such
other dimensions as may be required by law) reading as follows:
"NOTICE OF MORTGAGE
This Vessel is owned by RBF Exploration Co. and is subject to
a First Preferred Ship Mortgage in favor of Chase Bank of
Texas, National Association, as Indenture Trustee, as
Mortgagee, under authority of the United States Ship Mortgage
Act, as amended, recodified as 46 U.S.C. Section 31301 et seq., a
certified copy of which Mortgage is kept with this Vessel's
papers. Under the terms of said Mortgage, neither the owner,
any charterer or subcharterer, the master of this Vessel nor
any other person has any right, power or authority to create,
incur or permit to be placed or imposed upon this Vessel any
lien whatsoever other than the lien of said Mortgage, liens
for wages, general average or salvage, and certain other liens
permitted by the provisions of said Mortgage."
Section 2.8 Libel or Attachment. If any legal action is filed
against the Vessel or if the Vessel shall be attached, arrested, levied
upon or taken into custody by virtue of any proceeding in any court or
tribunal, Mortgagor will promptly notify Mortgagee thereof by telegram,
cable or facsimile, confirmed by letter addressed to Mortgagee, and
within thirty (30) days after any such action (other than (i) an action
involving claims less than $1,000,000 or (ii) an action involving claims
equal to or in excess of $1,000,000 and where the Mortgagee has not
received a reservation of rights notice, or similar communication from
its insurer contesting or denying coverage), levy, attachment, arrest,
or taking into custody, Mortgagor will cause the Vessel to be released
and will promptly notify Mortgagee of such release in the manner
aforesaid. In the event that the Vessel shall not be released within
thirty (30) days after such action, levy, attachment, arrest or action
to take the Vessel into custody, Mortgagor does hereby authorize and
empower Mortgagee, in the name of Mortgagor, or its successor or
assigns, to apply for and receive possession of and to take possession
of the Vessel with all the rights and powers that Mortgagor, or its
successors or assigns, might have, possess or exercise in any such
event; and this power of attorney shall be irrevocable and may be
exercised not only by Mortgagee hereinabove named but also by any one
such appointee or the appointees of Mortgagee, with full power of
substitution, to the same extent as if the said appointee or appointees
had been named as one of the attorneys above named by express
designation.
Section 2.9 Maintenance of Vessel. Except as to such period as
(i) the use or title of the Vessel has been taken, requisitioned or
chartered by a Governmental Authority, (ii) there has been actual or
constructive total loss or an agreed or compromised total loss of the
Vessel, or (iii) there has been any other partial loss or damage with
respect to the Vessel and Mortgagor shall be in compliance with its
obligations under Sections 5.2(b) and 8.3(e) of the Trust Indenture,
Mortgagor will, at all times and without cost or expense to Mortgagee,
maintain and preserve, or cause to be maintained and preserved, the
Vessel in good running order and repair, so that the Vessel shall be
tight, staunch, strong and well and sufficiently tackled, appareled,
furnished, seaworthy, equipped and in every respect in first class order
and operating condition and in full compliance with and able to perform
all operations under the SDDI Contract; and otherwise in compliance with
the provisions of the Trust Indenture.
Section 2.10 Inspection. Weather permitting, and subject to
approval (if any) by applicable Governmental Authority and SDDI pursuant
to any rights of SDDI under the SDDI Contract, Mortgagor will permit
Mortgagee, any Note Holder or its representative to visit and inspect
the Vessel, under the Mortgagor's guidance, to examine all of its books
of account, records, reports and other papers, to make copies and
extracts therefrom and to discuss its affairs, finances and accounts
with its officers, employees, and independent public accountants (and by
this provision the Mortgagor authorizes said accountants to discuss with
Mortgagee or any Note Holder the finances and affairs of the Mortgagor)
all at such reasonable time, upon reasonable notice and as often as may
be reasonably requested; provided that the Mortgagor shall not be
required to pay or reimburse any Note Holder for expenses which such
Note Holder may incur in connection with any such visitation or
inspection, except that if such visitation or inspection is made during
any period when an Indenture Default or an Indenture Event of Default
shall have occurred and be continuing, the Mortgagor agrees to reimburse
such Note Holder for all such reasonable expenses promptly upon demand.
Section 2.11 Sale or Other Disposition of Vessel. Except as
expressly allowed in the Trust Indenture, Mortgagor will not sell,
mortgage, transfer or in any other way dispose of all or any part of the
Vessel without the prior written consent of Mortgagee.
Section 2.12 Notice. Mortgagor shall notify the Mortgagee
forthwith by facsimile thereafter confirmed by letter of:
(a) any casualty event in excess of $1,000,000 with respect to the
Vessel; and
(b) any occurrence in respect of the Vessel that is or is likely,
by the passing of time or otherwise, to become an Event of Loss; and
(c) any material requirement or recommendation made by any insurer
or classification society or by any competent authority which is not
complied with within a reasonable time; and
(d) any arrest, governmental detention, or attachment of the
Vessel or the assertion or purported assertion of any lien against the
Vessel; and
(e) any intended dry docking of the Vessel, as to which the
Mortgagor shall give the Mortgagee 30 days' prior notice, provided, that
in the event of any emergency dry docking of the Vessel, the Mortgagor
shall promptly notify the Mortgagee; and
(f) any intended deactivation or lay-up of the Vessel.
Section 2.13 Insurance.
(a) All Risk Property Insurance. Mortgagor shall, at its own
expense, keep the Vessel insured, in lawful money of the United States,
against all such risks (including without limitation, hull and
machinery/increased value, protection and indemnity risk, pollution
liability, war risks (when available) and, when laid up, port risk
insurance, as well as such excess policies over and above protection and
indemnity and general liability coverage which shall represent
collective limits of not less than $400,000,000), in such form and with
such insurance companies or underwriters as required under Section
2.13(f) as shall be at least as protective as insurance maintained by
prudent owners of vessels and equipment similar to the Vessel, engaged
in international contract offshore oil and gas operations, and in any
event all as reasonably acceptable to Mortgagee and, so long as the
Performance Bond is outstanding or amounts are due to the Surety as a
result of payments made by it thereunder, the Surety and in compliance
with the SDDI Contract. Without limiting the generality of the
foregoing, with respect to hull and machinery/increased value insurance,
including war risk (when available), the Mortgagor shall insure the
Vessel for an amount which is at least equal to the actual value of the
Vessel, but in no event less than $275,000,000. Such insurance shall
cover marine and war risk perils, on hull and machinery, with per
occurrence deductibles not in excess of $1,000,000 and shall be
maintained in the broadest forms reasonably available in the American
and British insurance markets. The Mortgagor shall maintain protection
and indemnity (or its equivalent) insurance, including war risk
protection and indemnity (or its equivalent) coverage and coverage
against pollution liability in an amount not less than $400,000,000 (or
such greater amount as may be required from time to time under Oil
Pollution Act of 1990 or other environmental laws). All of the
foregoing insurance shall have a per occurrence deductible not to exceed
$1,000,000 and be placed through such underwriters or associations
reasonably acceptable to the Mortgagee. The Vessel shall not operate in
or proceed into any area then excluded by trading warranties under its
marine or war risk policies (including protection indemnity or its
equivalent) without satisfying the conditions of the relevant policies,
evidence of which shall be furnished to the Mortgagee and, so long as
the Performance Bond is outstanding or amounts are due to the Surety as
a result of payments made by it thereunder, the Surety.
(b) Liability; Workers' Compensation. Mortgagor shall
maintain at all times such worker's compensation, employer's liability,
and longshoreman and harbor worker's insurance as shall be required by
applicable law. Such policies shall provide that any loss under such
insurance may be paid directly to the entity to whom any liability
covered by such policies has been incurred.
(c) Payment Provisions. All payments made under policies of
insurance maintained under this Section shall be applied as set forth in
Section 5.2 of the Trust Indenture.
(d) Constructive Total Loss. In the case of an Event of Loss
that is a constructive total loss of the Vessel, Mortgagee shall have
the right (but only with prior written consent of Mortgagor unless an
Indenture Event of Default has occurred and is continuing) to join in
Mortgagor's claim for a constructive total loss of the Vessel, and if
both (i) such claims are accepted by all underwriters under all policies
then in force as to the Vessel and (ii) payment in full is made in cash
under such policies to Mortgagee in an amount at least equal to the then
outstanding amount of the Obligations, then Mortgagee shall have the
right to abandon the Vessel to the underwriters under such policies,
free from the Lien of this Mortgage.
(e) Agreed Total Loss. Mortgagee shall not have the right to
enter into an agreement or compromise providing for an agreed or
compromised total loss of the Vessel without the prior written consent
of Mortgagor unless an Indenture Event of Default has occurred and is
continuing. If Mortgagor shall have given its prior consent thereto, or
an Indenture Event of Default has occurred and is continuing, Mortgagee
shall have the right in its discretion to enter into an agreement or
compromise providing for an agreed or compromised total loss of the
Vessel, provided the same is agreed to by underwriters under all
applicable policies.
(f) Insurers. All insurance required under this Section 2.13
shall be placed and kept with such insurance companies, Lloyd's
Syndicates, underwriters' associations, protection and indemnity clubs
or underwriting funds as are reputable, generally recognized within the
industry, and (i) in the case of hull and machinery insurance, rated by
either Standard & Poors Rating Services, a division of the McGraw Hill
Companies, Inc. ("S&P"), Moody's Investors Services, Inc. ("Moody's) or
Duff & Phelps Credit Rating Co. ("Duff") with at least the equivalent to
an S&P rating of BBB (and with at least 75% of the companies, determined
by dollar amount of policy coverage, rated by S&P, Duff or Moody's with
at least the equivalent to an S&P rating of A) or, if not rated by S&P,
Duff or Moody's then rated "excellent" or better by A.M. Best, and (ii)
in the case of protection and indemnity risk insurance, rated by either
S&P, Duff or Moody's with at least the equivalent to an S&P rating of
BBB.
(g) Taking by United States. During the continuance of a
taking, requisition or charter of the use of the Vessel by any
governmental body of the United States of America, the provisions of
this Section 2.13 shall be deemed to have been complied with in all
respects as to the Vessel if the United States Government or any such
governmental body shall have agreed (i) to reimburse Mortgagee and
Mortgagor for loss or damage resulting from the risks indicated in
paragraphs (a) and (b) of this Section 2.13, or (ii) that Mortgagee and
Mortgagor shall be entitled to just compensation therefor. In the event
of any taking, requisition, charter or loss of the Vessel contemplated
by this paragraph (g), Mortgagor shall promptly furnish to Mortgagee a
sworn certificate of an officer of Mortgagor stating that such taking,
requisition, charter or loss has occurred and, if there shall have been
a taking, requisition or charter of the Vessel, that the United States
Government or governmental body has agreed (i) to reimburse Mortgagor
for loss or damage resulting from the risks indicated in the
above-mentioned paragraphs (a) and (b) or (ii) that Mortgagor or
Mortgagee, as the case may be, is entitled to just compensation
therefor.
(h) Mortgage Provisions. All insurance required under this
Section 2.13 shall be taken out in the name of Mortgagor or on its
behalf by an Affiliate of Mortgagor. Mortgagee and each Note Holder and
the Sureties shall be named as an additional insureds under all
liability policies (other than workers' compensation and similar
insurance), and the Mortgagee and, so long as the Performance Bond is
outstanding or amounts are due to the Surety as a result of payments
made by it thereunder, the Surety, shall be named as the loss payees, as
their interests may appear, under all physical damage policies with
respect to the Vessel for any loss in excess of $5,000,000 or, after the
occurrence and during the continuation of any Event of Default, any
loss. All policies for such insurance shall also provide that (i) there
shall be no recourse against Mortgagee (or its assignee) or any Note
Holder or any loss payee or additional insured for the payment of
premiums or commissions, (ii) if such policies provide for the payment
of club calls, assessments or advances, there shall be no recourse
against Mortgagee (or its assignee) or any Note Holder or any loss payee
or additional insured for the payment thereof. All policies shall
provide that the insurers shall provide to Mortgagee (or its assignee)
and each Note Holder and any loss payee and additional insured, as the
case may be, 30 days prior notice of any material change in the coverage
of such insurance as well as ten (10) days prior written notice of any
cancellation of such insurance in the event of non-payment of premiums
and seven (7) days prior written notice of any cancellation of such
insurance for war risk.
(i) Compliance. Mortgagor shall not do any act, nor permit
any act to be done, whereby any insurance required by this Section 2.13
shall or may be suspended, impaired or defeated, or permit the Vessel to
engage in any voyage, to engage in any activity or to carry any cargo
not permitted under the policies of insurance then in effect without
first procuring comparable insurance for such voyage, activity or the
carriage of such cargo.
(j) Policies. Mortgagor, upon execution of this Mortgage,
shall deliver to Mortgagee certificates of insurance, evidencing the
insurance maintained under this Section 2.13. Mortgagor, upon the
request of Mortgagee, will promptly deliver to Mortgagee true copies of
such policies.
(k) Opinion and Certificates. On the date hereof, and on each
anniversary and each material change in coverage, Mortgagor shall
promptly furnish or cause to be furnished to Mortgagee and, so long as
the Performance Bond is outstanding or amounts are due to the Surety as
a result of payments made by it thereunder, the Surety, a detailed
certificate or opinion (signed by a reputable insurance broker) as to
the insurance maintained by Mortgagor pursuant to this Section 2.13,
specifying the respective policies of insurance covering the same and
attaching certificates of confirmation evidencing the same and stating
with regard to the insurance maintained by Mortgagor pursuant to this
Section 2.13 the amounts, deductibles, and the risks against which such
insurance is issued.
(l) Obligation to Collect. Mortgagor shall, at no cost or
expense to Mortgagee, have the duty and responsibility to make all
proofs of loss and take any and all other steps necessary as a prudent
owner or as reasonably directed by Mortgagee to effect collections from
underwriters for any loss under any insurance on or in respect of the
Vessel or the operation thereof.
Section 2.14 Change of Flag, Port of Documentation or Name.
Mortgagor will not change or transfer the flag, port of documentation,
hailing port or the name of the Vessel, except in strict compliance with
Section 8.11, 9.19 and 9.20 of the Trust Indenture.
Section 2.15 Mortgage Covenant Regarding Payment and Performance
of Obligations. Mortgagor hereby expressly agrees as an express
mortgage covenant to pay and perform when due and performable all of the
Obligations in accordance with their terms.
ARTICLE III
REMEDIES; APPLICATION OF PROCEEDS
Section 3.1 Sale, Etc. If an Event of Default shall have occurred
and be continuing, Mortgagee may, to the fullest extent permitted by and
in accordance with applicable law:
(a) exercise all the rights and remedies in foreclosure and
otherwise given to mortgagees by the federal laws of the United States
of America, and by the applicable laws of any other applicable
jurisdiction;
(b) bring suit at law, in equity or in admiralty or initiate and
prosecute such other judicial, extrajudicial, or administrative
proceedings as it may consider appropriate to recover any and all sums
due, or declared due, in respect of the Obligations, with the right to
enforce payment of said sums against any assets of Mortgagor, whether
they are covered by this Mortgage or otherwise;
(c) to the extent permitted by and in accordance with any
applicable law, take possession of the Vessel, with or without legal
proceedings, at any place where it may be found, and Mortgagor or any
Person in possession of the Vessel, forthwith upon request by Mortgagee,
as mortgage creditor, shall deliver possession to Mortgagee on demand of
Mortgagee, and Mortgagee shall have the right, subject to applicable
law, without being responsible for loss or damage to lay up, hold,
charter, lease, operate or otherwise use the Vessel for such period and
under such conditions as it may deem most expedient for its interest,
accounting only for net profits, if any, arising from such use and
charging against all receipts from such use or from the sale of the
Vessel by court proceedings or pursuant to subsection (d) below, all
costs, expenses, charges, damages or losses by reason of such use; and
if at any time Mortgagee shall avail itself of the right herein given to
it to take the Vessel and shall take it, Mortgagee shall have the right
to dock the Vessel at any dock, pier or other premises owned or leased
by Mortgagor without charge, or at any other place at the cost and
expense of Mortgagor;
(d) to the extent permitted by and in accordance with any
applicable law, sell the Vessel at public or private sale, by sealed
bids or otherwise, on such terms and conditions as Mortgagee deems best,
free of any claim, lien, commitment or encumbrance, regardless of the
nature thereof, in favor of Mortgagor and, except as provided by law,
any other person, upon advance notice of ten (10) consecutive days
published in any newspaper authorized to publish legal notices of that
kind in the port of registry and the place of sale of the Vessel and by
sending notice of such sale at least twenty (20) days prior to the date
fixed for such sale, by telegraph, cable, telefax or telex, confirmed by
mail, to Mortgagor. In the event that the Vessel shall be offered for
sale by private sale, no newspaper publication of notice shall be
required, nor notice of adjournment of sale. Sale may be held at such
place and at such time as Mortgagee by notice may have specified, or may
be adjourned by Mortgagee from time to time by announcement at the time
and place appointed for such sale or for such adjourned sale, and
without further notice or publication Mortgagee may make any such sale
at the time and place to which the same shall be so adjourned; and any
sale may be conducted without bringing the Vessel to the place
designated for such sale and in such manner as Mortgagee may deem to be
for its best advantage, and Mortgagee may become the purchaser at any
public sale, and shall have the right to credit on the purchase price
any and all sums of money due hereunder or under any other Project
Document. Without limiting the generality of the foregoing, Mortgagee
shall be entitled to exercise all the rights and remedies available to
it under the federal laws of the United States of America;
(e) manage, insure, maintain and repair the Vessel and charter,
employ, sail or lay up the Vessel in such manner, upon such terms and
for such period as the Mortgagee deems reasonably expedient; and for the
purposes aforesaid the Mortgagee shall be entitled to do all acts and
things reasonably incidental or conducive thereto and in particular to
enter into such arrangements respecting such Vessel, and the insurance,
management, maintenance, repair, classification, chartering and
employment of such Vessel, in all respects as if the Mortgagee were the
owner of such Vessel and without being responsible for any loss thereby
incurred;
(f) recover from the Mortgagor on demand any liabilities, losses
and reasonable expenses as may be incurred by the Mortgagee in or about
the exercise of the power vested in the Mortgagee hereunder;
(g) generally, recover from the Mortgagor on demand any
liabilities, losses and reasonable expenses incurred by the Mortgagee in
or about or incidental to the exercise by it of any of the powers
aforesaid;
(h) not be required to have the Vessel marshaled (upon any sale of
the Vessel) or be required to realize on any other collateral prior to
its realization on the Vessel; and
(i) exercise any other rights it may have under applicable law or
any other Project Document.
As used in this Mortgage, "Event of Default" shall mean the
occurrence of an Indenture Event of Default under the Trust Indenture.
Section 3.2 Finality of Sale. A sale of the Vessel made in
pursuance of this Mortgage, whether under the power of sale hereby
granted or any judicial proceedings, shall operate to divest all right,
title and interest of any nature whatsoever of Mortgagor therein and
thereto, and shall bar Mortgagor, its successors and assigns, and all
Persons claiming by, through or under them. No purchaser shall be bound
to inquire whether notice has been given or whether any default has
occurred, or as to the propriety of the sale, or as to application of
the proceeds thereof.
Section 3.3 Powers and Rights of Mortgagee Upon Notice of Default.
During the occurrence and continuance of an Event of Default, Mortgagee
shall have the following powers and rights:
(a) Sale. Mortgagor does hereby irrevocably appoint
Mortgagee and its successors and assigns the true and lawful attorney of
Mortgagor, in its name and stead, for the purpose of Sections 3.1 and
3.2, to make all necessary transfers of the Vessel, and for that purpose
Mortgagee shall execute all necessary instruments of assignment and
transfer (including bills of sale), Mortgagor hereby ratifying and
confirming all that its said attorney shall lawfully do by virtue
hereof. Nevertheless, Mortgagor shall, if so requested by Mortgagee,
ratify and confirm any sale of the Vessel by executing and delivering to
the purchaser thereof such proper bills of sale, conveyances,
instruments of transfer and releases as may be designated in such
request.
(b) Revenues and proceeds of Vessel; Prior Liens.
(i) Mortgagee is hereby irrevocably appointed
attorney-in-fact of Mortgagor, with the power, among other things,
so long as an Event of Default has occurred and is continuing, in
the name of Mortgagor to demand, collect, receive, compromise and
sue for, so far as may be permitted by law, all freights, hire,
earnings, issues, revenues, income and profits of the Vessel, and
all amounts due from underwriters under any insurance thereon as
payment of losses or as return premiums or otherwise, salvage
awards and recoveries, recoveries in general average or otherwise,
and all other sums due or to become due in respect of the Vessel or
in respect of any insurance thereon from any person whomsoever, and
to make, give and execute in the name of Mortgagor acquittances,
receipts, releases or other discharges for the same, whether under
seal or otherwise, and to endorse and accept in the name of
Mortgagor all checks, notes, drafts, warrants, agreements and all
other instruments in writing with respect to the foregoing,
Mortgagor hereby confirming and ratifying the same.
(ii) So long as an Event of Default has occurred and is
continuing, Mortgagee is hereby irrevocably authorized to pay or
furnish indemnity in the proper amounts against any Liens which
have or may (in the reasonable opinion of Mortgagee) have priority
over the Lien of this Mortgage and which are not permitted under
this Mortgage or the Trust Indenture.
(c) Additional Rights. Mortgagor covenants and agrees that
in addition to any and all other rights, powers and remedies elsewhere
in this Mortgage granted to and conferred upon Mortgagee, Mortgagee in
any suit to enforce any of its rights, powers or remedies shall be
entitled as a matter of right and not as a matter of discretion (i) to
seek the appointment of a receiver or receivers of the Vessel and any
receiver or receivers so appointed shall have full right and power to
use and operate the Vessel as shall be ordered by any court having
jurisdiction, (ii) to a decree ordering and directing the sale and
disposal of the Vessel, and Mortgagee may become the purchaser at such
sale and shall have the right to credit against the purchase price any
and all sums of money due hereunder, and (iii) to have full rights and
remedies at law and in equity including, without limitation, specific
performance of the covenants hereof including, without limitation, the
following paragraph of this Section 3.3(c).
Mortgagor further covenants and agrees that if (i) an Indenture
Event of Default under Section 7.1(a), (d), (e), (f), (h), (j), (m) or
(n) of the Trust Indenture has occurred and is continuing or (ii) any
other Indenture Event of Default has occurred and is continuing which
has resulted in acceleration of the maturity of the Obligations, then
Mortgagor shall, upon the request of Mortgagee and at the direction of
Majority Holders, immediately move the Vessel to such United States port
or other location within the territorial waters of the United States
subject to the in rem admiralty jurisdiction of the United States
federal courts as Mortgagee may designate in its sole and absolute
discretion.
(d) Notice to Mortgagor. Mortgagee shall notify Mortgagor
promptly after taking any action permitted by this Section 3.3.
Section 3.4 Restoration of Position. In case Mortgagee shall have
proceeded to enforce any right, power or remedy under this Mortgage by
foreclosure, entry or otherwise, and such proceeding shall have been
discontinued or abandoned by Mortgagee for any reason or shall have been
determined adversely to Mortgagee, then and in every such case Mortgagor
and Mortgagee shall, subject to any determination in such proceeding, be
restored to their former positions and rights hereunder with respect to
the property subject or intended to be subject to this Mortgage, and all
rights, remedies and powers of Mortgagee shall, subject to any
determination in such proceeding, continue as if no such proceedings had
been taken.
Section 3.5 Application of Proceeds. The proceeds of any sale and
net earnings derived from the operation, use, charter, or any other
employment of the Vessel by Mortgagee, as mortgage creditor, and within
any of the powers and authority above given, as well as the proceeds of
any judgment which Mortgagee may obtain by reason of the breach or
failure to perform any of the terms of this Mortgage, as well as the
proceeds of any claim for damage received by Mortgagee while exercising
the powers and the authorities above given shall be applied as follows:
(i) to the payment of all charges and expenses, including the
costs of any public or private sale or sales, the cost of
replevying or taking possession of the Vessel which may be incurred
or paid out by Mortgagee, as mortgage creditor, and the expenses
and reasonable administration and external attorneys' fees incurred
by Mortgagee on foreclosure or in the protection of the rights and
interests of Mortgagee founded upon this Mortgage;
(ii) to pay or to furnish indemnity in the proper amounts
against any Liens which have or may (in the reasonable opinion of
Mortgagee) have priority over the Lien of this Mortgage and which
are not Liens permitted under this Mortgage; and
(iii) to deliver to the Mortgagee for application as
provided in the Trust Indenture.
Section 3.6 Waiver. (a) To the extent now or at any time hereafter
enforceable under applicable law, the Mortgagor covenants that it will
not at any time insist upon or plead, or in any manner whatsoever claim
or take any benefit or advantage of, any stay or extension law now or at
any time hereafter in force, nor claim, take nor insist upon any benefit
or advantage of or from any law now or hereafter in force providing for
the valuation or appraisement of the Vessel or any part thereof, prior
to any sale or sales thereof to be made pursuant to any provision herein
contained, or to the decree, judgment or order of any court of competent
jurisdiction, nor, after such sale or sales, claim or exercise any right
under any statute now or hereafter made or enacted by any state or
otherwise to redeem the property so sold or any part thereof, and hereby
expressly waives for itself and on behalf of each and every Person, all
benefit and advantage of any such law or laws, and covenants that it
will not invoke or utilize any such law or laws or otherwise hinder,
delay or impede the execution of any power herein granted and delegated
to the Mortgagee, but will suffer and permit the execution of every such
power as though no such law or laws had been made or enacted.
(b) The Mortgagor waives any right to require the Mortgagee,
the Sureties or the Note Holders to proceed against any other Person, or
to exhaust any other Collateral or other security for the obligations
secured hereby, or to have any other Person joined with the Mortgagor in
any suit arising out of the Obligations or the other Project Documents,
or to pursue any other remedy in the Mortgagee's, the Sureties or the
Note Holders' power. The Mortgagor further waives any and all notice of
acceptance of this Mortgage by any other Person directly or indirectly
liable for such obligations from time to time. The Mortgagor further
waives any defense arising by reason of any disability or other defense
of any other Person or by reason of the cessation from any cause
whatsoever of the liability of any other Person liable for the
Obligations secured hereby. Until all of such Obligations shall have
been paid in full, the Mortgagor shall have no right to subrogation and
the Mortgagor waives the right to enforce any remedy which the
Mortgagee, the Sureties or the Note Holders have or may hereafter have
against any other Person liable for such obligations, and the Mortgagor
waives any benefit of any right to participate in any security
whatsoever now or hereafter held by the Mortgagee, the Sureties or the
Note Holders. The Mortgagor authorizes the Mortgagee, the Sureties
(when and if they are an assignee of this Mortgage as provided in the
Performance Bond) and the Note Holders, without notice or demand and
without any reservation of rights against the Mortgagor and without
affecting the Mortgagor's liability hereunder or on the obligations
secured hereby, from time to time to (a) take or hold any Property other
than the Collateral from any other Person as security for such
obligations, and exchange, enforce, waive and release any or all of such
Property, (b) apply such Property and direct the order or manner of sale
thereof as the Mortgagee, the Sureties (when and if they are an assignee
of this Mortgage as provided in the Performance Bond) and the Note
Holders may in their discretion determine, and (c) renew, extend for any
period, accelerate, modify, compromise, settle or release any of the
obligations of any other Person in respect of the Obligations secured
hereby or other security for such Obligations.
ARTICLE IV
GENERAL POWERS OF MORTGAGEE
Section 4.1 General Powers of Mortgagee.
(a) Arrest or Detention of Vessel. In the event that the
Vessel shall be arrested or detained by a marshal or other officer of
any court of law, equity or admiralty jurisdiction in any country or
nation of the world or by any government or other entity and shall not
be released from arrest or detention within thirty (30) days from the
date of arrest or detention, Mortgagor does hereby authorize and empower
Mortgagee, in the name of Mortgagor, or its successors or assigns, to
apply for and receive possession of and to take possession of the Vessel
with all the rights and powers that Mortgagor, or its successors or
assigns, might have, possess or exercise in any such event; and this
power of attorney shall be irrevocable and may be exercised not only by
Mortgagee but also by its appointee or appointees, with full power of
substitution, to the same extent as if the said appointee or appointees
had been named as the attorney above named by express designation.
(b) Suits. Mortgagor also authorizes and empowers Mortgagee
or its appointees or any of them to appear in the name of Mortgagor, its
successors or assigns, in any court of any country or nation of the
world where a suit is pending against the Vessel because of or on
account of any alleged Lien against the Vessel from which the Vessel has
not been released in accordance with the terms of this Mortgage and to
take such proceedings as to it may seem proper towards the defense of
such suit and the discharge of such Lien.
(c) Reimbursement of Expenses. If Mortgagor fails to perform
any obligation or covenant under this Mortgage, Mortgagee shall have the
right, but not the obligation, to perform or take such actions to comply
with the terms of this Mortgage, and all amounts reasonably expended in
connection with such conduct shall be a demand obligation of Mortgagor
owing to Mortgagee at the Default Rate specified in the Trust Indenture
and shall be secured by the Lien of this Mortgage.
ARTICLE V
SUNDRY PROVISIONS
Section 5.1 Release. If the Obligations shall have been fully and
finally satisfied and discharged to the satisfaction of the Trustee then
this Mortgage and the estate and rights hereunder shall cease,
determine, and become null and void; and Mortgagee, on the request of
Mortgagor and at Mortgagor's cost and expense, shall forthwith cause
satisfaction and discharge of this Mortgage to be entered upon its and
other appropriate records and shall execute and deliver to Mortgagor
such instruments as may be necessary in Mortgagor's reasonable opinion
to duly acknowledge the satisfaction and discharge of this Mortgage.
Upon any termination of this Mortgage or release of the Vessel as
permitted by the Trust Indenture, Mortgagee will, at the expense of
Mortgagor, execute and deliver to Mortgagor such documents and take such
other actions as Mortgagor shall reasonably request to evidence the
termination of this Mortgage or the release of the Vessel, as the case
may be.
Section 5.2 Right of Peaceful Enjoyment. During the term of this
Mortgage and so long as no Event of Default shall have occurred and be
continuing, Mortgagor shall have full and peaceful enjoyment, use, right
to possession and control of the Vessel subject to the terms of the
Project Documents.
Section 5.3 Cumulative Remedies; No Waiver. Each and every power
and remedy herein given to Mortgagee shall be cumulative and shall be in
addition to every other power and remedy herein or in any other Project
Document or now or hereafter existing at law, in equity, in admiralty,
or by statute, and each and every power and remedy whether herein given
or given in any other Project Document or otherwise existing may be
exercised from time to time and as often and in such order, or in the
alternative as may be deemed expedient by Mortgagee, and the exercise or
the beginning of the exercise of any power or remedy shall not be
construed to be a waiver of the right to exercise at the same time or
thereafter any other power or remedy. No course of dealing on the part
of Mortgagee, its officers, employees, consultants or agents, nor any
delay or omission by Mortgagee in the exercise of any right or power or
in the pursuance of any remedy shall operate as a waiver of any such
right, power or remedy.
Section 5.4 Further Assurances. In the event that this Mortgage,
or any provisions hereof, shall be deemed invalid in whole or in part by
reason of any present or future law or any decision of any court having
jurisdiction, or if the documents at any time held by Mortgagee shall be
deemed by Mortgagee for any reason insufficient to carry out the rights
and powers granted to Mortgagee herein, then, from time to time,
Mortgagor will do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered, such other and further
assurances and documents as in the opinion of Mortgagee may reasonably
be required in order to more effectively subject the Vessel to the Lien
of this Mortgage or more effectively subject the Vessel to the
performance of the terms and provisions of this Mortgage, or to enable
this Mortgage to continuously enjoy the status of a first preferred ship
mortgage.
Section 5.5 Survival of Agreements. All representations,
warranties, covenants and agreements herein contained or made in writing
in connection with this Mortgage shall survive the execution of this
Mortgage and shall continue in full force and effect until all sums
secured hereby shall have been paid in full, and the same shall bind and
inure to the benefit of the respective successors and assigns of
Mortgagor and Mortgagee.
Section 5.6 Notices. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing
(including by facsimile transmission), and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made when
actually delivered or in the case of facsimile transmission, when
received and telephonically confirmed, addressed as follows or to such
other address as may be hereafter notified by the respective parties
hereto or any assignee thereof or successor thereto:
Mortgagor: RBF Exploration Co.
901 Threadneedle
Houston, Texas 77079
Facsimile No. (281) 496-0285
Attention: President
Mortgagee: Chase Bank of Texas, National Association
1150 Chase Tower
600 Travis Street
Houston, TX 77002
Attention: Mauri J. Cowen, V.P.
Section 5.7 Counterparts. This instrument may be executed in any
number of counterparts, and each of such counterparts shall for all
purposes be deemed to be an original.
Section 5.8 Section Headings. The section headings used in this
Mortgage are for convenience of reference only and are not to affect the
construction of or be taken into consideration in interpreting this
Mortgage.
Section 5.9 GOVERNING LAW. THIS MORTGAGE, AND ALL OF THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER, AND THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS, SHALL BE GOVERNED BY THE FEDERAL LAWS OF THE
UNITED STATES OF AMERICA INCLUDING, WITHOUT LIMITATION, THE MARITIME
LAWS OF THE UNITED STATES OF AMERICA AND TO THE EXTENT THAT SUCH LAWS
ARE NOT APPLICABLE, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
Section 5.10 Jurisdiction.
(a) Any legal action or proceeding with respect to this Mortgage
may be brought in the courts of the United States for the Southern
District of New York and the Mortgagor hereby accepts for itself and its
property, generally and unconditionally, the non-exclusive jurisdiction
of such court. The Mortgagor further irrevocably consents to the
service of process out of such court in any such action or proceeding in
the manner provided for in the Trust Indenture. Nothing herein shall
affect the right of the Mortgagee to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed
against the Mortgagor in any other jurisdiction.
(b) Without prejudice to the generality of Clause 5.10(a), the
Mortgagee shall have the right to arrest and take action against the
Vessel at whatever place such Vessel shall be found lying and for the
purpose of any action which the Mortgagee may bring before the courts of
such jurisdiction or other judicial authority and for the purpose of any
action which the Mortgagee may bring against such Vessel, any writ,
notice, judgment or other legal process or documents may (without
prejudice to any other method of service under applicable law) be served
upon the master of such Vessel (or upon anyone acting as the master) and
such service shall be deemed good service on the Mortgagor for all
purposes.
(c) Each of the parties hereto stipulates that, when the Vessel is
located on the Outer Continental Shelf within the jurisdiction of the
United States Federal District Courts under 43 U.S.C. Section 1331(1) and
1349(b)(1), (i) that the United States Federal District Courts shall
have "in rem" admiralty jurisdiction over the Vessel and (ii) that the
Vessel is present within the territorial jurisdiction of said courts for
all purposes, including the enforcement of any maritime liens or other
remedies hereunder.
Section 5.11 Amendments and Waivers. None of the terms or
provisions of this Mortgage may be waived, amended, supplemented or
otherwise modified except if made in compliance with the terms and
provisions of the Trust Indenture.
Section 5.12 Termination. The grant of the Liens hereunder and
all of Mortgagee's rights, powers and remedies in connection therewith,
shall unless otherwise provided in the Trust Indenture or this Mortgage,
remain in full force and effect until final payment in full of (A) the
Notes under the terms thereof or of the Trust Indenture, and (B) all
other Obligations then due and owing under the Trust Indenture, the
Notes and the other Project Documents. Upon the payment in full of
(A) the Notes under the terms thereof or of the Trust Indenture, and
(B) all Obligations then due and owing under the Trust Indenture, the
Notes and the other Project Documents, Mortgagor shall be entitled to
the return, upon its request and at its expense, of the Vessel free and
clear of all liens created by this Mortgage.
Section 5.13 Trust Indenture. This Mortgage is issued pursuant to
the terms, conditions and provisions of the Trust Indenture.
Section 5.14 Severability. In the event that any provision of
this Mortgage or the Trust Indenture or the Notes shall be deemed
invalid or unenforceable by reason of any present or future law or any
decision of any authoritative court, the validity and enforceability of
the other provisions hereof or thereof shall not be affected thereby.
[Signature Pages Begin Next Page]
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be duly
executed as of the day and year first above written.
MORTGAGOR: RBF EXPLORATION CO.
By:
Name:
Title:
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
THIS INSTRUMENT was acknowledged before me on __________, ____, by
_____________________________, ___________________________________ of
RBF Exploration Co., a Nevada corporation on behalf of such corporation,
and after having first been duly authorized by said corporation to do
so.
AND THE said ___________ did further produce to me sufficient proof
that he is the duly elected ___________ of said corporation and that he
was duly authorized by said corporation to execute the foregoing
Mortgage, and I the notary hereby certify that the signature of the said
______________ on the foregoing Mortgage was placed thereon in my
presence and is therefore authentic.
Notary Public in and for
the State of Texas
Printed Name of Notary:
______________________________
My Commission Expires:
______________________________
EXHIBIT 10.6
Execution Copy
===========================================================================
RBF Exploration Co.
----------------------
TRUST INDENTURE
AND SECURITY AGREEMENT
----------------------
Dated as of August 12, 1999
===========================================================================
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINED TERMS. . . . . . . . . . . . . . . . . . .3
1.1 Special Definitions. . . . . . . . . . . . . . . . . . . . .3
ARTICLE 2. FORM, EXECUTION, ISSUE AND DELIVERY OF NOTES . . 16
2.1 Issue of Notes . . . . . . . . . . . . . . . . . . . . . . 16
2.2 Authentication of Notes; Denominations of Notes and Form . 16
2.3 Registration of Notes. . . . . . . . . . . . . . . . . . . 17
2.4 Exchange of Notes. . . . . . . . . . . . . . . . . . . . . 17
2.5 Transfer of Notes. . . . . . . . . . . . . . . . . . . . . 17
2.6 General Rules. . . . . . . . . . . . . . . . . . . . . . . 19
2.7 Valid Obligations. . . . . . . . . . . . . . . . . . . . . 19
2.8 Execution and Delivery . . . . . . . . . . . . . . . . . . 19
2.9 Replacement of Notes . . . . . . . . . . . . . . . . . . . 20
ARTICLE 3. PAYMENTS AND DISTRIBUTION THEREOF. . . . . . . . 20
3.1 Payment by Issuer. . . . . . . . . . . . . . . . . . . . . 20
3.2 Delivery Expenses. . . . . . . . . . . . . . . . . . . . . 20
3.3 Issue Taxes. . . . . . . . . . . . . . . . . . . . . . . . 21
3.4 Required Payments of Notes without Premium . . . . . . . . 21
3.5 Required Prepayments of Notes. . . . . . . . . . . . . . . 21
3.6 Surrender of Notes on Prepayment . . . . . . . . . . . . . 22
3.7 Provision for Applicable Make-Whole Amount, Yield
Protection Amount, Special Yield Protection Amount and
Breakage Amount. . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 4. RECEIPT, DISTRIBUTION AND APPLICATION OF
NOTE PROCEEDS AND SDDI CONTRACT REVENUES . . . . 27
4.1 Payment Reserve Account. . . . . . . . . . . . . . . . . . 27
4.2 Construction Account.. . . . . . . . . . . . . . . . . . . 28
4.3 Collection Account.. . . . . . . . . . . . . . . . . . . . 29
ARTICLE 5. RECEIPT, DISTRIBUTION AND APPLICATION OF
TRUST ESTATE . . . . . . . . . . . . . . . . . . 29
5.1 Application of the Collection Account and the
Construction Account . . . . . . . . . . . . . . . . . . . 29
5.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Payments in Case of an Event of Loss . . . . . . . . . . . 30
(b) Payments in Case of a Partial Event of Loss. . . . . . . . 30
5.3 Lump Sum Payment and Payments During Continuance of an
Indenture Event of Default. .. . . . . . . . . . . . . . . 31
5.4 Amounts Held by Trustee. . . . . . . . . . . . . . . . . . 32
5.5 Allocation of Payments . . . . . . . . . . . . . . . . . . 33
5.6 Method of Payment to Holders . . . . . . . . . . . . . . . 33
5.7 Method of Payment to Issuer. . . . . . . . . . . . . . . . 33
5.8 Payments for which No Application is Otherwise
Provided . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 6. EVIDENCE OF ACTS OF NOTE HOLDERS.. . . . . . . . 34
6.1 Execution by Note Holders or Agents. . . . . . . . . . . . 34
6.2 Future Holders Bound . . . . . . . . . . . . . . . . . . . 34
ARTICLE 7. INDENTURE DEFAULTS - REMEDIES. . . . . . . . . . 34
7.1 Indenture Events of Default. . . . . . . . . . . . . . . . 34
7.2 Acceleration of Notes. . . . . . . . . . . . . . . . . . . 36
7.3 Annulment of Acceleration of Notes . . . . . . . . . . . . 37
7.4 Default Remedies . . . . . . . . . . . . . . . . . . . . . 38
7.5 Other Enforcement Rights . . . . . . . . . . . . . . . . . 40
7.6 Effect of Sale, etc. . . . . . . . . . . . . . . . . . . . 42
7.7 Restoration of Rights and Remedies . . . . . . . . . . . . 43
7.8 Application of Sale Proceeds and Deficiency. . . . . . . . 43
7.9 Cumulative Remedies. . . . . . . . . . . . . . . . . . . . 43
7.10 Limitations on Suits . . . . . . . . . . . . . . . . . . . 43
7.11 Suits for Principal and Interest . . . . . . . . . . . . . 44
7.12 Waiver by the Issuer . . . . . . . . . . . . . . . . . . . 44
ARTICLE 8. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . 45
8.1 Financial Statements.. . . . . . . . . . . . . . . . . . . 45
8.2 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 47
8.3 Acceptance of Drilling Rig, Maintenance, Etc.. . . . . . . 48
8.4 Environmental Matters. . . . . . . . . . . . . . . . . . . 51
8.5 Further Assurances . . . . . . . . . . . . . . . . . . . . 51
8.6 Performance of Obligations . . . . . . . . . . . . . . . . 52
8.7 ERISA Information and Compliance . . . . . . . . . . . . . 52
8.8 Maintenance of Agency. . . . . . . . . . . . . . . . . . . 52
8.9 Additional Assurances. . . . . . . . . . . . . . . . . . . 52
8.10 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . 53
8.11 Change in Location of Collateral . . . . . . . . . . . . . 53
8.12 Use of Issuer's Name . . . . . . . . . . . . . . . . . . . 53
8.13 Corporate Independence . . . . . . . . . . . . . . . . . . 53
8.14 Maintenance of Payment Reserve Account . . . . . . . . . . 54
8.15 Notice of Intention. . . . . . . . . . . . . . . . . . . . 54
ARTICLE 9. NEGATIVE COVENANTS . . . . . . . . . . . . . . . 54
9.1 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.2 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.3 Investments, Loans and Advances. . . . . . . . . . . . . . 55
9.4 Dividends, Distributions and Redemptions . . . . . . . . . 55
9.5 Sales and Leasebacks . . . . . . . . . . . . . . . . . . . 55
9.6 Nature of Business . . . . . . . . . . . . . . . . . . . . 55
9.7 Limitation on Leases . . . . . . . . . . . . . . . . . . . 55
9.8 Mergers, Etc.. . . . . . . . . . . . . . . . . . . . . . . 55
9.9 Proceeds of Notes. . . . . . . . . . . . . . . . . . . . . 55
9.10 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . 56
9.11 Sale or Discount of Receivables. . . . . . . . . . . . . . 57
9.12 Sale of Drilling Rig . . . . . . . . . . . . . . . . . . . 57
9.13 Environmental Matters. . . . . . . . . . . . . . . . . . . 57
9.14 Transactions with Affiliates . . . . . . . . . . . . . . . 57
9.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 57
9.16 Location of Issuer.. . . . . . . . . . . . . . . . . . . . 58
9.17 Acquisition of Notes . . . . . . . . . . . . . . . . . . . 58
9.18 Non-Petition Covenant. . . . . . . . . . . . . . . . . . . 58
ARTICLE 10. THE TRUSTEES . . . . . . . . . . . . . . . . . . 58
10.1 Certain Duties and Responsibilities of Trustees. . . . . . 58
10.2 Trustees' Compensation and Indemnification . . . . . . . . 59
10.3 Certain Rights of Trustees . . . . . . . . . . . . . . . . 60
10.4 Showings Deemed Necessary by a Trustee . . . . . . . . . . 62
10.5 Status of Monies Received. . . . . . . . . . . . . . . . . 62
10.6 Resignation of Trustees. . . . . . . . . . . . . . . . . . 62
10.7 Removal of Trustees. . . . . . . . . . . . . . . . . . . . 62
10.8 Successor Trustee. . . . . . . . . . . . . . . . . . . . . 62
10.9 Appointment of Successor Trustees. . . . . . . . . . . . . 62
10.10 Merger or Consolidation of Trustee. . . . . . . . . . 63
10.11 Acceptance of Appointment by Successor Trustee. . . . 63
10.12 Conveyance upon Request of Successor Trustee. . . . . 63
10.13 Co-Trustees and Additional Trustees . . . . . . . . . 64
10.14 Trustee's Representations and Warranties. . . . . . . 64
10.15 Non-Petition Covenant.. . . . . . . . . . . . . . . . 65
ARTICLE 11. SUPPLEMENTAL INDENTURES, WAIVERS . . . . . . . . 65
11.1 Supplemental Indentures Without Note Holders'
Consent . . . . . . . . . . . . . . . . . . .. . . . . . . 65
11.2 Waivers and Consents by Note Holders; Supplemental
Indentures with Consent . . . . . . . . . . . . . . . . . 66
11.3 Notice of Supplemental Indenture . . . . . . . . . . . . . 67
11.4 Solicitation of Note Holders . . . . . . . . . . . . . . . 67
11.5 Opinion of Counsel Conclusive as to Supplemental
Indentures. . . . . . . . . . . . . . . . . . . . . . . . 67
11.6 Effect of Supplemental Indentures. . . . . . . . . . . . . 67
11.7 New Notes. . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 12. UNCLAIMED MONIES . . . . . . . . . . . . . . . . 68
12.1 Satisfaction and Discharge of Agreement. . . . . . . . . . 68
12.2 Return of Unclaimed Monies . . . . . . . . . . . . . . . . 68
ARTICLE 13. MISCELLANEOUS. . . . . . . . . . . . . . . . . . 69
13.1 Successors and Assigns . . . . . . . . . . . . . . . . . . 69
13.2 Unenforceability of Provision. . . . . . . . . . . . . . . 69
13.3 Communications . . . . . . . . . . . . . . . . . . . . . . 69
13.4 Governing Law; Submission to Jurisdiction. . . . . . . . . 70
13.5 Limitation on Interest . . . . . . . . . . . . . . . . . . 72
13.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 73
13.7 Headings, etc.; Gender . . . . . . . . . . . . . . . . . . 73
13.8 Amendments . . . . . . . . . . . . . . . . . . . . . . . . 73
13.9 Benefits of Agreement Restricted to Parties and Note
Holders . . . . . . . . . . . . . . . . . . . . . . . 73
13.10 Waiver of Notice. . . . . . . . . . . . . . . . . . . 73
13.11 Obligations of Bankers Trust Company. . . . . . . . . 73
13.12 Non Recourse Persons. . . . . . . . . . . . . . . . . 74
13.13 Additional Financing Statement Filings. . . . . . . . 74
13.14 Directly or Indirectly. . . . . . . . . . . . . . . . 74
13.15 Exhibits, Annexes and Sections. . . . . . . . . . . . 74
13.16 Officers' Certificate and Opinions of Counsel;
Statements to be Contained Therein.. . . . . . . . . . 74
13.17 Payment of Expenses, Indemnities, etc.. . . . . . . . 75
13.18 No Oral Agreements. . . . . . . . . . . . . . . . . . 78
13.19 Exculpation Provisions. . . . . . . . . . . . . . . . 79
13.20 Trustees Not Engaging in a Trade or Business. . . . . 79
Annex A-1 Form of Class A1 Note
Annex A-2 Form of Class A2 Note
Annex B Class A1 Note Payment Schedule
Annex C Surveys and Inspections
Annex D Form of Engineer's Certification
Annex E Form of Opinion of Issuer s Counsel regarding
Drilling Rig and First Preferred Ship Mortgage
Annex F Form of SDDI Estoppel Letter
Annex G Form of Year 2000 Schedule
Annex H Form of Request for Construction Advance
Schedule 10.2 Trustee Fees
TRUST INDENTURE AND SECURITY AGREEMENT
TRUST INDENTURE AND SECURITY AGREEMENT dated as of August 12, 1999,
between RBF Exploration Co., a Nevada corporation (the "Issuer"), and Chase
Bank of Texas, National Association (the "Trustee"; the Trustee and each
other Person accepting trusts created hereby being individually referred
to as a "Trustee" and collectively as the "Trustees").
RECITALS:
WHEREAS, the defined terms used in this Indenture shall have the
respective meanings set forth in Section 1.1 unless elsewhere defined or
the context shall otherwise require;
WHEREAS, the Issuer is authorized by law, and deems it necessary to
borrow money for its proper legal purposes and to mortgage, assign and
pledge its Property to secure the payment thereof and to that end, in the
exercise of said authority, has duly authorized the execution and delivery
of this Indenture providing for the issue of secured promissory notes of
the Issuer hereunder;
WHEREAS, the Issuer has duly authorized the issuance of (i) its drilling
vessel secured notes limited in aggregate original principal amount to Two
Hundred Million Dollars ($200,000,000) to be known as its Senior Secured
Class A1 Notes, and (ii) its drilling vessel secured notes limited in
aggregate original principal amount to Fifty Million Dollars ($50,000,000),
to be known as its Senior Secured Class A2 Notes on the terms herein
provided;
WHEREAS, the Notes and the Trustee's Certificate of Authentication
thereon are to be substantially in the forms set forth in Annexes A-1 and
A-2; and
WHEREAS, all acts and proceedings required by law and by the Certificate
of Incorporation and Bylaws of the Issuer necessary to make the Notes, when
executed by the Issuer and authenticated and delivered by the Trustee, the
legal, valid and binding obligations of the Issuer, and all acts and
proceedings required by law and by the Certificate of Incorporation and
Bylaws of the Issuer necessary to constitute this Indenture a legal, valid
and binding agreement for the uses and purposes herein set forth, in
accordance with its terms, have been done and taken; and the Issuer has
duly authorized, executed and delivered this Indenture;
GRANTING CLAUSE:
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that to secure the prompt and
complete payment of the principal of, and interest and any applicable
Make-Whole Amount on, all of the Notes issued and delivered and
Outstanding, the payment of all other sums owing hereunder and under all
other Project Documents and the performance of the covenants contained
herein and in all other Project Documents, and in consideration of the
premises and of the covenants contained herein, the purchase of the Notes
by the Purchasers, and the sum of One Dollar ($1.00) paid by the Trustee
to the Issuer at or before the delivery hereof, the receipt and sufficiency
whereof are hereby acknowledged, the Issuer has hereby granted, bargained,
sold, conveyed, assigned, transferred, mortgaged, affected, pledged, set
over, confirmed, granted a continuing security interest in, and
hypothecated and does hereby grant, bargain, sell, convey, assign,
transfer, mortgage, affect, pledge, set over, confirm, grant a continuing
security interest to the Trustee and to any co-trustee or separate trustee
hereafter acting pursuant to this Indenture, and to their respective
successors and assigns in trust forever (subject to Section 12.1), all of
its right, title and interest in, to and under the following described
Properties whether now owned, existing or hereafter acquired or arising
(all of such Properties, including without limitation all properties
hereafter specifically subjected to the lien of this Indenture by any
indenture supplement hereto, being hereinafter collectively referred to as
the "Trust Estate"):
(a) All equipment, inventory, fixtures and other goods (including,
without limitation, the Drilling Rig) in all forms, wherever located and
whether now or hereafter existing, which are owned by the Issuer or in
which the Issuer otherwise has any rights and all parts thereof, all
accessions thereto, all replacements or substitutions therefor, all
accounts now or hereafter arising in connection therewith, and all
chattel paper, documents and general intangibles covering or relating
thereto (any and all such equipment, inventory, fixtures, other goods,
parts, accessions, replacements, substitutions, accounts, chattel paper,
documents and general intangibles being herein collectively called the
"Pledged Equipment");
(b) All accounts, General Intangibles (including without
limitation, the Construction Contract, the SDDI Contract, the
Construction Supervisory Agreement, the Operation and Maintenance
Agreement, the Performance Guarantee, Refundment Guarantee and the
Performance Bond), instruments, chattel paper and documents, deposit
accounts and investment property (including, without limitation, all
Permitted Investments) now owned or hereafter acquired;
(c) All Properties subjected to the Lien of this Indenture by each
supplemental indenture entered into and delivered pursuant to
Article 11;
(d) All insurance proceeds, condemnation proceeds and the
accounts, issues, profits, products, revenues and other income of and
from the SDDI Contract and the other Properties subjected or required to
be subjected to the Lien of this Indenture and all the estate, right,
title and interest of every nature whatsoever of the Issuer in and to
the same and every part thereof;
(e) The Collection Account, the Payment Reserve Account, the
Construction Account and all other monies now or hereafter paid or
deposited or required to be paid or deposited to or with a Trustee
pursuant to Section 4.1, 4.2, 4.3, 5.1 or 5.3 hereof or any other term
hereof or any term of the other Project Documents and held or required
to be held by any Trustee hereunder;
(f) Any and all other Properties and any and all other rights,
interests and privileges granted to any Trustee in accordance with the
provisions hereof and pursuant to or in connection with the provisions
of the other Project Documents, including but not limited to the First
Preferred Ship Mortgage and the Assignment of Drilling Contract and all
Permitted Investments with respect to any of the foregoing; and
(g) All proceeds and products of any of the foregoing.
It is expressly contemplated that additional property may from time
to time be pledged, assigned or granted to a Trustee as additional
security for the Outstanding Notes and the other Project Documents from
time to time, and the term "Trust Estate" as used herein shall be deemed
for all purposes hereof to include all such additional property,
together with all other property of the types described above related
thereto, and all proceeds and replacements of the same.
TO HAVE AND TO HOLD, all and singular, the Trust Estate for the uses and
purposes and subject to the terms and provisions set forth in this
Indenture unto the Trustees and their respective successors in trust, and
to their respective assigns forever.
IN TRUST NEVERTHELESS, under and subject to the terms and conditions
herein set forth and for the equal and proportionate, unless otherwise
stated herein, benefit and security of the holders from time to time of the
Outstanding Notes and for the enforcement of the prompt and complete
payment when due of all sums due in connection with the Outstanding Notes
from time to time, this Indenture and each of the other Project Documents
and for the performance and observance by the Issuer of the covenants,
obligations and conditions to be performed and observed by the Issuer and
all other parties, other than the Trustees and the holders of Outstanding
Notes from time to time, to this Indenture and each of the other Project
Documents;
PROVIDED, HOWEVER, that these presents are upon the condition that if
the Issuer, its successors or assigns, shall satisfy the conditions set
forth in Section 12.1 for a release of the Trust Estate in full, then this
Indenture, and the estates and rights assigned to the Trustees in the other
Project Documents, shall cease, determine and be void; otherwise they shall
remain and be in full force and effect;
IT IS HEREBY FURTHER COVENANTED AND AGREED that all of the Notes are to
be issued, authenticated and delivered and that the Trust Estate is to be
held and applied by the Trustees, subject to the further covenants,
agreements, conditions, uses and trust hereafter set forth. The Issuer for
itself and its successors and permitted assigns does hereby covenant and
agree with the Trustees and their respective successors in trust for the
benefit of all present and future holders of the Outstanding Notes, or any
of them, and the Sureties as follows:
ARTICLE 1. DEFINED TERMS.
1.1 Special Definitions. For purposes of this Indenture, the following
terms shall have the respective meanings (i) set forth below, (ii) set
forth in the Section or other part of this Indenture following such term
or (iii) provided for in the section or other part of such other Project
Document as may be referred to immediately following such term (such
definitions to be equally applicable to both the singular and plural forms
of the terms defined):
Affiliate -- at any time, and with respect to any Person, any other
Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control
with, such first Person. As used in this definition, "Control" means
the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise
(and "Controlled" shall be construed accordingly). Unless the context
otherwise clearly requires, any reference to an "Affiliate" is a
reference to an Affiliate of the Issuer.
Asset Purchase Agreement (Parthenon) -- the Master Asset Purchase
Agreement dated December 18, 1998 as supplemented by the confirmation
thereunder dated August 18, 1999, among BTMTC, as agent, PRFL and SRFP
as from time to time amended, supplemented or modified.
Asset Purchase Agreement (Victory) -- the Asset Purchase Agreement
with respect to the Class A1 Notes held by CP Conduit (Victory), dated
as of August 18, 1999, among Victory Receivables Corporation, BTM
Capital Corporation, Bankers Trust Company, the agent, and the banks
party thereto, as from time to time amended, supplemented or modified.
Assignment of Drilling Contract -- has the meaning set out in
Schedule B to the Note Purchase Agreements.
Breakage Amount -- has the meaning set out in Section 3.7(d).
Breakage Party -- has the meaning set out in Section 3.7(d).
BTM, Ltd. -- The Bank of Tokyo - Mitsubishi, Ltd., New York Branch.
BTMTC -- Bank of Tokyo - Mitsubishi Trust Company.
Building Account -- an account established by the Issuer by notice
in writing to the Trustee for the receipt of funds from the Construction
Account pursuant to Section 4.2(b) hereof. Such account is initially
established at Wells Fargo Bank, N.A., 1000 Louisiana, Houston, Texas
77002 with the following designation:
Account Name: RBF Exploration Co.
Account Number: 4296919863
ABA Number: 1210-0024-8
SWIFT Number: WFBIUS6S
Business Day -- a day other than a Saturday, a Sunday or a day on
which banks are required or allowed by law to be closed in one or both
of the State of Texas and New York.
Certificate of Requisition -- a document in the form of Annex H
hereto.
Class A1 Notes -- has the meaning set out in Section 2.1(a).
Class A2 Notes -- has the meaning set out in Section 2.1(b).
Closing Date -- the date of the initial issuance of the Notes.
Code -- the Internal Revenue Code of 1986, as amended from time to
time.
Collateral -- the Trust Estate, and any and all other collateral
held by any one or more of the Trustees to secure the Notes or any other
obligations created pursuant to the Project Documents, including without
limitation the Project Documents and all collateral covered thereby.
Collection Account -- has the meaning set out in Section 4.3.
Commencement Date -- has the meaning set out in Section 1.3 of the
SDDI Contract.
Consolidated -- the consolidation of any Person with its properly
consolidated subsidiaries, in accordance with GAAP.
Construction Account -- has the meaning set out in Section 4.2.
Construction Contract -- that certain Contract for Construction and
Sale of Vessel (Hull No. HRBS6) dated November 14, 1997, between the
Issuer and Hyundai.
Construction Supervisory Agreement -- that certain Construction
Supervisory Agreement dated as of August 12, 1999, between RBF II and
the Issuer.
Contested in Good Faith -- actively contested in good faith by
appropriate actions or proceedings provided that (i) adequate book
reserves have been established with respect thereto as required by GAAP,
(ii) the applicable Person's title to, and its right to use, any of its
material Property is not materially adversely affected thereby and (iii)
the action to be taken will not result in any risk of imposition of
civil or criminal penalties on the Trustees or the holders of the Notes
or substantial danger of sale, forfeiture or loss of the Drilling Rig or
the benefit of the SDDI Contract.
CP Conduit -- either or both of CP Conduit (Parthenon) and CP
Conduit (Victory) and any other commercial paper conduit which shall
hold any Note.
CP Conduit (Parthenon) -- PRFL or any other commercial paper
conduit co-sponsored by SRFP and BTM, Ltd. or administered by BTMTC
(either as agent or as sub-agent) which is an owner and holder of a
Class A2 Note.
CP Conduit (Victory) -- Victory Receivables Corporation or any
other commercial paper conduit sponsored by BTM, Ltd. or administered by
BTMTC (either as agent or as sub-agent) which is an owner and holder of
a Class A1 Note.
Credit Support Party -- BTM, Ltd., BTMTC, The Norinchukin Bank, New
York Branch, SRFP, Victory Credit Enhancer LLC, any "Bank" under the
Liquidity Agreements (Victory) and the Liquidity Agreements (Parthenon),
and any purchaser under the Asset Purchase Agreement (Victory), and
Asset Purchase Agreement (Parthenon) and any other financial
institutions providing funding, liquidity, credit or asset purchase
support with respect to sourcing the funds for any of the Notes.
Debt -- for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or
evidenced by bonds, debentures, notes or other similar instruments
(including principal, interest, fees and charges); (ii) all obligations
of such Person (whether contingent or otherwise) in respect of bankers'
acceptances, letters of credit, surety or other bonds and similar
instruments; (iii) all obligations of such Person to pay the deferred
purchase price of Property or services (other than for borrowed money);
(iv) all obligations under leases which shall have been, or should have
been, in accordance with GAAP, recorded as capital leases in respect of
which such Person is liable (whether contingent or otherwise); (v) all
obligations under leases which require such Person or its Affiliate to
make payments over the term of such lease, including payments at
termination, which are substantially equal to at least eighty percent
(80%) of the purchase price of the Property subject to such lease plus
interest at an imputed rate of interest; (vi) all Debt (as described in
the other clauses of this definition) and other obligations of others
secured by a Lien on any asset of such Person, whether or not such Debt
or other obligation is assumed by such Person; (vii) all Debt (as
described in the other clauses of this definition) and other obligations
of others guaranteed by such Person or in which such Person otherwise
assures a creditor against loss of the debtor or obligations of others;
(viii) all obligations or undertakings of such Person to maintain or
cause to be maintained the financial position or covenants of others or
to purchase the Debt or Property of others; (ix) obligations to deliver
goods or services in consideration of advance payments; (x) obligations
to pay for goods or services whether or not such goods or services are
actually received or utilized by such Person; (xi) any capital stock or
other equity interest of such Person in which such Person has a
mandatory obligation to redeem such stock or other equity interest; and
(xii) all obligations of such Person under Hedging Agreements.
Default Rate -- 2% per annum above the prematurity interest rate
set forth in the Class A2 Notes; except to the extent a "Default Rate"
is called for in the Class A1 Notes when such rate shall be 2% per annum
above the prematurity interest rate set forth in the Class A1 Notes.
Definitive Notes -- Class A1 Notes in the form of Exhibit A-1
attached hereto and Class A2 Notes in the form of Exhibit A-2 attached
hereto.
Drilling Rig -- the drilling vessel and all equipment appurtenant
thereto currently known as the "RBS-8M" and to be named DEEPWATER
NAUTILUS being the vessel and all equipment and other properties set out
and described in the First Preferred Ship Mortgage as the "Vessel" .
Engineer s Certification -- a document in the form of Annex D
hereto.
Environmental Laws -- any and all Governmental Requirements
pertaining to health, safety or the environment or the regulation of
hazardous substances or pollutants in effect in any and all
jurisdictions in which the Issuer is conducting or at any time has
conducted business, or where any Property of the Issuer is located,
including without limitation, the Oil Pollution Act of 1990 ("OPA"), the
Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the
Federal Water Pollution Control Act, as amended, the Occupational Safety
and Health Act of 1970, as amended, the Resource Conservation and
Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking Water Act,
as amended, the Toxic Substances Control Act, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, the Hazardous
Materials Transportation Act, as amended, and any other international,
federal, local or state environmental conservation or protection laws.
The terms "oil" and "discharge" shall have the meanings specified in
OPA, the terms "hazardous substance" and "release" (or "threatened
release") have the meanings specified in CERCLA, except that "hazardous
substance" shall also include petroleum and any fraction thereof, and
the terms "solid waste" and "disposal" (or "disposed") have the meanings
specified in RCRA; provided, however, that (i) in the event either OPA,
CERCLA or RCRA is amended so as to broaden the meaning of any term
defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment and (ii) to the extent the laws of the
state in which any material Property of the Issuer is located establish
a meaning for "oil," "discharge," "hazardous substance," "release,"
"solid waste" or "disposal" which is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply.
ERISA -- the Employee Retirement Income Security Act of 1974, as
amended from time to time.
ERISA Affiliate -- has the meaning set out in Schedule B to the
Note Purchase Agreements.
ERISA Event -- (i) a reportable event described in Section 4043
(c)(5), (c)(6), (c)(11) or (c)(13) of ERISA and the regulations issued
thereunder, (ii) the filing of a notice of intent to terminate a Plan or
the treatment of a Plan amendment as a termination under section 4041 of
ERISA, (iii) the institution of proceedings by the Pension Benefit
Guaranty Corporation ("PBGC") under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan
or (iv) the partial or complete withdrawal of Issuer or any ERISA
Affiliate from a Multiemployer Plan.
Event of Loss -- shall mean any one of the following events: (i)
actual total loss or destruction of the Drilling Rig or any accident,
occurrence or event resulting in a constructive total loss or an agreed
or compromised total loss of the Drilling Rig; or (ii) substantial
damage to the Drilling Rig, the repair of which is uneconomical as
determined in good faith by the Issuer, including, but not limited to,
any event pursuant to which insurance proceeds are available which are
not applied to repair the Drilling Rig or any other event resulting for
any reason whatsoever in the Drilling Rig being permanently rendered
unfit for normal use; or (iii) the condemnation, confiscation,
requisition, seizure, detention, forfeiture, purchase or other taking of
title to or use for more than ninety (90) days of the Drilling Rig.
Excepted Liens -- (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being Contested
In Good Faith; (ii) Liens in connection with workmen's compensation,
unemployment insurance or other social security, old age pension or
public liability obligations not yet due or which are being Contested In
Good Faith; (iii) operators', vendors', suppliers of necessaries to the
Drilling Rig, carriers', warehousemen's, repairmen's, mechanics',
workmen's, materialmen's, construction, shipyard liens (during repair or
upgrade periods) or other like Liens arising by operation of law in the
ordinary course of business or statutory landlord's liens, each of which
is in respect of obligations that have not been outstanding more than 60
days (so long as no action has been taken to file or enforce such Liens
within said 60 day period) or which are being Contested In Good Faith;
(iv) deposits of cash or securities to secure the performance of bids,
trade contracts, leases, statutory obligations and other obligations of
a like nature incurred in the ordinary course of business; and (v) other
Liens expressly permitted by the Project Documents.
Exchange Act -- has the meaning set forth in Schedule B to the Note
Purchase Agreements.
First Preferred Ship Mortgage -- has the meaning set forth in
Schedule B to the Note Purchase Agreements.
GAAP -- those generally accepted accounting principles and
practices which are recognized as such in the United States by the
Financial Accounting Standards Board (or any generally recognized
successor) as in effect from time to time.
General Intangibles -- all general intangibles including, in any
event without limitation, all (i) letters of credit, bonds, guaranties,
purchase or sales agreements and other contractual rights, rights to
performance, and claims for damages, refunds (including tax refunds) or
other monies due or to become due; (ii) orders, franchises, permits,
certificates, licenses, consents, exemptions, variances, authorizations
or other approvals by any governmental agency or court;
(iii) consulting, engineering and technological information and
specifications, design data, patent rights, trade secrets, literary
rights, copyrights, trademarks, labels, trade names and other
intellectual property; (iv) business records, computer tapes and
computer software; (v) goodwill; and (vi) all other intangible personal
property, whether similar or dissimilar to the other property that is
part of the Trust Estate.
Governmental Authority -- the country, the state, county, city and
political subdivisions in which any Person or such Person's Property is
located or which exercises jurisdiction over any such Person or such
Person's Property, and any court, agency, department, commission, board,
body, bureau or instrumentality of any of them including monetary
authorities which exercises jurisdiction over any such Person or such
Person's Property. Unless otherwise specified, all references to
Governmental Authority herein shall mean a Governmental Authority having
jurisdiction over, where applicable, the Issuer, the Parent or any of
their Property or the Trustees or any Note Holder.
Governmental Requirements -- any applicable law, statute, code,
ordinance, order, determination, rule, regulation, publication,
judgment, decree, injunction, franchise, permit, registration, consent,
approval, certificate, license, authorization or other directive or
requirement (whether or not having the force of law), including, without
limitation, Environmental Laws, energy regulations and occupational,
safety and health standards or controls, of any Governmental Authority.
Hedging Agreements -- any commodity, interest rate or currency
swap, cap, floor, collar, forward agreement or other exchange or
protection agreements or any option with respect to any such
transaction.
Hyundai -- Both Hyundai Heavy Industries Co., Ltd. and Hyundai
Corporation.
Indemnified Parties -- has the meaning set out in Section 13.17(b).
Indemnity Matters -- (i) any and all loss, cost, damage and expense
suffered or incurred; and (ii) any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), orders, claims,
demands and causes of action made or threatened against or affecting a
Person and, in connection therewith, all settlements, judgments, losses,
liabilities, obligations, damages, penalties, fines (including, without
limitation, consequential damages) or reasonable costs and expenses of
any kind or nature whatsoever incurred by such Person whether caused by
the sole or concurrent negligence (but not gross negligence or willful
misconduct) of such Person seeking indemnification.
Indenture -- this Trust Indenture and Security Agreement as
originally executed or as it may from time to time be supplemented or
amended in accordance with the provisions hereof.
Indenture Default -- an event or condition the occurrence of which
would, with the lapse of time or the giving of notice or both, become an
Indenture Event of Default.
Indenture Event of Default -- has the meaning set out in
Section 7.1.
Independent Director -- has the meaning set out in the Certificate
of Incorporation of the Issuer, as amended, as it existed on August 12,
1999.
Independent Engineer -- means an engineer registered under the laws
of the State of Texas, in good standing, selected by the Required
Holders and employed by a Trustee at the expense of the Issuer.
Initial Drawing Interest Amount -- has the meaning set out in
Section 3.7(c).
Initial Drawing Period -- has the meaning set out in Section
3.7(c).
Initial Drawing Rate -- has the meaning set out in Section 3.7(c).
Initial LIBOR Period -- has the meaning set out in Section 3.7(c).
Institutional Investor -- has the meaning set out in Schedule B to
the Note Purchase Agreements.
Issuer -- has the meaning set out in the first paragraph of this
Indenture.
Investment Grade -- a rating equal to or higher than "BBB-" by
Standard & Poor's Rating Services, a division of The McGraw Hill
Companies, Inc. or any successor thereto or equal to or higher than
"Baa3" by Moody's Investors Service, Inc. or any successor thereto and
equal to or higher than "BBB-" by Duff & Phelps Credit Rating Co. or any
successors thereto (if Duff & Phelps Credit Rating Co. is then rating
the applicable security) or a comparable rating by another nationally
recognized statistical rating organization, which rating and
organization are approved by the Required Holders.
LIBOR -- has the meaning set out in Section 3.7(c).
Lien -- any interest in Property securing an obligation owed to, or
a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including
but not limited to the security interest or lien arising from a
mortgage, encumbrance, pledge, conditional sale or other title retention
agreement, trust receipt or a lease, consignment or bailment for
security purposes. The term "Lien" shall include reservations,
exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and
encumbrances (including, with respect to stock, stockholder agreements,
voting trust agreements, buy back agreements and all similar agreements)
affecting the Property. For the purposes of this Indenture, a Person
shall be deemed to be the owner of any Property which it has acquired or
holds subject to a conditional sale agreement, financing lease or other
arrangement pursuant to which title to the Property has been retained by
or vested in some other Person for security purposes, and such retention
or vesting shall constitute a Lien.
Liquidity Agreements (Parthenon) -- the BTM Assets Liquidity
Agreement dated as of December 18, 1998 between BTM, Ltd. and SRFP, as
from time to time amended, supplemented or modified, and the SRFP
Liquidity Agreement dated December 18, 1998 between BTM, Ltd. and SRFP,
as from time to time amended, supplemented or modified.
Liquidity Agreements (Victory) -- General Liquidity Agreement No.
1, dated as of October 19, 1998, among Victory Receivables Corporation,
Bankers Trust Company, as administrator and collateral agent, BTM, Ltd.,
as agent, The Norinchukin Bank, New York Branch, and the banks parties
thereto, as from time to time amended, supplemented or modified, and the
Liquidity Agreement, dated as of August 18, 1999, among Victory
Receivables Corporation, Bankers Trust Company, as administrator and
collateral agent, BTM, Ltd., as agent, and the banks parties thereto, as
from time to time amended, supplemented or modified.
Liquidity Documents -- the Parthenon Program Agreement, the Victory
Credit Agreement, the Liquidity Agreements (Parthenon) and the Liquidity
Agreements (Victory), the Asset Purchase Agreement (Parthenon), the
Asset Purchase Agreement (Victory) and any other arrangement providing
liquidity for the commercial paper notes issued by any CP Conduit to
fund its purchase and carrying of the Notes.
Loss Payment Date -- the date that the Issuer shall receive the
proceeds of any insurance payment or settlement or any condemnation
award or other payment in relation to an Event of Loss.
Lump Sum Payment -- the payments made pursuant to the first
sentence of Section 4.2 and/or Section 4.3 of the Construction
Supervisory Agreement.
MPPAA -- Multiemployer Pension Plan Amendments Act of 1980, as
amended.
Make-Whole Amount -- has the meaning set out in Section 3.7.
Material -- has the meaning set out in Schedule B to the Note
Purchase Agreements.
Material Adverse Effect -- has the meaning set out in Schedule B to
the Note Purchase Agreements.
Maturity Date -- has the meaning set out in Schedule B to the Note
Purchase Agreements.
Multiemployer Plan -- has the meaning set out in Schedule B to the
Note Purchase Agreements.
Note Holder -- the owner and holder of a Note registered with the
Issuer as provided in Section 2.3.
Note Purchase Agreements -- the separate Note Purchase Agreements
dated as of August 12, 1999, between the Issuer and each of the
Purchasers in respect of the Notes.
Notes -- any or all of the Class A1 Notes and Class A2 Notes.
Operation and Maintenance Agreement -- has the meaning set forth in
Schedule B to the Note Purchase Agreements.
Operational Period -- the Primary Period as defined in Section 1.11
of the SDDI Contract.
Operational Period Conditions Precedent -- shall include each and
all of the following: (i) Completion (as defined in the Construction
Supervisory Agreement) of the Drilling Rig has occurred, (ii) issuance
of a certificate of classification of the Drilling Rig by the American
Bureau of Shipping as A1 M, Column Stabilized Drilling Unit , CDS,
P, PAS, and accompanied by a statement of fact from ABS for UK/Den/HSE
compliance and Drilling System Compliance, (iii) vesting of title to the
Drilling Rig in the Issuer, free and clear of all liens, (iv) delivery
and registration of the First Preferred Ship Mortgage, as a first
preferred ship mortgage, together with an opinion of Issuer s counsel in
the form of Annex E hereto (v) delivery to a Trustee of the SDDI
Estoppel Letter, and (vi) no Indenture Default or Indenture Event of
Default shall have occurred and be continuing.
Opinion of Counsel -- an opinion of outside counsel (which may from
time to time serve as counsel for the Issuer, for the Trustees or for a
Note Holder) reasonably acceptable to the Trustees, which opinion is in
scope, form and substance reasonably satisfactory to the Trustees and
the Trustees counsel.
Outer Continental Shelf -- shall have the meaning assigned to such
term in 43 U.S.C. Section 1331.
Outside Date -- September 30, 2000 (unless the Trustees are deemed
to have consented to an extension of the Outside Date as provided in the
penultimate Provided, However paragraph of the Performance Bond in
which event the Outside Date shall be extended accordingly).
Outstanding -- when used with reference to Notes shall mean, as of
any particular time, all Notes authenticated and delivered by a Trustee
under this Indenture, except:
(a) Notes theretofore canceled by a Trustee or delivered to
a Trustee for cancellation;
(b) Notes for the payment or prepayment of which moneys in
the necessary amount shall have been deposited in trust with the
Trustees; and
(c) Notes in lieu of or in substitution for which other Notes
shall have been delivered pursuant to the terms of Section 2.4, 2.5
or 2.9 of this Indenture.
Owner's Supplies -- all of the items furnished and to be furnished
by the Issuer for the Drilling Rig as specified in the Construction
Contract.
Parent -- R&B Falcon Corporation, a Delaware corporation.
Parent Indemnity -- each indemnity agreement by the Parent or any
of its subsidiaries in favor of the Sureties.
Parthenon Program Agreement -- the Program Agreement, dated as of
December 18, 1998, among PRFL, SRFP, BTM, Ltd. and BTMTC, as program
administrator, as from time to time amended, supplemented or modified.
Payment Date -- any Phase One Payment Date and Phase Two Payment
Date.
Payment Reserve Account -- has the meaning set out in Section 4.1.
Performance Bond -- that certain Performance Bond dated August 12,
1999, executed by RBF II, as Principal, and Travelers Casualty and
Surety Company of America and American Home Assurance Company, as
Sureties, being Bond nos. 61 SB 103206545 BCM and 21-45-09 in favor of
Issuer, as Owner, and the Trustees in the maximum penal sum of
$265,000,000.
Performance Guarantee -- that certain Performance Guarantee dated
as of August 12, 1999 made by Parent in favor of Issuer and the Trustee.
Pension Plans -- employee pension benefit plans (as defined in
Section 3 of ERISA) to which from time to time the Issuer is required to
contribute.
Permitted Investments -- (a) direct obligations of the United
States of America (including obligations issued or held in book-entry
form on the books of the Department of the Treasury of the United States
of America and certificates or other instruments evidencing ownership
interests in such direct obligations of the United States of America
such as CATS, TIGRS, Treasury Receipts and Stripped Treasury Coupons)
which mature within one (1) year after the acquisition thereof;
(b) obligations for which the timely payment of the principal thereof
are fully guaranteed by the United States of America or the Federal
Deposit Insurance Corporation, which mature within one (1) year after
the acquisition thereof; (c) certificates of deposit of, or time
deposits in, any bank (including any Trustee) or trust company organized
under the laws of the United States of America or any state thereof
whose unsecured obligations are accorded one of the two highest ratings
by Standard & Poor's Ratings Services, a division of The McGraw Hill
Companies, Inc. or Moody's Investors Service, Inc. and by Duff & Phelps
Credit Rating Co. (if such unsecured obligations are rated by Duff &
Phelps Credit Rating Co.) and which have capital and unimpaired surplus
of at least Five Hundred Million Dollars ($500,000,000), maturing within
ninety (90) days after the acquisition thereof; (d) readily marketable
commercial paper of corporations doing business in and incorporated
under the laws of the United States of America or any State thereof
given on the date of the investment a credit rating of at least P-1 by
Moody's Investor Services, Inc., or A-1 by Standard & Poor's Ratings
Services, a division of The McGraw Hill Companies, Inc. and D-1 by Duff
& Phelps Credit Rating Co. (if Duff & Phelps Credit Rating Co. is then
rating such commercial paper) in each case due within 90 days after the
date of the making of the investment; and (e) investments in a money-
market fund (including any fund for which a Trustee or any Affiliate of
a Trustee serves as adviser or sponsor or otherwise receives
compensation with respect to such fund) rated AAAm or better by Standard
& Poor's Ratings Services, a division of The McGraw Hill Companies, Inc.
or Aaa by Moody's Investors Services, Inc. and having the equivalent
rating from Duff & Phelps Credit Rating Co., is such investments are
then rated by Duff & Phelps Rating Co. (or equivalent categories that
may be established by such rating services).
Person -- an individual, partnership, corporation, limited
liability company, trust, unincorporated association or organization,
government, governmental agency or governmental subdivision.
Phase One -- the period of time beginning on the Closing Date up
to, and including, the Phase One Maturity Date.
Phase One Contract Receipts -- has the meaning set out in
Section 4.1.
Phase One Interest Reserve -- has the meaning set out in Section
4.1(a).
Phase One Maturity Date -- April 30, 2000.
Phase One Payment Date -- the first day of each month of each year
beginning in the calendar month following the Closing Date, and
continuing to and including the Phase One Maturity Date.
Phase Two -- the period of time beginning on May 1, 2000 and ending
on the Maturity Date.
Phase Two Payment Date -- the first day of each month of each year
beginning in June of 2000, and continuing for fifty-nine (59) months
thereafter for a total of sixty (60) payment dates.
Phase Two Reserve Amount -- has the meaning set out in Section
4.1(a).
Plans -- employee benefit plans (as defined in Section 3(3) of
ERISA) sponsored, maintained or contributed to by the Parent or an ERISA
Affiliate.
Pledged Equipment -- has the meaning set forth in Paragraph (a) of
the Granting Clause.
PRFL -- Parthenon Receivables Funding, LLC.
Project Documents -- this Indenture, the Note Purchase Agreements,
the Notes, the Construction Supervisory Agreement, the Performance Bond,
the Performance Guarantee, the Parent Indemnity, the Refundment
Guarantee, the Assignment of Drilling Contract, the Operation and
Maintenance Agreement, the First Preferred Ship Mortgage, the SDDI
Acknowledgment and Consent (as defined in the Note Purchase Agreement),
and any and all other agreements or instruments now or hereafter
executed and delivered by the Issuer, RBF II or the Parent in connection
with or as a security for the payment and performance of the Notes.
Property -- any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
Purchasers -- each Person named in Schedule A to the Note Purchase
Agreements.
QPAM -- a "qualified professional asset manager" under Part V of
the QPAM Exemption.
QPAM Exemption -- has the meaning set out in Schedule B to the Note
Purchase Agreements.
Quotation Date -- has the meaning set out in Section 3.7(c).
Rating Agencies -- means both Standard & Poor's Rating Services, a
division of The McGraw Hill Companies, Inc. or any successor thereto and
Duff & Phelps Credit Rating Co. or any successor thereto.
RBF II -- has the meaning set out in Schedule B to the Note
Purchase Agreements.
Refundment Guarantee -- means the Bank Performance Guarantee (as
defined in the Performance Bond).
Regulatory Change -- means, relative to any Note Holder or Credit
Support Party: any change in (or the adoption, implementation, change in
phase in or commencement of effectiveness of) any (i) United States
federal or state law or foreign law applicable to such Note Holder or
Credit Support Party; (ii) regulation, interpretation, directive,
requirement or request (whether or not having the force of law)
applicable to such Note Holder or Credit Support Party of any
Governmental Authority charged with the interpretation or administration
of any law referred to in clause (i) above or of any fiscal, monetary or
other authority having jurisdiction over such Note Holder or Credit
Support Party; (iii) GAAP or regulatory accounting principles applicable
to such Note Holder or Credit Support Party; or (iv) any change in the
application to such Note Holder or Credit Support Party of any existing
law, regulation, interpretation, directive, requirement, request or
accounting principles referred to in clause (i), (ii) or (iii) above.
Required Holders -- at any time, holders of more than fifty percent
(50%) in aggregate principal amount of all Class A1 Notes then
Outstanding and fifty percent (50%) in aggregate principal amount of all
Class A2 Notes then Outstanding (in each case, exclusive of any Notes
held by the Issuer or any Affiliate of the Issuer).
Responsible Officer -- with respect to any corporation, the
chairman or a vice chairman of the board (if an officer), the president,
the chief executive officer, the chief financial officer, the chief
operating officer, executive vice president, senior vice president,
second vice president or any other vice president, the controller, the
treasurer, any assistant treasurer or the secretary; and with respect to
any Trustee which is a corporation or banking association, any vice
president, corporate trust officer or other officer, in each case
employed within the corporate trust department of such Trustee and who
has direct supervisory responsibility for the administration of this
Indenture and the other Project Documents.
Royal Dutch Shell -- has the meaning set out in Schedule B to the
Note Purchase Agreements.
SDDI -- has the meaning set out in Schedule B to the Note Purchase
Agreements.
SDDI Contract -- has the meaning set out in Schedule B to the Note
Purchase Agreements.
SDDI Estoppel Letter -- means a letter from SDDI to the Issuer and
the Trustees substantially in the form attached hereto as Annex F.
Security -- has the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
Shortfall -- has the meaning set out in Section 4.1(c).
Special Yield Protection Amount -- has the meaning set out in
Section 3.7(c).
Specifications -- has the meaning set out in the Construction
Contract.
SRFP -- Swiss Re Financial Products Corporation.
Subsidiary -- has the meaning set out in Schedule B to the Note
Purchase Agreements.
Sureties -- means the surety or sureties under the Performance
Bond.
Swap -- means the Confirmation, dated as of the date hereof, under
the ISDA Master Agreement, dated as of December 9, 1998, between Victory
Receivables Corporation and BTM, Ltd.
Transaction Document -- has the meaning set out in Section 3.7(b).
Trust Estate -- has the meaning set out in the Granting Clause
hereof.
Trustee -- has the meaning set out in the first paragraph of this
Indenture.
UCC -- has the meaning set out in Section 7.4.
Victory Credit Agreement -- the Credit Agreement, dated as of
October 19, 1998, among Victory Receivables Corporation, Bankers Trust
Company, as program administrator, and Victory Credit Enhancer LLC, as
from time to time amended, supplemented or modified.
Voting Stock -- capital stock or other equity interest of any class
or classes of a corporation or other entity the holders of which are
ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar
functions).
Written Request -- with respect to any Person a written order or
request signed in the name of such Person by a Responsible Officer of
such Person (if a corporation) or by a general or managing partner of
such Person (if a partnership) or by the manager of such Person (if a
limited liability company) or by the individual (if such Person is an
individual).
Year 2000 Problem -- the risk that computer hardware or software
applications or other data processing capacities used by the Issuer may
be unable to recognize and perform properly date-sensitive functions
involving certain dates before and any date after December 31, 1999.
Yield Protection Amount -- has the meaning set out in Section
3.7(b).
ARTICLE 2. FORM, EXECUTION, ISSUE AND DELIVERY OF NOTES.
2.1 Issue of Notes.
(a) The Issuer has authorized the issue and sale of Two Hundred
Million Dollars ($200,000,000) aggregate original principal amount of
its 7.31% Senior Secured Class A1 Notes due May 1, 2005 (such notes and
all notes given in substitution or exchange therefore are herein
collectively called the "Class A1 Notes"). The Class A1 Notes shall be
issuable as fully registered Notes in the form set out in Annex A-1 to
this Indenture.
(b) The Issuer has also authorized the issue and sale of Fifty
Million Dollars ($50,000,000) aggregate original principal amount of its
9.41% Senior Secured Class A2 Notes due May 1, 2005 (such notes and all
notes given in substitution or exchange therefor are herein collectively
called the "Class A2 Notes"). The Class A2 Notes shall be issuable as
fully registered Notes in the form set out in Annex A-2 of this
Indenture.
2.2 Authentication of Notes; Denominations of Notes and Form.
(a) Authentication. The Notes shall be of the tenor and purport
above recited, and the maturity date of each series of Notes shall be
determined, on or prior to the initial issuance of such series, in the
manner contemplated by the Note Purchase Agreements. Only such of the
Notes as shall bear thereon a certificate in form substantially as set
forth in the form of Trustee's Certificate of Authentication contained
in Annex A-1 or Annex B-2, as the case may be, executed by a Trustee,
shall be valid or become obligatory for any purpose or entitle the
holder thereof to any right or benefit under this Indenture, and the
Certificate of Authentication by a Trustee upon any such Note executed
on behalf of the Issuer as aforesaid shall be conclusive evidence that
the Note so authenticated has been duly authenticated and delivered
hereunder and that the holder is entitled to the benefits of this
Indenture. Subject to the provisions of Section 2.9 respecting Notes
issued in replacement of lost or stolen Notes, the aggregate principal
amount of all Notes which may be issued and outstanding under this
Indenture at any time shall not exceed Two Hundred Fifty Million Dollars
($250,000,000) less the aggregate amount of prepayments of principal
made on the Notes up to such time.
(b) Denominations. The Notes shall be issued in minimum
denominations of Five Hundred Thousand Dollars ($500,000); provided,
however, that if it is necessary to enable the registration of transfer
by a holder of its entire holding of Notes, a Note may be in a
denomination which is less than Five Hundred Thousand Dollars
($500,000).
(c) Form. All Notes shall be issued in the form of Definitive
Notes, duly executed by the Issuer and authenticated by a Trustee as
hereinabove provided.
2.3 Registration of Notes. All Notes issuable under this Indenture
shall be registered Notes. The Issuer shall cause to be kept at its
agency, maintained pursuant to Section 8.8, a register for the registration
and transfer of Notes. The name and address of each holder of record of
one or more Notes, each registration of transfer thereof and the name and
address of each transferee of one or more Notes shall be registered in such
register. The Person in whose name any Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes of this
Indenture, and the Issuer and the Trustees shall not be affected by any
notice or knowledge to the contrary.
2.4 Exchange of Notes. Upon surrender of any Note at the agency of the
Issuer maintained pursuant to Section 8.8, the Issuer, at the request of
the holder thereof, will execute and deliver, at the Issuer's expense
(except as provided in Section 2.6 below), and a Trustee will authenticate,
one or more new Notes payable to such holder in exchange therefor, of like
tenor for a like aggregate principal amount in authorized denominations.
2.5 Transfer of Notes.
(a) General. Any Note may be transferred at the agency of the
Issuer maintained pursuant to Section 8.8, by surrendering such Note for
cancellation, accompanied by a written instrument of transfer in the
form attached to the Note (which must specify the taxpayer
identification number of the transferee), duly executed by the holder of
such Note or by its attorney duly authorized in writing. Thereupon the
Issuer, at its expense, shall issue in the name of the transferee or
transferees, and arrange for the authentication by a Trustee of (and
such Trustee shall authenticate) and deliver in exchange therefor, a new
Note or Notes, of a like tenor for a like aggregate principal amount, in
authorized denominations.
(b) Legends. Each Note shall bear a legend in substantially the
following form:
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5
OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER
OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
ISSUER IS NOT REQUIRED TO REGISTER THE NOTES UNDER THE SECURITIES
ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE ISSUER THAT SUCH SECURITY MAY BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED, ONLY IN ACCORDANCE WITH AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EITHER
CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION.
(c) Subsequent Transferee Representations. Any transferee, by its
acceptance of a Note registered in its name (or the name of its
nominee), shall be deemed to have made the representations set forth in
Sections 6.1 and 6.2 of the Note Purchase Agreements, provided, however,
that, such transferee will not be deemed to have made the representation
set forth in Section 6.2(c), (d) or (g) unless such transferee shall
have made the disclosures referred to therein to the Issuer at least
five Business Days prior to its acceptance of such Note and shall have
received prior to such acceptance of such Note a certificate from the
Issuer stating that (1) the Issuer is neither a "party in interest" (as
defined in Section 3(14) of ERISA) nor a "disqualified person" (as
defined in Section 4975(e)(2) of the Code), with respect to any plan
identified pursuant to Section 6.2(c) or (g) or (2) with respect to any
plan identified pursuant to Section 6.2(d) neither the Issuer nor any
"affiliate" (as defined in Section V(e) of the QPAM Exemption) has at
such time, or has exercised during the immediately preceding one year,
the authority to appoint or terminate the QPAM as manager of the assets
of any plan identified in writing pursuant to Section 6.2(d) or to
negotiate the terms of said QPAM's management agreement on behalf of any
such identified plan, and provided, further, that, such transferee will
not be deemed to have made the representation set forth in Section
6.2(b), (c) or (d) unless the applicable Prohibited Transaction Class
Exemption referred to therein remains in effect at that time or another
similar Prohibited Transaction Class Exemption is then available. The
Issuer shall exercise reasonable due diligence as is necessary to
respond to any such disclosure, provided that, if the Issuer shall not
respond within five Business Days following receipt of any such
disclosure, it shall be deemed to have made the statement set forth in
either clause (1) or (2), as applicable, of this Section 2.5(c). If the
Issuer shall respond within five Business Days following receipt of any
such prospective transferee disclosure and shall state that the Issuer
is unable to make the statement set forth in either clause (1) or (2),
as applicable, of this Section 2.5(c) (which statement shall include a
description of the basis for its determination), a Trustee shall not be
permitted (and the Issuer shall not be required) to register the
transfer to such prospective transferee of the Note.
2.6 General Rules.
(a) All transfers, exchanges or replacements of Notes pursuant to
Section 2.4, Section 2.5 or Section 2.9 shall be made without expense to
the holder of the Notes, except that any stamp taxes or other
governmental charges required to be paid with respect to the same shall
be paid by the Note Holder requesting such transfer, exchange or
replacement as a condition precedent to the exercise of such privilege,
unless an Indenture Event of Default has occurred and is continuing, in
which case Issuer shall be liable for such stamp taxes or other
governmental charges. All Notes surrendered for transfer, exchange or
replacement shall be canceled and destroyed by the Trustees. Each new
Note delivered pursuant to Section 2.4 or Section 2.5 shall be dated and
bear interest from the most recent date to which interest has been paid
on the surrendered Note or Notes, or dated the date of the surrendered
Note or Notes if no interest has been paid thereon. The Trustees shall
make a notation on each new Note delivered pursuant to Section 2.4,
Section 2.5 or Section 2.9 of the amount of all payments of principal
previously made on the old Note or Notes with respect to which such new
Note is issued. The Issuer may deposit fully executed but
unauthenticated Notes with the Trustees, which shall hold such Notes (as
agent of the Issuer) for subsequent authentication and issuance and
delivery by the Issuer pursuant to this Article 2. The Issuer shall not
be required to register the transfer, exchange or replacement of,
pursuant to this Article 2, (i) any Note during the five (5) days
preceding the due date of any payment thereon or (ii) any Note after the
Issuer shall have given notice pursuant to Article 3 of this Indenture
of the prepayment thereof and prior to the prepayment date specified in
such notice.
(b) With respect to any CP Conduit that is a Purchaser, each
holder of a Note, by its acceptance of said Note, hereby agrees that
until the 368th day following the maturity of the last maturing
commercial paper note to be issued by any such CP Conduit in connection
with its funding of its investment in the Notes, said holder of a Note
will not institute, nor will said holder join with others in
instituting, any involuntary bankruptcy or analogous proceeding against
any such CP Conduit under any bankruptcy, reorganization, receivership
or similar law, domestic or foreign, as now or hereafter in effect.
2.7 Valid Obligations. All Notes executed, authenticated and delivered
in exchange for, upon transfer of, or in replacement of, other Notes as
provided in this Indenture shall be the valid obligations of the Issuer,
evidencing the same debt as such other Notes, and shall be entitled to the
benefits of this Indenture to the same extent as the Notes in exchange for
or upon transfer or replacement of which they were executed and delivered.
2.8 Execution and Delivery. The Notes may be typewritten, printed or
lithographed or produced by any other means acceptable to the Trustees, and
shall be signed on behalf of the Issuer by the manual signature of one of
the Responsible Officers under its corporate seal (which may be printed,
engraved or otherwise reproduced thereon or affixed thereto) and attested
by the manual signature of the Secretary or one of the Assistant
Secretaries of the Issuer. In the case that any of the officers who shall
have signed or sealed any of the Notes shall cease to be such officer or
officers of the Issuer before the Notes so signed or sealed shall have been
delivered by or on behalf of the Issuer, such Notes may nevertheless be
delivered and issued and, upon such delivery and issue, shall be binding
upon the Issuer as though those who signed or sealed the same had continued
to be such officer or officers.
2.9 Replacement of Notes. Upon receipt by the Issuer and the Trustees
of evidence reasonably satisfactory to each of them of the ownership of and
the loss, theft, destruction or mutilation of any Note and
(a) in the case of loss, theft or destruction, (i) if the holder
is a Purchaser, its nominee or other nationally recognized bank,
insurance company, benefit society or other institutional investor, upon
receipt of an unsecured indemnity agreement signed by the holder of the
Note in form reasonably satisfactory to the Issuer and the Trustees to
save each of them harmless, or (ii) otherwise, upon receipt of such
security or indemnity as may be reasonably required by the Issuer or the
Trustees to save each of them harmless, or
(b) in the case of mutilation, upon surrender and cancellation
thereof, the Issuer, at its own expense, will execute and deliver in
lieu thereof, and arrange for the authentication by the Trustees of (and
the Trustees will authenticate), a new Note of like tenor, dated and
bearing interest from the date to which interest has been paid on such
lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest has been paid
thereon.
ARTICLE 3. PAYMENTS AND DISTRIBUTION THEREOF.
3.1 Payment by Issuer. Anything in this Indenture or in the Notes to
the contrary notwithstanding, but subject to the provisions of Section 13.5
hereof, the Issuer will pay all amounts payable with respect to the Notes
held by each Purchaser or other registered holder of Notes (without any
presentment of any such Notes and without any notation of such payment
being made thereon) in lawful money of the United States of America to the
Trustee for payment on behalf of the Issuer as provided in this Article 3,
Article 4 and in Article 5. In any case where the date of maturity of
principal of, and interest and any applicable Make-Whole Amount, Yield
Protection Amount, Special Yield Protection Amount or Breakage Amount on,
the Notes or the date fixed for any prepayment (in whole or in part) of the
Notes will not be a Business Day, then payment of such principal of, and
interest and any applicable Make-Whole Amount, Yield Protection Amount,
Special Yield Protection Amount or Breakage Amount on, the Notes need not
be made on such date but may be made on the next succeeding Business Day
with the same force and effect as if made on the date of maturity or the
date fixed for such prepayment; provided any such delayed payment includes
interest accrued to date of payment. Each holder of a Note, by its
acceptance of such Note, agrees that (i) the Trustee, in its individual
capacity, shall not be liable to the holder of any Note for any amounts
payable under any Note or this Indenture, and (ii) the Trustee, in its
individual capacity, shall not have any liability under this Indenture,
except as provided herein. None of the Notes may be prepaid except as
required or permitted by Section 3.4, Section 3.5 or Section 7.2.
3.2 Delivery Expenses. If any holder of a Note shall surrender any
Note to the Issuer or to the Trustee pursuant to this Indenture, the Issuer
will pay the cost of delivering to or from such holder's home office from
or to the agency of the Issuer maintained pursuant to Section 8.8, as the
case may be, the surrendered Note and any Note issued in substitution or
replacement for the surrendered Note.
3.3 Issue Taxes. The Issuer will pay all taxes, assessments and
charges in connection with the issuance and sale of the Notes by the Issuer
and in connection with any modification of the Notes and will save each
holder of any Note harmless without limitation as to time against any and
all liabilities with respect to all such taxes. The obligations of the
Issuer under this Section 3.3 shall survive the payment or prepayment of
the Notes and the termination of this Indenture.
3.4 Required Payments of Notes without Premium.
(a) Scheduled Amortization for Class A1 Notes. The principal and
interest on the Class A1 Notes shall be due and payable in fifty-nine
(59) equal monthly installments aggregating Three Million Nine Hundred
Eighty-nine Thousand Five Hundred Fifty-six and 72/100 Dollars
($3,989,556.72) each month, commencing on the first Phase Two Payment
Date, and a final installment of all accrued and unpaid interest and
unpaid principal on the Maturity Date. Each such monthly installment
shall be applied first to the payment of accrued and unpaid interest on
the Class A1 Notes and then to the payment of the outstanding principal
amount of the Class A1 Notes. The aggregate amount of principal that is
due and payable on each Phase Two Payment Date and on the Maturity Date
on all Class A1 Notes is set forth in Annex B hereto.
(b) Amortization Schedules. Each Class A1 Note shall have
attached thereto a prepayment schedule showing the amortization payments
(principal and accrued interest) of such Note required to be paid
pursuant to Section 3.4(a) and the respective due dates of such amounts.
(c) Class A2 Notes. In addition to paying the entire outstanding
principal amount of, and the interest due on, the Class A2 Notes on the
Maturity Date, the Issuer agrees to pay, and there shall become due and
payable, unpaid accrued interest on Class A2 Notes on the Payment Dates.
(d) Class A1 Notes during Phase One. In addition to paying the
amounts due on the Class A1 Notes pursuant to the other Sections of this
Article, the Issuer agrees to pay, and there shall become due and
payable, unpaid accrued interest on Class A1 Notes on the Phase One
Payment Dates.
(e) Phase One Interest Payments. The payment of unpaid accrued
interest on the Notes, which is due and payable on any Phase One Payment
Date pursuant to Section 3.4(c) and Section 3.4(d), shall be made by the
Trustee pursuant to Section 4.1 of this Indenture or, if appropriate,
from the Construction Account, as provided in Section 5.1(b), for the
account of Issuer. All payments made by the Trustee pursuant to this
Indenture shall be deemed to have been made for the benefit of the
Issuer.
3.5 Required Prepayments of Notes. The Notes shall be prepaid in full
on the following dates, together with accrued interest thereon to the date
of prepayment and the Make-Whole Amount, if any, to each Note Holder other
than a Breakage Party and the Breakage Amount, if any, to each Breakage
Party, determined for the prepayment date with respect to the principal
amount plus all other amounts payable hereunder to the holders of the Notes
and the Trustee:
(a) Upon the occurrence of an Event of Loss;
(b) In the event either of the Construction Contract or the SDDI
Contract is rescinded or terminated, then upon the earlier to occur of
(i) the Outside Date and (ii) the date which is six (6) months after any
such rescission or termination.
(c) On June 28, 2000, if the Initial Acceptance (as defined in the
Construction Supervisory Agreement) of the Drilling Rig has not occurred
by said date;
(d) On the Outside Date, if Completion (as defined in the
Construction Supervisory Agreement) and the Operational Period
Conditions Precedent have not occurred by said date; or
(e) Immediately upon the date that the Trustee notifies the Issuer
that one or more of the Purchasers have failed to give their consent in
a circumstance in which an agreement has been reached between the Issuer
and SDDI (i) to accept the Drilling Rig notwithstanding that it fails to
meet the Specifications and/or (ii) to a reduction in the day rate
payable under the SDDI Contract.
The Issuer will give (or cause to be given) notice of such prepayment
under clause (a), (b), (c), (d) or (e) of this Section 3.5 to the Trustee
and the holders of the Notes promptly (and in any event within one (1)
Business Day) after the occurrence of the event specified in such clause,
and shall specify the date for such prepayment, which date, with respect
to an Event of Loss, shall not be less than 30 days nor more than 75 days
after the date of such notice and, with respect to an event specified in
Section 3.5(b), shall be the date specified in said Section and with
respect to any other clauses of this Section 3.5, shall be the date which
is 30 days after the event specified in such clause. In the event the
Trustee and the Note Holders have not received the aforesaid notice, such
prepayment shall be due and payable 30 days after the occurrence of the
event listed in (a) or the date specified in (b), (c), (d) and (e) above,
as appropriate.
3.6 Surrender of Notes on Prepayment. Following any prepayment of any
Note pursuant to Section 3.5 such Note shall, prior to any transfer
thereof, be (a) made available to the Trustee for notation on the
prepayment schedule attached to such Note of the amount of principal so
prepaid or, (b) at the option of the holder thereof and in lieu of the
alternative in the foregoing clause (a) of this sentence, held by the
holder of such Note who shall make a notation on such schedule of the
amount of principal so prepaid. In case the entire principal amount of any
Note is prepaid or paid, such Note shall be surrendered promptly at the
agency of the Issuer maintained pursuant to Section 8.8, for cancellation,
upon Written Request therefor by the Issuer, and shall not be reissued, and
no Note shall be issued in lieu of the prepaid or paid principal amount of
any Note.
3.7 Provision for Applicable Make-Whole Amount, Yield Protection
Amount, Special Yield Protection Amount and Breakage Amount.
(a) Applicable Make-Whole Amount. The Issuer acknowledges that the
right of each Note Holder (excluding any Breakage Party) to maintain a rate
of return based upon the full term of the Notes and the scheduled
prepayments under Section 3.4 is a valuable right, and that the provisions
for payment of the Make-Whole Amount by the Issuer in the event that
(a) the Notes are prepaid, or (b) the maturity of the Notes is accelerated,
are intended to provide reasonable compensation for the deprivation of such
right under such circumstances.
The term "Make-Whole Amount" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over
the amount of such Called Principal, provided that the Make-Whole Amount
may in no event be less than zero. For the purposes of determining the
Make-Whole Amount, the following terms have the following meanings:
"Called Principal" means, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to Section 3.5 or has become
or is declared to be immediately due and payable pursuant to
Section 7.2, as the context requires.
"Discounted Value" means, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of
any Note, .50% over the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the second Business
Day preceding the Settlement Date with respect to such Called Principal,
on the display designated as "Page 678" on the Telerate Access Service
(or such other display as may replace Page 678 on Telerate Access
Service) for actively traded U.S. Treasury securities having a maturity
equal to the Remaining Average Life of such Called Principal as of such
Settlement Date, or (ii) if such yields are not reported as of such time
or the yields reported as of such time are not ascertainable, the
Treasury Constant Maturity Series Yields reported, for the latest day
for which such yields have been so reported as of the second Business
Day preceding the Settlement Date with respect to such Called Principal,
in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities
having a constant maturity equal to the Remaining Average Life of such
Called Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the duration closest to and
greater than the Remaining Average Life and (2) the actively traded U.S.
Treasury security with the duration closest to and less than the
Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (b) the number of years (calculated to the nearest one-twelfth year)
that will elapse between the Settlement Date with respect to such Called
Principal and the scheduled due date of such Remaining Scheduled
Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and
interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on such
Settlement Date pursuant to Sections 3.5 or 7.2.
"Settlement Date" means, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 3.5 or has become or is declared to be immediately
due and payable pursuant to Section 7.2, as the context requires.
(b) Yield Protection Amount. If any Regulatory Change occurring after
the date hereof:
(i) shall subject any Note Holder or Credit Support Party to any
tax, duty or other charge with respect to any Note (or its participation
therein), or any of its obligations or right to acquire or hold any Note
or to provide funding, liquidity, credit or asset purchase support to a
CP Conduit in respect of any of the foregoing (or with respect to its
participation in any of the foregoing), or shall change the basis of
taxation of payments to a Note Holder or Credit Support Party of the
principal or interest on any Note (or its participation in any of the
foregoing) or any other amounts due hereunder or under any funding,
liquidity, or credit support agreement it may have with a CP Conduit or
another Credit Support Party (collectively, a "Transaction Document") or
its obligations or rights, if any, to acquire or participate in any Note
or to provide funding, liquidity, credit or asset purchase support to a
CP Conduit or another Credit Support Party in respect of any of the
foregoing (or with respect to its participation in any of the foregoing)
(except for changes in the rate of tax on or determined by reference to
the overall net income of such Note Holder or Credit Support Party or
franchise tax based on capital or net income of such Note Holder or
Credit Support Party imposed by the United States of America or any
state); or
(ii) shall impose upon any Note Holder or Credit Support Party,
modify or deem applicable any reserve, special deposit or similar
requirement against assets of any Note Holder or Credit Support Party,
deposits or obligations with or for the account of any Note Holder or
Credit Support Party or with or for the account of any Affiliate (or
entity deemed by the Federal Reserve Board to be an Affiliate) of any
Note Holder or Credit Support Party, or credit extended by any Note
Holder or Credit Support Party; or
(iii) shall change the amount of capital maintained or required
or requested or directed to be maintained by any Note Holder or Credit
Support Party; or
(iv) shall impose any other condition affecting any Note (or its
participation therein) or any of its obligations or right to acquire or
hold any Note or to provide funding, liquidity, credit or asset purchase
support to a CP Conduit or Credit Support Party in respect of any of the
foregoing (or with respect to its participation in any of the
foregoing);
and the result of any of the foregoing is or would be
(I) to increase the cost to (or impose a cost on) (I) a Note
Holder or Credit Support Party funding or acquiring or holding any Note,
or loans or other extensions of credit under any Transaction Document or
any obligation or commitment of such Note Holder or Credit Support Party
with respect to any of the foregoing, or (II) a Credit Support Party for
continuing its relationship with its respective CP Conduit,
(II) to reduce the amount of any sum received or receivable by a
Credit Support Party as successor in interest to a CP Conduit as a Note
Holder under this Indenture, or under any Transaction Document (or its
participation in any of the foregoing), or
(III) to reduce the rate of return on the capital of such a
Credit Support Party as a consequence of its obligations under the
Transaction Documents (or its participation therein) to a level below
that which such Credit Support Party could otherwise have achieved,
in each such case by an amount reasonably deemed by such Note Holder or
Credit Support Party to be material, then prior to the next scheduled
Payment Date, and in any case within 30 days after demand by such Note
Holder or Credit Support Party (which demand shall be accompanied by a
statement setting forth in reasonable detail the basis of such demand), the
Issuer shall pay directly to the Trustee for the benefit of such Note
Holder or Credit Support Party such additional amount or amounts as will
compensate such Note Holder or Credit Support Party for such additional or
increased cost or such reduction (the "Yield Protection Amount"). The
Trustee will deposit such amounts in the Collection Account for
distribution in accordance with Article 5.
In determining any amount provided for or referred to in this
Section 3.7(b), a Note Holder or Credit Support Party may use any
reasonable averaging and attribution method that it (in its sole
discretion) shall deem applicable. Any Note Holder or Credit Support Party
when making a claim under this Section 3.7(b) shall submit to the Issuer
and the Trustee a statement as to such increased cost or reduced return
(including calculation thereof in reasonable detail), which statement
shall, in the absence of error, be conclusive and binding upon the Issuer.
No Note Holder or Credit Support Party shall be entitled to recover any
Yield Protection Amount under this Section 3.7(b), incurred or accrued more
than 180 days prior to the notice described in this Section 3.7(b), unless
the Regulatory Change giving rise to such Yield Protection Amount is
retroactive in its application to said Note Holder or Credit Support Party.
(c) Special Yield Protection Amount. Each time that all or part of the
funding for a Purchaser s carrying of a Note shall be provided pursuant to
a draw or utilization by such Purchaser of a Liquidity Document, the Issuer
shall pay to such Purchaser, the Special Yield Protection Amount applicable
to such drawing or utilization. The Special Yield Protection Amount, in
respect of any drawing or utilization of a Liquidity Document, means the
excess, if any, of (I) the Initial Drawing Interest Amount over (II) the
Related Floating Rate Swap Payment. The Initial Drawing Interest Amount
means the amount of interest accrued at the Initial Drawing Rate on the
principal amount of such drawing or utilization for the period beginning
on the date of such drawing or utilization and ending on the next Payment
Date that occurs at least two (2) Business Days after such date (such
period, the Initial Drawing Period ). The Related Floating Rate Swap
Payment is the portion of the floating rate payment or payments due under
the Swap in respect of the Initial Drawing Period that is allocable to the
princial amount of the Notes corresponding to such drawing or utilization.
The Initial Drawing Rate with respect to any Initial Drawing Period shall
be (x) the Base Rate from the first day of such Initial Drawing Period
through the last day preceding the third Business Day during such Initial
Drawing Period and (y) the LIBOR Rate for the remainder of the Initial
Drawing Period. The LIBOR Rate shall be equal to LIBOR plus 0.65%. Base
Rate means, on any date, a fluctuating rate of interest per annum equal
to the higher of (x) the rate of interest most recently announced by Bank
of Toyko-Mitsubishi Trust Company in New York, New York as its Prime Rate;
and (y) the then Federal Funds Rate plus 0.50% per annum. Federal Funds
Rate means, for any day, the rate per annum (rounded upward, if necessary,
to the nearest 1/100th of 1%) equal to the weighted average of the rate on
overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by
Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (i) if such day is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day,
and (ii) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate quoted
to The Bank of Tokyo-Mitsubishi, Ltd., New York branch, as agent under the
Liquidity Document. LIBOR shall mean, in relation to any Initial Drawing
Period or other period as the case may be, the percentage rate per annum
equal to (a) the offered rate for deposits in Dollars for a period equal
to (or as close as practicable to) the period from the third Business Day
during the Initial Drawing Period until the end of the Initial Drawing
Period (the Initial LIBOR Period ) or other period as displayed at or
about 11.00 a.m. (London time) on the first day of the Initial Drawing
Period (the Quotation Date ) in question for such period on Telerate page
3750 (British Banker s Association Interest Settlement Rates) or such other
page as may replace page 3750 from time to time; or (b) if on such
Quotation Date no such rate is displayed on the Telerate page 3750 or such
other replacement page, as the case may be, the arithmetic mean (rounded
upwards, if necessary, to the nearest whole multiple or one-sixteenth of
one per cent (1/16%) of the offered rates (if any) for deposits in Dollars
for a period equal to (or as close as practicable to) such period as
displayed on the LIBOR page of the Reuter Monitor System at or about 11.00
a.m. (London time) on the Quotation Date for such period; or (c) if on such
Quotation Date no such rates are displayed on such page of the Reuter
Monitor System, the rate at which the Reference Bank is at or about 11.00
a.m. (London time) on such relevant Quotation Date in question offered by
prime banks in the London Interbank Market deposits in Dollars for a period
equal to (or as close as practicable to) such Initial LIBOR Period or other
period as the case may be.
(d) Breakage Amount. Within 10 days after demand by CP Conduit
(Victory) or any Credit Support Party in respect of CP Conduit (Victory)
(a "Breakage Party") (which demand shall be accompanied by a statement in
reasonable detail setting forth the basis for such demand), the Issuer
shall pay directly to the Trustee for the benefit of such Breakage Party
such amount or amounts (the "Breakage Amount") as shall compensate such
Breakage Party for any loss, cost or expense incurred by such Breakage
Party in connection with any Hedging Agreements, as a result of any
prepayment of principal of any Note held by such Breakage Party being made
pursuant to Section 3.5 or Section 7.2 hereof. The determination by any
such Breakage Party of any such loss, expense or amount shall be presumed
correct, absent manifest error. The Trustee will deposit such amounts in
the Collection Account for distribution in accordance with Article 5.
ARTICLE 4. RECEIPT, DISTRIBUTION AND APPLICATION OF NOTE PROCEEDS AND
SDDI CONTRACT REVENUES.
4.1 Payment Reserve Account.
(a) The Trustee shall establish an account styled "RBF Exploration
Payment Reserve Account" (the "Payment Reserve Account"), subject to the
Trustee's sole dominion and control. From the proceeds received by the
Issuer upon the issuance of the Notes pursuant hereto and pursuant to
the Note Purchase Agreements, Issuer shall deposit or cause to be
deposited an amount in the Payment Reserve Account equal to all regular
interest payments to become due on the Notes prior to the inception of
Phase Two (the "Phase One Interest Reserve") plus the first three (3)
months of principal and interest payments to become due on the Notes
after the inception of Phase Two (the "Phase Two Reserve Amount"). Any
payments received by the Trustee from RBF II pursuant to the second
sentence of Section 4.2 of the Construction Supervisory Agreement or
pursuant to Section 4.1 thereof shall be deposited in the Payment
Reserve Account (in addition to the Phase One Interest Reserve and the
Phase Two Reserve Amount) to pay interest on the Notes during Phase One
and thereafter as provided in clause 4.1(c) below. Any payments
received by the Trustee pursuant to the SDDI Contract prior to the
commencement of Phase Two (the "Phase One Contract Receipts") shall be
deposited in the Payment Reserve Account, provided that any such
payments deposited from the proceeds of said SDDI Contract shall not be
deemed to satisfy either the Phase One Interest Reserve or the Phase Two
Reserve Amount required to be held in the Payment Reserve Account, as
aforesaid, and shall be held in addition thereto for application, if
needed, on the last maturing installments of the Notes as provided in
Section 5.1(a) or Section 5.3, as appropriate.
(b) On each and every Phase One Payment Date, the Trustee shall
withdraw an amount from the Payment Reserve Account (and shall deduct
such amount from the amount deposited as Phase One Interest Reserve in
the Payment Reserve Account pursuant to Section 4.1(a)) equal to any
amount due under Section 3.4 of this Agreement and distribute such
amount to the Note Holders as provided in Section 5.6.
(c) Five (5) Business Days prior to a Phase Two Payment Date, the
Trustee shall determine whether the sums received in the Collection
Account pursuant to Section 4.3, 5.2 or 5.3 will be sufficient to cover
the required payments of principal and interest due on the Notes under
Article 3 hereof on the next Payment Date. In the event the Trustee
determines that insufficient funds are available as aforesaid, the
Trustee will give notice to the Issuer and each Note Holder three (3)
Business Days prior to the Payment Date that a shortfall (a "Shortfall")
exists, the amount thereof, the basis for such Shortfall and the
Trustee's intention to draw on the Payment Reserve Account to cover such
Shortfall. In such event, the Trustee will transfer an amount equal to
the lesser of (i) the Shortfall and (ii) the balance in the Payment
Reserve Account to the Collection Account on the Business Day next
preceding the Payment Date. Thereafter, from time to time, the Payment
Reserve Account shall be replenished as provided in Section 8.14.
4.2 Construction Account.
(a) The Trustee shall establish an account styled "RBF Exploration
Construction Account" (the "Construction Account"), subject to the
Trustee's sole dominion and control. From the proceeds received by the
Issuer upon the issuance of the Notes pursuant hereto and pursuant to
the Note Purchase Agreements, Issuer shall deposit or cause to be
deposited in the Construction Account all proceeds received by the
Issuer upon the issuance of the Notes pursuant hereto and pursuant to
the Note Purchase Agreements, less any amounts used to fund the Payment
Reserve Account.
(b) Upon receipt of a duly completed Certificate of Requisition
(with all required attachments) (which may be completed by and signed by
the Sureties as provided in paragraph (3)(a) of the Performance Bond)
together with a duly completed Engineer s Certification executed by the
Independent Engineer, provided (unless the Certificate of Requisition is
submitted by the Sureties as aforesaid) no Indenture Default or
Indenture Event of Default has occurred and is continuing, the Trustee
(subject to the priority of payment of any amounts due under Section
5.1(b)) shall advance the amount so requested from the Construction
Account to the Building Account of the Issuer (or the Sureties as
appropriate) on the date which is two (2) Business Days from the receipt
by the Trustee of such Certificate of Requisition. By submission of
each Certificate of Requisition to the Trustee, the Issuer shall be
deemed to represent to the Trustee and the Note Holders that (i) the
information contained in the Certificate of Requisition is true, (ii)
the representations and warranties of the Issuer contained in this
Indenture and in the Note Purchase Agreements and otherwise made in
writing by or on behalf of the Issuer pursuant to the Indenture and the
Note Purchase Agreements were true and correct when made and are true
and correct at and as of the time of delivery of such certificate,
except to the extent such representations and warranties are expressly
limited to an earlier date or the Required Holders have expressly
consented in writing to the contrary, (iii) the Issuer has performed and
complied with all agreements and conditions contained in this Indenture
and in the Note Purchase Agreements required to be performed or complied
with by it prior to or at the time of delivery of such certificate, (iv)
since the Purchase Date (as defined in the Note Purchase Agreement), no
change has occurred, either in any case or in the aggregate, in the
condition, financial or otherwise, of the Issuer or the Parent which
would have a Material Adverse Effect, (v) there exists, and, after
giving effect to the advance with respect to which such certificate is
being delivered, will exist, no Indenture Default, (vi) no defaults or
events which with notice or lapse of time could create a default have
occurred and are continuing under the Construction Contract, the
Construction Contract is in full force and effect and all work performed
to date has been completed in a good and workmanlike manner and in
compliance with the Construction Contract and the Specifications of the
Drilling Rig and (vii) after the advance of funds requested by such
certificate the funds remaining in the Construction Account will be
sufficient for completion of the Drilling Rig in accordance with the
Construction Contract, the Specifications therefor, the furnishing of
the Owner s Supplies and for compliance with the SDDI Contract. If the
Certificate of Requisition is submitted by the Sureties, the Sureties
shall be deemed to make the representations set forth in (i) above to
the Trustees and the Note Holders. On the Commencement Date, any moneys
remaining in the Construction Account shall be transferred to the
Collection Account.
4.3 Collection Account.
The Trustee shall establish an account styled "RBF Exploration Cash
Collateral Account" (the "Collection Account") subject to the Trustee's
sole dominion and control. Each payment to the Trustee under any
Project Document (except as otherwise provided herein) and all payments
under the Performance Bond and all payments under the SDDI Contract,
other than any payment under the SDDI Contract made prior to the
commencement of Phase Two (which shall be deposited and disbursed in
accordance with Section 4.1) and other than the Lump Sum Payment (which
shall be deposited and disbursed in accordance with Section 5.3), shall
be deposited with the Trustee in the Collection Account and held in
trust by it as part of the Trust Estate and disbursed as provided in
Article 5 hereof.
ARTICLE 5. RECEIPT, DISTRIBUTION AND APPLICATION OF TRUST ESTATE.
5.1 Application of the Collection Account and the Construction Account
When No Indenture Event of Default is continuing.
(a) The Trustee shall, after the commencement of Phase Two and so
long as no Indenture Event of Default shall have occurred and be
continuing, apply any amounts in the Collection Account on the next
succeeding Payment Date as follows:
first, the amount required to reimburse any Trustee for any unpaid
fees for its services under this Indenture and to reimburse any Trustee
for any reasonable expenses (including reasonable external attorneys'
fees) not previously reimbursed;
second, the accrued unpaid interest and any applicable Make-Whole
Amount, Special Yield Protection Amount and/or Breakage Amount due and
payable to the Note Holders on any of the Notes, allocated among the
Notes pursuant to Section 5.5 and distributed to the Note Holders
thereof;
third, the required prepayments of principal, if any, due and
payable on the Class A1 Notes on such Payment Date, allocated among such
Notes pursuant to Section 5.5 and distributed to the Note Holders
thereof;
fourth, the amount required to reimburse an Indemnified Party or
other Person entitled to reimbursement under Section 13.17 hereof
(except to the extent already provided for in the "first" provision
above);
fifth, to deposit with the Trustee (for deposit into the Payment
Reserve Account) the amount, if any, by which the amount on deposit in
the Payment Reserve Account (exclusive of the Phase One Interest Reserve
and the Phase One Contract Receipts) is less than the Phase Two Reserve
Amount.
sixth, the amount required to pay any Yield Protection Amount due
to any Note Holder or Credit Support Party; and
seventh, the balance, if any, of such payment remaining shall be
distributed to the Issuer or its assigns.
(b) Before the Commencement Date, the Trustee shall, so long as no
Indenture Event of Default shall have occurred and be continuing, in
addition to the payment applications provided in Section 4.2(b), apply
any funds in the Construction Account on the next succeeding Payment
Date as follows:
first, the amount required to reimburse any Trustee for any unpaid
fees for its services under this Indenture and to reimburse any Trustee
for any reasonable expenses (including reasonable external attorneys'
fees) not previously reimbursed;
second, to the extent funds for payment of accrued unpaid interest
plus any applicable Make-Whole Amount, Special Yield Protection Amount
and/or Breakage Amount owing on the Notes is unavailable for
disbursement from the Payment Reserve Account pursuant to Section
4.1(b), the accrued unpaid interest plus any applicable Make-Whole
Amount and/or Breakage Amount due and payable to the Note Holders on any
of the Notes, allocated among the Notes pursuant to Section 5.5 and
distributed to the Note Holders thereof;
third, the amount required to reimburse an Indemnified Party or
other Person entitled to reimbursement under Section 13.17 hereof
(except to the extent already provided for in the "first" provision
above);
fourth, the amount required to pay any Yield Protection Amount due
to any Note Holder or Credit Support Party; and
fifth, any amount requested to pay any costs of construction and
equipping of the Drilling Rig as provided in Section 4.2(b).
5.2 (a) Payments in Case of an Event of Loss. All payments received
by the Trustee as proceeds of insurance, condemnation, confiscation or
otherwise by reason by an Event of Loss shall be deposited with the Trustee
in the Collection Account and held in trust by it and applied when received
in the same manner as provided in Section 5.3 below.
(b) Payments in Case of a Partial Event of Loss. So long as there is
no Indenture Event of Default that has occurred and is continuing, in the
event of any accident, occurrence or event resulting in damage to the
Drilling Rig that does not constitute an Event of Loss (a "Partial Loss"),
to the extent the insurance proceeds do not exceed $5,000,000 such proceeds
shall be paid directly to the Issuer for the repair of the Drilling Rig;
and to the extent such proceeds of insurance equal or exceed $5,000,000 by
reason of such Partial Loss they shall be payable to the Trustee as loss
payee and shall be applied upon direction by the Trustee as follows:
(i) To the Issuer to reimburse the Issuer for the actual
costs incurred by the Issuer in connection with the repairs, upon
receipt by the Trustee of the following:
(a) For progress payments, a certificate signed by a
Responsible Officer of the Issuer certifying that
all work for which reimbursement is requested has
been completed as required by Section 8.3 hereof,
in a good and workmanlike manner, the Issuer has
expended funds in the full amount of all insurance
deductibles and has obtained lien waivers with
respect to any liens in excess of $1,000,000
individually or $5,000,000 in the aggregate that
could attach with respect to such work, with such
certificate to include an itemization of the costs
incurred by the Issuer in connection with the
repairs. For all progress payments prior to
completion of all required repairs the Trustee
shall withhold an amount equal to 10% of the
completed repair cost to be disbursed upon final
payment as provided under clause (b) below.
(b) For final payment (which will include the hold back
amount called for in clause (a) above), a
certificate signed by a Responsible Officer that
all repairs have been completed as required by
Section 8.3, in a good and workmanlike manner, has
obtained final lien waivers with respect to liens
in excess of $1,000,000 individually or $5,000,000
in the aggregate that could attach with respect to
such work, with the certificate to include an
itemization of the costs incurred by the Issuer in
connection with the repairs.
(ii) Any insurance proceeds not paid pursuant to clause (i)
above shall be paid pursuant to Section 5.1 or 5.3, as appropriate.
5.3 Lump Sum Payment and Payments During Continuance of an Indenture
Event of Default. Any Lump Sum Payment and all monies held or
realized hereunder or in connection herewith in the Collection Account,
Payment Reserve Account, Construction Account, proceeds of insurance,
proceeds of the Performance Bond, or otherwise by the Trustee after an
Indenture Event of Default shall have occurred and be continuing or after
the acceleration of the Notes pursuant to Sections 7.2(a) or (b) (including
any amounts realized by the Trustee from the exercise of any remedies
pursuant to Article 7), as well as all payments or amounts then held or
thereafter received by the Trustee as part of the Trust Estate while any
such Indenture Event of Default shall be continuing, shall be applied by
the Trustee as follows:
first, so much of such monies, payments or amounts as shall be
required to reimburse any Trustee for its default administration
services and the costs and expenses of foreclosure or suit, if any, and
the retaking, holding, preparing for sale or other disposition of the
Collateral and the reasonable external attorneys fees and legal
expenses incurred by any Trustee;
second, so much of such monies, payments or amounts remaining as
shall be required to reimburse (a), if the Sureties shall have made
payment in full of all amounts (including Liquidated Damages) due
pursuant to Section 6.1 of the Construction Supervisory Agreement as
provided by Section 3(b) of the Performance Bond and the proceeds of
such payment shall have been otherwise distributed pursuant to this
Section 5.3, the Sureties to reimburse them for such payment and (b),
subject to the foregoing clause (a), the holders of the Outstanding
Notes for all theretofore unreimbursed payments paid by the then
existing or prior holders of Outstanding Notes pursuant to any indemnity
furnished to any Trustee shall be distributed to such holders ratably,
without priority of one over the other, in the proportion that the
amount of each such unreimbursed payment of each such holder of a Note
bears to the aggregate amount of all such unreimbursed payments by all
such holders of Outstanding Notes;
third, so much of such monies, payments or amounts remaining as
shall be required to pay the unpaid principal balance of all of the
Outstanding Notes, plus all accrued and unpaid interest on such
principal, plus any applicable Make-Whole Amount, Special Yield
Protection Amount and/or Breakage Amount shall be distributed to the
appropriate holders of such Notes without priority of one such holder
over another in the proportion that the amount then owed to such holder
bears to the aggregate amount of all such obligations which are then due
and payable;
fourth, so much of such monies, payments or amounts remaining as
shall be required to reimburse any holders of the Outstanding Notes or
any Indemnified Party for any expenses or other indemnity amount
(including reasonable external attorneys fees) or other losses incurred
by them (to the extent reimbursable hereunder and not previously
reimbursed) shall be distributed to each such holder or Indemnified
Party, ratably, without priority of one over the other, in the
proportion that the amount of the expenses or other loss incurred by
such holder or Indemnified Party bears to the aggregate amount of such
losses or expenses incurred by all such holders or Indemnified Party;
fifth, so much of such monies, payments or amounts remaining as
shall be required to pay any other obligations of the Issuer hereunder
(other than the obligation of the Issuer under Section 3.7(b)) or under
any other Project Document to the holders of the Outstanding Notes which
are then due and payable, shall be distributed to such holders ratably
without priority of one such holder over another in the proportion that
the amount then owed to such holder bears to the aggregate amount of all
such obligations which are then due and payable;
sixth, so much of such monies, payments or amounts remaining as
shall be required to pay the Note Holders or any Credit Support Party
any Yield Protection Amount;
seventh, to the extent the Sureties shall have made any payment
under the Performance Bond and shall not have been assigned the rights
of the Trustee in the Trust Estate in the manner contemplated by the
Performance Bond, so much of such monies, payments or amounts remaining
as shall be required to reimburse the Sureties for all payments due to
them under the Parent Indemnity; and
eighth, the balance, if any, of such monies, payments or amounts
shall be distributed to the Issuer or its assigns.
5.4 Amounts Held by Trustee. Any amounts held by the Trustee in the
Payment Reserve Account, Construction Account, Collection Account, or
pursuant to any other provision hereof or any provision of any other
Project Document providing for amounts to be held by the Trustee which are
not distributed pursuant to the other provisions of this Article 5 shall
be invested by the Trustee from time to time in Permitted Investments
selected by the Issuer, provided such investments are managed such that
maturities match required payments hereunder. All Permitted Investments
shall be held in the name of the Trustees and control thereof shall be
maintained by the Trustees as provided in Section 8-106 of the UCC. Unless
otherwise expressly provided in this Indenture, any income realized as a
result of any such Permitted Investment, net of the Trustee's reasonable
fees and expenses in making such Permitted Investment, shall be held and
applied by the Trustee in the same manner as the principal amount of such
Permitted Investment is to be applied and any losses, net of earnings and
such reasonable fees and expenses, shall be charged against the principal
amount invested. The Trustee shall not be liable for any loss resulting
from any investment required to be made by it under this Indenture other
than (i) investments on which the Trustee is the obligor and (ii) by reason
of its willful misconduct or gross negligence, and any such investment may
be sold (without regard to its maturity) by the Trustee without
instructions whenever the Trustee reasonably believes that such sale is
necessary to make a distribution required by this Indenture.
5.5 Allocation of Payments. Each payment applied to the Outstanding
Notes pursuant to Articles 3, 4 or 5 shall be allocated among the
appropriate Outstanding Notes in proportion to the respective outstanding
principal amounts thereof, with adjustments to avoid fractions of one
dollar ($1). All payments of principal of the Notes as and when called for
hereunder, except those required pursuant to Section 3.4, shall be applied
against the principal amount due at maturity and then against the last
maturing prepayment installments of principal, if any, provided for in
Section 3.4.
5.6 Method of Payment to Holders. The principal of, and Yield
Protection Amount, Special Yield Protection Amount, any Make-Whole Amount
and/or Breakage Amount and interest on, each Note and all other amounts
payable to the holders of the Notes pursuant to this Indenture will be
payable at the office of the Trustee, which has been designated as the
agency of the Issuer in Section 8.8, in United States dollars in
immediately available funds, prior to 9:00 a.m. Central time, on the due
date thereof. Notwithstanding the foregoing or any provision in any Note
to the contrary, the Trustee will pay, if so requested in writing by a
holder of an Outstanding Note, all amounts payable by the Trustee hereunder
to such holder, by wire transfer of immediately available funds to an
account maintained by such holder with any other bank located in the United
States. The Trustee acknowledges that the payment instructions given in
Schedule A to the Note Purchase Agreements constitute the written notice
required by the preceding sentence to make all payments on the Notes as
provided therein. The Trustee shall institute the transfer of such funds
prior to 11:00 a.m. Central time on such due date in accordance with this
section if it has received funds prior to 9:00 a.m. Central time. If the
Trustee fails to so institute the transfer of such funds and such funds are
not received prior to the end of such due date, the Issuer agrees to
compensate the Note Holders for the loss of the use of such funds.
5.7 Method of Payment to Issuer or Sureties. Any amounts distributed
hereunder by the Trustee to the Issuer or the Sureties shall be paid to the
Issuer or the Sureties or as Issuer or the Sureties may otherwise direct
by wire transfer of immediately available funds of the type received by the
Trustee at such office and to such account or accounts of such entity or
entities as shall be designated by written notice from the Issuer or the
Sureties, as the case may be, to the Trustee from time to time.
5.8 Payments for which No Application is Otherwise Provided. Any
payments received by the Trustee for which no provision as to the
application thereof is made elsewhere in this Indenture or in any other
Project Document, shall be distributed by the Trustee (a) to the extent
received or realized at any time prior to the payment in full of all
obligations secured by this Indenture, in the order of priority specified
in Section 5.1, 5.2 or 5.3, as appropriate, and (b) to the extent received
or realized at any time after payment in full of all such obligations:
first, to any continuing amount of the type provided in clause "first",
"second", "fourth" and "fifth" of Section 5.3 and second, to the Issuer or
as the Issuer may request.
ARTICLE 6. EVIDENCE OF ACTS OF NOTE HOLDERS.
6.1 Execution by Note Holders or Agents. Any request, consent,
demand, authorization, direction, notice, waiver or other action provided
by this Indenture to be given or taken by holders of the Notes may be
embodied in and evidenced by one or more instruments of substantially
similar tenor and may be signed or executed by such holders in person or
by agent or agents duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is
hereby expressly required, to the Issuer.
6.2 Future Holders Bound. Any request, consent, demand,
authorization, direction, notice, waiver or other action of the holder of
any Note shall bind every future holder of the same Note and the holder of
every Note issued upon registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done or suffered to be
done by the Trustee or the Issuer in pursuance of such action irrespective
of whether or not any notation in regard thereto is made upon such Note.
ARTICLE 7. INDENTURE DEFAULTS - REMEDIES
7.1 Indenture Events of Default. One or more of the following events
shall constitute an "Indenture Event of Default":
(a) the Issuer shall default in the payment or prepayment when
due of any principal of, or interest, or any applicable Make-Whole
Amount, Breakage Amount, Yield Protection Amount or Special Yield
Protection Amount, on any Note, or any fees or other amount payable
by it hereunder or under any other Project Document and such default,
other than a default of a payment or prepayment of principal,
applicable Make-Whole Amount or Breakage Amount (which shall have no
cure period), shall continue unremedied for a period of five (5)
Business Days; or
(b) any representation, warranty or certification at any time
made or deemed made herein or in any other Project Document by the
Issuer or the Parent, or any certificate furnished to any Purchaser
or other holder of any Note or the Trustee pursuant to the provisions
hereof or any other Project Document, shall prove to have been false
or misleading as of the time made or furnished in any material
respect; or
(c) (i) the Issuer shall default in the performance of any of
its obligations under Sections 8.3(d)(y), 8.11, 8.12 and 8.14,
Article 9 or any other Article of this Indenture other than under
Article 8 (with the exception of Sections 8.3(d)(y), 8.11, 8.12 and
8.14) or in any obligation to maintain insurance as required by this
Agreement or the First Preferred Ship Mortgage; or (ii) the Issuer
shall default in the performance of any of its obligations under
Article 8 (with the exception of Sections 8.3(d)(y), 8.11, 8.12 and
8.14) or any other Project Document (other than the payment of amounts
due which shall be governed by Section 7.1(a)), and any such default
described in clause (ii) shall continue unremedied by Issuer or Parent
(or shall continue unwaived by the Required Holders) for a period of
thirty (30) days after the earlier to occur of (x) notice thereof to
the Issuer by the Trustee or any Note Holder and (y) the date when a
Responsible Officer of the Issuer or of the Parent has actual
knowledge of the existence of such default; or
(d) the Issuer shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(e) the Issuer shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under the Federal Bankruptcy Code (as
now or hereafter in effect), (iv) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, liquidation or composition or readjustment
of debts, (v) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an
involuntary case under the Federal Bankruptcy Code, or (vi) take any
corporate action for the purpose of effecting any of the foregoing;
or
(f) a proceeding or case shall be commenced, without the
application or consent of the Issuer, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts,
(ii) the appointment of a trustee, receiver, custodian, liquidator or
the like of the Issuer of all or any substantial part of its assets,
or (iii) similar relief in respect of the Issuer under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or case shall
continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed
and in effect, for a period of sixty (60) days; or (iv) an order for
relief against the Issuer shall be entered in an involuntary case
under the Federal Bankruptcy Code; or
(g) a judgment or judgments for the payment of money in excess
of $1,000,000 in the aggregate shall be rendered by a court or
arbitrator against the Issuer and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of
execution thereof shall not be procured, within thirty (30) days from
the date of entry thereof and the Issuer shall not, within said period
of thirty (30) days, or such longer period during which execution of
the same shall have been stayed, appeal therefrom and cause the
execution thereof to be stayed during such appeal; or
(h) any of the Project Documents after delivery thereof shall
for any reason, except to the extent permitted by the terms thereof,
cease to be in full force and effect and valid, binding and
enforceable in accordance with their terms, or cease to create a valid
and perfected Lien of the priority required thereby on any of the
collateral purported to be covered thereby, or the Issuer or the
Parent shall so state in writing; or
(i) the Issuer discontinues its usual business; or
(j) Parent, SDDI, Royal Dutch Shell, RBF II or, prior to
satisfaction of the Operational Period Conditions Precedent, one of
the Sureties takes, suffers or permits to exist with respect to itself
any of the events or conditions of the type referred to in paragraphs
(d), (e), (f) or (i) hereof; or
(k) a default, Default or Event of Default shall occur under the
Construction Supervisory Agreement, the Operation and Maintenance
Agreement, the Performance Guarantee, the Refundment Guarantee, the
Performance Bond or the SDDI Contract after giving effect to any grace
periods in such contracts; or
(l) any default occurs in the obligations of the Owner (as
defined in the Construction Contract) under the Construction Contract
after giving effect to any grace periods in the Construction Contract;
or
(m) at any time after the Commencement Date, the SDDI Contract
shall for any reason terminate or cease to be in full force and effect
or SDDI (or any other permitted assignee in accordance with the SDDI
Contract) ceases to be a party to the SDDI Contract; or
(n) the Issuer shall cease to be a 100% owned Subsidiary of the
Parent, directly or indirectly;
(o) The Issuer shall fail to execute, deliver and permanently
record the First Preferred Ship Mortgage and deliver the opinion of
Issuer s counsel in the form of Annex E hereto upon delivery of the
Drilling Rig by Hyundai under the Construction Contract; or
(p) the Performance Bond terminates for any reason prior to
Completion (as defined in the Construction Supervisory Agreement).
7.2 Acceleration of Notes.
(a) Acceleration by Trustee. If an Indenture Event of Default exists
under any of Subsections 7.1(d), (e) or (f), the Notes then Outstanding
shall automatically become forthwith due and payable. If any other
Indenture Event of Default exists, the Trustee upon written request of the
Required Holders, shall declare the entire principal of and all interest
accrued on all the Notes then Outstanding and the applicable Make-Whole
Amount and/or Breakage Amount, if any, to be, and such Notes shall
thereupon become, forthwith due and payable together with all interest
accrued thereon and the applicable Make-Whole Amount and/or Breakage
Amount, if any, and all other amounts due and payable under the Project
Documents to the Trustee and/or the Note Holders and the Credit Support
Parties. In either such case, the Outstanding Notes shall become due and
payable without any presentment, demand, protest, notice of protest, notice
of acceleration or intention to accelerate or any other notice or
declaration of any kind, all of which are hereby expressly waived by the
Issuer, and the Issuer will forthwith pay to the Trustee for the benefit
of all holders of the Notes then Outstanding the entire principal of and
interest accrued on their respective Notes (but specifically excluding
unearned interest) and, to the extent permitted by applicable law and for
the reasons set forth in the first sentence of Section 3.7, the applicable
Make-Whole Amount and/or Breakage Amount, if any, for the then entire
outstanding principal of the Notes as of the date of such declaration or
automatic acceleration.
(b) Acceleration by Individual Holder. Subject to the provisions of
Section 7.3, during the existence of an Indenture Event of Default
described in Section 7.1(a) or 7.1(c) (to the extent the Indenture Event
of Default described in Section 7.1(c) is with respect to the obligation
to maintain or repair the Drilling Rig or to maintain insurance as required
by this Indenture or the First Preferred Ship Mortgage or to the
obligations set forth in Sections 8.11, 8.12 or 9.19) and irrespective of
whether the Trustee shall have declared all the Notes to be due and payable
pursuant to Section 7.2(a), any holder of an Outstanding Note which has not
consented to a waiver with respect to such Indenture Event of Default
described in Section 7.1(a) or 7.1(c) may, at its option, by notice in
writing to the Issuer and the Trustee, declare the entire principal of, and
all interest accrued on, such holder's Notes then Outstanding and the
applicable Make-Whole Amount and/or Breakage Amount, if any, to be, and
such holder's Notes shall thereupon become, forthwith due and payable
together with all interest accrued thereon and the applicable Make-Whole
Amount and/or Breakage Amount, if any, without any presentment, demand,
protest, notice of protest, notice of acceleration or intention to
accelerate or any other notice or declaration of any kind, all of which are
hereby expressly waived by the Issuer, and the Issuer shall forthwith pay
to such holder the entire principal of and interest accrued on its Notes
(but specifically excluding unearned interest) and, to the extent permitted
by applicable law and for the reasons set forth in the first sentence of
Section 3.7, the amount of the applicable Make-Whole Amount and/or Breakage
Amount, if any, for the then entire outstanding principal of such Notes as
of the date of such declaration by such holder. Such Notes shall be
surrendered by the holder thereof upon such full payment thereof with a
Written Request for such surrender by, and at the sole cost and expense of,
the Issuer.
(c) Nonwaiver and Expenses. No course of dealing on the part of any
holder of the Notes or on the part of any Trustee nor any delay or failure
on the part of any holder of the Notes or on the part of any Trustee to
exercise any right shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers and remedies. If the Issuer fails
to pay when due the principal of, or interest, any applicable Make-Whole
Amount, Breakage Amount, Yield Protection Amount or Special Yield
Protection Amount on any Note, or fails to comply with any other provision
of this Indenture, the Issuer will pay to the holders of the Notes and to
each Trustee, to the extent permitted by law, such further amounts as shall
be sufficient to cover such costs and expenses, including but not limited
to reasonable external attorneys' fees and disbursements, as may be
incurred by such holder or by such Trustee, or both, in collecting any sums
due on the Notes or in otherwise enforcing any of their rights.
7.3 Annulment of Acceleration of Notes. If (i) a declaration is made
pursuant to Section 7.2(a) by the Trustee, then, and in every such case,
the Required Holders may, by written instrument filed with the Issuer and
the Trustee, rescind and annul such declaration, and the consequences
thereof or (ii) a declaration is made pursuant to Section 7.2(b) by a
holder of any of the Notes, then, such holder may, by written instrument
filed with the Issuer and the Trustee, rescind and annul such declaration,
and the consequences thereof; provided, that at the time such declaration
is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of
any monies due on or pursuant to the Notes or this Indenture;
(b) all arrears of interest upon all the Notes and all other
sums payable under the Notes and under this Indenture, except any
principal of, or interest or any applicable Make-Whole Amount and/or
Breakage Amount on, the Notes which has become due and payable solely
by reason of such declaration under Section 7.2(a) or Section 7.2(b),
shall have been duly paid;
(c) each and every other Indenture Default and Indenture Event
of Default shall have been waived pursuant to Section 11.2 or
otherwise made good or cured;
and, provided further, that no such rescission and annulment shall
(i) extend to or affect any subsequent Indenture Default or Indenture Event
of Default or (ii) impair any right consequent thereon.
7.4 Default Remedies.
(a) If an Indenture Event of Default exists, each Trustee may
exercise (i) all of the rights and remedies granted to such Trustee
hereunder and/or under each of the other Project Documents, and (ii) all
of the rights and remedies of a secured party on default under the Uniform
Commercial Code in effect in the State of New York or in effect in any
other jurisdiction, the laws of which are applicable to the Collateral (the
"UCC"). Any Trustee (including any agent appointed by the Trustee) may
take possession of all or any part of the Properties covered or intended
to be covered by the Lien created by this Indenture or by any other Project
Document, and such Trustee may exclude the Issuer and all Persons claiming
under the Issuer wholly or partly therefrom. Without limiting the
foregoing, if any Indenture Event of Default exists, any Trustee may from
time to time in its discretion, without notice (except as expressly
provided in this Section 7.4) do any of the following:
(i) subject to compliance with any mandatory legal
requirements, take immediate possession of the Collateral, and
require the Issuer to, and the Issuer hereby agrees that it will
at its expense and upon request of any Trustee forthwith,
assemble all or part of the Collateral as reasonably directed by
such Trustee and make it available to such Trustee at a place or
places to be designated by such Trustee which are reasonably
convenient to both parties. In any event, Issuer shall bear the
risk of accidental loss or damage to or diminution in value of
the Collateral, and Trustee shall have no liability whatsoever
for failure to obtain or maintain insurance, nor to determine
whether any insurance ever in force is adequate as to amount or
as to the risk insured;
(ii) either with or without taking possession and either
before or after taking possession, and without instituting any
legal proceedings whatsoever, subject to compliance with any
mandatory legal requirements, dispose of by public or private
proceedings conducted at its office, on the premises of the
Issuer, at any site where any Collateral is located, or
elsewhere, all or any part of the Collateral, as a unit or in
parts and separately or in combination with any other
Collateral, and by way of one or more contracts (it being agreed
that the sale of any part of the Collateral shall not exhaust
the Trustee's power of sale, but sales may be made from time to
time, and at any time, until all of the Collateral has been sold
or until the obligations secured by this Indenture have been
paid and performed in full), and at any such sale it shall not
be necessary to move any of the Collateral to any location of
sale, or to assemble, prepare in any manner or exhibit any of
the Collateral (the Issuer hereby acknowledging that the
Collateral is not of a type for which moving, assembling,
preparation in any manner or exhibition is necessary for a
commercially reasonable sale);
(iii) buy the Collateral, or any part thereof, at any
public sale;
(iv) buy the Collateral, or any part thereof, at any
private sale if the Collateral is of a type customarily sold in
a recognized market or is of a type which is the subject of
widely distributed standard price quotations;
(v) retain the Collateral in satisfaction of the
obligations secured by this Indenture whenever the circumstances
are such that any Trustee is entitled to do so under the UCC or
otherwise (but under no circumstances will any Trustee be deemed
to have elected to retain the Collateral in satisfaction of such
obligations unless it shall have sent written notice of such
election to the Issuer);
(vi) take possession of all books and records of Issuer
pertaining to the Collateral. Each Trustee shall have the
authority (subject to compliance with any mandatory legal
requirements) to enter upon any real property or improvements
thereon in order to obtain any such books or records, or any
Collateral located thereon, and remove the same therefrom
without liability;
(vii) apply proceeds of the disposition of the
Collateral to the obligations hereby secured in the manner set
forth in this Indenture and permitted by the UCC or otherwise
permitted by law or in equity. Such application may include,
without limitation, the reasonable expenses of retaking,
holding, preparing for sale or other disposition, and the
reasonable external attorneys' fees and legal expenses incurred
by each Trustee;
(viii) appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by each
Trustee of the Collateral. Additionally, any sale or transfer
hereunder may be conducted by an auctioneer or any officer or
agent of each Trustee;
(ix) receive, change the address for delivery, open and
dispose of mail addressed to Issuer, and to execute, assign and
endorse negotiable and other instruments for the payment of
money, documents of title or other evidences of payment,
shipment or storage for any form of Collateral on behalf of and
in the name of Issuer;
(x) notify or require Issuer to notify account debtors
that the accounts have been assigned to each Trustee and direct
such account debtors to make payments on the accounts directly
to each Trustee. To the extent each Trustee does not so elect,
Issuer shall continue to collect the accounts. Each Trustee or
its designee shall also have the right, in its own name or in
the name of Issuer, to do any of the following: (A) to demand,
collect, receipt for, settle, compromise any amounts due, give
acquittance for, prosecute or defend any action which may be in
relation to any monies due or to become due by virtue of, the
accounts; (B) to sell, transfer or assign or otherwise deal in
the accounts or the proceeds thereof or the related goods, as
fully and effectively as if each Trustee were the absolute owner
thereof; (C) to extend the time of payment of any of the
accounts, to grant waivers and make any allowance or other
adjustment with reference thereto; (D) to endorse the name of
Issuer on notes, checks or other evidences of payments on
Collateral that may come into possession of each Trustee; (E) to
take control of cash and other proceeds of any Collateral;
(F) to sign the name of Issuer on any invoice or bill of lading
relating to any Collateral, or any drafts against account
debtors or other Persons making payment with respect to
Collateral; (G) to send a request for verification of accounts
to any account debtor; (H) to send billing notices to SDDI
pursuant to the SDDI Contract; and (I) to do all other acts and
things necessary to carry out the intent of this Indenture; and
(xi) exercise all other rights and remedies permitted by
law or in equity.
(b) The Issuer agrees that, to the extent notice of sale shall
be required by law, at least ten (10) Business Days' notice to the
Issuer of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Trustee shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The
Trustee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned.
(c) In addition to any other remedies provided under this
Article 7, the Trustee at the written direction of the Required
Holders shall appoint a substitute contractor in accordance with
Section 2.2.4.1 of the SDDI Contract.
7.5 Other Enforcement Rights.
(a) Each Trustee may, but unless first requested so to do by the
Required Holders and furnished with indemnity reasonably satisfactory
to it pursuant to Section 10.3(f) hereof shall not (subject to the
provisions of Section 10.1) be under any obligation to, proceed to
protect and enforce this Indenture, the Notes and any other Project
Document by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant
or agreement herein or therein provided, or for foreclosure
thereunder, or for the appointment of a receiver or receivers for the
foreclosure thereunder, or for the appointment of a receiver or
receivers for the Trust Estate or other Collateral or any part
thereof, for the recovery of judgment for the obligations hereby
secured or for the enforcement of any other proper, legal or equitable
remedy available under applicable law.
(b) In case an Indenture Event of Default has occurred and is
continuing and there shall be pending any case or proceedings for the
bankruptcy or for the reorganization or arrangement of the Issuer, the
Parent or SDDI, under the federal bankruptcy laws or any other
applicable law or in connection with the insolvency of the Issuer, the
Parent or SDDI, or in case a custodian, receiver or trustee shall have
been appointed for the Issuer, the Parent or SDDI, or in case of any
other proceedings in respect of the Issuer, the Parent or SDDI, the
Trustee may file such proof of claim and other papers or documents as
may be necessary or advisable in order to have the claims of any
Trustee and of the Note Holders allowed in any judicial proceedings
relative to the Issuer, the Parent or SDDI, and, irrespective of
whether the principal of all of the Notes shall then be due and
payable as therein expressed, by proceedings for the prepayment
thereof, by declaration or otherwise, the Trustee shall be entitled
and empowered to file and prove a claim for the whole amount of
principal, applicable Make-Whole Amount and/or Breakage Amount (if
any) and interest owing and unpaid in respect of the Notes, and any
other sum or sums owing thereon or pursuant thereto or pursuant
hereto, and to collect and receive any or other Property payable or
deliverable on any such claim, and to distribute the same as provided
in Section 5.3; and any receiver, custodian, assignee or trustee in
bankruptcy, trustee or debtor in reorganization or trustee or debtor
in any proceedings for the adoption of an arrangement is hereby
authorized by each holder of any Note, by the acceptance of the Note
or Notes held by it, 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 Note Holders, to pay to each of the Trustees any
amount due it for compensation and expenses, including reasonable
external counsel fees, incurred by it up to the date of such
distribution; provided, however, that nothing herein contained shall
be deemed to authorize or empower the Trustee to consent to accept or
adopt, on behalf of any holder of the Notes, any plan of
reorganization or readjustment of the Issuer affecting the Notes or
the rights of any holder thereof, or to authorize or empower the
Trustee to vote in respect of the claim of any holder in any such
proceedings.
(c) The Issuer hereby irrevocably appoints the Trustee as the
Issuer's attorney-in-fact and proxy, with full authority in the place
and stead of the Issuer and in the name of the Issuer or otherwise,
from time to time during the continuance of an Indenture Event of
Default in the Trustee's discretion, to take any action and to execute
any instrument which the Trustee may deem necessary or advisable to
accomplish the purposes of this Indenture, including, without
limitation: (a) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for monies due and to become
due under or in respect of any of the Collateral; and (b) to file any
claims or take any action or institute any proceedings which the
Trustee may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of the Trustee with
respect to any of the Collateral. Without limiting the generality of
the foregoing and whether or not an Indenture Event of Default shall
have occurred and be continuing, the Trustee shall have the right to
receive, collect and endorse all checks made payable to the Issuer or
the Issuer's order representing payments under the SDDI Contract or
any payment on account of any of the Collateral and to give full
discharge therefor.
(d) If the Issuer or the Parent fails to perform any act or to
take any action which hereunder or under any other Project Document
to which it is a party, the Issuer or the Parent is required (or has
the right) to perform or take, or to pay any money which hereunder or
under any other Project Document the Issuer or the Parent is required
to pay, the Trustee, in the Issuer's or the Parent's name or in its
own name, may (but shall not be obligated to) following notice to the
Issuer or Parent perform or cause to be performed such act or take
such action or pay such money, and any expenses so incurred by the
Trustee, and any money so paid by the Trustee, shall be a demand
obligation owing by the Issuer and shall bear interest from the date
of making such payment until paid at the Default Rate and shall be
secured by this Indenture and by any other instrument securing the
obligations secured hereby. Upon making any such payment, the Trustee
shall be subrogated to all of the rights of the Person receiving such
payment, which rights will be held by the Trustee to secure the
obligations secured hereby.
(e) Unless and until the rights of the Trustee in the Trust
Estate have been assigned to the Sureties as provided in the
Performance Bond, anything in this Indenture to the contrary
notwithstanding, the Required Holders shall have the right, at any
time, by an instrument or instruments in writing, executed and
delivered to any Trustee and providing for indemnity satisfactory to
it pursuant to Section 9.3(f), to direct the method and place of
conducting all proceedings to be taken by the Trustee in connection
with the enforcement of the terms and conditions of this Indenture;
provided, however, that such direction shall not be otherwise than in
accordance with the provisions of law and of this Indenture.
7.6 Effect of Sale, etc.
(a) Any sale or sales pursuant to the provisions hereof or of
any other Project Document, whether under the power of sale granted
hereby or thereby or pursuant to any legal proceedings, shall operate
to divest the Issuer of all right, title, interest, claim and demand
whatsoever, either at law or in equity, of, in and to the Trust Estate
or other Collateral, or any part thereof, so sold, and any Property
so sold shall be free and clear of any and all rights of redemption
by, through or under the Issuer. At any such sale, the holder of any
Note may bid for and purchase the Property sold and may make payment
therefor as set forth below, and any Note Holder so purchasing any
such Property, upon compliance with the terms of sale may hold, retain
and dispose of such Property without further accountability.
(b) The receipt by any Trustee, or by any Person authorized
under any judicial proceedings to make any such sale, of the proceeds
of any such sale shall be a sufficient discharge to any purchaser of
the Trust Estate or other Collateral, or of any part thereof, sold as
aforesaid; and no such purchaser shall be bound to see to the
application of such proceeds, or be bound to inquire as to the
authorization, necessity or propriety of any such sale. In the event
that, at any such sale, any holder of Outstanding Notes is the
successful purchaser, it may, in paying the purchase price, turn in
any of its Notes in lieu of cash in the amount which shall, upon
distribution of the net proceeds of such sale, be payable thereon, and
if the cash amounts so payable thereon shall be less than the amount
due therein, said Notes shall be returned to the holders thereof after
a notation of each partial prepayment shall have been made thereon.
7.7 Restoration of Rights and Remedies. If any Trustee shall have
instituted any proceeding to enforce any right or remedy under this
Indenture or under any other Project Document and such proceeding shall
have been discontinued or abandoned for any reason, or shall have been
determined adversely to such Trustee, then and in every such case such
Trustee, the Issuer and the holders of the Notes shall, subject to any
determination in such proceeding, be restored severally and respectively
to their former positions hereunder or under any other Project Document,
and thereafter all rights and remedies of such Trustee shall continue as
though no such proceeding had been instituted.
7.8 Application of Sale Proceeds and Deficiency. The proceeds of any
exercise of rights with respect to the Trust Estate or any other
Collateral, or any part thereof, and the proceeds and the avails of any
remedy hereunder shall be paid to and applied as described in Section 5.3.
In the event that at any time and from time to time the payments under the
SDDI Contract then collected by the Trustee and the proceeds of any sale,
collection or realization of or upon Collateral by the Trustee are
insufficient to pay all the obligations secured by this Indenture, the
Issuer shall be liable for the deficiency, together with interest thereon
as provided in the governing Project Documents or (if no interest is so
provided) at such other rate as shall be fixed by applicable law, together
with the costs of collection and the reasonable fees and disbursements of
any external attorneys employed by the Trustee or any holder of an
Outstanding Note to collect such deficiency.
7.9 Cumulative Remedies. No delay or omission of any Trustee or of
the holder of any Note to exercise any right or power hereunder or under
any other Project Document arising from any
Indenture Default or Indenture Event of Default or failure of performance
on the part of the Issuer shall exhaust or impair any such right or power
or prevent its exercise during the continuance of such Indenture Default
or Indenture Event of Default. No waiver by any Trustee, or the holder of
any Note, of any such Indenture Default or Indenture Event of Default,
whether such waiver be full or partial, shall extend to or be taken to
affect any subsequent default, or to impair the rights resulting therefrom
except as may be otherwise expressly provided herein. No remedy hereunder
or under any other Project Document is intended to be exclusive of any
other remedy but each and every remedy shall be cumulative and in addition
to any and every other remedy given hereunder or under any other Project
Document or otherwise existing; nor shall the giving, taking or enforcement
of any other or additional security, Collateral or guaranty for the payment
of the obligations secured under this Indenture operate to prejudice, waive
or affect the security of this Indenture or any other Project Document or
any rights, powers or remedies hereunder or under any other Project
Document, nor shall any Trustee or any holder of any Note be required to
first look to, enforce or exhaust such other or additional security,
Collateral or guaranties. All covenants, conditions, provisions,
warranties, guaranties, indemnities and other undertakings of the Issuer
contained in this Indenture, or in any document referred to herein or in
any agreement supplementary hereto or in any other Project Documents shall
be deemed cumulative to and not in derogation or substitution of any of the
terms, covenants, conditions, or agreements of the Issuer herein contained.
To the extent of overlap of any security interest or lien granted hereunder
or under any other Project Document on any particular Collateral, the
Trustee may elect to exercise rights and remedies under either or, if
appropriate, both of such security interests or liens.
7.10 Limitations on Suits. Except as provided in Section 7.2(b), no
holder of any Note issued hereunder shall have the right to institute any
suit, action or proceeding at law or in equity, for the execution of any
trust or power granted to the Trustees under this Indenture or any other
Project Document or for any other remedy under or upon this Indenture or
any other Project Document, unless (a) the Required Holders shall have made
Written Request upon the applicable Trustee to exercise the powers herein
granted or to institute such action, suit or proceeding in its own name;
(b) such holder or said holders shall have offered to such applicable
Trustee the security and indemnity reasonably satisfactory to it as
provided under Section 10.3(f); and (c) such applicable Trustee shall have
refused or failed to comply with such Written Request for a period of
thirty (30) days after such Written Request shall have been received by it.
Such notification, request, offer of indemnity and refusal or failure are
hereby declared, in every case, to be conditions precedent to the exercise
by any holder of a Note of any remedy hereunder; it being understood and
intended that no one or more holders of Notes shall have any right in any
manner whatever by its or their action to enforce any right under this
Indenture or any other Project Document, except in the manner herein
provided, and that all judicial proceedings to enforce any provision of
this Indenture or any other Project Document shall be instituted, had and
maintained in the manner herein or any other Project Document provided and
for the equal and proportionate benefit of all holders of the Outstanding
Notes.
7.11 Suits for Principal and Interest. Nothing contained in
Section 7.10 or in any other provision of this Indenture or in the Notes
shall affect or impair the obligation of the Issuer, which is absolute and
unconditional, to pay (or cause to be paid from the Trust Estate or other
Collateral as in Article 4 or 5 provided) the principal of, any applicable
Make-Whole Amount, Breakage Amount, Yield Protection Amount and Special
Yield Protection Amount and interest on, the Notes to the holders thereof
on the dates when due, respectively, and at the place specified in
Section 5.6, or affect or impair the right of action, which is also
absolute and unconditional, of such holders to institute suit to enforce
such payment by virtue of the contract embodied in the Notes.
7.12 Waiver by the Issuer.
(a) In granting to the Trustee the power to enforce its rights
hereunder without prior judicial process or judicial hearing, the
Issuer expressly waives, renounces and knowingly relinquishes (to the
extent it may lawfully do so) any legal right which might otherwise
require the Trustee to enforce its rights by judicial process. In so
providing for non-judicial remedies, the Issuer recognizes and
concedes that such remedies are consistent with the usage of trade,
are responsive to commercial necessity, and are the result of a
bargain at arm's length. Nothing herein is intended to prevent the
Trustee or the Issuer from resorting to judicial process.
(b) The Issuer by becoming a party to any Project Document (to
the extent that it may lawfully do so) hereby covenants that it will
not at any time insist upon or plead, or in any manner claim or take
the benefit or advantage of, any stay (except in connection with a
pending appeal of a judgment in a legal proceeding), valuation,
appraisal, redemption or extension law now or at any time hereafter
in force which, but for this waiver, might be applicable to any sale
made under any judgment, order or decree based on any of the Notes or
this Indenture or any other Project Document; and the Issuer by
becoming a party to any Project Document (to the extent it may
lawfully do so) hereby expressly waives and relinquishes all benefit
and advantage of any and all such laws and hereby covenants that it
will not hinder, delay or impede the execution of any power herein
granted and delegated to any Trustee, but that it will suffer and
permit the execution of every such power as though no such law or laws
had been made or enacted.
(c) The Issuer waives any right to require the Trustee or the
holders of the Outstanding Notes to proceed against any other Person,
or to exhaust any Collateral or other security for the obligations
secured hereby, or to have any other Person joined with the Issuer in
any suit arising out of such obligations or the Project Documents, or
to pursue any other remedy in the Trustee's or such holders' power.
The Issuer further waives any and all notice of acceptance of this
Indenture by any other Person directly or indirectly liable for such
obligations from time to time. The Issuer further waives any defense
arising by reason of any disability or other defense of any other
Person or by reason of the cessation from any cause whatsoever of the
liability of any other Person liable for the obligations secured
hereby. Until all of such obligations shall have been paid in full,
the Issuer shall have no right to subrogation and the Issuer waives
the right to enforce any remedy which the Trustee or the holders of
the Outstanding Notes have or may hereafter have against any other
Person liable for such obligations, and the Issuer waives any benefit
of any right to participate in any security whatsoever now or
hereafter held by the Trustee or the holders of the Outstanding Notes.
The Issuer authorizes the Trustee and the holders of the Outstanding
Notes, without notice or demand and without any reservation of rights
against the Issuer and without affecting the Issuer's liability
hereunder or on the obligations secured hereby, from time to time to
(a) take or hold any Property other than the Collateral from any other
Person as security for such obligations, and exchange, enforce, waive
and release any or all of such Property, (b) apply such Property and
direct the order or manner of sale thereof as the Trustee and the
Required Holders may in their discretion determine, and (c) renew,
extend for any period, accelerate, modify, compromise, settle or
release any of the obligations of any other Person in respect of the
obligations secured hereby or other security for such obligations.
ARTICLE 8. AFFIRMATIVE COVENANTS.
The Issuer covenants and agrees that, so long as any of the
commitments are in effect and until payment in full of all Notes issued
hereunder, all interest thereon and all other amounts payable by the Issuer
hereunder or secured hereby:
8.1 Financial Statements. The Issuer shall deliver, or shall cause
to be delivered, to the Trustee, the Sureties (so long as the Performance
Bond is outstanding or amounts are due to the Sureties as a result of
payments made by them thereunder) and each Note Holder (and at a Note
Holder s direction, any Credit Support Party):
(a) As soon as available and in any event within 120 days after
the end of each fiscal year of the Issuer the audited statements of
operations, stockholders' equity and cash flow, of the Issuer for such
fiscal year, and the related balance sheet of the Issuer as at the end
of such fiscal year, and setting forth in each case in comparative
form the corresponding figures for the preceding fiscal year, and
accompanied by (i) the related opinion of Arthur Andersen LLP, or such
other independent public accountants of recognized national standing
acceptable to the Required Holders, which opinion shall state that
said financial statements fairly present the financial condition and
results of operations of the Issuer as at the end of, and for, such
fiscal year, that such financial statements have been prepared in
accordance with GAAP, except for such changes in such principles with
which the independent public accountants shall have concurred and
footnoted and such opinion shall not contain a "going concern" or
scope or like qualification or exception and that the examination of
such accountants in connection with such financial statements has been
conducted in accordance with generally accepted auditing standards and
included such tests of the accounting records and such other auditing
procedures as said accountants deemed necessary in the circumstances
and (ii) a certificate of such accountants stating that in making the
examination necessary for their opinion, they obtained no knowledge,
except as specifically stated, of any Indenture Default or Indenture
Event of Default.
(b) Within five (5) Business Days after the filing thereof,
copies of Parent s Form 10-K filing with the Securities and Exchange
Commission or, if Parent ceases to make such filings, as soon as
available and in any event within 120 days after the end of each
fiscal year of the Parent, the audited consolidated statements of
operations, stockholders' equity, and cash flow, of the Parent and its
consolidated subsidiaries for such fiscal year, and the related
balance sheet of the Parent and its consolidated subsidiaries as at
the end of such fiscal year, and setting forth in each case in
comparative form the corresponding figures for the preceding fiscal
year, and accompanied by the related opinion of Arthur Andersen LLP,
or such other independent public accountants of recognized national
standing acceptable to the Required Holders, which opinion shall
state that said financial statements fairly present the financial
condition and results of operations of the Parent and its consolidated
subsidiaries as at the end of, and for, such fiscal year, that such
financial statements have been prepared in accordance with GAAP,
except for such changes in such principles with which the independent
public accountants shall have concurred and footnoted and such opinion
shall not contain a "going concern" or scope or like qualification or
exception and that the examination of such accountants in connection
with such financial statements has been conducted in accordance with
generally accepted auditing standards and included such tests of the
accounting records and such other auditing procedures as said
accountants deemed necessary in the circumstances.
(c) As soon as available and in any event within 60 days after
the end of each of the first three fiscal quarterly periods of each
fiscal year of the Issuer the unaudited statements of operations and
cash flows of the Issuer for such period and for the period from the
beginning of the respective fiscal year to the end of such period, and
the related balance sheets as at the end of such period, and setting
forth in each case in comparative form the corresponding figures for
the corresponding period in the preceding fiscal year, accompanied by
the certificate of a Responsible Officer, which certificate shall
state that said financial statements fairly present the financial
condition and results of operations of the Issuer in accordance with
GAAP, as at the end of, and for, such period (subject to normal year-
end audit adjustments) and further stating whether there existed as
of the date of such financial statements and whether, to the best of
such officer's knowledge, there exists on the date of the certificate
or existed at any time during the period covered by such financial
statements any Indenture Default or Indenture Event of Default and,
if any such condition or event exists on the date of the certificate,
specifying the nature and period of existence thereof and the action
the Issuer is taking and proposes to take with respect thereto.
(d) Within five (5) Business Days after the filing thereof,
copies of Parent s Form 10-Q filing with the Securities and Exchange
Commission or, if Parent ceases to make such filings, as soon as
available and in any event within 60 days after the end of each of the
first three fiscal quarterly periods of each fiscal year of the
Parent, the unaudited consolidated statements of operations of the
Parent and its consolidated subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of
such period, and the related consolidated balance sheets as at the end
of such period, and setting forth in each case, in comparative form
the corresponding figures for the corresponding period in the
preceding fiscal year, accompanied by the certificate of a Responsible
Officer, which certificate shall state that said financial statements
fairly present the consolidated financial condition and results of
operations of the Parent and its consolidated subsidiaries in
accordance with GAAP, as at the end of, and for, such period (subject
to normal year-end audit adjustments).
(e) Within the period provided in paragraph (a) above, a
certificate of a Responsible Officer of the Issuer stating whether
there existed as of the date of such financial statements and whether,
to the best of such officer's knowledge, there exists on the date of
the certificate or existed at any time during the period covered by
such financial statements any Indenture Default or Indenture Event of
Default and, if any such condition or event exists on the date of the
certificate, specifying the nature and period of existence thereof and
the action the Issuer is taking and proposes to take with respect
thereto.
(f) Promptly and in any event within three (3) Business Days
after the Issuer knows that any Indenture Default or Indenture Event
of Default or any Material Adverse Effect has occurred, a notice of
such Indenture Default or Indenture Event of Default or Material
Adverse Effect, and promptly and in any event within three (3)
Business Days after the Issuer knows of any material default under the
SDDI Contract, the Construction Supervisory Agreement, the Refundment
Guarantee, the Performance Bond or the Operation and Maintenance
Agreement a notice of such default, in each case, describing the same
in reasonable detail and the action the Issuer proposes to take with
respect thereto.
(g) Promptly upon its becoming available, each financial
statement, report, notice or proxy statement sent by the Issuer, or
the Parent to stockholders generally and each regular or periodic
report and any registration statement, prospectus or written
communication (other than transmittal letters) in respect thereof
filed by the Issuer or the Parent with or received by the Issuer or
the Parent in connection therewith from any securities exchange or the
Securities and Exchange Commission or any successor agency.
(h) From time to time such other information regarding the
business, affairs or financial condition of the Issuer or the Parent
reasonably related to the Issuer or the Parent (including, without
limitation, any Plan or Multiemployer Plan and any reports or other
information required to be filed under ERISA) as any Purchaser or
other Note Holder or the Trustee or either of the Sureties or any
Credit Support Party may reasonably request.
8.2 Litigation. The Issuer shall promptly give to the Trustee, the
Sureties and each Note Holder (and at the direction of a Noteholder the
Credit Support Parties) notice of any material litigation or proceeding
against or adversely affecting the Issuer or the Parent in which the amount
involved is not covered in full by insurance (over and above reasonable
deductibles or other self-insured retentions) or in which the Issuer has
received notice from any insurer reserving its rights or contesting
coverage under any policy (subject to normal and customary deductibles, or
in which injunctive or similar relief is sought. The Issuer will promptly
notify the Trustee, the Sureties and each Note Holder of all claims,
judgments, Liens or other encumbrances affecting any Property of the Issuer
if the aggregate value of such claims, judgments, Liens or other
encumbrances affecting such Property shall exceed $1,000,000.
8.3 Acceptance of Drilling Rig, Maintenance, Etc.
(a) The Issuer shall: (i) preserve and maintain its corporate
existence and all of its material rights, privileges, licenses and
franchises; (ii) keep proper books of record and account in which
full, true and correct entries will be made of all dealings or
transactions of, or in relation to its business and activities in
accordance with GAAP consistently applied; (iii) comply with all
Governmental Requirements if failure to comply with such requirements
will have a Material Adverse Effect; (iv) pay and discharge all taxes,
assessments and governmental charges or levies imposed on it or on its
income or profits or on any of its Property, all trade accounts
payable in accordance with usual and customary business terms and all
claims for work, labor or materials prior to the date on which any
Lien (other than Liens for obligations that have not been outstanding
more than 60 days, unless action has been taken to file or enforce
such Liens) or penalties attach thereto, except for any such tax,
assessment, charge, levy, account payable or claim, the payment of
which is being Contested In Good Faith; (v) permit a Trustee, any
holder of the Notes and any Credit Support Party to visit and inspect,
under the Issuer's guidance, any of the properties of the Issuer, to
examine all of its books of account, records, reports and other
papers, to make copies and extracts therefrom and to discuss its
affairs, finances and accounts with its officers, employees, and
independent public accountants (and by this provision the Issuer
authorizes said accountants to discuss with any holder of the Notes
the finances and affairs of the Issuer) all at such reasonable time,
upon reasonable notice and as often as may be reasonably requested and
the Issuer agrees to reimburse such holder for all reasonable expenses
incurred thereby promptly upon demand, and (vi) keep, or cause to be
kept, insured by financially sound and reputable insurers all Property
of a character usually insured by Persons engaged in the same or
similar business similarly situated against loss or damage of the
kinds and in the amounts customarily insured against by such Persons
and carry or cause to be carried such other insurance as is usually
carried by such Persons including, without limitation, (1) until
Issuer's acceptance of the Drilling Rig pursuant to Article VII of the
Construction Contract full coverage of the Owner's Supplies to the
full replacement value thereof and naming the Trustee as loss payee
or as an additional insured as its interest may appear, as applicable,
and (2) after Issuer's acceptance of the Drilling Rig pursuant to
Article VII of the Construction Contract, insurance as required by
each of the SDDI Contract and the First Preferred Ship Mortgage, all
such policies to provide that (i) there shall be no recourse against
the Trustee or any Note Holder for the payment of premiums or
commissions, (ii) if such policies provide for the payment of
assessments or advances, there shall be no recourse against the
Trustee or any Note Holder for the payment thereof. All policies
shall provide that the insurers shall also provide to the Trustee
thirty (30) days' prior written notice of any material change in the
coverage of such insurance as well as ten (10) days' prior written
notice of any cancellation of such insurance in the event of non-
payment of premiums and seven (7) days' prior written notice of any
cancellation of such insurance for war risk.
(b) Contemporaneously with the delivery of the financial
statements required by Section 8.1 to be delivered for each year, the
Issuer will furnish or cause to be furnished to the Trustee a
certificate of insurance coverage from each insurer in form and
substance reasonably satisfactory to the Trustee and the Required
Holders.
(c) The Construction Contract will not be amended or modified
(including modification or changes pursuant to Article V of the
Construction Contract) without the approval of the Required Holders
if such amendment or modification will change the time of delivery of
the Drilling Rig by more than thirty (30) days (but in no event beyond
the Outside Date), materially modify the plans and Specifications for
the Drilling Rig, decrease the fair market value of the Drilling Rig
when completed or in any way modify the Drilling Rig in a manner which
could impair the ability of the Issuer and the Drilling Rig to comply
with the terms of the SDDI Contract. In this connection, the Issuer
will maintain the Construction Contract in full force and effect and,
except for immaterial variances and immaterial waivers, comply with
all terms and provisions thereof including, without limitation,
maintenance of insurance as required by the Construction Contract and
enforce the compliance with the terms thereof by the contractor
thereunder.
(d) The Issuer will accept delivery of the Drilling Rig pursuant
to Article VII of the Construction Contract only if (i) the Drilling
Rig has been constructed and is complete in accordance with the terms
of the Construction Contract including, without limitation, the
Specifications and all terms and conditions thereof or (ii) the
Issuer s acceptance is authorized by all of the Note Holders.
Immediately, upon such acceptance, the Issuer will cause the Drilling
Rig to (x) be covered by insurance required by Section 2.13 of the
First Preferred Ship Mortgage and the Indenture with such insurance
being in full force and effect and all premiums due in respect thereof
paid, (y) be documented in the name of the Issuer under the laws of
the United States of America with no other filing, recordation or
registration of any other document or instrument necessary in order
to establish the Issuer s good and valid title thereto and (z) be
covered by the First Preferred Ship Mortgage which shall have been
duly filed with the U.S. Coast Guard National Vessel Documentation
Center and be a first preferred ship mortgage effective as against
creditors of and purchasers from the Issuer, securing all obligations
secured thereby and further the Issuer shall have delivered to the
Trustee an opinion of Issuer s counsel as to the title to the Drilling
Rig and the authorization, execution, delivery, validity,
enforceability and priority of the First Preferred Ship Mortgage in
the form of Annex E hereto.
(e) The Issuer will maintain the Drilling Rig and all equipment
used in connection therewith in a good running order, repair and first
class condition and in compliance with the SDDI Contract and all
Governmental Requirements and within the class designation as set out
in the definition of Operational Period Conditions Precedent and with
all equipment capable of operation within the tolerances designated
in the Specifications and at all times registered as a vessel under
the laws of the United States of America and otherwise operate the
Drilling Rig or cause the Drilling Rig to be operated in United States
territorial waters in the Gulf of Mexico or in the Gulf of Mexico on
or above the outer Continental Shelf of the United States; provided,
however, if SDDI requires the Drilling Rig to change location pursuant
to the SDDI Contract, the Drilling Rig may be moved to such location
as SDDI so requires; and as set forth in Section 1 of the SDDI
Contract and in accordance with the SDDI Contract and the practices
of the industry and in compliance with all other applicable contracts
and agreements and otherwise in a careful efficient manner and in
compliance with all Governmental Requirements.
The Issuer s maintenance obligations hereunder shall include,
without limitation, causing the surveys and inspections referred to
in Annex C hereto to be timely conducted and satisfactorily passed
with the 5 year surveys and inspections conducted and passed prior to
the Maturity Date.
In the event of any damage to the Drilling Rig from any casualty
having an estimated repair cost in excess of $1,000,000, the Issuer
shall give prompt written notice thereof to the Trustee, which notice
shall set forth in reasonable detail the nature and extent of the
damage, an estimate of the cost of repairs and an estimate of the
length of time necessary to repair such damage. Such notice shall
also state whether the Issuer considers such damage to constitute an
Event of Loss, which statement shall not, however, be determinative.
With respect to any casualty damage other than an Event of Loss,
regardless of whether insurance proceeds are available, the Issuer
shall promptly and diligently repair the Drilling Rig or cause the
Drilling Rig to be repaired to the same condition as it was before
such damage and in compliance with the foregoing requirements of this
Section 8.3(d), free and clear of all liens and encumbrances other
than Excepted Liens. All contracts for any such repairs shall be
assigned to the Trustee as part of the Trust Estate as security for
Issuer's obligations hereunder. Such assignment may be effected by
a blanket assignment and by specific assignments with respect to third
party contracts in excess of $100,000. In the event of any damage
that constitutes an Event of Loss, then the Issuer shall be relieved
of the foregoing repair obligations subject to repayment in full of
all principal, interest and all other amounts payable under the Notes
and the other Project Documents in compliance with the provisions of
Section 3.5 hereof.
(f)(i) The Issuer will maintain the Construction Contract, the
Construction Supervisory Agreement, the Refundment Guarantee, the
Performance Guarantee, the Performance Bond, the SDDI Contract and the
Operation and Maintenance Agreement in full force and effect and
comply with all terms and provisions thereof and take all action
necessary or appropriate to enforce the compliance of the Builder (as
defined in the Note Purchase Agreement), the issuer of the Refundment
Guarantee, SDDI, RBF II, the Parent and the Sureties in accordance
with their respective terms.
(ii) Neither the SDDI Contract, the Construction Supervisory
Agreement, the Refundment Guarantee, the Performance Bond, the
Operation and Maintenance Agreement nor the Performance Guarantee will
be amended or modified without the approval of the Trustee at the
direction of the Required Holders. Without the consent of all of the
Note Holders, the Issuer will not consent to the assignment by SDDI
(except to permitted assignees in accordance with the SDDI Contract)
of the SDDI Contract.
(g) Promptly after the submission to SDDI of each monthly
billing under the SDDI Contract, the Issuer shall supply the Trustee
with a copy thereof, which billing shall clearly set out the amount
of the billing and the due date thereof.
8.4 Environmental Matters.
(a) The Issuer will operate the Drilling Rig in compliance with
Environmental Laws, and will establish and implement such procedures
as may be reasonably necessary to continuously determine and assure
that: (i) all Property of the Issuer and the operations conducted
thereon and other activities of the Issuer are in compliance with and
do not violate the requirements of any Environmental Laws, (ii) no
oil, hazardous substances or solid wastes are disposed of, discharged
or otherwise released except in compliance with Environmental Laws,
(iii) no hazardous substance will be released in a quantity equal to
or exceeding that quantity which requires reporting pursuant to
Section 103 of CERCLA, and (iv) no oil, oil and gas exploration and
production wastes or hazardous substance is discharged or released so
as to pose an imminent and substantial endangerment to public health
or welfare or the environment which will result in damages recoverable
under the OPA.
(b) The Issuer will promptly notify the Trustee and the Note
Holders in writing of any threatened action, investigation or inquiry
by any Governmental Authority of which the Issuer has knowledge in
connection with any Environmental Laws, excluding routine testing and
corrective action.
8.5 Further Assurances. The Issuer will cure promptly any defects
in the creation and issuance of the Notes and the execution and delivery
of the Project Documents and this Indenture. The Issuer at its expense
will promptly execute and deliver or cause to be executed or delivered to
the Trustee upon request all such other documents, agreements (including,
without limitation, account control agreements) and instruments to comply
with or accomplish the covenants and agreements of the Issuer in the
Project Documents and this Indenture, or to further evidence and more fully
describe the Collateral intended as security for the Notes, or to correct
any omissions in the Project Documents, or to state more fully the security
obligations set out herein or in any of the Project Documents, or to
perfect, protect or preserve any Liens created pursuant to any of the
Project Documents, or to make any recordings, to file any notices or obtain
any consents, all as may be necessary or appropriate in connection
therewith. To facilitate assembling the Collateral upon the occurrence of
an Indenture Event of Default and making it available to the Indenture
Trustee at a place to be designated by the Indenture Trustee which is
reasonably convenient, the Issuer has agreed to, among other things, move
the Drilling Rig under certain conditions as specified in Section 3.3(c)
of the First Preferred Ship Mortgage. In addition and in connection
therewith, the Issuer acknowledges that the Indenture Trustee and the Note
Holders have certain rights under and pursuant to the Operation and
Maintenance Agreement which rights shall be exercisable under the
circumstances and in accordance with the terms of the Operation and
Maintenance Agreement without any demand on, or legal or other proceeding
or action against, the Issuer.
8.6 Performance of Obligations. The Issuer will pay the Notes
according to the reading, tenor and effect thereof; and the Issuer will
perform every act and discharge all of the obligations to be performed and
discharged by it under the Project Documents including, without limitation,
this Indenture, at the time or times and in the manner specified therein.
8.7 ERISA Information and Compliance. The Issuer will furnish to the
Trustee and the Note Holders (i) immediately upon becoming aware of the
occurrence of any ERISA Event or of any "prohibited transaction," as
described in section 406 of ERISA or in section 4975 of the Code, in
connection with any Plan or any trust created thereunder, a written notice
signed by a Responsible Officer specifying the nature thereof, what action
the Issuer or the ERISA Affiliate is taking or proposes to take with
respect thereto, and, when known, any action taken or proposed by the
Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto, and (ii) immediately upon receipt thereof, copies of any notice
of the PBGC's intention to terminate or to have a trustee appointed to
administer any Plan. With respect to each Plan (other than a Multiemployer
Plan), the Issuer will, and will cause each ERISA Affiliate to, (i) satisfy
in full and in a timely manner without giving rise to any Lien, all of the
contribution and funding requirements of section 412 of the Code
(determined without regard to subsections (d), (e), (f) and (k) thereof)
and of section 302 of ERISA (determined without regard to sections 303, 304
and 306 of ERISA), and (ii) pay, or cause to be paid, to the PBGC in a
timely manner, all premiums required pursuant to sections 4006 and 4007 of
ERISA.
8.8 Maintenance of Agency. So long as any of the Notes remain
Outstanding, the Issuer will maintain a single agency where: (i) the Notes
may be presented for payment, and (ii) the Notes may be presented for
registration of transfer, exchange or replacement as in Article 2 provided.
The Issuer hereby designates the principal corporate trust office of the
Trustee in Houston, Texas, as its agency for each such purpose. The Issuer
will give to the Trustees and the holders of the Notes prior written notice
of any change of location of any such agency, which shall be located in the
United States. In case the Issuer shall fail to maintain such agency or
shall fail to give such notices of any change of the location thereof,
presentations and demands may be made and notice may be served at the
address specified for the Issuer in or pursuant to Section 13.3. Notice
and demands to or upon the Issuer in respect to the Notes or this Indenture
may also be served at such address.
8.9 Additional Assurances. The Issuer will cause this Indenture, any
and all supplemental indentures, mortgages, security agreements,
instruments of further assignment, financing statements and continuation
statements at all times to be kept recorded and filed in such manner and
in such places as may be required by law to fully preserve and protect the
rights of the holders of the obligations secured hereby as a first priority
security interest and the Trustees hereunder and under all other documents
and instruments evidencing or securing the obligations secured hereby
(including, without limitation, documents and instruments granting Liens
to the Trustees with respect to the Trust Estate). The Issuer will, at its
expense and at any time and from time to time, promptly execute and deliver
or cause to be executed or delivered all further instruments and documents
and take all further action that may be necessary or desirable or that the
Trustee may request in order to (a) perfect and protect the Liens and other
rights created or purported to be created hereby and by the other Project
Documents and the first priority of such Liens and other rights; (b) enable
the Trustee to exercise and enforce its rights and remedies hereunder in
respect of the Collateral; or (c) otherwise effect the purposes of this
Indenture, including, without limitation: (i) executing and filing such
supplements to this Indenture and such financing or continuation statements
(or amendments thereto) as may be necessary or desirable or that the
Trustee may reasonably request in order to perfect and preserve the Liens
created or purported to be created hereby or thereby; and (ii) furnishing
to the Trustee from time to time such other information in connection with
the Collateral as the Trustee may reasonably request, all in reasonable
detail. The Issuer will furnish to the Trustee any information which the
Trustee may from time to time reasonably request concerning any covenant,
provision or representation contained herein or concerning any other matter
in connection with the Collateral.
8.10 Year 2000 Compliance. The Issuer shall comply with the covenants
and agreements set out in Annex G hereto.
8.11 Change in Location of Collateral. The Drilling Rig shall be kept
at all times in United States territorial waters in the Gulf of Mexico or
in the Gulf of Mexico on or above the outer Continental Shelf of the United
States; provided, however, if SDDI requires the Drilling Rig to change
location pursuant to the SDDI Contract, the Drilling Rig may be moved to
such location as SDDI so requires. In the event of movement pursuant to
the SDDI Contract, the Issuer will give sixty (60) days notice to the
Trustees and the Note Holders of such movement. Issuer will not, without
the Required Holders' prior written consent, change the location of any of
the other Collateral to any state, county or other jurisdiction in which
Trustee has not already filed a financing statement or taken other
necessary steps to perfect its first priority security interests in the
Collateral or to maintain such perfection.
8.12 Use of Issuer's Name. Without the express written consent of the
Required Holders, Issuer will not engage in any business or transaction
under any name other than Issuer's name hereunder.
8.13 Corporate Independence. Until 367 days have elapsed following
payment and satisfaction of all Notes, the Issuer shall not change its
legal structure to anything other than a corporation and shall observe the
applicable legal requirements for the recognition of the Issuer as a legal
entity separate and apart from Parent and its Affiliates, including,
without limitation, compliance with the following:
(i) the Issuer shall maintain separate corporate records, books
of account and financial statements (each of which shall be
sufficiently full and complete to permit a determination of the
Issuer's assets and liabilities and to permit a determination of the
obligees thereon and the time for performance on each of the Issuer's
obligations) from those of the Parent and its Affiliates;
(ii) the Issuer shall not commingle any of its assets or funds
with those of the Parent or any of its Affiliates;
(iii) the board of directors of the Issuer shall be elected
independently from the board of directors of the Parent and any of its
Affiliates and shall at all times include at least one Independent
Director (except in the case of death, incapacity, resignation or
removal, and in any such case said Independent Director shall be
promptly replaced);
(iv) the board of directors and stockholders of the Issuer shall
hold all regular and special meetings appropriate to authorize
corporate actions. Regular meetings of directors will be held at
least annually. The board of directors may act from time to time
through one or more committees of the board in accordance with the
Issuer's by-laws. Appropriate minutes of all meetings of board of
directors (and committees thereof) and of the stockholders' meetings
shall be kept by the Issuer;
(v) the Issuer shall act solely in its own corporate name and
through its own authorized officers and agents. Neither the Parent
nor any of its Affiliates shall be appointed agent of the Issuer other
than as permitted or required by the Project Documents;
(vi) the Issuer shall at all times hold itself out to the public
under the Issuer's own name as a legal entity separate and distinct
from Parent and its Affiliates (the foregoing to include, but not be
limited to the use of materially separate and distinct letterhead);
(vii) all financial reports prepared by the Issuer shall
comply with GAAP and shall be issued separately from any reports
prepared for Parent and any of its Affiliates; and
(viii) Parent's financial reports shall disclose the
separateness of the Issuer as required by GAAP and that the Collateral
is owned by the Issuer and is not available to creditors of Parent or
any of its Affiliates.
8.14 Maintenance of Payment Reserve Account. Issuer agrees that it
will maintain at all times an amount in the Payment Reserve Account
(exclusive of the Phase One Contract Receipts and the Phase One Interest
Reserve) equal to or greater than the Phase Two Reserve Amount. Issuer
also agrees that, during Phase One, it will maintain an amount in the
Payment Reserve Account (exclusive of the Phase One Contract Receipts and
the Phase Two Reserve Amount) equal to or greater than the Phase One
Interest Reserve less any amounts withdrawn pursuant to Section 4.1(b).
8.15 Notice of Intention. No later than 180 days before the Maturity
Date, the Issuer will give notice to the Trustee of Issuer s intention with
respect to the refinancing of the Drilling Rig upon the maturity of the
Notes. Such notice shall be accompanied by evidence satisfactory to the
Trustee that the Issuer will have sufficient resources to repay the Class
A2 Notes at the Maturity Date.
ARTICLE 9. NEGATIVE COVENANTS.
The Issuer covenants and agrees that, so long as any of the
commitments under the Note Purchase Agreements are in effect and until
payment in full of Notes issued hereunder, all interest thereon and all
other amounts payable by the Issuer hereunder, without the prior written
consent of the Required Holders (except as expressly required by the
Project Documents):
9.1 Debt. The Issuer will not incur, create, assume, suffer to exist
or otherwise become liable in respect of any Debt, except:
(a) the Notes or other indebtedness arising under the Project
Documents; and
(b) accounts payable (for the deferred purchase price of
Property or services) from time to time incurred in the ordinary
course of business which, if greater than 60 days past the invoice or
billing date, are being Contested In Good Faith.
9.2 Liens. The Issuer will not create, incur, assume or permit to
exist any Lien on the Drilling Rig or any of its other Properties (now
owned or hereafter acquired), or upon any income or profits therefrom
except:
(a) Liens securing the payment of the Notes; and
(b) during the period up to but not including the Maturity Date,
Excepted Liens.
9.3 Investments, Loans and Advances. The Issuer will not make or
permit to remain outstanding any loans or advances to or investments
(whether debt, equity or otherwise) in any Person, except that the
foregoing restriction shall not apply to:
(a) accounts receivable arising in the ordinary course of
business; and
(b) Permitted Investments made pursuant to the requirements of
this Indenture.
9.4 Dividends, Distributions and Redemptions. In the event of the
occurrence and during the continuance of an Indenture Default or Indenture
Event of Default, the Issuer will not declare or pay any dividend,
purchase, redeem or otherwise acquire for value any of its stock now or
hereafter outstanding, return any capital to its stockholders or make any
distribution of its assets to its stockholders.
9.5 Sales and Leasebacks. The Issuer will not enter into any
arrangement, directly or indirectly, with any Person whereby the Issuer
shall sell or transfer any of its Property, whether now owned or hereafter
acquired, and whereby the Issuer shall then or thereafter rent or lease as
lessee such Property or any part thereof or other Property which the Issuer
intends to use for substantially the same purpose or purposes as the Prop-
erty sold or transferred.
9.6 Nature of Business. The Issuer will not engage directly or
indirectly in any business or activity except construction, owning and
operating the Drilling Rig and activities incidental thereto.
9.7 Limitation on Leases. The Issuer will not create, incur, assume
or suffer to exist any obligation for the payment of rent or hire of
Property of any kind whatsoever (real or personal including capital
leases), under leases or lease agreements.
9.8 Mergers, Etc. The Issuer will not merge into or with or consoli-
date with any other Person, or sell, lease or otherwise dispose of (whether
in one transaction or in a series of transactions) all or substantially all
of its Property to any other Person.
9.9 Proceeds of Notes. The Issuer will not permit the proceeds of
the Notes to be used for any purpose other than those permitted by the Note
Purchase Agreements. Neither the Issuer nor any Person acting on behalf
of the Issuer has taken or will take any action which might cause any of
the Project Documents to violate Regulation T, U or X or any other
regulation of the Board of Governors of the Federal Reserve System or to
violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.
9.10 ERISA Compliance. The Issuer will not at any time:
(a) engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which the Issuer or any ERISA Affiliate
could be subjected to either a civil penalty assessed pursuant to
section 502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43 of
Subtitle D of the Code that is Material;
(b) terminate, or permit any ERISA Affiliate to terminate, any
Plan in a manner, or take any other action with respect to any Plan,
which could result in any liability of the Issuer or any ERISA
Affiliate to the PBGC that is Material;
(c) fail to make, or permit any ERISA Affiliate to fail to make,
full payment when due of all amounts which, under the provisions of
any Plan, agreement relating thereto or applicable law, the Issuer or
any ERISA Affiliate is required to pay as contributions thereto to the
extent that such failure could reasonably be expected to result in a
liability of the Issuer or any ERISA Affiliate that is Material;
(d) permit to exist, or allow any ERISA Affiliate to permit to
exist, any accumulated funding deficiency within the meaning of
Section 302 of ERISA or section 412 of the Code, whether or not
waived, with respect to any Plan;
(e) permit, or allow any ERISA Affiliate to permit, the
actuarial present value of the benefit liabilities under any Plan
maintained by the Issuer or any ERISA Affiliate which is regulated
under Title IV of ERISA to exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of
ERISA) of such Plan allocable to such benefit liabilities by an amount
which in the event of the termination of such Plan would be Material.
The term "actuarial present value of the benefit liabilities" shall
have the meaning specified in section 4041 of ERISA;
(f) contribute to or assume an obligation to contribute to, or
permit any ERISA Affiliate to contribute to or assume an obligation
to contribute to, any Multiemployer Plan if a future withdrawal or
partial withdrawal from such Plan could reasonably be expected to
result in a withdrawal liability assessment which is Material;
(g) acquire, or permit any ERISA Affiliate to acquire, an
interest in any Person that causes such Person to become an ERISA
Affiliate with respect to the Issuer or any ERISA Affiliate if such
Person sponsors, maintains or contributes to, or at any time in the
six-year period preceding such acquisition has sponsored, maintained,
or contributed to, (1) any Multiemployer Plan, if a Material
withdrawal liability has been assessed by such Plan against such ERISA
Affiliate or Person or if a future withdrawal or partial withdrawal
from such Plan could reasonably be expected to result in a withdrawal
liability assessment which is Material or (2) any other Plan that is
subject to Title IV of ERISA under which the actuarial present value
of the benefit liabilities under such Plan exceeds the current value
of the assets (computed on a plan termination basis in accordance with
Title IV of ERISA) of such Plan allocable to such benefit liabilities
by an amount which in the event of the termination of such Plan would
be Material;
(h) incur, or permit any ERISA Affiliate to incur, a Material
liability to or on account of a Plan under sections 515, 4062, 4063,
4064, 4201 or 4204 of ERISA;
(i) contribute to or assume an obligation to contribute to, or
permit any ERISA Affiliate to contribute to or assume an obligation
to contribute to, any employee welfare benefit plan, as defined in
section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities,
that may not be terminated by such entities without any Material
liability; or
(j) amend or permit any ERISA Affiliate to amend, a Plan
resulting in an increase in current liability such that the Issuer or
any ERISA Affiliate is required to provide security to such Plan under
section 401(a)(29) of the Code.
9.11 Sale or Discount of Receivables. The Issuer will not discount
or sell (with or without recourse) any of its notes receivable or accounts
receivable.
9.12 Sale of Drilling Rig. The Issuer will not sell, lease, charter,
assign, convey, dispose or otherwise transfer the Drilling Rig or any
interest therein; provided, however, this covenant shall not apply to
attendant equipment to the Drilling Rig which is obsolete or which is
replaced by equipment of equal or greater value.
9.13 Environmental Matters. The Issuer will not cause or permit any
of its Property to be in violation of, or do anything or permit anything
to be done which will subject any such Property to any remedial obligations
under any Environmental Laws, assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions and circumstances,
if any, pertaining to such Property.
9.14 Transactions with Affiliates. The Issuer will not enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property or the rendering of any service, with any Affiliate
unless such transactions are otherwise permitted under this Indenture or
the other Project Documents, are in the ordinary course of its business and
are upon fair and reasonable terms no less favorable to it than it would
obtain in a comparable arm's length transaction with a Person not an
Affiliate.
9.15 Subsidiaries. The Issuer has no subsidiaries and shall not
create or acquire any subsidiaries.
9.16 Location of Issuer; Change of Name of Issuer. The Issuer will
not cause or permit any change to be made in its corporate name or identity
or any change to be made in the address of its chief executive office or
principal place of business (presently being the address set forth in
Section 13.3), unless the Issuer shall have first notified the Trustee and
each Note Holder of such change at least thirty (30) days prior to the
effective date of such change and shall have first taken all action
required by the Trustee for the purpose of further perfecting or protecting
the rights of the Trustee in the Collateral. In any notice furnished
pursuant to this subsection 9.16, the Issuer will state that the notice is
required by this Indenture and contains facts that may require additional
filings of financing statements.
9.17 Acquisition of Notes. The Issuer will not, directly or
indirectly through any of its Affiliates or otherwise, purchase, redeem,
prepay or otherwise acquire any of the Outstanding Notes except upon
payment or prepayment of the Notes in accordance with the terms of this
Indenture and the Notes. In case the Issuer or any of its Affiliates
acquires any Notes, such Notes shall thereupon be delivered to the Trustee
for cancellation and no Notes shall be issued in substitution therefor.
9.18 Non-Petition Covenant. With respect to any CP Conduit that is
a Purchaser, the Issuer hereby agrees that until the 368th day following
the maturity of the last maturing commercial paper note to be issued by any
such CP Conduit in connection with its funding of its investment in the
Notes, the Issuer will not institute, and will not join with others in
instituting, any involuntary bankruptcy or analogous proceeding against any
such CP Conduit under any bankruptcy, reorganization, receivership or
similar law, domestic or foreign, as now or hereafter in effect.
9.19 Jurisdiction of Registration. The Issuer shall not change the
jurisdiction of registration of the Drilling Rig to another jurisdiction,
unless the Issuer has given the Trustee and the Note Holders not less than
60 days prior written notice, the Required Holders have consented (which
consent shall not be unreasonably withheld) and the Issuer has furnished
the Trustee and the Note Holders with a new replacement ship mortgage
acceptable to the Trustee and the Required Holders and appropriate opinions
of counsel, acceptable in form and substance to the Required Holders, with
respect to such mortgage and the filing and first priority thereof.
9.20 Change of Name of Drilling Rig. The Issuer may change the name
of the Drilling Rig during the term of this Indenture; provided that the
change of name does not affect the perfection or the priority of the First
Preferred Ship Mortgage.
ARTICLE 10. THE TRUSTEES.
10.1 Certain Duties and Responsibilities of Trustees.
(a) Except during the continuance of an Indenture Event of
Default:
(i) each Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read
into this Indenture against such Trustee; and
(ii) each Trustee may conclusively rely, in good faith, as
to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions
furnished to such Trustee and conforming to the requirements of
this Indenture or other Project Documents; but in the case of
any such certificates or opinions which by any provision hereof
are specifically required to be furnished to such Trustee, such
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this
Indenture.
(b) In case an Indenture Event of Default has occurred and is
continuing, each Trustee shall exercise such of the rights and powers
vested in it by this Indenture and under each of the other Project
Documents for the benefit of the holders of the Notes, and use the
same degree of care and skill in their exercise, as a prudent man
would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve
any Trustee from liability for its own negligence or its own willful
misconduct, or the inaccuracy of any of its representations or
warranties made in Section 10.14, except that:
(i) no Trustee which is a corporation or banking
association shall be liable for any error of judgment made in
good faith by an officer of such Trustee unless it shall be
proved that such Trustee was negligent in ascertaining material
facts; and
(ii) no Trustee shall be liable to the holder of any Note
with respect to any action taken or omitted to be taken by it,
in good faith after an Indenture Event of Default shall have
occurred in accordance with the direction of the Required
Holders relating to the method and place of conducting any
proceeding for any remedy available to such Trustee.
(d) No provision of this Indenture shall require any Trustee to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
(e) Whether or not therein expressly so provided, every
provision of this Indenture and any other Project Documents relating
to the conduct or affecting the liability of or affording protection
to any Trustee shall be subject to the provisions of this
Section 10.1.
(f) The Trustee shall give to the holder of each Note written
notice of each and every Indenture Default or Indenture Event of
Default of which one of its Responsible Officers has actual knowledge
within three (3) Business Days of obtaining such actual knowledge
unless the same shall be cured during such period.
10.2 Trustees' Compensation and Indemnification. The Issuer covenants
and agrees to pay to each Trustee promptly (and in any event within 30 days
after receipt of any invoice or other statement or notice) and each Trustee
shall be entitled to the fees and expenses determined as provided in
Schedule 10.2 hereto for all services rendered and expenses incurred by it
in the execution of the trusts hereby created and in the exercise and
performance of any of the powers and duties hereunder of such Trustee,
which compensation shall not be limited by any provisions of law in regard
to the compensation of a trustee of an express trust, and the Issuer will
pay or reimburse each Trustee promptly (and in any event within 30 days
after receipt of any invoice or other statement or notice) for all
reasonable expenses, disbursements and advances incurred or made by such
Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements
of its external counsel and of all Persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
gross negligence (but not mere negligence) or bad faith or wilful
misconduct. Subject to Section 10.3(f), each Trustee agrees that it shall
have no right against any holder of any Note for the payment of
compensation for its services hereunder or any expenses or disbursements
incurred in connection with the exercise and performance of its powers and
duties hereunder or any indemnification against liability which it may
incur in the exercise and performance of such powers and duties but on the
contrary, shall look solely to the Issuer for such payment and
indemnification and that it shall have no Lien on or security interest in
the Collateral as security for such compensation, expenses, disbursements
and indemnification except to the extent provided for in Section 5.3 and
the other Project Documents.
10.3 Certain Rights of Trustees.
(a) No Trustee shall be responsible for any recitals herein or
for insuring all or any portion of the Trust Estate nor shall any
Trustee be bound to ascertain or inquire as to the performance or
observance of any covenants, conditions or agreement contained herein.
Except in the case of an Indenture Default or Indenture Event of
Default of which a Responsible Officer of the Trustee has actual
knowledge, the Trustee shall be deemed to have knowledge of an
Indenture Default or Indenture Event of Default only upon receipt of
written notice thereof from the Issuer or any holder of a Note;
provided, however, that the Trustee shall be deemed to have actual
knowledge of any failure to receive (i) payments under the SDDI
Contract when due, if the Trustee shall have received a copy of the
billing for such payment pursuant to Section 8.3(g) above, (ii) sums
required to be deposited in the Payment Reserve Account and sums
actually deposited, and (iii) payments of the principal of, any
applicable Make-Whole Amount and/or Breakage Amount or interest on,
any Note on the date any such payment is due.
(b) No Trustee makes any representation, or warranty as to the
validity, sufficiency or enforceability of this Indenture, the Notes,
the Note Purchase Agreements or any other Project Documents, or as to
the title, operation, merchantability or fitness for use or purpose,
value, compliance with specifications, condition, design, quantity,
durability or otherwise with respect to the Drilling Rig or any other
Collateral or any substitute therefor. No Trustee shall be
accountable to anyone for the use or application of any of the Notes
of the proceeds thereof or for the use or application of any
Collateral or the proceeds thereof which shall be released from the
Lien and security interest in favor of such Trustee held in trust
under the terms hereof, in accordance with the provisions of this
Indenture.
(c) Each Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice request, direction, consent,
order, bond, note or other paper or document believed by it, in good
faith, to be genuine and to have been signed or presented by the
proper party or parties.
(d) Any request, direction or authorization by the Issuer shall
be sufficiently evidenced by a request, direction or authorization in
writing, delivered to a Trustee, and signed in the name of such party
by a Responsible Officer; and any resolution of the Board of Directors
of the Issuer or any committee thereof shall be sufficiently evidenced
by a copy of such resolution certified by its Secretary or an
Assistant Secretary to have been duly adopted and to be in full force
and effect on the date of such certification, and delivered to such
Trustee.
(e) Any Trustee may consult with counsel, appraisers, engineers,
accountants and other skilled persons to be selected by such Trustee,
and the written advice of any thereof 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.
(f) No Trustee shall be under any obligation to take any action
to protect, preserve or enforce any rights or interests in the
Collateral or to take any action towards the execution or enforcement
of the trusts hereunder or otherwise hereunder, whether on its own
motion or on the request of any other Person, if it shall have
notified the holders of the Notes that the same, in the opinion of
such Trustee, may involve pecuniary loss, liability or expense to the
Trustee, unless the Issuer or one or more holders of the Notes shall
offer and furnish reasonable security or indemnity reasonably
satisfactory to such Trustee against pecuniary loss, liability and
expense to such Trustee. With respect to any original Purchasers of
the Notes or any other Institutional Investor an indemnity agreement
by such Purchaser, in form and substance reasonably satisfactory to
such Trustee, will satisfy such requirement without any bond, security
or third party indemnity.
(g) No Trustee shall be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, note or other paper or document, unless requested in
writing to do so by the Required Holders and such holders shall have
tendered funds to pay expenses to be incurred in performing such
duties.
(h) Any Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and such Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed by it with due care.
(i) The provisions of paragraphs (c) through (h), inclusive, of
this Section 10.3, shall be subject to the provisions of Section 10.1.
(j) No Trustee need post any bond for any action taken under
this Indenture.
10.4 Showings Deemed Necessary by a Trustee. Anything else in this
Indenture contained to the contrary notwithstanding, each Trustee shall
have the right, but shall not be required, to demand in respect of the
withdrawal of any cash (other than payments out of the Construction
Account, Collection Account or the Payment Reserve Account contemplated by
this Indenture), the release of any Property or the subjection of any after
acquired Property to any Lien to be held by such Trustee pursuant to the
terms hereof, or any other action whatsoever within the purview hereof, any
certificates, opinions, appraisals or other information which such Trustee
may deem reasonably necessary or appropriate in addition to the matters
required by the terms hereof as a condition precedent to such action.
10.5 Status of Monies Received. All monies received by a Trustee
shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received, but, if such Trustee is a bank, need
not be segregated in any manner from any other monies, except to the extent
required by law, and may be deposited by such Trustee under such general
conditions as may be (if such Trustee is a bank) prescribed by law and such
Trustee's trust department, and such Trustee shall be under no liability
for interest on any monies received by it hereunder except as provided in
Section 5.4. Any Trustee which is a trust company, banking corporation or
banking association and any affiliated corporation may be interested in any
financial transaction with the Issuer or any of its Affiliates; and any
such Trustee may act as depository or otherwise in respect to other
Securities of the Issuer or any of its Affiliates, all with the same rights
which it would have if not a Trustee; provided that such Trustee shall not
exercise any right of setoff against any part of the Trust Estate.
10.6 Resignation of Trustees. Any Trustee may resign and be
discharged of the trusts hereby created by mailing notice to the Issuer and
to all holders of Notes specifying the time and date (not earlier than
sixty (60) days after the date of such notice) when such resignation shall
take effect. Such resignation shall take effect upon the appointment,
qualification and acceptance of a successor trustee as herein provided.
10.7 Removal of Trustees. Any Trustee may be removed (after giving
each Trustee thirty (30) days written notice of such removal), with or
without cause, and a successor Trustee may be appointed at any time by the
Required Holders and delivered to each other Trustee and the Issuer, and,
in the case of the appointment of a successor Trustee, to such successor
Trustee.
10.8 Successor Trustee. Each Trustee appointed in succession of the
Trustee named in this Indenture, or its successor in trust, shall be a
trust company, banking corporation or banking association organized under
the laws of the United States of America, in good standing and having
unimpaired capital and surplus aggregating at least $250,000,000, if there
be such a trust company, banking corporation or banking association
qualified, able and willing to accept the trusts upon reasonable or
customary terms; and otherwise having the highest capital of such trust
companies, banking corporations or banking associations that are qualified,
able and willing to accept the trusts upon reasonable or customary terms.
10.9 Appointment of Successor Trustees. If a Trustee shall have given
notice of resignation pursuant to Section 10.6 or if notice of removal
shall have been given to a Trustee and the Issuer pursuant to Section 10.7
and such notice does not appoint a successor Trustee or if such notice of
removal appointed a successor Trustee and such successor shall not have
accepted such appointment within fifteen (15) days after the giving of such
notice of removal, a successor Trustee may be appointed by the Required
Holders with the consent of the Issuer not to be unreasonably withheld.
If no such appointment shall have been made within twenty-five (25) days
after the giving of such notice of resignation or the giving of such notice
of removal, a successor Trustee may be appointed by the holder of any
Outstanding Note or, upon application of the retiring Trustee at the
expense of the Issuer, by any court of competent jurisdiction.
10.10 Merger or Consolidation of Trustee. Any corporation into
which a Trustee which is a corporation, or any successor to it in the
trusts created by this Indenture, may be merged or consolidated or with
which it or any successor to it may be consolidated or any corporation
resulting from any merger or consolidation to which such Trustee or any
successor to it shall be a party or any state or national bank or trust
company succeeding to the corporate trust business of the Trustee as a
whole or substantially as a whole (provided such corporation which is a
successor to the Trustee shall be a corporation organized under the laws
of any state of the United States of America or of the United States of
America, having unimpaired capital and surplus aggregating at least
$250,000,000 and such corporation which is a successor to any other Trustee
shall be permitted by law to perform its obligations hereunder), shall be
the successor to such Trustee under this Indenture without the execution
or filing of any paper or any further act on the part of any of the parties
hereto. The Issuer covenants that in case of any such merger,
consolidation or transfer of the corporate trust business it will, upon the
request of the merged, consolidated or transferred corporation, execute,
acknowledge and cause to be recorded or filed suitable instruments in
writing to confirm the estates, rights and interests of such corporation
as such Trustee under this Indenture.
10.11 Acceptance of Appointment by Successor Trustee. Any new
Trustee appointed pursuant to any of the provisions hereof shall execute,
acknowledge and deliver to the Issuer an instrument accepting such
appointment; and thereupon such new Trustee, without any further act, deed
or conveyance, shall become vested with all the estates, Properties,
rights, powers and trusts of its predecessor in the rights hereunder with
like effect as if originally named as Trustee herein; but, nevertheless
upon the Written Request of the Issuer or the successor Trustee, the
Trustee ceasing to act, upon payment of fees and expenses due to it, shall
execute and deliver an instrument transferring to such successor Trustee,
upon the trusts herein expressed, all the estates, Properties, rights,
powers, and trusts of the Trustee so ceasing to act, and shall duly assign,
transfer and deliver any of the Property of the Trust Estate and monies
held by such Trustee to the successor Trustee so appointed in its or his
place. Upon acceptance of appointment by a successor Trustee as provided
in this Section 10.11, the successor Trustee shall give to the Note Holders
written notice of the succession of such Trustee to the trusts hereunder.
Neither failure so to mail nor any defect in the notice so mailed shall
affect the sufficiency of the proceedings in question.
10.12 Conveyance upon Request of Successor Trustee. Should any
deed, conveyance or instrument in writing from the Issuer be required by
any successor Trustee for more fully and certainly vesting in and
confirming to such new Trustee such estates, Properties, rights, powers and
trusts, then upon request of such successor Trustee any and all such deeds,
conveyances and instruments in writing shall be made, executed,
acknowledged and delivered, and, if and where appropriate, shall be caused
to be recorded and filed, by the Issuer.
10.13 Co-Trustees and Additional Trustees.
(a) Delivery of Documents. Anything herein contained to the
contrary notwithstanding, if, at any time or times, in order to
conform with any law of any jurisdiction in which the Issuer shall
then own or hold any Collateral, the Trustee shall be advised by
counsel satisfactory to it that it is necessary or prudent in the
interest of the Note Holders so to do, the Trustee shall execute and
deliver any and all instruments and agreements necessary or proper to
appoint, on behalf of the Trustee, the Note Holders and the Issuer,
another trust company, banking corporation or banking association, or
one or more other Persons approved by the Trustee either to act as co-
trustee or co-trustees hereunder, jointly with the Trustee, or its
successors, or to act as separate trustee or trustees hereunder; and
the trust company, banking corporation or banking association, or the
Person or Persons so appointed shall be such co-trustee or
co-trustees, or separate trustee or trustees, with such powers, duties
and discretion as shall be specified in the said instruments or
agreements of appointment, executed as aforesaid. It shall not be
necessary for any holder of a Note or the Issuer or any other Person
other than the Trustee to execute and deliver any such instruments or
agreements.
(b) Exercise of Powers. The rights, powers, duties and
obligations conferred or imposed upon the Trustee shall be conferred
and imposed upon, and exercised or performed by the Trustee, or
jointly by the Trustee and any co-trustee or co-trustees or separate
trustee or trustees appointed pursuant to this Section 10.13 as
provided herein or in the instrument or agreement appointing such co-
trustee or co-trustees or separate trustee or trustees, except to the
extent that under the law of any jurisdiction in which any particular
act or acts are to be performed the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations shall be exercised and performed by
such co-trustee or co-trustees or separate trustee or trustees.
(c) Trustee Attorney-in-Fact. Any co-trustee or co-trustees or
separate trustee or trustees appointed hereunder may at any time by
an instrument in writing constitute the Trustee, or its successor in
the trusts hereunder, his, their or its agent or attorney-in-fact,
with full power and authority, to the extent which may be permitted
by law, to do any and all acts and things and exercise any and all
discretion authorized or permitted by him, them or it, for and on
behalf of him, them or it, and in his, their or its name.
(d) Resignation of Co-Trustee or Separate Trustee. Each co-
trustee or separate trustee appointed pursuant to the provisions of
this Section 10.13 may resign and may be removed by the Trustee, and
the successors to such trustees may be appointed by the Trustee as set
forth in the first paragraph of this Section 10.13.
10.14 Trustee's Representations and Warranties. The Trustee
represents, warrants and covenants that:
(a) Organization, Etc. It is a national banking association
with trust powers duly chartered, validly existing and in good
standing under the laws of the United States of America, and has all
requisite power, authority and legal right under the laws of the State
of Texas and the United States to execute, deliver and carry out the
terms of each of the Project Documents to which it is a party. Its
principal place of business is located at its street address set forth
in Section 13.3.
(b) Authorization, Etc. It has duly authorized, executed and
delivered this Indenture and the other Project Documents to which it
is a party and this Indenture and the other Project Documents
constitute legal, valid and binding obligations, enforceable against
it in accordance with the terms thereof.
(c) No Violation. The execution and delivery of, and
performance of its obligations under, this Indenture and the other
Project Documents to which it is a party will not result in any
violation of, or be in conflict with, or constitute a default under,
any of the provisions of its articles of association or by-laws, or
of any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, lease, note or bond purchase agreement,
license or bank loan or credit agreement or other agreement to which
it is a party or by which it is bound, or any law, judgment,
governmental rule, regulation or order of any government or
governmental authority or agency governing the banking or trust powers
of the Trustee, the violation of, conflict with or default under which
would materially and adversely affect the Trustee s ability to perform
its obligations hereunder.
(d) No Consents or Approvals. Neither the execution and
delivery by it, in its individual capacity or as Trustee, as the case
may be, of this Indenture nor the consummation of any of the
transactions contemplated thereby requires the consent or approval of,
the giving of notice to, or the registration with, any federal or
State governmental authority or agency pursuant to any federal or
State law governing the banking or trust powers of Trustee.
(e) Capitalization. It has unimpaired capital and surplus
aggregating at least $250,000,000.
10.15 Non-Petition Covenant. With respect to any CP Conduit that
is a Purchaser, the Trustee hereby agrees that, to the extent permitted by
applicable law, until the 368th day following the maturity of the last
maturing commercial paper note to be issued by any such CP Conduit in
connection with its funding of its investment in the Notes, the Trustee
will not institute, and will not join with others in instituting, any
involuntary bankruptcy or analogous proceeding against any such CP Conduit
under any bankruptcy, reorganization, receivership or similar law, domestic
or foreign, as now or hereafter in effect.
The Trustee hereby agrees that, unless directed otherwise by the
Required Holders, to the extent permitted by applicable law, until the
368th day following the Maturity Date, the Trustee will not institute, and
will not join with others in instituting, any involuntary bankruptcy or
analogous proceeding against the Issuer under any bankruptcy,
reorganization, receivership or similar law, domestic or foreign, as now
or hereafter in effect.
ARTICLE 11. SUPPLEMENTAL INDENTURES, WAIVERS.
11.1 Supplemental Indentures Without Note Holders' Consent. The
Issuer and the Trustee from time to time and at any time, subject to the
restrictions in this Indenture contained, may, without consent from the
holder of any Note, enter into an indenture or indentures supplemental
hereto and which thereafter shall form a part hereof for any one or more
or all of the following purposes:
(a) to add to the Trust Estate held by the Trustees pursuant to
the terms hereof additional Property hereafter acquired by the Issuer
and intended to be subjected to this Indenture, and to correct and
amplify the description of any Property subject to this Indenture;
(b) to cure any ambiguity or cure, correct or supplement any
defective provisions of this Indenture or any supplement hereto;
provided, that the same shall in no respect be adverse to the
interests of the holders of the Class A1 Notes or the Class A2 Notes;
and
(c) to appoint a co-trustee or co-trustees, or a separate
trustee or trustees, pursuant to Section 10.13.
and the Issuer covenants to perform all requirements of any such
supplemental indenture. No restrictions or obligations imposed upon the
Issuer may, except as otherwise proved in this Indenture, be waived or
modified by such supplemental indentures or otherwise.
11.2 Waivers and Consents by Note Holders; Supplemental Indentures
with Consent. Except as provided in Section 11.1 above or this Section
11.2, no waivers may be granted with respect to any provision hereof or any
of the other Project Documents nor any amendments made to this Indenture
or any of the other Project Documents without the express written consent
of all of the Note Holders and the Sureties. Upon the waiver or consent
of the Required Holders: (i) the Trustee shall execute an appropriate
instrument permitting any Person to take any action prohibited, or omit the
taking of any action required, by any of the provisions of this Indenture
or any indenture supplemental hereto, or (ii) the Issuer and the Trustee
may enter into an indenture or indentures supplemental hereto for the
purpose of adding, changing or eliminating any provisions of this Indenture
or of any indenture supplemental hereto or modifying in any manner the
rights of the holders of the Notes or the rights and obligations of the
Issuer hereunder; provided, that no such waiver, consent or supplemental
indenture or amendment shall (A) impair or affect the right of any Note
Holder to receive payments of the principal of and payments of the interest
and any applicable Make-Whole Amount (if any), Yield Protection Amount,
Special Yield Protection Amount or Breakage Amount, if any, on any Note
held by it, as therein and herein provided including, without limitation,
the timing of any such payment or the principal amount of any Note or rate
of interest thereon, without the consent of such holder, (B) permit the
creating of any Lien with respect to any of the Trust Estate, without the
consent of the holders of all the Notes at the time Outstanding and the
Sureties, (C) deprive the holder of any Note or the Sureties of the benefit
of the Liens held by the Trustee pursuant to the terms of this Indenture
or any other Project Document without the consent of such holder or the
Sureties, as the case may be, (D) amend Article 2, Article 3, Article 4,
Article 5, Article 7 or Section 13.17 (other than an amendment of the
nature described, and permitted by the provisions of, Section 11.1),
without the consent of the holders of all of the Notes at the time
Outstanding, (E) reduce the percentage of the aggregate principal amount
of Notes, the holders of which are required by this Section 11.2 or any
other provision hereunder to consent to any action, waiver or supplemental
indenture or amendment pursuant to this Section 11.2, without the consent
of the holders of all of the Notes at the time Outstanding, or (F) modify
the rights, duties, privileges or immunities of any Trustee or either
Surety, without the written consent of such Trustee or such Surety. The
holder of any Notes may specify that any such waiver or consent shall be
effective only with respect to a portion of the Notes held by it (in which
case it shall specify by dollar amount the aggregate principal amount of
Notes with respect to which such waiver or consent shall be effective) and
in the event of any such specification such holder shall be deemed to have
given such waiver or consent only with respect to the portion of Notes so
specified.
11.3 Notice of Supplemental Indenture. Promptly after the execution
by the Issuer and the Trustee of any supplemental indenture or promptly
after the execution by the Trustee of an appropriate instrument or
permission pursuant to the provisions of Section 11.2, the Trustee shall
give written notice, setting forth in general terms the substance of such
supplemental indenture or instrument, together with a conformed copy
thereof to each Note Holder. Any failure of the Trustee to give such
notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture or instrument.
11.4 Solicitation of Note Holders. So long as there are any Notes
Outstanding, the Issuer will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of
this Indenture or the Notes unless each Note Holder shall be informed
thereof by the Issuer and shall be afforded the opportunity of considering
the same and shall be supplied by the Issuer with sufficient information
to enable it to make an informed decision with respect thereto. The Issuer
will not, directly or indirectly, pay or cause to be paid any remuneration,
whether by way of supplemental or additional interest, fee or otherwise,
to any Note Holder as consideration for or as an inducement to entering
into by any Note Holder of any waiver or amendment of any of the provisions
of this Indenture or of any Note unless such remuneration is concurrently
offered to be paid, on the same terms, ratably to the Note Holders of all
Notes then Outstanding even if such holder did not consent to such waiver
or amendment. Such remuneration will not be inferred solely from the
participation by a holder of the Notes in an existing or future loan to or
investment in or with the Issuer or any of its Affiliates.
11.5 Opinion of Counsel Conclusive as to Supplemental Indentures. The
Trustee is hereby authorized to join with the Issuer in the execution of
any such supplemental indenture authorized or permitted by the terms of
this Indenture and to make the further agreements and stipulations which
may be therein contained, and the Trustee may receive an Opinion of Counsel
as conclusive evidence that any supplemental indenture executed pursuant
to the provisions of this Article 11 complies with the requirements of this
Article 11.
11.6 Effect of Supplemental Indentures. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article 11, this
Indenture shall be deemed to be modified and amended in accordance
therewith and the respective rights, duties and obligations under this
Indenture of the Issuer, the Trustees and all Note Holders shall thereafter
be determined, exercised and enforced hereunder subject in all respects to
such modification and amendment, and all the terms and conditions of any
such supplemental indenture shall be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
11.7 New Notes. Notes executed and delivered after the execution of
any supplemental indenture pursuant to the provisions of this Article 11
may bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If such supplemental
indenture shall so provide, new Notes, so modified as to conform, in the
opinion of the Trustee and the Board of Directors of the Issuer to any
modification or amendment of this Indenture contained in any such
supplemental indenture, may be prepared by the Issuer, executed and
delivered without cost to the Note Holders, upon surrender of such Notes,
in equal aggregate principal amounts. All rights and reference to the
Sureties herein shall apply only so long as the Performance Bond is
outstanding or amounts are due to the Sureties as a result of payments made
by them thereunder.
ARTICLE 12. UNCLAIMED MONIES.
12.1 Satisfaction and Discharge of Agreement. If at any time (a) the
Issuer shall pay and discharge the entire indebtedness on all Notes
hereunder by paying or causing to be paid as provided in Articles 4 and 5
the principal of, and any applicable Make-Whole Amount, Breakage Amount,
Yield Protection Amount and Special Yield Protection Amount and interest
on, all Notes hereunder, as and when the same become due and payable or (b)
all such Notes shall have been repurchased by the Issuer or an Affiliate
of the Issuer and canceled as herein provided (other than any Notes which
shall have been destroyed, lost or stolen and which shall have been
replaced as provided in Section 2.9); and if the Issuer shall also pay or
cause to be paid all other sums payable hereunder by the Issuer (including,
without limitation, fees and expenses of the Trustees), and the Issuer
shall fully and faithfully discharge, and cause to be faithfully
discharged, every other obligation herein and in each of the other Project
Documents (including, without limitation, the Parent Indemnity) contained,
then and in that case this Indenture shall cease, determine, and become
null and void, and thereupon each Trustee shall, upon Written Request of
the Issuer or any other party to the Project Documents forthwith execute
proper instruments acknowledging satisfaction of and discharging this
Indenture and releasing all Liens held by it pursuant to the terms hereof
and any other Project Document, including the First Preferred Ship
Mortgage; provided, however, that in no event shall the trusts created by
this Indenture continue beyond the expiration of twenty-one (21) years
after the death of the last to die of all descendants living on the date
of execution of this Indenture of Joseph P. Kennedy, late father of the
late President of the United States, John F. Kennedy. The satisfaction and
discharge of this Indenture shall be without prejudice to the rights of
each Trustee under Section 10.2 to charge and be reimbursed by the Issuer
for any expenditures which it may thereafter incur in connection herewith.
12.2 Return of Unclaimed Monies. Notwithstanding any provisions of
this Indenture, any monies deposited with any Trustee in trust for the
payment of the principal of, or interest or any applicable Make-Whole
Amount and/or Breakage Amount on, any Notes and remaining unclaimed for two
(2) years after the last date on which any such principal, interest or any
applicable Make-Whole Amount and/or Breakage Amount shall have become due
and payable (whether at maturity or upon optional or required prepayment
or by declaration as provided in this Indenture), shall then be repaid to
the Issuer upon its Written Request, unless otherwise required by mandatory
provisions of applicable escheat or abandoned property laws, and the
holders of such Notes, unless otherwise required by mandatory provisions
of applicable escheat or abandoned property laws, shall thereafter be
entitled to look only to the Issuer for repayment thereof, and all
liability of such Trustee with respect to such monies shall thereupon
cease; provided, however, that before the repayment of such monies to the
Issuer, as aforesaid, such Trustee shall (at the cost of the Issuer) first
mail to all Note Holders of the Notes then Outstanding at their addresses
as set forth in the register required to be maintained pursuant to
Section 2.3, a notice that said monies remain unclaimed and that, after a
date named in said notice, which date shall not be less than ten (10) or
more than twenty (20) days after the date of the first mailing of such
notice, the balance of such monies then unclaimed will be returned to the
Issuer. In the event of the repayment of any such monies to the Issuer as
aforesaid, the Note Holders in respect of which such monies were deposited
shall thereafter be deemed to be unsecured creditors of the Issuer for
amounts equivalent to the respective amounts deposited for the payment of
such Notes and so repaid to the Issuer (without interest thereon and
subject to applicable escheat and abandoned property laws).
ARTICLE 13. MISCELLANEOUS.
13.1 Successors and Assigns. Whenever any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party; and all the covenants, promises and agreements in
this Indenture contained by or on behalf of the Issuer, by or on behalf of
a Trustee or by or on behalf of a Purchaser, shall bind and inure to the
benefit of the respective successors and assigns of such parties whether
so expressed or not; provided; however, that the Issuer shall not assign
or transfer any of its rights or delegate any of its duties or obligations
under the Project Documents without the prior written consent of the
Required Holders and, so long as the Performance Bond is outstanding or
amounts are due to the Sureties as a result of payments made by them
thereunder, the Sureties.
13.2 Unenforceability of Provision.
(a) Partial Invalidity. Any provision of this Indenture that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
(to the full extent permitted by law) not invalidate or render
unenforceable such provision in any other jurisdiction.
(b) Trustee Rights and Issuer Obligations. All rights of the
Trustee and all obligations of the Issuer hereunder shall be absolute
and unconditional irrespective of any lack of validity or
enforceability of any of the Project Documents or any other agreement
or instrument relating thereto (other than against the Trustee) or any
change in the terms of or any amendment or waiver of or any consent
to any departure from the Project Documents or any other agreement or
instrument relating thereto.
13.3 Communications. All communications provided for herein shall be
in writing or by telecommunication device capable of creating a written
record and shall be deemed to have been given when delivered personally or
otherwise actually received by such Person listed below at its address set
forth below:
If to the Issuer:
If by mail:
RBF Exploration Co.
901 Threadneedle
Houston, Texas 77079
Attention: President
If to the Trustee:
If by mail:
Chase Bank of Texas, National Association
1150 Chase Tower
600 Travis Street
Houston, TX 77002
Attention: Mauri J. Cowen, V.P.
or to either such party at such other address as such party may designate
by notice duly given in accordance with this Section to the other party.
Where this Indenture provides for any communication to holders of Notes,
such communication shall be deemed to have been given when delivered
personally or otherwise actually received by such holder at its last
address as it appears in the register required to be maintained pursuant
to Section 2.3. A copy of all notices given pursuant to the terms of this
Indenture to or by the Trustees shall also be sent to each of the Rating
Agencies at the following addresses or to such other addresses as such
party may designate by notice duly given in accordance with this Section
to the other parties, to wit:
Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, IL 60603
Attention: Asset-Backed Monitoring Group
Standard & Poor s
Corporate Ratings -- Oil and Gas
55 Water Street, 39th Floor
New York, NY 10041
Attention: Jill Unferth
13.4 Governing Law; Submission to Jurisdiction.
(a) This Indenture and the Notes (including, but not limited to,
the validity and enforceability hereof and thereof) shall be governed
by, and construed in accordance with, the laws of the state of New York
other than conflict of law rules thereof that would require the
application of the laws of a jurisdiction other than such state.
(b) any legal action or proceeding with respect to the Project
Documents may be brought in the courts of the state of New York in
New York County or of the United States of America for the Southern
District of New York, and, by execution and delivery of this
Indenture, each of the Issuer and the Trustees hereby accepts for
itself and (to the extent permitted by law) in respect of its
Property, generally and unconditionally, the jurisdiction of the
aforesaid courts. each of the Issuer and the Trustees hereby
irrevocably waives any objection, including, without limitation,
any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the
bringing of any such action or proceeding in such respective
jurisdictions. this submission to jurisdiction is non-exclusive
and does not preclude the parties from obtaining jurisdiction over
other parties in any court otherwise having jurisdiction.
(c) The Issuer hereby irrevocably designates Capitol Services,
Inc. located at 40 Colvin Street, Suite 200, Albany, New York 12206,
as the designee, appointee and agent of the Issuer to receive, for
and on behalf of the issuer, service of process in such jurisdiction
in any legal action or proceeding with respect to the Project
Documents. It is understood that a copy of such process served on
such agent will be promptly forwarded by overnight courier to the
issuer at its address set forth in section 13.3 hereof, but the
failure of the issuer to receive such copy shall not affect in any
way the service of such process. The issuer further irrevocably consents
to the service of process of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, to the issuer at its said address,
such service to become effective thirty (30) days after such mailing.
(d) Nothing herein shall affect the right of the Issuer or the
Trustees or any holder of a Note to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed
against the Issuer in any other jurisdiction, including without
limitation, the commencement of enforcement proceedings under the
Project Documents in all applicable jurisdictions.
(e) The Issuer hereby (i) irrevocably and unconditionally waives,
to the fullest extent permitted by law, trial by jury in any legal action
or proceeding relating to this Agreement or any other Project Document
and for any counterclaim therein; (ii) irrevocably waives, to the maximum
extent not prohibited by law, any right it may have to claim or recover
in any such litigation any special, exemplary, punitive or consequential
damages, or damages other than, or in addition to, actual damages; (iii)
certifies that no party hereto nor any representative or agent of counsel
for any party hereto has represented, expressly or otherwise, or implied
that such party would not, in the event of litigation, seek to enforce
the foregoing waivers, and (iv) acknowledges that it has been induced
to enter into this Agreement and the other Project Documents and the
transactions contemplated hereby and thereby by, among other things,
the mutual waivers and certifications contained in this Section 13.4.
13.5 Limitation on Interest.
(a) It is the intent of the parties hereto to comply strictly
with applicable usury laws, and the parties hereto stipulate and agree
that none of the terms and provisions contained in this Indenture, the
Notes or any other Project Documents shall ever be construed to create
a contract to pay, for the use, forbearance or detention of money,
interest in excess of the maximum amount of interest permitted to be
charged by applicable law from time to time in effect. If any excess
of interest in such respect is hereby provided for or shall be
adjudicated to be so provided, in this Indenture, in any Note or
otherwise in connection with the Project Documents, the provisions of
this Section 13.5 shall govern and prevail, and neither the Issuer nor
any present or future guarantors, endorsers, or other Persons
hereafter becoming liable for payment of the Notes shall ever be
obligated to pay the excess amount of such interest. The provisions
of this Section 13.5 shall control over all other provisions of the
Project Documents which may be in conflict or apparent conflict
herewith. Each of the Trustees and the holders of the Notes expressly
disavows any intention to charge, collect or contract for excessive
unearned interest or finance charges in the event the maturity of any
of the Notes is accelerated. If the maturity of a Note is accelerated
for any reason, any amounts held to constitute interest (including any
applicable Make-Whole Amount, Breakage Amount, Yield Protection Amount
or Special Yield Protection Amount due upon acceleration if such
applicable Make-Whole Amount, Breakage Amount, Yield Protection Amount
or Special Yield Protection Amount is held to constitute interest
under applicable law) which are then unearned and have theretofore
been collected by any Trustee or the holder of such Note shall be
applied as of the date of receipt thereof to reduce the principal
balance thereof then outstanding and if the principal of the Notes has
been paid in full, any remaining excess shall be forthwith paid to the
Issuer. If any Trustee or any holder of any Note shall receive,
collect or apply monies which are deemed to constitute interest which
would otherwise increase the interest on such Note to an amount in
excess of that permitted to be charged by applicable law then in
effect, all such sums deemed to constitute interest in excess of such
legal limit shall be applied to reduce the principal balance thereof
then outstanding or immediately returned to the Issuer or the other
payor thereof upon such determination. All sums paid or agreed to be
paid to any Trustee or holder of any Note for the use, forbearance or
detention of sums due hereunder shall, to the extent permitted by law
applicable to such party, be amortized, prorated, allocated and spread
throughout the full term of the indebtedness evidenced by the Notes
until payment in full so that the rate or amount of interest on
account of any indebtedness hereunder does not exceed the maximum
amount allowed by such applicable law. If at any time and from time
to time (i) the amount of interest payable to any holder of a Note on
any date shall be pursuant to this Section 13.5 be limited and (ii) in
respect of any subsequent interest computation period the amount of
interest otherwise payable to such holder would be less than the
amount of interest payable to such holder computed at the maximum
lawful rate applicable to such holder, then the amount of interest
payable to such holder in respect to such subsequent interest
computation period shall continue to be computed at the maximum lawful
rate applicable to such holder until the total amount of interest
payable to such holder shall equal the total amount of interest which
would have been payable to such holder if the total amount of interest
had been computed without giving effect to this Section 13.5. As used
in this section the term "applicable law" means the laws of the State
of New York or the laws of the United States of America, whichever
laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
(b) All proceeds of the sale of the Notes are to be delivered
by the Purchasers to the Trustee for the account of the Issuer to be
applied as provided in Section 4.2 hereof.
(c) Notwithstanding any term or provision contained in this
Indenture, the Notes or any other Project Document to the contrary the
Make-Whole Amount, Breakage Amount and/or Yield Protection Amount or
Special Yield Protection Amount shall be charged and payable only to
the extent permitted by applicable law.
13.6 Counterparts. This Indenture may be executed, acknowledged and
delivered in any number of counterparts, each of such counterparts
constituting an original but all together only one Indenture; provided,
however, that this Indenture shall not be deemed to be delivered until at
least one counterpart shall have been executed by the Issuer and the
Trustee and a counterpart so executed shall have been delivered to the
Trustee at its principal place of business specified in Section 13.3.
13.7 Headings, etc.; Gender. Any headings or captions preceding the
text of the several sections hereof are intended solely for convenience of
reference and shall not constitute a part of this Indenture nor shall they
affect its meaning, construction or effect. Each covenant contained in
this Indenture shall be construed (absent an express contrary provision
therein) as being independent of each and every other covenant contained
herein and compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any and all
other covenants. All references herein or in any other Project Document
to the masculine, feminine or neuter gender shall also include and refer
to each other gender not so referred to.
13.8 Amendments. This Indenture may, subject to the provisions of
Article 11 hereof, from time to time and at any time, be amended or
supplemented by an instrument or instruments in writing executed by the
parties hereto.
13.9 Benefits of Agreement Restricted to Parties and Note Holders.
Nothing in this Indenture expressed or implied is intended or shall be
construed to give to any Person other than the Issuer, the Trustees, the
Credit Support Parties, the Note Holders and the Sureties, any legal or
equitable right, remedy or claim under or in respect of this Indenture or
any covenant, condition or provision therein or herein contained; and all
such covenants, conditions and provisions are and shall be held to be for
the sole and exclusive benefit of the Issuer, the Trustees, the Credit
Support Parties and the holders of the Notes issued hereunder and the
Sureties, in the case of the Note Holders, the Credit Support Parties and
the Sureties, as express third party beneficiaries of such covenants,
conditions and provisions.
13.10 Waiver of Notice. Whenever in this Indenture the giving of
notice by mail or otherwise is required, the giving of such notice may be
waived in writing by the Person or Persons entitled to receive such notice.
13.11 Obligations of Bankers Trust Company. The parties to this
Agreement agree that Bankers Trust Company shall have no obligation, in its
capacity as program administrator for Victory Receivables Corporation or
otherwise, to take any actions under the Project Documents if Bankers Trust
Company is relieved of its obligations as program administrator for Victory
Receivables Corporation.
13.12 Non Recourse Persons. No recourse shall be had for the
payment of any amount owing in respect of any obligation of, or claim
hereunder or in connection herewith against, any stockholder, employee,
officer, director, member or incorporator of the Purchaser (or of any
member of the Purchaser), any Credit Support Party or J H Management
Corporation; provided, however, that the foregoing shall not relieve any
such person or entity from any liability they might otherwise have arising
from his, her or its willful misconduct or intentional misrepresentation.
13.13 Additional Financing Statement Filings. The Issuer hereby
authorizes the Trustee to file, without the signature of the Issuer where
permitted by law, one or more financing or continuation statements, and
amendments thereto, relating to the Collateral. The Issuer further agrees
that a carbon, photographic or other reproduction of any Project Document
or any financing statement describing any Collateral is sufficient as a
financing statement and may be filed in any jurisdiction the Trustee may
deem appropriate.
13.14 Directly or Indirectly. Where any provision in this
Indenture refers to action to be taken by any Person, or which such Person
is prohibited from taking, such provision shall be applicable whether such
action is taken directly or indirectly by such Person, including actions
taken by or on behalf of any partnership in which such Person is a general
partner.
13.15 Exhibits, Annexes and Sections. All references herein to
Exhibits, Annexes, Articles or Sections shall be to the Exhibits and
Annexes attached to this Indenture and to the Sections hereof unless the
context otherwise requires reference to an exhibit, annex to or section of
another document. All Exhibits and Annexes attached to this Indenture are
made a part hereof for all purposes. The words "this Indenture," "this
instrument," "herein," "hereof," "hereby," "hereunder," and words of
similar import refer to this Indenture as a whole and not to any particular
subdivision unless expressly so limited. The phrases "this section" and
"this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not
exclusive.
13.16 Officers' Certificate and Opinions of Counsel; Statements
to be Contained Therein.
(a) Upon any request, application or demand by the Issuer to the
Trustee to take any action under any of the provisions of this
Indenture, the Issuer shall furnish to the Trustee a certificate
signed by one of its Responsible Officers stating that all conditions
precedent provided for in this Indenture relating to the proposed
action have been complied with, that no Indenture Event of Default has
occurred and is continuing, and accompanied by an Opinion of Counsel
stating that in the opinion of such counsel all such conditions
precedent (to which a legal opinion is reasonably appropriate) have
been complied with, except that in the case of any such request,
application or demand as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to
such particular request, application or demand, no additional
certificate or opinion need be furnished.
(b) Each certificate or opinion provided for in this Indenture
and delivered to the Trustee with respect to compliance with a
condition or covenant provided for in this Indenture shall include (i)
a statement that the person making such certificate or opinion has
read such covenant or condition, (ii) 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, (iii) 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 (iv) a statement as to whether
or not, in the opinion of such person, such condition or covenant has
been complied with.
(c) Any certificate, statement or opinion of an officer of the
Issuer may be based, insofar as it relates to legal matters, upon a
certificate or opinion of or representations by counsel, unless such
officer has actual knowledge that the certificate or opinion or
representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the
same are erroneous. Any certificate, statement or opinion of counsel
may be based, insofar as it relates to factual matters, upon
information with respect to which is in the possession of the Issuer,
upon the certificate, statement or opinion of or representations by
a Responsible Officer or Officers of the Issuer, unless such counsel
has actual knowledge that the certificate, statement or opinion or
representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are
erroneous.
(d) Any certificate, statement or opinion of an officer of the
Issuer or of counsel may be based, insofar as it relates to accounting
matters, upon a certificate or opinion of or representations by an
accountant or firm of accountants in the employ of the Issuer or an
Affiliate thereof, unless such officer or counsel, as the case may be,
has actual knowledge that the certificate or opinion or
representations with respect to the accounting matters upon which his
certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the
same are erroneous.
(e) Any certificate or opinion of any independent firm of public
accountants filed with the Trustee shall contain a statement that such
firm is independent.
13.17 Payment of Expenses, Indemnities, etc. The Issuer agrees:
(a) to pay all reasonable expenses of the Trustees in the
administration (both before and after the execution hereof and
including advice of counsel as to the rights and duties of the
Trustees and the Note Holders with respect thereto) of, and in
connection with the negotiation, investigation, preparation, execution
and delivery of, recording or filing of, preservation of rights under,
enforcement of, and refinancing, renegotiation or restructuring of,
any Project Document and any proposed amendment, waiver or consent,
whether or not adopted, relating thereto (including, without
limitation, travel, photocopy, mailing, courier, telephone and other
similar expenses of the Trustees), the reasonable fees and
disbursements of external counsel and other outside consultants for
the Trustees and, in the case of enforcement, the Trustee s default
administration fees and the reasonable fees and disbursements of
external counsel for the Trustees and the reasonable fees, charges and
disbursements of special counsel to each of the Class A1 Noteholders,
Class A2 Noteholders and Credit Support Parties; provided that to the
extent it is feasible and a conflict of interest does not exist in the
reasonable judgment of the Class A1 Noteholders, Class A2 Noteholders
or Credit Support Parties as applicable, the Class A1 Noteholders
shall all use the same counsel, the Class A2 Noteholders shall all use
the same counsel and the Credit Support Parties shall all use the same
counsel; and promptly reimburse the Trustees and the Note Holders for
all amounts expended, advanced or incurred by the Trustees and any of
the Note Holders to satisfy any obligation of the Issuer under this
Indenture or any other Project Document, including without limitation,
all costs and expenses of foreclosure;
(b) to indemnify each Trustee, each Note Holder, each Surety and
each Credit Support Party and each of their Affiliates and each of their
officers, directors, employees, representatives, agents, attorneys,
accountants and experts ("Indemnified Parties") from, hold each of them
harmless against and promptly upon demand pay or reimburse each of them
for, the Indemnity Matters which may be incurred by or asserted against
or involve any of them (whether or not any of them is designated a party
thereto) as a result of, arising out of or in any way related to (i) any
actual or proposed use by the Issuer of the proceeds of any of the Notes,
(ii) the execution, delivery and performance of the Project Documents,
(iii) the operations of the business of the Issuer or any Affiliate
thereof, (iv) the failure of the Issuer or any Affiliate thereof to
comply with the terms of any Project Document including, without
limitation, the Construction Supervisory Agreement, the Operation and
Maintenance Agreement or this Indenture, or with any Governmental
Requirement, (v) any inaccuracy of any representation or statement or
any breach of any warranty or covenant of the Issuer or any Affiliate
thereof set forth in any of the Project Documents or any certificates
delivered pursuant thereto, (vi) any assertion that the Trustee or the
Note Holders were not entitled to receive the proceeds received pursuant
to the Project Documents or (vi) any other aspect of the Project Documents,
including, without limitation, the reasonable fees and disbursements of
counsel and all other expenses incurred in connection with investigating,
defending or preparing to defend any such action, suit, proceeding
(including any investigations, litigation or inquiries) or claim and
including all Indemnity Matters arising by reason of the ordinary
negligence of any Indemnified Party, but excluding all Indemnity Matters
arising solely by reason of claims between the Note Holders or a Note
Holder and a Note Holder's shareholder or solely by reason of the gross
negligence or willful misconduct on the part of the Indemnified Party;
and
(c) to indemnify and hold harmless the Indemnified Parties from
and against any and all losses, claims, cost recovery actions,
administrative orders or proceedings, damages and liabilities to which
any such Person may become subject in connection with this Indenture, the
Note Purchase Agreements or any other Project Document (i) under any
Environmental Law, (ii) as a result of the breach or non-compliance with
any Environmental Law applicable to the Issuer or any Affiliate thereof,
(iii) due to past ownership of any of the Properties of the Issuer or any
affiliate thereof or past activity on any of their Properties which,
though lawful and fully permissible at the time, could result in present
or future liability, (iv) the presence, use, release, discharge, storage,
treatment or disposal of hazardous substances or oil on or at any of the
Properties now or formerly owned or operated by the Issuer or any
Affiliate thereof, or (v) any other environmental, health or safety
condition in connection with the Project Documents, provided, however,
no indemnity shall be afforded under this section 13.17 in respect of
any Property for any occurrence arising solely from the acts or omissions
(in each case constituting gross negligence or wilful misconduct) of a
Trustee or any Note Holder arising during the period after which such
Person, its successors or assigns shall have obtained possession of
such Property (whether by foreclosure or deed in lieu of foreclosure,
as mortgagee-in-possession or otherwise), except such acts or omissions
of the Indenture Trustee or any Note Holder arising out of or resulting
from any circumstance or condition in existence prior to the possession
by the Indenture Trustee or any Note Holder, whether or not known to, or
knowable or discoverable by, any party prior to such possession.
(d) So long as no Indenture Default or Indenture Event of
Default has occurred and is continuing, no Indemnified Party may
settle any claim to be indemnified without the consent of the
indemnitor, such consent not to be unreasonably withheld; provided,
that the indemnitor may not reasonably withhold consent to any
settlement that an Indemnified Party proposes, if the indemnitor does
not have the financial ability to pay all its obligations outstanding
and asserted against the indemnitor at that time, including the
maximum potential claims against the Indemnified Party to be
indemnified pursuant to this Section 13.17.
(e) In the case of any indemnification hereunder, an Indemnified
Party shall give notice to the Issuer of any claim or demand being
made against it; provided, however, that the failure to give such
notice shall not release the Issuer from any of its obligations,
except to the extent that failure to give notice of any action, suit
or proceeding against such Indemnified Party shall prevent the
Issuer's ability to contest such claim or demand. Subject to the
provisions of the following paragraph, the Issuer shall at its sole
cost and expense be entitled to control, and shall assume full
responsibility for, the defense of such claim or liability; provided
that the Issuer shall keep the Indemnified Party which is the subject
of such proceeding fully apprised of the status of such proceeding and
shall provide such Indemnified Party with all information with respect
to such proceeding as such Indemnified Person shall reasonably
request.
Notwithstanding any of the foregoing to the contrary, the Issuer shall
not be entitled to control and assume responsibility for the defense of
such claim or liability if (i) an Indenture Event of Default shall have
occurred and be continuing, (ii) such proceeding will involve any
possibility of the sale, forfeiture or loss of, or the creation of any Lien
(other than an Excepted Lien or a Lien which is adequately bonded to the
reasonable satisfaction of such Indemnified Party) on, the Trust Estate or
any part thereof, (iii) in the good faith opinion of such Indemnified
Party, there exists an actual or potential conflict of interest such that
it is advisable for such Indemnified Person to retain control of such
proceeding or (iv) such claim or liability involves the possibility of
criminal sanctions or liability to such Indemnified Party. In the
circumstances described in clauses (i) - (iv), the Indemnified Party shall
be entitled to control and assume responsibility for the defense of such
claim or liability at the expense of the Issuer. In addition, any
Indemnified Party may participate in any proceeding controlled by the
Issuer, at its own expense in respect of any such proceeding as to which
the Issuer shall have acknowledged in writing its obligation to indemnify
the Indemnified Party, and at the expense of the Issuer in respect of any
such proceeding as to which the Issuer shall not have so acknowledged its
obligation to the Indemnified Party, the Issuer may in any event
participate in all such proceedings at its own cost. Nothing contained
herein shall be deemed to require an Indemnified Party to contest any claim
or demand or to assume responsibility for or control of any judicial
proceeding with respect thereto.
(f) the foregoing indemnities shall extend to the Indemnified Parties
notwithstanding the sole or concurrent negligence of every kind or character
whatsoever, whether active or passive, whether an affirmative act or an
omission, including without limitation, all types of negligent conduct
identified in the restatement (second) of torts of one or more of the
Indemnified Parties or by reason of strict liability imposed without
fault on any one or more of the Indemnified Parties. to the extent that
an Indemnified Party is found to have committed an act of gross negligence
or willful misconduct, this contractual obligation of indemnification as to
such Indemnified Party shall continue but shall only extend to the portion
of the claim that is deemed to have occurred by reason of events other than
the gross negligence or willful misconduct of the Indemnified Party.
(g) The Issuer's obligations under this Section 13.17 shall
survive any termination of this Indenture or any other Project
Document and the payment of the Notes and shall continue thereafter
in full force and effect.
(h) The Issuer shall pay any amounts due under this
Section 13.17 within thirty (30) days of the receipt by the Issuer of
notice of the amount due.
(i) If any amounts due by the Issuer to the Trustees or any Note
Holder under this Section 13.17 or any other provision of this
Agreement or any other Project Document is not paid on the date due,
such amounts shall bear interest and Issuer agrees to pay such amounts
with interest at the Default Rate from the due date of such payable
until paid.
13.18 No Oral Agreements. The Project Documents Embody the Entire
Agreement and Understanding Between the Parties and Supersede All Other
Agreements and Understandings Between Such Parties Relating to the Subject
Matter Hereof and Thereof. The ProjectDocuments 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.
13.19 Exculpation Provisions. Each of the parties hereto specifically
agrees that it has a duty to read this Indenture and the other Project
Documents and agrees that it is charged with notice and knowledge of the
terms of this Indenture and the other Project Documents; that it has in fact
read this Indenture and is fully informed and has full notice and knowledge
of the terms, conditions and effects of this Indenture; that it has been
represented by independent legal counsel of its choice throughout the
negotiations preceding its execution of this Indenture and the other
Project Documents; and has received the advice of its attorney in entering
into this Indenture and the other Project Documents; and that it recognizes
that certain of the terms of this Indenture and the other Project Documents
result in one party assuming the liability inherent in some aspects of the
transaction and relieving the other party of its responsibility for such
liability. Each party hereto agrees and covenants that it will not contest
the validity or enforceability of any exculpatory provision of this
Indenture and the other Project Documents on the basis that the party had
no notice or knowledge of such provision or that the provision is not
"conspicuous."
13.20 Trustees Not Engaging in a Trade or Business. The trusts
created hereunder have been organized for the purposes described herein
with no objective by the Trustees to engage in the conduct of a trade or
business. The Trustees shall treat the trusts for federal income tax
purposes as a "grantor trust" subject to the provisions of Subchapter J,
subpart E of the Code unless otherwise required.
[Signature Pages Start Next Page]
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed by their respective officers thereunto duly authorized,
and their respective corporate seals to be hereunder affixed and attested,
all as of the day and year first written above.
ATTEST: RBF Exploration Co.
________________________ By _________________________
Name: Name:
Title: Title:
(seal)
ATTEST: Chase Bank of Texas, National Association
________________________ By _________________________
Name: Name:
Title: Title:
(seal)
ANNEX A-1
RBF EXPLORATION CO.
No. A-____
7.31% Senior Secured Class A1 Note due May 1, 2005
$_______________ __________________
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT ),
AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. THE HOLDER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE ISSUER IS NOT REQUIRED TO REGISTER THIS SECURITY UNDER THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR
THE BENEFIT OF THE ISSUER THAT SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (2) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION.
RBF Exploration Co., a Nevada corporation (the "Issuer"), for value
received, hereby promises to pay to _________________________ or registered
assigns the principal sum of [________] Dollars ($__________) in
installments as provided in the Indenture (hereinafter defined) with final
payment due on May 1, 2005, and to pay interest (computed on the basis of
a 360-day year of twelve 30-day months) on the unpaid principal balance
thereof from the date of this Note at the rate of 7.31% per annum, monthly
on the first (1st) day of each month of each year, commencing on September
1, 1999, and to pay on demand interest on any overdue principal, including
any overdue prepayment of principal, and (to the extent permitted by
applicable law) on any applicable Make-Whole Amount, Breakage Amount, Yield
Protection Amount, Special Yield Protection Amount or overdue installment
of interest, at a rate of interest per annum equal to the Default Rate;
provided that interest on this Note shall in no event exceed the maximum
rate permitted by applicable law, and this Note is expressly made subject
to Section 13.5 of the Indenture.
Payments of principal, applicable Make-Whole Amount, Breakage Amount,
Yield Protection Amount and Special Yield Protection Amount, if any, or
other amounts due hereon, and interest shall be made in any coin or
currency of the United States of America as at the time of payment is legal
tender for the payment of public and private debts in installments in such
manner and at such place as provided in Section 5.6 of the Indenture.
This Note is one of an issue of Senior Secured Class A1 Notes of the
Issuer issued in an aggregate original principal amount limited to
$200,000,000 under the Trust Indenture and Security Agreement of the Issuer
(said indenture, together with all agreements and indentures supplemental
thereto being herein called the "Indenture") dated as of August 12, 1999,
with Chase Bank of Texas, National Association as Trustee and is entitled
to the benefits thereof. Reference is hereby made to the Indenture for a
description of certain rights, obligations and duties of the parties
thereto and for the meanings assigned to terms used and not defined in this
Note. The Issuer agrees to make required prepayments on account of this
Note in accordance with the prepayment schedule attached to this Note and
in accordance with the provisions of the Indenture. This Note is secured
as set forth in the Indenture and in the separate Note Purchase Agreements
dated as of August 12, 1999, between the Issuer and each of the Purchasers
(listed on Schedule A attached thereto).
This Note is a registered Note and is transferable only by surrender
thereof at the agency of the Issuer maintained pursuant to Section 8.8 of
the Indenture, duly endorsed or accompanied by a written instrument of
transfer duly executed by the registered holder of this Note or its
attorney duly authorized in writing.
Following any partial prepayment of this Note, this Note shall, prior
to any transfer hereof, be (a) made available to the Trustee for notation
on the prepayment schedule attached hereto of the amount of principal so
prepaid or, (b) at the option of the holder hereof and in lieu of the
alternative in the foregoing clause (a), held by the holder who shall make
a notation of such schedule of the amount of principal so prepaid. In case
the entire principal amount on this Note is prepaid or paid, this Note
shall, upon written request therefor by the Issuer, be surrendered promptly
at the agency of the Issuer maintained pursuant to Section 8.8 of the
Indenture, for cancellation.
In any case where the date of maturity of any interest, applicable
Make-Whole amount, Breakage Amount, Yield Protection Amount, Special Yield
Protection Amount, or other amount due hereon, or principal owed with
respect to this Note or the date fixed for any prepayment (in whole or in
part) of this Note will not be a Business Day, then payment of such
interest, applicable Make-Whole Amount, Breakage Amount, Yield Protection
Amount, Special Yield Protection Amount, or other amount due hereon, or
principal need not be made on such date but may be made on the next
succeeding Business Day with the same force and effect as if made on the
date of maturity or the date fixed for such prepayment.
Under certain circumstances, as specified in the Indenture, the
principal of this Note (together with interest accrued thereon and any
applicable Make-Whole Amount, Breakage Amount, Yield Protection Amount and
Special Yield Protection Amount) may be declared due and payable in the
manner and with the effect provided in the Indenture.
This Note and the Indenture are governed by, and shall be construed
and enforced in accordance with, the internal law of the State of New York
applicable to contracts made and to be performed entirely within such state
and applicable federal law.
Dated:____________________
ATTEST: RBF EXPLORATION CO.
______________________ By _________________________
Secretary Name: _________________
Title: ________________
[CORPORATE SEAL]
This is one of the Class A1 Notes described in the Indenture referred
to herein.
[________________], as Trustee
By _______________________________
Name: _______________________
Its: ________________________
PREPAYMENT SCHEDULE TO
NOTE NO. A-_______________
(Class A1)
In addition to paying the entire outstanding principal amount of, and
the interest due on, this Note on May 1, 2005, the maturity date hereof,
the Issuer agrees to prepay, and there shall become due and payable,
principal and interest amounts in fifty-nine (59) equal monthly
installments of Three Million Nine Hundred Eighty-nine Thousand Five
Hundred Fifty-six and 72/100 Dollars ($3,989,556.72) on the first day of
each month beginning June 1, 2000.
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
_____________________________________________________________________
(Insert assignee s soc. sec. or tax I.D. no.)
_____________________________________________________________________
_____________________________________________________________________
(Print or type assignee s name, address and zip code)
and irrevocably appoint _____________________________________________
to transfer this Note on the books of the Issuer. The agent may
substitute another to act for him.
_____________________________________________________________________
Date:_______________________
Your Signature:______________________
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee:_________________
ANNEX A-2
RBF EXPLORATION CO.
No. B-_____
9.41% Senior Secured Class A2 Note due May 1, 2005
$________________ _______________________
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY IS HEREBY NOTIFIED THAT THE ISSUER IS NOT REQUIRED TO REGISTER
THIS SECURITY UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)
IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION.
RBF Exploration Co., a Nevada corporation (the "Issuer"), for value
received, hereby promises to pay to _________________________ or registered
assigns the principal sum of _________________________ Dollars
($__________) on May 1, 2005, and to pay interest (computed on the basis
of a 360-day year of twelve 30-day months) on the unpaid principal balance
thereof from the date of this Note at the rate of 9.41% per annum, monthly
on the first (1st) day of each month of each year, commencing on September
1, 1999, until the principal amount hereof shall become due and payable and
to pay on demand interest on any overdue principal, including any overdue
prepayment of principal, and (to the extent permitted by applicable law)
on any applicable Make-Whole Amount, Breakage Amount, Yield Protection
Amount, Special Yield Protection Amount or overdue installment of interest,
at a rate of interest per annum equal to the Default Rate; provided that
interest on this Note shall in no event exceed the maximum rate permitted
by applicable law, and this Note is expressly made subject to 13.5 of the
Indenture (as hereinafter defined).
Payments of principal, applicable Make-Whole Amount, Breakage Amount,
Yield Protection Amount and Special Yield Protection Amount, if any, or
other amounts due hereon, and interest shall be made in any coin or
currency of the United States of America as at the time of payment is legal
tender for the payment of public and private debts in such manner and at
such place as provided in Section 5.6 of the Indenture.
This Note is one of an issue of Senior Secured Class A2 Notes of the
Issuer issued in an aggregate original principal amount limited to
$50,000,000 under the Trust Indenture and Security Agreement of the Issuer
(said indenture, together with all agreements and indentures supplemental
thereto being herein called the "Indenture") dated as of August 12, 1999,
with Chase Bank of Texas, National Association as Trustee and is entitled
to the benefits thereof. Reference is hereby made to the Indenture for a
description of certain rights, obligations and duties of the parties
thereto and for the meanings assigned to terms used and not defined in this
Note. This Note is secured as set forth in the Indenture and in the
separate Note Purchase Agreements dated as of August 12, 1999, between the
Issuer and each of the Purchasers (listed on Schedule A attached thereto).
This Note is a registered Note and is transferable only by surrender
thereof at the agency of the Issuer maintained pursuant to Section 8.8 of
the Indenture, duly endorsed or accompanied by a written instrument of
transfer duly executed by the registered holder of this Note or its
attorney duly authorized in writing.
Following any partial prepayment of this Note, this Note shall, prior
to any transfer hereof, be (a) made available to the Trustee for notation
on the prepayment schedule attached hereto of the amount of principal so
prepaid or, (b) at the option of the holder hereof and in lieu of the
alternative in the foregoing clause (a), held by the holder who shall make
a notation of such schedule of the amount of principal so prepaid. In case
the entire principal amount on this Note is prepaid or paid, this Note
shall, upon written request therefor by the Issuer, be surrendered promptly
at the agency of the Issuer maintained pursuant to Section 8.8 of the
Indenture, for cancellation.
In any case where the date of maturity of any interest, applicable
Make-Whole Amount, Breakage Amount, Yield Protection Amount, Special Yield
Protection Amount, or other amounts due hereon, or principal owed with
respect to this Note or the date fixed for any prepayment (in whole or in
part) of this Note will not be a Business Day, then payment of such
interest, applicable Make-Whole Amount, Breakage Amount, Yield Protection
Amount, Special Yield Protection Amount, or other amounts due hereon, or
principal need not be made on such date but may be made on the next
succeeding Business Day with the same force and effect as if made on the
date of maturity or the date fixed for such prepayment.
Under certain circumstances, as specified in the Indenture, the
principal of this Note (together with interest accrued thereon and any
applicable Make-Whole Amount, Breakage Amount, Yield Protection Amount and
Special Yield Protection Amount) may be declared due and payable in the
manner and with the effect provided in the Indenture.
This Note and the Indenture are governed by, and shall be construed
and enforced in accordance with, the internal law of the State of New York
applicable to contracts made and to be performed entirely within such state
and applicable federal law.
Dated:_______________________
ATTEST: RBF EXPLORATION CO.
____________________ By __________________________
Secretary Name: __________________
Title: _________________
[CORPORATE SEAL]
This is one of the Class A2 Notes described in the Indenture referred
to herein.
[________________], as Trustee
By ____________________________________
Name: ____________________________
Its: _____________________________
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
________________________________________________________________________
(Insert assignee s soc. sec. or tax I.D. no.)
________________________________________________________________________
________________________________________________________________________
(Print or type assignee s name, address and zip code)
and irrevocably appoint ________________________________________________
to transfer this Note on the books of the Issuer. The agent may
substitute another to act for him.
________________________________________________________________________
Date:_____________________
Your Signature: _______________________
(Sign exactly as your name
appears on the face of this Note)
Signature Guarantee:____________________
Annex D
FORM OF ENGINEER S CERTIFICATION
___________, ____
__________________ a __________ __________ (the Engineer ), pursuant
to Section 4.2(b) of the Trust Indenture and Security Agreement dated as
of August 12, 1999 (together with all amendments or supplements thereto,
the Trust Indenture ) between RBF Exploration Co. (the Issuer ), and Chase
Bank of Texas, National Association (the Trustee ), certifies, represents
and warrants as follows in this engineer s certification (this
Certificate ) (unless otherwise defined herein, capitalized terms are
defined in the Indenture):
(a) In all respects pertaining to the execution and delivery of
this Certificate, the Engineer will use Prudent Engineering and
Operating Practices, as such phrase is defined in the Operation and
Maintenance Agreement by and between R&B Falcon Corporation and the
Issuer, dated as of August 12, 1999.
(b) The funds requested by the Certificate of Requisition of
even date herewith are (i) for work to be performed under and properly
completed pursuant to the terms of the Construction Contract or (ii)
for the purchase of Owner's Supplies as defined therein. The funds
requested are within the [Budget] for such work and are due and
payable by the Issuer pursuant to the terms and conditions of the
Construction Contract.
(c) No defaults or events which with notice or lapse of time
could create a default have occurred and are continuing under the
Construction Contract, the Construction Contract (as defined in the
Trust Indenture) is in full force and effect and all work performed
thereunder to date has been completed in a good and workmanlike manner
and in substantial compliance with the Construction Contract and the
Specifications of the Drilling Rig.
(d) After the advance of funds requested by the Certificate of
Requisition of even date herewith the funds remaining in the
Construction Account will be sufficient for completion of the Drilling
Rig in accordance with the Construction Contract and the
Specifications therefor and for compliance with the SDDI Contract.
(e) The in process value of the Drilling Rig as it presently
exists, during its current stage of construction, is at least equal
to all payments advanced to the Issuer pursuant to the Trust Indenture
after giving effect to the Payments requested hereby.
The undersigned certifies that he is the _________________ of the
Engineer, and that as such he is authorized to execute this Certificate on
behalf of the Engineer. The undersigned further certifies, represents and
warrants on behalf of the Engineer that the Engineer is qualified to issue
this Certificate.
EXECUTED AND DELIVERED this ____ day of ______________.
____________________________________
By:_________________________________
Name:
Title:
SCHEDULE A
Amendments, Supplement and Other Modifications
to the SDDI Contract
ANNEX F
[SDDI Estoppel Letter]
[Letterhead of Shell Deepwater Development Inc.]
____________, 1999
RBF Exploration Co.
901 Threadneedle, Suite 200
Houston, Texas 77079
Chase Bank of Texas, National Association
1150 Chase Tower
600 Travis Street
Houston, Texas 77002
Re: Offshore Daywork Drilling Contract
Contract No. RBS6-1
Dated and effective August 12, 1998
Gentlemen:
Reference is made to that certain Offshore Daywork Drilling contract,
Contract No. RBS6-1, between Shell Deepwater Development Inc. ("SDDI") and
RBF Exploration Co. ("Contractor"), dated and effective August 12, 1998 (as
amended, supplemented and otherwise modified to date, the "Drilling
Contract"). Unless otherwise specified, capitalized terms used herein have
the meanings set forth in the Drilling Contract.
In connection with the transactions contemplated by the Trust
Indenture and Security Agreement between Contractor and Chase Bank of
Texas, National Association, as Trustee, dated as of August 12, 1999, SDDI
hereby certifies as follows:
1. The conditions set forth in the definition of Commencement Date
in the Drilling Contract have been fully satisfied to the
satisfaction of SDDI, and the Commencement Date has occurred.
2. The Drilling Contract is in full force and effect and has not
been amended, supplemented or otherwise modified except as set
forth on Schedule A hereto, A true, accurate and complete copy
of the Drilling Contract is attached hereto.
3. SDDI is currently obligated to make payments under Article 3 of
the Drilling Contract at the Operating Rate. The Operating Rate
during the Primary Period is $[189,000] per day.
4. There is currently no breach or default by Contractor in the
performance of any of its obligations under the Drilling
Contract.
Very truly yours,
SHELL DEEPWATER DEVELOPMENT INC.
By:__________________________________
Name:
Title:
SCHEDULE A
Amendments, Supplement and Other Modifications
to the Drilling Contract
ANNEX G
FORM OF YEAR 2000 SCHEDULE
This YEAR 2000 SCHEDULE is attached to and made a part of that certain
Trust Indenture and Security Agreement, dated as of August 12, 1999 (the
"Indenture"), between RBF Exploration Co., as Issuer ("Issuer") and Chase
Bank of Texas, National Association, as Trustee ("Trustee"), with respect
to the Trust Estate described therein (the "Trust Estate"). Capitalized
terms not otherwise defined herein shall have the meaning set out in the
Indenture.
1. As used in this Schedule, the "Year 2000 Problem" means the inability
of any computer hardware or software applications or other data
processing capacities, including without limitation those in or used
in connection with the Trust Estate, to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999.
2. Issuer represents that directly or through its Affiliates:
(a) it has developed and implemented a comprehensive, detailed
program to properly assess, quantify, address and resolve all
elements of Issuer s and its subsidiaries Year 2000 Problem on
a timely basis, and reasonably anticipates that it will on a
timely basis successfully resolve the Year 2000 Problem for all
material computer hardware or software applications or other
data processing capacities used by it or its subsidiaries;
(b) on the basis of inquiries made, Issuer believes that each
supplier, vendor and customer of Issuer (including its
Affiliates and Subsidiaries) that is of material importance to
the financial well-being of Issuer will also successfully
resolve on a timely basis the Year 2000 Problem for all of its
material computer hardware or software applications or other
data processing capacities; and
(c) Issuer does not believe that the Year 2000 Problem or the costs
of implementing a comprehensive program to address the Year 2000
Problem will result in a material adverse change in the business
condition (financial or otherwise), operations, properties or
prospects of Issuer and its Subsidiaries or the ability of
Issuer to pay and perform its obligations.
3. Issuer covenants that:
(a) it shall, and shall cause each Subsidiary to, take appropriate
steps to assess, quantify, address and resolve its business and
financial risks resulting from the Year 2000 Problem, including
those business and economic risks resulting from the failure of
key suppliers, vendors and customers of Issuer and each
subsidiary to properly assess, quantify, address and resolve
their respective Year 2000 Problem; and
(b) it will provide from time to time such further information
regarding the business, assets, liabilities, financial
condition, results of operations or business prospects of Issuer
and its Subsidiaries as Trustee may request, with respect to
their efforts to address the Year 2000 Problem and any auditor's
management letters concerning the same.
4. Notwithstanding any language in the Indenture to the contrary, Issuer
agrees as follows:
(a) Issuer ASSUMES ALL RISKS OF THE YEAR 2000 PROBLEM.
(b) in no event shall Trustee have liability to Issuer or to any
other person, whether arising in contract, tort, negligence of
any degree, strict liability or otherwise, with respect to any
non-conformance or defect in the Trust Estate, or any part
thereof, including any embedded chips in the Trust Estate, which
non-conformance or defect is related in any way to the Year 2000
Problem, including any liability for indirect, consequential,
and/or incidental damages (including all loss of use, loss of
revenue and/or profits, or any other economic or financial
loss).
(c) it shall defend, hold harmless and indemnify each Indemnified
Party, from any claim, complaint, demand, suit, action or
proceeding brought against any of them seeking damages (or any
other legal or equitable relief) for bodily injury, property
damage, damage to reputation, economic loss or any other type of
loss, damage or harm, including all incidental and consequential
losses, caused by or related in any way to any Year 2000 Problem
in the Trust Estate (a Year 2000 Loss ), and it will use its
best efforts to identify and remedy any potential or threatened
Year 2000 Loss.
(d) the insurance provided to Trustee and each other person entitled
to be loss payee or additional insured pursuant to the
Indenture, shall not contain any exclusion, deduction,
limitation or offset for any risk or liability of an actual or
threatened Year 2000 Loss.
5. The undersigned agrees that a breach of the foregoing representations,
covenants and agreements, which has occurred and is continuing for
thirty (30) days after written notice thereof is given to Issuer,
shall be deemed to be an Indenture Event of Default under the
Indenture.
ANNEX H
Form of Request for Construction Advance
CERTIFICATE OF REQUISITION
REQUISITION NO. ___
Dated: ________________
FROM: RBF Exploration II Inc. ("Construction Supervisor")
TO: RBF Exploration Co. ("Owner")
PROJECT: DEEPWATER NAUTILUS
Capitalized terms used herein without definition have the meanings set
forth in the Construction Supervisory Agreement, dated as of <>, 1999,
between Owner and Construction Supervisor.
Construction Supervisor hereby certifies as follows:
1. Summary to Date.
The following is a summary of previous payments made by Owner to
Construction Supervisor pursuant to Article III of the Agreement and the
payments requested by this Requisition No. ___ and their relation to the
Cost of the Project.
Estimated Cost of the Project
(as of the date of the
Agreement) $315,000,000
Aggregate amount of all
previous payments on account
of the Cost of the Project $
This Requisition $
Balance to complete the Project $
Current estimated Cost of the Project $
2. The payments to be made pursuant to this Certificate of
Requisition are to be made on account of costs that are part of the Cost
of the Project. None of these costs have been reimbursed pursuant to a
previous Certificate of Requisition. These costs are as set forth on
Schedule 1 attached hereto.
3. Attached hereto is the Engineer's Certification (as defined in
the Trust Indenture) of Independent Engineer (as defined in the Trust
Indenture) certifying that, among other things, the "in process value" of
the Drilling Rig is at least equal to all payments made by Owner on account
of the Cost of the Project after giving effect to the payments requested
hereby.
4. With respect to any cost described on Schedule 1 hereto other
than a payment due to Builder pursuant to the Construction Contract, the
following documents are attached hereto:
(a) Bill of Sale with respect to any Owner's Supplies or other
equipment
(b) Invoice
(c) Evidence of payment in full of all taxes, charges, fees and
costs now due and payable, if any, with respect to any
Owner's Supplies or other equipment
5. With respect to any costs to be reimbursed to Construction
Supervisor, Construction Supervisor has made payment in full of such cost
to Builders or another party providing the goods or services that are the
subject of such costs, and evidence of such payment is attached hereto.
6. There have been no change orders, amendments or modifications to
the Construction Contract or the plans and specifications for the Drilling
Rig except as set forth on Schedule 2 hereto.
7. There is no Default or Event of Default continuing under the
Agreement. Construction Supervisor is not in default of any obligation to
any vendor or supplier of goods or services in connection with the Project.
8. All of the representations and warranties of Construction
Supervisor set forth in the Agreement are true, complete and correct as of
the date of this Certificate of Requisition.
9. All other funds disbursed by Owner under previously approved
Certificates of Requisition have been expended for the purposes for which
they were requisitioned.
10. As of the date of this Certificate of Requisition, the amount
shown in paragraph 1 as the "balance to complete the Project" represents,
in Construction Supervisor's best judgment, a correct statement of the
total amount required to pay all costs that will be incurred as part of the
Cost of the Project in connection with the completion of the Project.
11. Upon approval of this Certificate of Requisition, payments
requested hereby should be directed as set forth in Schedule 1 hereto.
Executed under seal as of the date first above written.
RBF EXPLORATION II INC.
By:________________________
Name:
Title:
Approved:
RBF EXPLORATION CO.
By:_____________________
Name:
Title:
REQUISITION NO. _______________
SCHEDULE 1
Description of Cost Party to Whom Payment is Requested Amount
Due
REQUISITION NO. _______________
SCHEDULE 2
Change Orders, Amendment and Modifications to the Construction Contract
IN WITNESS WHEREOF, the undersigned have executed this YEAR 2000
SCHEDULE as of the [____] day of [________], 1999.
RBF Exploration Co.
By:______________________________
Name:
Title:
Chase Bank of Texas, National Association
By:______________________________
Name:
Title:
EXHIBIT 10.7
Execution Copy
ASSIGNMENT OF DRILLING CONTRACT
THIS ASSIGNMENT OF DRILLING CONTRACT (this "Agreement"), is
made as of August 12, 1999, by RBF Exploration Co., a corporation
organized under the laws of the State of Nevada ("Assignor"), to
the Trustee from time to time under that certain Trust Indenture
and Security Agreement (the "Trust Indenture") dated as of even
date herewith between Assignor and Chase Bank of Texas, National
Association, as trustee (together with its successors and
assigns, the "Assignee"). Unless otherwise defined herein, all
capitalized terms used herein shall have the respective meanings
assigned to such terms in the Trust Indenture.
WHEREAS, Shell Deepwater Development Inc. ("SDDI") and
Assignor are parties to that certain Deep Water Rig Contract
dated August 12, 1998 (the "SDDI Contract");
WHEREAS, the Trust Indenture provides for, among other
things, the pledge of certain collateral and the issuance of
$200,000,000.00 Senior Secured Class A1 Notes and the issuance of
$50,000,000.00 Senior Secured Class A2 Notes (collectively, the
"Notes"), subject to the terms and conditions contained therein;
and
WHEREAS, in connection with the sale of the Notes, Assignor
has entered into certain Note Purchase Agreements dated August
12, 1999 (the "Note Purchase Agreements") with various Note
purchasers (the "Note Holders"); and
WHEREAS, in connection with the Trust Indenture, and the
pledge of collateral related thereto, Assignor on even date
herewith entered into that certain First Preferred Ship Mortgage
(the "First Preferred Ship Mortgage") on the vessel to be
documented under U.S. flag with the name DEEPWATER NAUTILUS (the
"Drilling Rig", or sometimes the "Vessel"); and
WHEREAS, in consideration of entering into the Note Purchase
Agreements, the Note Holders have required that Assignor enter
into this Agreement for the assignment of all revenues due or to
become due to Assignor relating to the SDDI Contract;
NOW, THEREFORE, in consideration of the mutual premises and
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1. Assignment. As security for the obligations
secured by the Trust Indenture and the other Project Documents,
the Assignor hereby grants, sells, conveys, assigns, transfers,
sets over, mortgages and pledges to the Assignee, and unto the
Assignee's successors and assigns, all its right, title,
interest, claim and demand in and to:
(i) all of the Assignor's rights in the SDDI Contract;
(ii) all monies whatsoever due or to become due to
Assignor arising out of the SDDI Contract, all
accounts reflected on Assignor's books relating to
such payments and all written evidence of the
foregoing, including all invoices, statements, and
other writings rendered under the SDDI Contract;
(iii) all other monies whatsoever due or to become
due to the Assignor arising out of the use or
operation of the Vessel pursuant to any employment
of the Vessel, including, but not limited to the
SDDI Contract, all day rate payments, freight,
charter hire and passage monies, proceeds of
off-hire insurance, any other monies earned and to
be earned, due or to become due, or paid or
payable to, or for the account of, the Assignor,
of whatsoever nature, arising out of or as a
result of the SDDI Contract or any other drilling
contract for, or use, operation or management by
the Assignor or its agents of, the Vessel;
(iv) all monies and claims for monies due and to
become due to the Assignor under and all claims
for damages arising out of the breach (or payments
for variation or termination) of the SDDI Contract
and any other employment of the Vessel, any and
all other present and future drilling contracts,
and operations of every kin d whatsoever of the
Vessel that may now and hereafter accrue or belong
to the Assignor, its successors or assigns,
arising out of or in any way connected with its
present or future requisitions, drilling contracts,
use, operation or management of the Vessel or
arising out of or in any way connected with the
Vessel;
(v) all monies and claims for monies due and to
become due to the Assignor, and all claims for
damages against parties other than SDDI in respect
of the actual or constructive total or partial
loss of or requisition of use of or title to the
Vessel; and
(vi) any proceeds of any of the foregoing.
SECTION 2. Payments. The Assignor covenants that, (i)
it will have all the day rate payments, charter hires, earnings,
freights and other monies hereby assigned paid over directly to
the order of the Assignee, and if any such amounts are paid to or
received by the Assignor, it will promptly pay such amounts to
the Assignee; (ii) it will promptly notify in writing (and
deliver a duplicate copy of such notice to the Assignee) SDDI and
each of the Assignor's agents and representatives into whose
control may come any earnings and monies hereby assigned,
informing each such Person of this Agreement, and instructing
such addressee to remit promptly to the order of the Assignee all
earnings and monies hereby assigned which may come into such
Person's control and to continue to make such remittances until
such time as such Person may receive written notice to the
contrary directly from the Assignee; and (iii) it will instruct
each such Person to acknowledge directly to the Assignee receipt
of the Assignor's written notification and the instructions. Any
sum in respect of monies assigned hereunder which is in the hands
of any Assignor's agents and representatives referred to above,
shall be deemed to have been received by them for the use and on
behalf of the Assignee and shall be promptly paid to the
Assignee.
SECTION 3. Limitation on Assignee's Liability. Anything
herein contained to the contrary notwithstanding, the Assignee,
each Note Holder, each Credit Support Party and their respective
successors and assigns shall have no obligation or liability
under the SDDI Contract, any other agreement or under any other
drilling contract by reason of or arising out of this Agreement,
and the Assignee, each Note Holder, each Credit Support Party,
and their respective successors and assigns, shall not be
required or obligated in any manner to perform or fulfill any
obligations of the Assignor under or pursuant to any agreement,
drilling contract or charter or to make any payment or to make
any inquiry as to the nature or sufficiency of any payment
received by it or to present or file any claim, or to take any
other action to collect or enforce the payment of any amounts
which may have been assigned to it or to which it may be entitled
hereunder at any time or times.
SECTION 4. Appointment. The Assignor hereby constitutes
the Assignee, and its successors and assigns, whether or not an
Indenture Event of Default shall have occurred and be continuing,
its true and lawful attorney-in-fact, irrevocably, with full
power, in the name of the Assignor or otherwise, to receive,
compound and give acquittance for any and all monies and claims
for monies due and to become due, property and rights hereby
assigned, to endorse any checks or other instruments or orders in
connection therewith, to file any document or to take any action
or institute any proceedings which the Assignee, and its
successors and assigns, may deem necessary or advisable in the
premises, and to take any action in the name of the Assignor or
otherwise, which the Assignor is obligated to take hereunder.
SECTION 5. Consideration. The powers and authorities
granted to the Assignee, and its successors or assigns, herein,
having been given for valuable consideration and coupled with an
interest, are hereby declared to be irrevocable.
SECTION 6. Remedies. The Assignor hereby agrees that if
an Indenture Event of Default shall have occurred and be
continuing, the Assignee shall have the right, but not the
obligation, in its own name or in the name of the Assignee, to
exercise all of the Assignor's rights and, to perform any or all
of the Assignor's obligations under the SDDI Contract and any
other drilling contract respecting the Vessel as though named as
ship owner therein. The Assignor hereby agrees that the remedies
herein are cumulative, and not exclusive of any other remedies
provided by law or any other Project Document.
SECTION 7. Third Party Consents. The Assignor covenants
to obtain the consent of SDDI to this Agreement, in a form and in
substance reasonably satisfactory to the Assignee.
SECTION 8. Representations and Covenants. The Assignor
warrants and represents that it has not assigned or pledged the
rights, title and interest assigned hereunder to anyone other
than the Assignee. The Assignor hereby covenants that, without
the prior written consent thereto of the Assignee, it will not
assign or pledge the whole or any part of the rights, title and
interest hereby assigned to anyone other than the Assignee, and
it will not take or omit to take any action, the taking or
omission of which might result in an alteration or impairment of
this Agreement, or of any of the rights created by this
Agreement.
SECTION 9. Financing Statements. The Assignor hereby
appoints the Assignee as its attorney-in-fact to execute on the
Assignor's behalf and file any financing statements under the
Uniform Commercial Code, or papers of similar purpose or effect
in respect of this Agreement, but the foregoing shall not limit
the obligations of the Assignor under Section 10.
SECTION 10. Further Assurances. The Assignor agrees that
at any time and from time to time, upon the written request of
the Assignee, the Assignor will promptly and duly execute and
deliver any and all further instruments and documents as the
Assignee may deem desirable in obtaining the full benefits of
this Agreement.
SECTION 11. Successors and Assigns. Assignor may not
make an assignment or other transfer of this Agreement or any
interest herein by operation of law or otherwise unless it has
obtained the prior written consent of Assignee to such assignment
or other transfer, which consent may be withheld, conditioned or
delayed. Assignee may assign its right and benefits under this
Agreement to any successor or to any one or more of the holders
of the Notes or, upon payment by the Sureties pusuant to the
Performance Bond, to the Sureties.
SECTION 12. Notices. All notices to Assignor and
Assignee required to be served under this Agreement shall be in
writing and shall be served by registered mail and shall be
addressed as follows:
If to the Assignee: Chase Bank of Texas, National Association
1150 Chase Tower
600 Travis Street
Houston, TX 77002
Attn: Mauri J. Cowen, V.P.
If to Assignor: RBF Exploration Co.
901 Threadneedle
Houston, Texas 77079
Attn: President
or at such other address as Assignor and Assignee may from time
to time designate in writing to the other party. All notices
required to be served under this Agreement will be effective when
received by the addressee.
SECTION 13. No Waiver; Amendments. Subject to applicable
statutes of limitations, no failure on the part of the Assignee
or any of its agents to exercise, and no course of dealing with
respect to, and no delay in exercising, any right, power, or
remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by Assignee or any of its agents of
any right, power, or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right,
power, or remedy. No amendment of this Agreement shall be
effective unless the same shall be in writing and signed by
Assignor and Assignee. No waiver of any provision of this
Agreement shall be effective unless signed by Assignee.
SECTION 14. Governing Law; Submission to Jurisdiction;
Etc. (a) This Agreement (including, but not limited to, the
validity and enforceability hereof and thereof) 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 which
would require the application of the laws of another
jurisdiction.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
IN NEW YORK COUNTY OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, ASSIGNOR HEREBY ACCEPTS FOR ITSELF AND (TO THE
EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
ASSIGNOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING
IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO
JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE ANY PERSON
FROM OBTAINING JURISDICTION OVER OTHER PARTIES IN ANY COURT
OTHERWISE HAVING JURISDICTION.
(c) ASSIGNOR HEREBY IRREVOCABLY DESIGNATES CAPITOL
SERVICES, INC. LOCATED AT 40 COLVIN STREET, SUITE 200, ALBANY,
NEW YORK 12206, AS THE DESIGNEE, APPOINTEE AND AGENT OF ASSIGNOR
TO RECEIVE, FOR AND ON BEHALF OF ASSIGNOR, SERVICE OF PROCESS IN
SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT. IT IS UNDERSTOOD THAT A COPY OF
SUCH PROCESS SERVED ON SUCH AGENT WILL BE PROMPTLY FORWARDED BY
OVERNIGHT COURIER TO ASSIGNOR AT ITS ADDRESS SET FORTH HEREIN,
BUT THE FAILURE OF ASSIGNOR TO RECEIVE SUCH COPY SHALL NOT AFFECT
IN ANY WAY THE SERVICE OF SUCH PROCESS. ASSIGNOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO ASSIGNOR AT ITS SAID ADDRESS, SUCH SERVICE TO
BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ASSIGNEE,
THE HOLDER OF A NOTE OR ANY OTHER PERSON TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST ASSIGNOR IN ANY OTHER JURISDICTION.
(e) ASSIGNOR HEREBY (I) IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
PROJECT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II)
IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION
ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III)
CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT
OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (IV)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT, AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED
IN THIS SECTION.
SECTION 15. NO ORAL AGREEMENTS. THIS AGREEMENT, TOGETHER
WITH THE PROJECT DOCUMENTS, EMBODY THE ENTIRE AGREEMENT AND
UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO
THE SUBJECT MATTER HEREOF AND THEREOF. THIS AGREEMENT, TOGETHER
WITH THE PROJECT 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.
SECTION 16. Third Party Beneficiaries. In addition to
Assignee, each of the Sureties, each of the Note Holders and each
of the Credit Support Parties is an intended third party
beneficiary of this Agreement.
[Remainder of Page is Intentionally Blank.]
IN WITNESS WHEREOF, Assignor has caused this Agreement to be
duly executed as of the day and year first above written.
RBF EXPLORATION CO.
By:
Name:
Title:
EXHIBIT 10.8
Execution Copy
=========================================================================
R&B FALCON GUARANTY
from
R&B FALCON CORPORATION
Dated as of August 31, 1999
==========================================================================
R&B FALCON GUARANTY
THIS GUARANTY (this "Guaranty"), dated as of August 31, 1999, made by R&B
FALCON CORPORATION (the "Guarantor") in favor of the Beneficiaries named
below;
W I T N E S S E T H:
WHEREAS, pursuant to the terms of (i) a Participation Agreement, dated
as of the date hereof (the Participation Agreement ), among Deepwater
Drilling II L.L.C., a Delaware limited liability company, Wilmington Trust
FSB, a federal savings bank, not in its individual capacity except as
expressly provided therein, but solely as trustee under the Investment
Trust Agreement, Deepwater Investment Trust 1999-A, a Delaware business
trust, Wilmington Trust Company, a Delaware banking corporation, not in its
individual capacity except as expressly provided therein, but solely as
Charter Trustee under the Charter Trust Agreement), BA Leasing & Capital
Corporation, a California corporation, as Documentation Agent, each of the
financial institutions listed on the signature pages thereto, or that may
become a party thereto, as a Certificate Purchaser, solely with respect to
Sections 2.15, 6.9, 9.4(a) and 12.13(b), R&B Falcon Corporation and Conoco
Inc., and solely with respect to Sections 5.2 and 6.4, RBF Deepwater
Exploration II Inc., a Nevada corporation, and Conoco Development II Inc., a
Delaware corporation, and (ii) a Master Charter (together with the Charter
Supplements), dated as of the date hereof, between the Charter Trustee and
Deepwater, the Charter Trustee has agreed to charter to Deepwater and
Deepwater agreed to charter from the Charter Trustee all of the Charter
Trustee s interest in the Drillship;
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Participation Agreement and other
Transaction Documents that Guarantor execute and deliver this Guaranty and
that Conoco execute and deliver the Conoco Guaranty; and
WHEREAS, this Guaranty is offered by Guarantor, and the Conoco Guaranty
is offered by Conoco, as an inducement to the Participants to consummate
the transactions contemplated in the Participation Agreement, which
transactions, if consummated, will be of benefit to Guarantor and Conoco;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged by
Guarantor, Guarantor hereby agrees as follows:
SECTION 1. Defined Terms. Capitalized terms used but not otherwise
defined in this Guaranty shall have the respective meanings specified in
Appendix 1 to the Participation Agreement. The obligations guaranteed
under Section 2(a) below are collectively referred to as the Guaranteed
Obligations and individually referred to as a Guaranteed Obligation .
Each of the Investment Trust, the Investment Trustee, the Charter Trustee,
the Documentation Agent, the Certificate Purchasers, the Hedging Agreement
Counterparties, if any, and the other Indemnified Parties is referred to
as a Beneficiary and are collectively referred to as the Beneficiaries .
SECTION 2. Guaranteed Obligations.
(a) Subject to the terms hereof, the Guarantor does hereby irrevocably
and unconditionally guarantee to the Beneficiaries entitled thereto, as a
primary obligor and not as a surety, until such time as final and
indefeasible payment thereof has been made, the due and punctual payment
by Deepwater, when due, whether by acceleration or otherwise, of
(i) an amount equal to (x), with respect to any payments of Purchase
Option Price due by Deepwater under Section 20.1 of the Master Charter
(whether such Purchase Option is exercised at Deepwater s option or at
the Charter Trustee s option pursuant to an exercise of remedies under
either Charter Supplement), (A) the Guarantor's Percentage of that
portion of the Purchase Option Price representing the Certificate
Purchaser Balance and any accrued and unpaid Certificate Return plus (B)
60% of that portion of the Purchase Option Price representing accrued
and unpaid Supplemental Hire and (y), with respect to payments due with
respect to an exercise of the remedy set forth in Section 4.2(a) of
Charter Supplement No. 1, (A) the Guarantor's Percentage of Termination
Value plus (B) the Applicable Percentage of any Supplemental Hire due
under such Section 4.2(a) and all other amounts payable pursuant to such
Section 4.2(a); provided, however, that for purposes of this clause
(a)(i)(y) the Guarantor's Percentage shall be calculated using the
Applicable Percentage calculated in accordance with Section 4.2(a) of
Charter Supplement No. 1; provided, further, that for the purposes of
this Guaranty, the "Termination Value" hereunder shall not exceed the
Termination Value as of the Scheduled Charter Expiration Date;
(ii) with respect to any payments of the Residual Guaranty Amount due by
Deepwater under Section 20.3 of the Master Charter,
(A) where the Residual Guaranty Amount is less than the Maximum
Residual Guaranty Amount, (1) the Guarantor's Percentage of that
amount listed in clause (i)(A) of the definition of Residual
Guaranty Amount plus (2) 60% of that amount listed in clause (i)(B)
of the definition of Residual Guaranty Amount, or
(B) where the Residual Guaranty Amount is equal to the Maximum
Residual Guaranty Amount, (1) the Guarantor s Percentage of that
amount listed in clause (i) of the definition of Maximum Residual
Guaranty Amount plus (2) 60% of that amount listed in clause (ii)
of the definition of Maximum Residual Guaranty Amount;
(iii) 60% of the amount of any premium payable under any policy of
insurance required to be maintained by Deepwater under Section 14.1 of
the Master Charter;
(iv) 60% of any Claims and Tax Claims due by Deepwater pursuant to
Section 10 of the Participation Agreement;
(v) the Applicable Percentage of the amount due by Deepwater to the
Charter Trustee under the Deepwater Hedging Agreements (if any) upon the
occurrence of an Early Termination Date (as defined in the Deepwater
Hedging Agreements) in connection with an Event of Loss during the
Charter Term; and
(vi) all installments of Basic Hire due by Deepwater under the R&B
Falcon Charter during the period after the Scheduled Charter Expiration
Date (or, if the Charter Term has been extended pursuant to Section 19.1
of the Master Charter, after the end of such extension period) until the
earlier of (A) the transfer of the risk of loss with respect to the
Drillship to a purchaser under an agreement for sale of the Drillship
and (B) the redelivery of the Drillship in accordance with Section 18.1
of the Master Charter;
provided, however, that the Guarantor shall be liable under this Guaranty
for the maximum amount of such liability that can be hereby incurred
without rendering this Guaranty, as it relates to the Guarantor, voidable
under Applicable Law relating to fraudulent conveyance or fraudulent
transfer, and not for any greater amount.
(b) Subject to the terms hereof, the Guarantor does hereby irrevocably
and unconditionally guarantee as a primary obligor and not as a surety to
each of the Beneficiaries entitled thereto, until such time as final and
indefeasible payment thereof has been made, the due and punctual payment
by RBF Deepwater Exploration II Inc. when due, whether by acceleration or
otherwise, of all damages payable by RBF Deepwater Exploration II Inc. as
a result of a breach of its covenant set forth in Section 6.4(a) of the
Participation Agreement at any time when RBF Deepwater Exploration II Inc.
is not a Subsidiary of the Guarantor.
(c) The Guarantor hereby indemnifies and holds harmless each of the
Beneficiaries for any and all costs and expenses (including reasonable
attorney s fees and expenses) incurred by such Beneficiary in enforcing any
rights under this Guaranty.
SECTION 3. Nature of Obligations. This Guaranty shall constitute a
guaranty of prompt payment and not of collection, and the Guarantor
specifically agrees that it shall not be necessary, and that the Guarantor
shall not be entitled to require, before or as a condition of enforcing the
liability of the Guarantor under this Guaranty or requiring payment or
performance of the Guaranteed Obligations by the Guarantor as provided
herein, or at any time thereafter, that any Person: (a) file suit or
proceed to obtain or assert a claim for personal judgment against Deepwater
or any other Person that may be liable for any Guaranteed Obligation; (b)
make any other effort to obtain payment or performance of any Guaranteed
Obligation from Deepwater or any other Person that may be liable for such
Guaranteed Obligation; (c) foreclose against or seek to realize upon any
security now or hereafter existing for such Guaranteed Obligation; (d)
exercise or assert any other right or remedy to which any Beneficiary is
or may be entitled in connection with any Guaranteed Obligations or any
security or other guaranty therefor (including any Letter of Credit or
Qualified Letter of Credit); or (e) assert or file any claim against the
assets of Deepwater or any other Person liable for any Guaranteed
Obligation. Notwithstanding the foregoing, the provisions of this Section
3 shall not be construed to avoid any notices or demands or the lapse of
any time periods available to Deepwater under the Transaction Documents.
SECTION 4. Continuing Guaranty. This Guaranty shall in all respects be
a continuing, primary, absolute and unconditional guaranty of prompt and
complete payment and shall remain in full force and effect until the full
and final payment and performance of the Guaranteed Obligations and
Guarantor s obligations hereunder. The Guarantor guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms
of the Participation Agreement and each other Transaction Document under
which they arise, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Beneficiaries with respect thereto. The liability of the
Guarantor under this Guaranty shall be absolute, unconditional and
irrevocable, irrespective of:
(1) any lack of validity, legality or enforceability of the
Participation Agreement, any Certificate or any other Transaction
Document;
(2) the failure of any Beneficiary
(a) to assert any claim or demand or to enforce any right or
remedy against Deepwater or any other Person (including any
guarantor (including the Guarantor)) under the provisions of
the Participation Agreement, any Certificate, any other
Transaction Document or otherwise, or
(b) to exercise any right or remedy against any guarantor
(including the Guarantor) of, or collateral securing, any
obligations of Deepwater or any other Person;
(3) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations or the
obligations of any guarantor (including the Guarantor), or any
other extension, compromise or renewal of any Guaranteed Obligation
or the obligations of any guarantor (including the Guarantor);
(4) any reduction, limitation, impairment or termination of any
Guaranteed Obligations or the obligations of any guarantor
(including the Guarantor) for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not
be subject to (and the Guarantor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability of, or
any other event or occurrence affecting, any Guaranteed Obligations
or the obligations of any guarantor (including the Guarantor) or
otherwise, other than the payment in full in cash or satisfaction
or discharge in full of such Guaranteed Obligation;
(5) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the
Participation Agreement, any Certificate or any other Transaction
Document;
(6) any addition, exchange, release, surrender or non-perfection of any
collateral, or any amendment to or waiver or release or addition
of, or consent to departure from, any other guaranty held by any
Beneficiary securing any of the Guaranteed Obligations or the
obligations of any guarantor (including the Guarantor);
(7) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, Deepwater, any
surety or any guarantor; or
(8) the condition, design, operation, fitness for use or seaworthiness
of the Drillship or the failure of the Drillship to be constructed
in accordance with the Construction Contract.
SECTION 5. Reinstatement. If at any time all or any part of any
payment theretofore applied to any of the Guaranteed Obligations is
rescinded or returned for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of Deepwater),
such Guaranteed Obligations shall, for the purposes of this Guaranty, to
the extent that such payment is or must be rescinded or returned, be deemed
to have continued in existence, notwithstanding such application, and this
Guaranty shall continue to be effective or be reinstated, as the case may
be, as to such Guaranteed Obligations, all as though such application had
not been made.
SECTION 6. Amendments to Transaction Documents; Demands. Guarantor
shall remain obligated under this Guaranty notwithstanding that, without
any reservation of rights against Guarantor and without notice to or
further consent by Guarantor, the obligations or the liability of any other
party, upon or for any part of the obligations under the Transaction
Documents, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, waived, surrendered or released by the
Beneficiaries (or anyone acting through or on behalf of the Beneficiaries)
and any of the other Transaction Documents may be amended, modified,
supplemented or terminated, in whole or in part; provided, however, that
notwithstanding anything contained in this Section 6 to the contrary, to
the extent that the obligations of Deepwater constituting the Guaranteed
Obligations are expressly released or waived in writing, such release or
waiver shall be deemed to extend to Guarantor. For the purposes of this
Guaranty, any reference to the Transaction Documents shall mean such
documents as they now exist and as they may be modified, amended,
supplemented, renewed or extended from time to time. When making any
demand against Deepwater, a Beneficiary (or anyone acting through or on
behalf of such Beneficiary) may, but shall be under no obligation to, make
a similar demand on Guarantor and any failure by a Beneficiary (or anyone
acting through or on behalf of such Beneficiary) to make any such demand
or to collect any payments from Deepwater shall not relieve Guarantor of
any of its liabilities under this Guaranty and shall not impair or affect
the rights and remedies of the Beneficiaries (or anyone acting through or
on behalf of the Beneficiaries) against Guarantor.
SECTION 7. Payments; No Subrogation. Guarantor hereby agrees that
payments under this Guaranty will be paid to the Beneficiary entitled
thereto in immediately available funds in accordance with the terms of the
applicable Transaction Documents. Until all of the Guaranteed Obligations
are indefeasibly paid in full, Guarantor hereby agrees that no payment made
by or for the account of Guarantor pursuant to this Guaranty shall entitle
Guarantor by subrogation, indemnification, exoneration, contribution,
reimbursement or otherwise to any payment by Deepwater or from or out of
any property of Deepwater in respect of payments made hereunder, and
Guarantor hereby expressly waives, to the fullest extent possible, and
shall not exercise, any right or remedy against Deepwater or any property
of Deepwater by reason of any performance by Guarantor of this Guaranty
unless and until all of the Guaranteed Obligations are fully and finally
performed, indefeasibly paid or discharged.
SECTION 8. Waiver. Guarantor hereby expressly waives: (a) notice of
the acceptance of this Guaranty; (b) notice of the existence or creation
or non-payment of all or any of the Guaranteed Obligations; (c)
presentment, demand, notice of dishonor, protest, and, to the fullest
extent permitted by Applicable Law, any notice not required herein, and all
other notices whatsoever; and (d) any right to require marshaling of its
assets in connection with the satisfaction of the Guaranteed Obligations.
When making any demand hereunder against Guarantor, a Beneficiary may, but
shall be under no obligation to, make a similar demand on Deepwater and any
failure by a Beneficiary to make any such demand or to collect any payments
from Deepwater shall not relieve Guarantor of its obligations or
liabilities hereunder, and shall not impair or affect the rights and
remedies, express or implied, or as a matter of law, of the Beneficiaries
against Guarantor.
SECTION 9. Assignment. This Guaranty shall be binding upon Guarantor
and upon Guarantor s successors and permitted assigns and shall inure to
the benefit of the Beneficiaries and their respective successors and
permitted assigns. The Guarantor may not delegate any of its obligations
hereunder without the prior written consent of the Certificate Purchasers
except as provided in the definition of "Prepayment Change of Control
Trigger Event" or "Pricing Change of Control Trigger Event". The Guarantor
hereby consents and agrees to the Charter Trustee s assignment of its
rights under this Guaranty to the Investment Trust pursuant to the Charter
Trustee Assignment.
SECTION 10. Guarantor's Liabilities Not Affected. The duties and
obligations of Guarantor under this Guaranty shall remain in full force and
effect, without the necessity of any reservation of rights against
Guarantor or further assent by Guarantor, and without regard to, and shall
not be impaired or affected by:
(a) any limitation of the remedies of the Beneficiary under any of
the Transaction Documents or the rejection or disaffirmance thereof
which may now or hereafter be imposed by any Applicable Law or the
occurrence of any Event of Default;
(b) any merger or consolidation of Deepwater or Guarantor into or
with any other Person, or any sale, lease or transfer of any or all of
the capital stock or assets of Deepwater or Guarantor to any other
Person;
(c) any claim, counterclaim, set-off, deduction or defense (other
than payment in full) that Guarantor or Deepwater may have against any
Beneficiary, whether hereunder or under any Transaction Document or
independent of or unrelated to the transactions contemplated by the
Transaction Documents; or
(d) any extension of the Charter Term.
SECTION 11. Bankruptcy of Deepwater. Guarantor agrees that, so long as
there are any Guaranteed Obligations outstanding, it shall not (i) commence
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 Deepwater or its debts; (ii)
seek appointment of a receiver, trustee, custodian or other similar
official for Deepwater or for all or any substantial part of its property;
(iii) cause, or permit RBF Deepwater Exploration II Inc., as a Member of
Deepwater, to vote to permit Deepwater to file a voluntary petition in
bankruptcy or under insolvency or similar laws or an answer admitting the
material obligations of a petition filed against Deepwater in any such
proceeding; or (iv) if Deepwater becomes a debtor-in-possession under
applicable bankruptcy laws, cause, or permit RBF Deepwater Exploration II
Inc., as a Member of Deepwater, to vote to permit Deepwater to reject
either of the Drilling Contracts.
SECTION 12. No Material Adverse Change. Guarantor represents and
warrants to the Beneficiaries that as of the date hereof, there has been
no material adverse change in the consolidated assets, liabilities,
operations, business or financial condition of the Guarantor from that set
forth in its financial statements for the fiscal quarter ended June 30,
1999 included in its report on Form 10-Q filed with the Securities and
Exchange Commission with respect to such period.
SECTION 13. Financial Statements. The Guarantor shall deliver to the
Charter Trustee, with sufficient copies for each Certificate Purchaser,
copies of its annual and quarterly reports on Form 10-K and Form 10-Q,
respectively, filed with the Securities and Exchange Commission promptly
after such filings have been made.
SECTION 14. Miscellaneous. No delay in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise
of any right or remedy shall preclude other or further exercise thereof or
the exercise of any other right or remedy. No modification or waiver of
any of the provisions of this Guaranty shall be binding upon the
Beneficiaries or Guarantor unless such modification or waiver is by an
instrument in writing and signed by Guarantor and the Beneficiaries. No
action permitted hereunder shall in any way affect or impair the rights of
any Beneficiary or Guarantor's obligations under this Guaranty. This
Guaranty is effective upon delivery.
This Guaranty is a Transaction Document which is being executed pursuant
to the Participation Agreement and in connection with the transactions
contemplated therein.
Wherever possible each provision of this Guaranty shall be interpreted
in such manner as to be effective and valid under Applicable Law, but if
any provision of this Guaranty shall be prohibited by or invalid
thereunder, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
All notices, demands, declarations, consents, directions, approvals,
instructions, requests and other communications required or permitted by
this Guaranty shall be in writing and shall be deemed to have been duly
given when addressed to the appropriate Person and delivered (in the case
of the Beneficiaries) in the manner specified in Section 12.3 of the
Participation Agreement and (in the case of the Guarantor) when delivered
in the manner specified in Section 12.3 of the Participation Agreement and
addressed as set forth below:
R&B Falcon Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
Telephone No.: (281) 496-5000
Telecopy No.: (281) 496-0285
Attn: Chief Executive Officer
THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
GUARANTY (INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE)
SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE
NEW YORK GENERAL OBLIGATIONS LAW, BUT EXCLUDING, TO THE MAXIMUM EXTENT
PERMITTED BY APPLICABLE LAW, ALL OTHER CHOICE OF LAW RULES). THIS GUARANTY
HAS BEEN DELIVERED IN THE STATE OF NEW YORK.
All judicial actions, suits or proceedings brought against Guarantor
with respect to its obligations, liabilities or any other matter under or
arising out of or in connection with this Guaranty or any transaction
contemplated or for recognition or enforcement of any judgment rendered in
any such proceedings may be brought in any state or federal court of
competent jurisdiction in The City of New York. By execution and delivery
of this Guaranty, Guarantor accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and irrevocably agrees to be bound
by any final judgment rendered in connection with this Guaranty or any
transaction contemplated hereby from which no appeal has been taken or is
available. Guarantor irrevocably agrees that all process in any proceeding
or any court arising out of or in connection with this Guaranty may be
effected by mailing a copy by registered or certified mail or any
substantially similar form of mail, postage prepaid, to Guarantor at its
address as designated in this Guaranty. Guarantor irrevocably waives trial
by jury and any objections which it now or subsequently may have to the
bringing of any such action or proceeding in any such
jurisdiction.
Upon request of any Beneficiary, Guarantor shall execute and deliver
such further assurances as such Beneficiary may determine in its reasonable
judgment to be necessary or desirable to confirm the obligations of
Guarantor under this Guaranty.
The section headings used in this Guaranty are for convenience of
reference only and are not to affect the construction of the terms of this
Guaranty.
[The Remainder of this Page is Left Intentionally Blank]
IN WITNESS WHEREOF, Guarantor has caused this R&B GUARANTY to be
executed and delivered under seal by its duly authorized officer as of the
date first above written.
R&B FALCON CORPORATION
By:
Name:
Title:
EXHIBIT 10.9
Execution Copy
=========================================================================
PARTICIPATION AGREEMENT
dated as of August 31, 1999
among
DEEPWATER DRILLING II L.L.C.,
DEEPWATER INVESTMENT TRUST 1999-A, as Investment Trust
WILMINGTON TRUST FSB, not in its individual capacity
except as expressly stated herein, but solely as Investment Trustee
WILMINGTON TRUST COMPANY,
not in its individual capacity except as expressly
provided herein, but solely as Charter Trustee,
BA LEASING & CAPITAL CORPORATION,
as Documentation Agent,
THE OTHER FINANCIAL INSTITUTIONS LISTED ON THE
SIGNATURE PAGES HEREOF OR THAT MAY
HEREAFTER BECOME PARTY HERETO,
as Certificate Purchasers,
solely with respect to Sections 2.15, 6.9, 9.4(a) and 12.13(b)
R&B FALCON CORPORATION and
CONOCO INC.,
and
solely with respect to Sections 5.2 and 6.4,
RBF DEEPWATER EXPLORATION II INC. and
CONOCO DEVELOPMENT II INC.
=========================================================================
SECTION 1
DEFINITIONS; INTERPRETATION
SECTION 2
COMMITMENTS OF THE PARTIES
SECTION 2.1 Certain Closing Date Events. . . . . . . . . . . . . .2
SECTION 2.2 Certain Delivery Date Events . . . . . . . . . . . . .3
SECTION 2.3 Advances by Certificate Purchasers and Investment
Trust . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 2.4 Certificates and Payments; Certificate Margin. . . . .4
SECTION 2.5 Limitations on Advances. . . . . . . . . . . . . . . .5
SECTION 2.6 Fundings; Application of Proceeds. . . . . . . . . . .6
SECTION 2.7 [Intentionally Omitted]. . . . . . . . . . . . . . . .6
SECTION 2.8 Postponement of Advance. . . . . . . . . . . . . . . .6
SECTION 2.9 Records. . . . . . . . . . . . . . . . . . . . . . . .7
SECTION 2.10 [Intentionally Omitted]. . . . . . . . . . . . . . . .8
SECTION 2.11 Timing of Fundings to Investment Trustee and Payments
to Certificate Purchasers . . . . . . . . . . . . . . 8
SECTION 2.12 Computations . . . . . . . . . . . . . . . . . . . . .8
SECTION 2.13 Conditions to each Advance . . . . . . . . . . . . . .9
SECTION 2.14 Fees . . . . . . . . . . . . . . . . . . . . . . . . .9
SECTION 2.15 Payments Under the Ship Mortgage;
Limitation on Foreclosure. . . . . . . . . . . . . . .9
SECTION 3
EFFECTIVE DATE; CLOSING DATE; CONDITIONS PRECEDENT
SECTION 3.1 Closing Date . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.2 Conditions Precedent to Closing Date . . . . . . . . 10
SECTION 4
DELIVERY DATE; CONDITIONS PRECEDENT
SECTION 4.1 Conditions Precedent to Delivery Date. . . . . . . . 14
SECTION 4.2 Head Lease Transaction . . . . . . . . . . . . . . . 17
SECTION 4.3 Replacement Conditions . . . . . . . . . . . . . . . 17
SECTION 4.4 Accounting Changes . . . . . . . . . . . . . . . . . 18
SECTION 5
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of Deepwater. . . . . 18
SECTION 5.2 Representations and Warranties of Members. . . . . . 23
SECTION 5.3 Representations and Warranties of the Investment Trust25
SECTION 5.4 Representations and Warranties of Certificate
Purchasers . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.5 Representations and Warranties of the Trustees . . . 28
SECTION 6
CERTAIN COVENANTS AND AGREEMENTS
SECTION 6.1 Covenants of Deepwater . . . . . . . . . . . . . . . 29
SECTION 6.2 Certain Covenants of the Charter Trustee, the
Investment Trustee and the Investment Trust . . . . .34
SECTION 6.3 Covenants of the Certificate Purchasers. . . . . . . 36
SECTION 6.4 Covenants of the Members . . . . . . . . . . . . . . 37
SECTION 6.5 Hedging Agreements . . . . . . . . . . . . . . . . . 38
SECTION 6.6 [Intentionally Omitted]. . . . . . . . . . . . . . . 38
SECTION 6.7 Charter Extension Option . . . . . . . . . . . . . . 38
SECTION 6.8 Excessive Use Indemnity. . . . . . . . . . . . . . . 39
SECTION 6.9 Letter of Credit . . . . . . . . . . . . . . . . . . 39
SECTION 7
CERTAIN PROCEDURES
SECTION 7.1 Illegality.. . . . . . . . . . . . . . . . . . . . . 40
SECTION 7.2 Increased Costs and Reduction of Return. . . . . . . 40
SECTION 7.3 Funding Losses . . . . . . . . . . . . . . . . . . . 41
SECTION 7.4 Inability to Determine Rates . . . . . . . . . . . . 42
SECTION 7.5 Reserves on Base Rate Advances . . . . . . . . . . . 42
SECTION 7.6 Certificates of Certificate Purchasers . . . . . . . 42
SECTION 7.7 Substitution of Certificate Purchasers; Change in
Applicable Office; Prepayments. .. . . . . . . . . . 43
SECTION 7.8 Legal and Tax Representation . . . . . . . . . . . . 43
SECTION 7.9 Failure of a Certificate Purchaser to Fund . . . . . 44
SECTION 8
PAYMENT OF CERTAIN EXPENSES
SECTION 8.1 Transaction Expenses . . . . . . . . . . . . . . . . 45
SECTION 8.2 Transaction Expenses if Closing does not Occur . . . 45
SECTION 8.3 On-Going Expenses. . . . . . . . . . . . . . . . . . 46
SECTION 9
RESTRICTIONS ON TRANSFERS; CHANGE OF CONTROL
SECTION 9.1 Restrictions on the Certificate Purchasers . . . . . 46
SECTION 9.2 Restrictions on Trustees . . . . . . . . . . . . . . 48
SECTION 9.3 Expenses . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9.4 Change of Control. . . . . . . . . . . . . . . . . . 48
SECTION 10
INDEMNIFICATION
SECTION 10.1 General Indemnity. . . . . . . . . . . . . . . . . . 51
SECTION 10.2 General Indemnity Exclusions . . . . . . . . . . . . 52
SECTION 10.3 Proceedings in Respect of Claims . . . . . . . . . . 53
SECTION 10.4 General Tax Indemnity. . . . . . . . . . . . . . . . 54
SECTION 11
AGENT
SECTION 11.1 Appointment of Documentation Agent; No Duties. . . . 64
SECTION 11.2 Delegation of Duties . . . . . . . . . . . . . . . . 65
SECTION 11.3 Exculpatory Provisions . . . . . . . . . . . . . . . 65
SECTION 11.4 Reliance by Agent. . . . . . . . . . . . . . . . . . 65
SECTION 11.5 [Intentionally Omitted]. . . . . . . . . . . . . . . 65
SECTION 11.6 Non-Reliance on Agent and Other Certificate
Purchasers . . . . . . . . . . . . . . . . . . . . . 66
SECTION 11.7 Indemnification. . . . . . . . . . . . . . . . . . . 66
SECTION 11.8 Agent. . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 11.9 Successor Agent. . . . . . . . . . . . . . . . . . . 67
SECTION 12
MISCELLANEOUS
SECTION 12.1 Survival of Agreements . . . . . . . . . . . . . . . 68
SECTION 12.2 No Broker; etc . . . . . . . . . . . . . . . . . . . 68
SECTION 12.3 Notices. . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 12.4 Counterparts . . . . . . . . . . . . . . . . . . . . 71
SECTION 12.5 Amendments, Waivers and Consents . . . . . . . . . . 71
SECTION 12.6 Confidentiality. . . . . . . . . . . . . . . . . . . 73
SECTION 12.7 Headings; etc. . . . . . . . . . . . . . . . . . . . 73
SECTION 12.8 Parties in Interest. . . . . . . . . . . . . . . . . 73
SECTION 12.9 Governing Law. . . . . . . . . . . . . . . . . . . . 73
SECTION 12.10 Severability . . . . . . . . . . . . . . . . . . . . 74
SECTION 12.11 Further Assurances . . . . . . . . . . . . . . . . . 74
SECTION 12.12 Waiver of Jury Trial . . . . . . . . . . . . . . . . 74
SECTION 12.13 Limitations on Recourse. . . . . . . . . . . . . . . 74
SECTION 12.14 Applicable Laws. . . . . . . . . . . . . . . . . . . 76
SECTION 12.15 Right to Inspect . . . . . . . . . . . . . . . . . . 76
SECTION 12.16 Accounts, Distribution of Payments and Flow of Funds 76
SECTION 12.17 Attorneys-in-Fact. . . . . . . . . . . . . . . . . . 76
SECTION 12.18 Successor Trustees; Jurisdiction of Trust. . . . . . 76
SECTION 12.19 Third-Party Beneficiaries. . . . . . . . . . . . . . 77
SECTION 12.20 Consent to Jurisdiction. . . . . . . . . . . . . . . 77
SECTION 12.21 Deepwater Acknowledgment With Respect to Charter Trust
Agreement. . . . . . . . . . . . . . . . . . . . . . 77
SECTION 12.22 Appointment of Wilmington Trust FSB as
Attorney-in-Fact on behalf of the Beneficial
Owners; Powers of Attorney . . . . . . . . . . . . . 78
SECTION 12.23 Non-Defaulting Drilling Party's Right to Pursue
Contests . . . . . . . . . . . . . . . . . . . . . . 78
EXHIBITS
EXHIBIT A - Form of Funding Indemnity Letter
EXHIBIT B - Opinion of White & Case LLP, special counsel to
Deepwater
EXHIBIT C - [Intentionally Omitted]
EXHIBIT D - Opinion of Wayne K. Anderson, in-house counsel to
Conoco
EXHIBIT E - Opinion of Wayne K. Hillin, counsel to R&B Falcon
EXHIBIT F - Officer's and Manager's Certificate
EXHIBIT G - Officer's Certificate
EXHIBIT H-1 - Amended and Restated Drilling Contracts
EXHIBIT H-2 - Amended and Restated Drilling Contract Guaranties
EXHIBIT I - Drilling Consent
EXHIBIT J - [Intentionally Omitted]
EXHIBIT K - [Intentionally Omitted]
EXHIBIT L - [Intentionally Omitted]
EXHIBIT M - Bill of Sale
EXHIBIT N - Form of Advance Request
EXHIBIT O - Opinion of Haight, Gardner, Holland & Knight
EXHIBIT P - Opinion of Arias, Fabrega & Fabrega, Panamanian
Counsel
EXHIBIT Q - Form of Notice of Certificate Return Rate
EXHIBIT R - Certificate Purchaser Assignment and Assumption
Agreement
EXHIBIT S-1 - Form of Hedging Agreements
EXHIBIT S-2 - Form of Deepwater Hedging Agreements
EXHIBIT T - Form of Ship Mortgage
EXHIBIT U - Opinions of Cynthia L. Corliss, Vice President and
Trust Counsel of Wilmington Trust Company and
Richards, Layton & Finger
EXHIBIT V - Form of Subcharter
EXHIBIT W-1 - Special Power of Attorney for Executing the
Charter Trust Agreement and Ship Mortgage on
Behalf of Wilmington Trust FSB and the Beneficial
Owners
EXHIBIT W-2 - Special Power of Attorney for Executing the
Charter Trust Agreement and Ship Mortgage on
Behalf of Wilmington Trust Company
EXHIBIT X - Form of Letter of Credit
SCHEDULES
SCHEDULE 1 - List of Transaction Documents
SCHEDULE 2 - Facility Fee Rate
SCHEDULE 3 - List of UCC and Other Necessary Security Filings
SCHEDULE 4 - Information Relied Upon by Appraiser
SCHEDULE 5 - Certificate Purchaser Notice Addresses, Payment
Instructions and Responsible Officers
SCHEDULE 6 - [Intentionally Omitted]
SCHEDULE 7 - Terms of Subordination for Subordinated Debt
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT, dated as of August 31, 1999 (this
"Agreement" or "Participation Agreement"), is entered into by and among
DEEPWATER DRILLING II L.L.C., a Delaware limited liability company
("Deepwater"), WILMINGTON TRUST FSB, a Federal savings bank, not in its
individual capacity except as expressly provided herein, but solely as
trustee under the Investment Trust Agreement (the "Investment Trustee"),
DEEPWATER INVESTMENT TRUST 1999-A, a Delaware business trust (the
"Investment Trust"), WILMINGTON TRUST COMPANY, a Delaware banking
corporation, not in its individual capacity except as expressly provided
herein, but solely as trustee under the Charter Trust Agreement (the
"Charter Trustee"), BA LEASING & CAPITAL CORPORATION, a California
corporation, as documentation agent (the "Documentation Agent"), each of
the financial institutions listed on the signature pages hereto, or that
may hereafter become a party hereto, as a certificate purchaser (each, a
"Certificate Purchaser" and collectively, the "Certificate Purchasers")
(each of the foregoing parties, a "Participant"), solely with respect to
Sections 2.15, 6.9, 9.4(a) and 12.13(b), R&B FALCON CORPORATION and CONOCO
INC., and solely with respect to Sections 5.2 and 6.4, RBF DEEPWATER
EXPLORATION II INC., a Nevada corporation, and CONOCO DEVELOPMENT II INC., a
Delaware corporation (each, a "Member").
WITNESSETH
WHEREAS, the Charter Trustee contemplates acquiring title to the
Drillship from Deepwater or chartering the Drillship from the Head Lessor,
and Deepwater contemplates chartering or subchartering the Drillship from
the Charter Trustee;
WHEREAS, Deepwater supervised the construction of the Vessel pursuant to
the Construction Contract and the acquisition and installation of the OFE
(the Vessel and the OFE, collectively, the "rillship");
WHEREAS, Deepwater, the Charter Trustee and the Investment Trust wish to
arrange financing for the cost of the acquisition of OFE, the construction
of the Vessel and the transfer of the completed Drillship to the Charter
Trustee and delivery to Deepwater;
WHEREAS, Deepwater and the Drilling Parties are parties to certain
Drilling Contracts providing for drilling services utilizing the Drillship
from Deepwater, and payments to Deepwater by the Drilling Parties of the
Day Rate and other amounts referred to in the Drilling Contracts; and
WHEREAS, the Certificate Purchasers have agreed to make Advances to the
Charter Trustee and the Investment Trust, as applicable, in an aggregate
amount not to exceed the Maximum Certificate Purchaser Commitment to fund
the acquisition of the Drillship and certain other costs.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
SECTION 1
DEFINITIONS; INTERPRETATION
Unless the context otherwise requires, capitalized terms used and not
otherwise defined in this Agreement have the meanings given to them in
Appendix 1 of this Agreement and, for all purposes of this Agreement, the
rules of interpretation set forth in such Appendix 1 apply.
SECTION 2
COMMITMENTS OF THE PARTIES
Subject to the terms and conditions of this Agreement (including
Sections 3 and 4) and the other Transaction Documents, each of the parties
hereto agrees to participate in the transactions contemplated by this
Agreement and the other Transaction Documents and, among other things, to
take each of the actions to be taken by it on the Closing Date and
thereafter, as more fully described in this Section 2.
SECTION 2.1 Certain Closing Date Events. On the Closing Date,
subject to the terms and conditions of this Agreement and the other
Transaction Documents:
(a) the Certificate Purchasers shall make Advances to the Charter
Trustee pursuant to Section 2.3 in an aggregate amount equal to the Series
A Portion of the Maximum Certificate Purchaser Commitment;
(b) each Certificate Purchaser shall purchase, and the Charter Trustee
shall issue to each Certificate Purchaser, (i) one Conoco Series A Trust
Certificate (which together with all other Conoco Series A Trust
Certificates shall have, in the aggregate, a principal amount equal to 40%
of the Series A Portion of the Maximum Certificate Purchaser Commitment)
and (ii) one R&B Falcon Series A Trust Certificate (which together with all
other R&B Falcon Series A Trust Certificates shall have, in the aggregate,
a principal amount equal to 60% of the Series A Portion of the Maximum
Certificate Purchaser Commitment);
(c) the Certificate Purchasers shall make Advances to the Investment
Trust pursuant to Section 2.3 in an aggregate amount equal to the
Investment Portion of the Maximum Certificate Purchaser Commitment;
(d) each Certificate Purchaser shall purchase, and the Investment
Trustee shall issue to each Certificate Purchaser, (i) one Conoco
Investment Trust Certificate (which together with all other Conoco
Investment Trust Certificates shall have, in the aggregate, a principal
amount equal to 40% of the Investment Portion of the Maximum Certificate
Purchaser Commitment) and (ii) one R&B Falcon Investment Trust Certificate
(which together with all other R&B Falcon Investment Trust Certificates
shall have, in the aggregate, a principal amount equal to 60% of the
Investment Portion of the Maximum Certificate Purchaser Commitment);
(e) the Investment Trust shall make advances to the Charter Trustee
pursuant to Section 2.3 in an aggregate amount equal to the Investment
Portion of the Maximum Certificate Purchaser Commitment;
(f) the Investment Trust shall purchase, and the Charter Trustee shall
issue, the Series B Trust Certificates in the aggregate principal amount
of the Investment Portion of the Maximum Certificate Purchaser Commitment;
(g) the Charter Trustee shall advance to Deepwater (as directed by
Deepwater) the amounts received from the Certificate Purchasers in
accordance with Sections 2.3 and 2.6;
(h) the Transaction Expenses and the Facility Fees shall be paid to the
Persons entitled to receive such payments on the Closing Date pursuant to
Section 8.1 by the Person responsible therefor;
(i) Intentionally Omitted;
(j) Deepwater and the Charter Trustee shall enter into the Master
Charter and each Charter Supplement, pursuant to which Deepwater shall
charter the Drillship from the Charter Trustee effective as of the Delivery
Date; and
(k) the parties shall enter into the other Transaction Documents
indicated on Schedule 1 hereto as being entered into as of the Closing
Date.
SECTION 2.2 Certain Delivery Date Events. On the Delivery Date,
subject to the terms and conditions of this Agreement (including Section
4.1) and the other Transaction Documents:
(a) Intentionally Omitted;
(b) if the Head Lease Transaction is being entered into in accordance
with Section 4.2, Deepwater shall transfer and convey, or cause to be
transferred and conveyed, to the Head Lessor all of its right, title and
interest in and to the Drillship and, immediately upon such transfer and
conveyance, the Charter Trustee shall enter into the Head Lease with the
Head Lessor;
(c) if the Head Lease Transaction is not being entered into, Deepwater
shall transfer all of its right, title and interest in and to the Drillship
and the Construction Contract to the Charter Trustee;
(d) Deepwater, on behalf of the Head Lessor or the Charter Trustee, as
applicable, shall cause the Drillship and the Ship Mortgage to be duly
provisionally registered under the laws of the Republic of Panama;
(e) the Charter Term shall commence; and
(f) the parties shall enter into the other Transaction Documents
indicated on Schedule 1 hereto as being entered into as of the Delivery
Date.
SECTION 2.3 Advances by Certificate Purchasers and Investment Trust.
Subject to the terms and conditions of this Agreement (including Sections
2.5, 3 and 4), the Depository Agreement and the Trust Agreements, and in
reliance on the representations and warranties of the other parties
contained herein or made pursuant hereto, upon receipt of an Advance
Request, on the Advance Date specified in such Advance Request, each
Certificate Purchaser shall advance (each an Advance ) to the Charter
Trustee and to the Investment Trust, as applicable, in immediately
available funds the Series A Portion and the Investment Portion,
respectively, of its Commitment Percentage of an amount equal to the
Maximum Drillship Cost, as set forth in a written request from Deepwater
to the Charter Trustee and the Investment Trust delivered at least three
Business Days prior to the Closing Date (the Advance Request ). Further,
the Investment Trust shall thereafter forward all such moneys received by
it from the Certificate Purchasers pursuant to the previous sentence to the
Charter Trustee as provided in Section 2.6.
SECTION 2.4 Certificates and Payments; Certificate Margin.
(a) Payments to Certificate Purchasers. An Advance made available by
a Certificate Purchaser pursuant to Section 2.3 shall be evidenced by the
Certificates issued by the Investment Trust and the Charter Trustee,
respectively, on the Advance Date to such Certificate Purchaser. Each
Certificate Purchaser shall be entitled to receive on the last day of any
Return Period as of which there is a Certificate Purchaser Balance greater
than zero (as measured before giving effect to any amounts paid in
reduction of the Certificate Purchaser Balance on the last day of such
Return Period), a return on its Certificate Purchaser Amount at the
Certificate Return Rate. Any payment required to be made to the
Certificate Purchasers by the Charter Trustee or the Investment Trust
pursuant to any Transaction Document shall be made in accordance with the
Depository Agreement and Article IV of the Investment Trust Agreement and
Article IV of the Charter Trust Agreement, as applicable.
(b) Payments to Investment Trust. Each advance made available by the
Investment Trust to the Charter Trustee pursuant to Section 2.6 shall be
evidenced by the Series B Trust Certificate issued by the Charter Trustee
on the Closing Date to the Investment Trust. The Investment Trust shall
be entitled to receive on the last day of any Return Period as of which
there is an Investment Balance greater than zero (as measured before giving
effect to any amounts paid in reduction of the Certificate Purchaser
Balance on the last day of such Return Period), a return on its Investment
Trust Amount at the Certificate Return Rate. Any payment required to be
made to the Investment Trust by the Charter Trustee pursuant to any
Transaction Document shall be made in accordance with the Depository
Agreement and Article IV of the Charter Trust Agreement.
(c) Certificate Margin. The certificate margin ("Certificate Margin")
shall be 150.0 basis points per annum adjusted as follows:
(i) prior to the Initial Certificate Margin Adjustment Date,
plus zero (0) basis points per annum; or
(ii) as of the most recent Adjustment Date on or preceding the
date of determination, for the Return Period which begins
on such Adjustment Date and for each subsequent Return
Period until the next succeeding Adjustment Date occurs:
(1) if the R&B Usage Ratio is less than 0.5, the product of
the Inverse R&B Usage Ratio and five (5.0) basis points
per annum (which product shall be a negative number)
applied in reduction of the 150 basis points in clause
(A) above;
(2) if the R&B Usage Ratio is equal to 0.5, plus zero (0)
basis points per annum; or
(3) if the R&B Usage Ratio is greater than 0.5, plus the
product of the R&B Usage Ratio and 12.5 basis points per
annum.
(d) Counterpart Certificates. Series A Trust Certificates shall only
be issued by the Charter Trustee in pairs consisting of one R&B Falcon
Series A Trust Certificate and one Conoco Series A Trust Certificate (each,
in relation to the other, a Counterpart Series A Trust Certificate ).
Investment Trust Certificates shall only be issued by the Investment Trust
in pairs consisting of one R&B Falcon Investment Trust Certificate and one
Conoco Investment Trust Certificate (each, in relation to the other, a
"Counterpart Investment Trust Certificate"). Each Series A Trust
Certificate and Investment Trust Certificate shall bear an indication of
the number assigned to its Counterpart Series A Trust Certificate and
Counterpart Investment Trust Certificate, respectively.
SECTION 2.5 Limitations on Advances.
(a) Limitation on Disbursements and Capitalizations. The aggregate
amount of Advances made by the Certificate Purchasers hereunder, shall not
exceed the Maximum Certificate Purchaser Commitment, and the aggregate
amount of Advances made by any Certificate Purchaser hereunder, shall not
exceed such Certificate Purchaser's Commitment.
(b) One Advance. During the Charter Term, Deepwater shall be entitled
to one and only one Advance, which shall occur on the Advance Date or as
otherwise permitted pursuant to Section 2.8.
(c) Obligations Several. The obligations of the Certificate
Purchasers, the Agent, the Depository and the Trustees under this Agreement
and the other Transaction Documents shall be several and not joint
obligations, and no Participant shall be liable or responsible for the acts
or defaults of any other Participant under any Transaction Document.
SECTION 2.6 Fundings; Application of Proceeds.
(a) Advance. On the Advance Date, upon (i) receipt by the Charter
Trustee and the Investment Trust of the Advances by the Certificate
Purchasers pursuant to Section 2.3 and (ii) the satisfaction or waiver of
each of the applicable conditions set forth in Sections 3.2 and 4.1,
(x) the Investment Trust shall advance in immediately available funds to
the Charter Trustee on the Advance Date the amount of the Advances received
by it from the Certificate Purchasers with respect to the Advance Date and
(y) the Charter Trustee shall advance to Deepwater (or as directed by
Deepwater) that portion of the Maximum Drillship Cost equal to the
aggregate of (1) the amounts in clauses (i), (ii) and (v) of the definition
of Construction Costs; (2) all costs of mobilizing the Drillship to the
port designated pursuant to the Drilling Contracts and the Rig Sharing
Agreement; and (3) all other costs, expenses, and fees incurred by, or on
behalf of, Deepwater in connection with the Drillship or the transactions
contemplated by the Transaction Documents. The balance of the Maximum
Drillship Cost not advanced to Deepwater pursuant to the foregoing sentence
shall be deposited by the Charter Trustee to the Deferred Construction
Costs Reserve Account.
(b) [Intentionally Omitted]
(c) [Intentionally Omitted]
(d) [Intentionally Omitted]
SECTION 2.7 [Intentionally Omitted]
SECTION 2.8 Postponement of Advance. If the Certificate Purchasers
have made Advances requested on the Closing Date or any Postponed Advance
Date and the conditions precedent to such Advance have not been satisfied
or waived on such date (as such, a "Postponed Advance"), Deepwater shall
pay to the Charter Trustee and the Investment Trust, for the benefit of
each Certificate Purchaser which has made a Postponed Advance, yield (the
"Postponement Yield") on the Advance funded by such Certificate Purchaser
at a rate equal to the Certificate Return Rate. Neither the Investment
Trust nor the Charter Trustee shall be required to invest such funds in
interest-bearing accounts, but the Charter Trustee shall, upon the
direction of Deepwater (or, if an Event of Default exists, the Required
Certificate Purchasers), invest such funds in Permitted Investments to the
extent it is able to do so. Amounts held by the Charter Trustee and the
Investment Trust may be pooled for this purpose. The Postponement Yield
shall be due and payable by Deepwater upon the occurrence of the postponed
Advance Date and such payment shall be an additional condition precedent
to such Advance Date. On such postponed Advance Date, the Charter Trustee
is hereby directed to liquidate any Permitted Investments then held
pursuant to this Section 2.8, to distribute the Postponed Advances in
accordance with Section 2.6 and to distribute any proceeds of Permitted
Investments held pursuant to this Section 2.8 in excess of the amount of
the Postponed Advances to each Certificate Purchaser pro rata (based on the
relation that such Certificate Purchaser's Postponed Advance bears to the
aggregate of all such Postponed Advances) for application to Deepwater's
obligation to pay Postponement Yield. Any accrued Postponement Yield
thereafter remaining unpaid shall be deemed to be Certificate Return and
shall be capitalized and the amount thereof shall be added to the
Certificate Purchaser Amount of each Certificate Purchaser entitled
thereto. No additional Advance Request shall be required if an Advance
Date is postponed and thereafter timely consummated. If the Advance Date
has not occurred by the third Business Day following the date specified in
the Advance Request in respect thereof, then all Postponement Yield shall
be due and payable on such third Business Day (and shall not be capitalized
pursuant to this Section), the Charter Trustee is hereby directed to
liquidate any Permitted Investments then held pursuant to this Section 2.8
and to pay to each Certificate Purchaser on such third Business Day (i) the
Postponed Advance funded by such Certificate Purchaser and (ii) the
proceeds of any Permitted Investments held pursuant to this Section 2.8 in
excess of the amount of the Postponed Advances refunded to such Certificate
Purchaser pro rata based on the relation that such Certificate Purchaser's
Postponed Advance bears to the aggregate of all such Postponed Advances to
be applied to Deepwater's obligation to pay Postponement Yield.
If the Advance Date has not occurred by the third Business Day following
the date specified in the Advance Request in respect thereof, upon
satisfaction or waiver of the conditions to the Advance Date, and upon
payment in full of all Postponement Yield due and payable to the
Certificate Purchasers, Deepwater shall have the right upon delivery of a
new Advance Request to the Certificate Purchasers and Trustee to set a new
date for the advances (the Postponed Advance Date ) which shall for all
purposes be deemed the Advance Date under the Transaction Documents.
Notwithstanding the foregoing, in no event shall Deepwater have the right
to set any Postponed Advance Date to be a date later than ten Business Days
after the Closing Date.
SECTION 2.9 Records. Upon the making of its Advance, each
Certificate Purchaser shall make a notation in its records indicating the
amount of such Advance and the Certificate Purchaser Amount of such
Certificate Purchaser as of such Advance Date. Each Certificate Purchaser
is hereby authorized to record the date and amount of its Advance made by
such Certificate Purchaser, each continuation thereof, the date and amount
of each payment or capitalization of Certificate Return with respect
thereto, the date and amount of each payment or repayment of Certificate
Purchaser Amount of such Certificate Purchaser and the length of each
Return Period with respect thereto, in its records, and any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded. The failure to make any recordation described in
this Section 2.9 or any error in such recordation shall not affect the
obligation of the Charter Trustee or the Investment Trust with respect of
such Certificates, or the obligation of Deepwater to pay Charter Hire in
accordance with the Transaction Documents.
SECTION 2.10 [Intentionally Omitted]
SECTION 2.11 Timing of Fundings to Investment Trustee and Payments to
Certificate Purchasers. The Advance Date specified in the Advance Request
shall be not less than three (3) Business Days after the date of delivery
of such Advance Request to the Charter Trustee. Any Advance Request
delivered by Deepwater to the Charter Trustee later than 4:00 p.m., New
York time, on any day shall be deemed to have been delivered on the next
Business Day. Subject to timely delivery of the Advance Request (together
with a funding indemnity letter from each of Conoco and R&B Falcon in the
form attached hereto as Exhibit A) and the other terms and conditions of
the Transaction Documents, each Certificate Purchaser shall make its
Commitment Percentage of the requested aggregate Advances available to the
Charter Trustee and the Investment Trust in an account at the Charter
Trustee's corporate trust department designated by the Charter Trustee by
12:00 noon, New York time, on the requested Advance Date, and the Charter
Trustee and the Investment Trust will transfer any such amounts so received
into the Trustee's Account, not later than 3:00 p.m., New York time, on
such Advance Date in accordance with Section 2.6.
Charter Hire shall be paid by or on behalf of Deepwater in immediately
available funds in accordance with the Depository Agreement and the
Charter. All such payments shall be paid by the Depository to the
Trustees, the Investment Trust or the Certificate Purchasers, as
applicable, not later than 2:00 p.m., New York time, on the date due.
Funds received after such time shall for all purposes of the Transaction
Documents be deemed to have been received on the next succeeding Business
Day.
SECTION 2.12 Computations.
(a) Determination of Certificate Return Rate and Fees. All
computations of accrued amounts pursuant to the Transaction Documents shall
be made on the basis of the actual number of days elapsed in a 360-day
year; provided, that Certificate Return on any Advance that is an Alternate
Rate Advance shall be calculated on the basis of the actual number of days
elapsed in a 365-day or 366-day year, as applicable. The Charter Trustee
shall, as soon as practicable, but in no event later than 11:00 a.m., New
York time, on the date two (2) Business Days before the effectiveness of
each Certificate Return Rate, cause to be determined such Certificate
Return Rate and notify each Certificate Purchaser and Deepwater thereof by
delivery of a notice of Certificate Return Rate in substantially the form
of Exhibit Q hereto; provided, however, that the Documentation Agent shall
have the right to determine the Certificate Return Rate and to deliver
notice of such Certificate Return Rate instead of Charter Trustee in
connection with the Return Period beginning on the Advance Date.
(b) Disbursement Information. The Charter Trustee shall deliver the
Disbursement Information to Deepwater and the Depository in accordance with
Section 4.3 of the Depository Agreement.
(c) Conclusive Determinations. All information provided by the Charter
Trustee pursuant to this Section 2.12 for the purposes of any Transaction
Document shall be conclusive and binding on the Charter Trustee, the
Investment Trust, Deepwater and the Certificate Purchasers in the absence
of manifest error.
SECTION 2.13 Conditions to each Advance. The obligation of each
Certificate Purchaser to make its Advance in accordance with this Section
2 and the obligations of the Charter Trustee and the Investment Trust to
disburse the proceeds of the Advances in connection with any Advance
Request and in accordance with this Section 2 shall be subject to
satisfaction or waiver of the following conditions precedent:
(a) no Material Default or Event of Default shall have occurred and be
continuing; and
(b) the representations and warranties of Deepwater set forth in
Section 5.1 shall be true and correct in all material respects on the date
of such Advance as though made on and as of such date, except to the extent
such representations or warranties relate solely to an earlier date, in
which case such representations and warranties shall have been true and
correct in all material respects on and as of such earlier date.
SECTION 2.14 Fees.
(a) Facility Fee. On the Closing Date, Deepwater shall pay to each
Certificate Purchaser a nonrefundable upfront fee (the "Facility Fee")
equal to such Certificate Purchaser's Commitment multiplied by the Facility
Fee rate applicable to such Certificate Purchaser as set forth in Schedule
2.
(b) [Intentionally Omitted]
SECTION 2.15 Payments Under the Ship Mortgage; Limitation on
Foreclosure.
Notwithstanding anything to the contrary in any Transaction Document,
all proceeds from any foreclosure under the Ship Mortgage shall not reduce
the maximum amount owed under the Conoco Guaranty and the R&B Falcon
Guaranty unless such maximum amount payable thereunder is greater than the
Certificate Purchaser Balance (excluding any Purchasing Party Amounts) at
the time such proceeds are distributed to the Certificate Purchasers, in
which case such a reduction shall be permitted only to the extent of such
excess; provided, however, that in no event shall the Charter Trustee, the
Investment Trust or the Certificate Purchasers seek to foreclose upon the
Drillship pursuant to the terms of the Ship Mortgage unless the Charter
Trustee shall first make a demand against Deepwater (and under the R&B
Falcon Guaranty and Conoco Guaranty to the extent the obligations owed by
Deepwater are guaranteed thereunder) for any amounts then due and owing
under the Transaction Documents; and provided, further, that in no event
shall the Charter Trustee, the Investment Trust or the Certificate
Purchasers seek to foreclose upon the Drillship pursuant to the terms of
the Ship Mortgage following the receipt in full by such Persons of the
Purchase Option Price (whether paid pursuant to the exercise of the Special
Purchase Right under Section 16.4 of the Master Charter or otherwise).
SECTION 3
EFFECTIVE DATE; CLOSING DATE; CONDITIONS PRECEDENT
SECTION 3.1 Closing Date.
(a) [Intentionally Omitted]
(b) All documents and instruments required to be delivered on the
Closing Date shall be delivered at the offices of Mayer, Brown & Platt,
1675 Broadway, New York, New York 10019, or at such other location as may
be determined by the Documentation Agent and Deepwater.
SECTION 3.2 Conditions Precedent to Closing Date. The
obligations of the parties hereto to enter into the transactions
contemplated by this Agreement and the other Transaction Documents and to
take the actions to be taken by each such party which are contemplated by
Section 2.1 to occur on the Closing Date shall be subject to satisfaction
or waiver as of the Closing Date of the following conditions precedent
(provided, that the obligations of any party shall not be subject to any
conditions contained in this Section 3.2 which are required to be performed
or caused to be performed by such party or any of its respective
Affiliates):
(a) Each Certificate Purchaser shall have funded the Advance to be made
by it on the Closing Date in accordance with Section 2.3.
(b) Each Certificate Purchaser shall have received its respective
Certificates in accordance with Section 2.4.
(c) Deepwater shall have given the Agent not less than three (3)
Business Days prior written notice of the Closing Date, which notice may
be included in the Advance Request delivered in accordance with Section 2.3
and each Certificate Purchaser shall have received a funding indemnity
letter from R&B Falcon and Conoco in the form of Exhibit A hereto not less
than three (3) Business Days prior to the Closing Date.
(d) All parties thereto shall have executed and delivered each of the
Transaction Documents to be entered into on the Closing Date, as indicated
on Schedule 1 hereto.
(e) Deepwater shall have delivered to the Charter Trustee (with copies
for each Certificate Purchaser) copies of the Services Agreements, the
Construction Contract, the Drilling Contracts, and the Drilling Contract
Guaranties, copies of all purchase orders and other documents relating to
the purchase of the OFE, together with any amendments thereto, in each case
certified by an authorized representative of Deepwater to be true, complete
and correct copies thereof as of the Closing Date and each of the Services
Agreements, the Construction Contract, the Drilling Contracts and the
Drilling Contract Guaranties shall be in full force and effect and no
default or material breach shall exist thereunder.
(f) The Documentation Agent and each Certificate Purchaser shall have
received the Appraisal in form and substance satisfactory to the
Documentation Agent and Deepwater shall have received a copy thereof.
(g) All Taxes, fees and other charges due in connection with the
execution, delivery, performance, recording, filing and registration of the
Transaction Documents on the Closing Date shall have been paid.
(h) (i) White & Case LLP, special counsel to Deepwater, shall have
issued its opinion to the effect and in the form set forth in Exhibit B;
(ii) Wayne K. Anderson, in-house counsel to Conoco, shall have delivered
his opinion to the effect and in the form set forth in Exhibit D;
(iii) Wayne K. Hillin, counsel to R&B Falcon, shall have delivered his
opinion to the effect and in the form set forth in Exhibit E; (iv) Arias,
Fabrega & Fabrega, Panamanian counsel, shall have delivered its opinion to
the effect and in the form set forth in Exhibit P; and (v) Cynthia L.
Corliss, Vice President and Trust Counsel of Wilmington Trust Company, and
Richards, Layton & Finger, counsel to the Charter Trustee and Investment
Trust, shall have delivered their opinions to the effect and in the form
set forth in Exhibit U.
(i) All actions required to have been taken by any Government Authority
on or prior to the Closing Date in connection with the transactions
contemplated by this Participation Agreement and the other Transaction
Documents shall have been taken and all Government Actions required to be
in effect on or prior to the Closing Date in connection with the
transactions contemplated by this Participation Agreement and the other
Transaction Documents shall have been issued or made, and all such
Government Actions shall be in full force and effect on the Closing Date.
All necessary consents, approvals and authorizations of all non-Government
Authorities required on the part of Deepwater, the Investment Trust, the
Trustees or third parties to be obtained, given or made on or prior to the
Closing Date in connection with the execution and delivery of the
Transaction Documents and transactions contemplated hereby and thereby
shall have been obtained, given or made and shall be in full force and
effect.
(j) No action shall have been instituted, nor shall any action or
proceeding be threatened, before any Government Authority, nor shall any
order, judgment or decree have been issued or proposed to be issued by any
Government Authority (i) to set aside, restrain, enjoin or prevent the
performance of this Participation Agreement, any other Transaction Document
or any transaction contemplated hereby or thereby or (ii) which would have
a Material Adverse Effect.
(k) The transactions contemplated by the Transaction Documents do not
and will not (i) violate any Applicable Law, (ii) contravene any charter,
by-laws or other organizational document of Deepwater, the Members, Conoco,
R&B Falcon, the Investment Trust, the Trustees, the Agent or any
Certificate Purchaser, (iii) contravene any contract, agreement or other
arrangement to which Deepwater, the Investment Trust, the Trustees, the
Agent or any Certificate Purchaser is a party or by which any of their
respective properties or assets are bound, or (iv) subject Deepwater, any
Member, the Investment Trust, the Trustees, the Agent or any Certificate
Purchaser to any regulations to which such party had not been subject prior
to entering into such Transaction Documents and which would be materially
adverse to such party.
(l) Deepwater, each Member, Conoco and R&B Falcon shall have each
delivered, or shall have caused to be delivered, to the Agent, and the
Trustees the following, in each case in form and substance satisfactory to
the Documentation Agent (with copies for each Certificate Purchaser):
(i) Organizational Documents. Copies of its articles of
incorporation or other organizational documents, certified to be true
and complete as of a recent date by the appropriate Government Authority
of the state, province or country of its incorporation or formation.
(ii) Resolutions. Copies of resolutions of its Members or Board of
Directors, as applicable, that, specifically or generally (as part of a
general enabling resolution), approve and adopt the Transaction
Documents and the transactions contemplated therein, and that,
specifically or generally (as part of a general enabling resolution),
authorize execution and delivery thereof, certified by an appropriate
officer or representative as of the Closing Date to be true and correct
and in full force and effect as of such date.
(iii) Bylaws. A copy of its operating agreement or bylaws
certified by an appropriate officer or representative as of the Closing
Date to be true and correct and in full force and effect as of such
date.
(iv) Good Standing. Copies of certificates of good standing,
existence or its equivalent, certified as of a recent date by the
appropriate government authorities of the state, province or country of
its incorporation or formation.
(v) Officer's or Manager's Certificate. An officer's certificate
or manager's certificate, dated the Closing Date, substantially in the
form of Exhibit F.
(m) Each of the Trustees shall have delivered, or shall have caused to
be delivered, to Deepwater, the Members, and each Certificate Purchaser the
following:
(i) Organizational Documents. Copies of its articles of
association or other organizational documents and a copy of the Charter
Trustee's and Investment Trust's certificate of trust (or, if
certificates of trust are not issued in the Charter Trustee's or
Investment Trust's jurisdiction of organization, other similar
organizational documents), together with all amendments in each case
certified to be true and complete as of a recent date by the appropriate
Government Authority.
(ii) Resolutions. Copies of resolutions of its board of directors,
approving and adopting the Transaction Documents and the transactions
contemplated therein, and authorizing execution and delivery thereof,
certified by an appropriate officer as of the Closing Date to be true
and correct and in full force and effect as of such date.
(iii) Good Standing. Copies of certificates of good standing
(or, if certificates of good standing are not issued in the Trustees' or
Investment Trust's jurisdiction of organization, some other similar
certificate), existence or its equivalent with respect to the Trustees
and the Investment Trust, in each case certified as of a recent date by
the appropriate Government Authorities.
(iv) Officer's Certificate. An officer's certificate, dated the
Closing Date, substantially in the form of Exhibit G.
(n) Closing Date. The Closing Date shall occur on or prior to August
31, 1999.
(o) No Material Adverse Change. As of the Closing Date, there shall
not have occurred any material adverse change in the consolidated assets,
liabilities, operations, business or financial condition of: (i) Deepwater
from that set forth in its financial statements for the fiscal year ended
December 31, 1998, (ii) R&B Falcon from that set forth in its financial
statements for the fiscal year ended December 31, 1998 or (iii) Conoco from
that set forth in its financial statements for the fiscal year ended
December 31, 1998.
(p) Transaction Expenses. All Transaction Expenses then due and owing
for which Deepwater has received an invoice at least two (2) Business Days
prior to the Closing Date and which will not be paid from the proceeds of
the Advance shall have been paid by Deepwater.
(q) Tax and Accounting. Deepwater shall have received (x) a
satisfactory tax opinion of White & Case LLP and (y) confirmation from its
auditors of the accounting treatment for the transactions contemplated
hereby satisfactory in all respects to Deepwater.
(r) Representations. The representations and warranties of each party
set forth in Section 5 and in any other Transaction Document entered into
on or prior to the Closing Date shall be true and correct as of the Closing
Date.
(s) Filings. All UCC and other applicable filings listed on Schedule
3 shall have been duly made at the locations set forth beside the filing
on such schedule. All other filings or recordings of any document in any
jurisdiction which are required to establish the perfected security
interests of the Charter Trustee and the Investment Trust in the Accounts
shall have been made.
(t) No Defaults under Transaction Documents. All Transaction Documents
shall be in full force and effect as to all of the parties thereto and no
Default, Event of Default or Event of Loss shall exist under any such
Transaction Document.
(u) Insurance Report. The Charter Trustee, the Investment Trust and
each Certificate Purchaser shall have received a satisfactory report from
J&H Marsh & McLennan with respect to the insurance to be carried by
Deepwater pursuant to Article XIV of the Master Charter.
(v) Drilling Contracts. The Drilling Parties and Deepwater shall have
entered into the Drilling Contracts in a form substantially similar to the
form attached hereto as Exhibit H and the Drilling Parties shall have
delivered the Drilling Consent in a form substantially similar to the form
attached hereto as Exhibit I.
(w) Securities Act Representation. Bank of America shall have delivered
to the Charter Trustee (with copies for each Certificate Purchaser), the
Investment Trust and Deepwater a certificate, in form substantially similar
to the form attached hereto as Exhibit J.
(x) Letter of Credit Established. R&B Falcon shall have obtained a
Letter of Credit complying with the terms of Section 6.9.
SECTION 4
DELIVERY DATE; CONDITIONS PRECEDENT
SECTION 4.1 Conditions Precedent to Delivery Date. The obligations
of the parties hereto to enter into the transactions to be entered into and
take the actions to be taken by each such party which are contemplated by
Section 2.2 to occur on the Delivery Date, taking into account Section 4.2,
shall be subject to satisfaction or waiver on the Delivery Date of the
following conditions precedent; provided, that the obligations of any party
shall not be subject to any condition contained in this Section 4.1 which
is required to be performed or caused to be performed by such party or any
of its respective Affiliates:
(a) The following events shall have occurred with respect to the
delivery and documentation of the Drillship:
(i) The Drillship (including the OFE) shall have been delivered by
Charter Trustee or Head Lessor, as applicable, to Deepwater and
Deepwater shall have accepted the same, and a Protocol of Delivery and
Acceptance substantially in the form set forth in Exhibit A to the
Master Charter (the "Protocol of Delivery and Acceptance") shall have
been executed by Deepwater and the Head Lessor or Charter Trustee, as
applicable, and each shall have been delivered to the Head Lessor or the
Charter Trustee, as the case may be.
(ii) Copies of the Bill of Sale substantially in the form set forth
in Exhibit M, respectively, a copy of the interim class certificate
(showing that the Drillship shall have been recommended for
classification with the Classification Society with the highest
classification and rating for vessels of the same age and type), and all
other documents required to be delivered by Builder under the
Construction Contract shall be delivered to Charter Trustee by Deepwater
(with copies to the Head Lessor (if applicable) and the Agent).
(iii) The Drillship shall have been duly provisionally
registered in the name of the Head Lessor or the Charter Trustee, as the
case may be, under Panamanian law free and clear of all Liens of record
and a provisional patente (the "Provisional Patente") shall have been
issued.
(iv) The Ship Mortgage shall have been duly provisionally recorded
under Panamanian Law.
(v) The Charter Trustee shall have received a Certificate of
Ownership and Encumbrance from the Panamanian registry, showing the Head
Lessor or the Charter Trustee, as the case may be, to be the owner of
the Drillship, free and clear of all recorded Liens, other than the Ship
Mortgage.
(vi) The Charter Trustee, the Investment Trust and the Certificate
Purchasers shall have received an opinion of Panamanian counsel in
substantially the form of Exhibit P.
(vii) Title to the Drillship shall have been transferred from
Deepwater to the Head Lessor or the Charter Trustee, as the case may be.
(b) [Intentionally Omitted]
(c) The parties shall have received opinions of counsel with respect to
the transactions to be consummated on the Delivery Date substantially in
the forms as set forth in Exhibits O, P and U and letters from the
appropriate Persons affirming the validity of the opinions of counsel
substantially in the forms of Exhibits B, D and E hereto as if the opinions
expressed therein were delivered as of the Delivery Date; provided,
however, that, to the extent that any of the opinions listed in Section
3.2(h) were delivered on the Closing Date, these same opinions shall be
deemed to have satisfied any requirement to deliver such opinions under
this paragraph (c).
(d) All Transaction Documents shall have been executed and delivered by
each of the parties thereto.
(e) All Transaction Expenses (including registration and recordation
fees under Panamanian Law) then due and owing shall have been paid on or
prior to the Delivery Date.
(f) The Charter Trustee and the Documentation Agent shall have received
(i) a report from J&H Marsh & McLennan confirming that the insurance then
in effect satisfies the insurance requirements set forth in Article XIV of
the Master Charter, such report being satisfactory in form and substance
to the Documentation Agent and (ii) certificates of insurance from
Deepwater's insurance broker(s) evidencing that all insurance required
under Article XIV of the Master Charter is in effect and that all premiums
have been paid; provided, however, that nothing in the Transaction
Documents shall be deemed to prohibit the acceptance by the Charter Trustee
and Documentation Agent of a single report satisfying both the condition
set forth in this paragraph (f) and the condition set forth in Section
3.2(u) hereof.
(g) Each of the Charter Trustee, the Investment Trust and the
Certificate Purchasers shall have received an Officer's Certificate of
Deepwater stating that the representations and warranties of Deepwater
listed in Section 5.1 or in any other Transaction Document are true and
correct as of the Delivery Date (except to the extent that such
representations and warranties relate solely to an earlier or to a later
date, in which event such representations and warranties shall be true on
and as of such earlier or later date); provided, however, that if the
Delivery Date occurs within seven (7) days of the Closing Date, the
delivery by Deepwater of the certificate listed in Section 3.2(l)(v) shall
be deemed to have satisfied its requirement under this paragraph (g);.
(h) [Intentionally Omitted]
(i) All necessary approvals, orders, permits, authorizations, and
consents which are required as of the Delivery Date on the part of
Deepwater, the Certificate Purchasers, the Agent, the Investment Trust, the
Trustees or other third parties (except to the extent that such approvals,
orders, permits, authorizations and consents are required as a result of
such Person's status as a trust company or a regulated depository or
banking institution) in connection with any of the transactions
contemplated by this Agreement or in connection with the ownership, use or
operation of the Drillship as of the Delivery Date shall have been duly
obtained, and Deepwater shall have provided evidence thereof reasonably
satisfactory to the Documentation Agent.
(j) All actions, if any, required to have been taken by any Government
Authority as of the Delivery Date in connection with the transactions
contemplated by this Agreement shall have been taken and all Government
Actions required to be in effect as of the Delivery Date in connection with
the transactions contemplated by this Agreement shall have been issued and
all such Government Actions shall be in full force and effect.
(k) [Intentionally Omitted]
(l) The Charter Trustee and the Certificate Purchasers shall have
received a report from the Independent Marine Surveyor stating that the
Drillship meets the Minimum Specifications.
SECTION 4.2 Head Lease Transaction. Deepwater shall, with the
consent of the Certificate Purchasers, be permitted to enter into, and to
require the Charter Trustee to enter into, the following transactions
(collectively, the "Head Lease Transaction") on or after the Delivery Date:
(i) title to the Drillship shall be transferred to the Head Lessor; (ii)
the Head Lessor shall charter (directly or through a sub-charter) the
Drillship to the Charter Trustee; (iii) the Head Lessor shall finance its
acquisition of title to the Drillship, in part, through a loan (the "Head
Lease Loan"); (iv) the Head Lessor and the Charter Trustee shall enter into
arrangements whereby the Charter Trustee's payment obligations under the
Head Lease are defeased (the "Head Lease Defeasance Arrangements"); (v) the
economic benefit of entering into the Head Lease Transaction shall be paid
over to, or otherwise accrue to the benefit of, Deepwater; and (vi) if the
Head Lease Transaction is entered into on or after the Delivery Date or any
Certificate Purchaser reasonably deems it necessary for the protection of
its rights in the Drillship, the Head Lessor shall enter into the Ship
Mortgage. If Deepwater shall have requested the Certificate Purchasers to
consent to the Head Lease Transaction not less than 45 days prior to the
proposed closing date of the Head Lease Transaction (which request shall
be accompanied by drafts of the documents relating thereto), the
Certificate Purchasers agree to consider such request in good faith.
Thereafter, Deepwater shall promptly provide the Certificate Purchasers
with the drafts of the Head Lease Documents to the extent such drafts are
distributed to the other parties to the Head Lease Transaction. If each
Certificate Purchaser in its sole discretion approves the Head Lease
Transaction, the Charter Trustee shall enter into the Head Lease
Transaction on the date proposed by Deepwater. Notwithstanding the
provisions of this Section 4, neither the consummation nor the failure to
consummate the Head Lease Transaction on or before the Delivery Date shall
be a condition to the obligation of any party hereto to enter into the
other transactions contemplated by this Agreement to occur on the Delivery
Date or to execute and deliver the Transaction Documents to be executed and
delivered on the Delivery Date (other than those transactions or documents
reflecting only the Head Lease Transaction).
SECTION 4.3 Replacement Conditions. Deepwater may, in its sole
discretion, elect to replace any Certificate Purchaser that does not
consent to the Head Lease Transaction or to an amendment proposed under
Section 4.4 hereof or that rejects Deepwater s offer to extend the Charter
Term by having another financial institution that meets the conditions set
forth in this Section 4.3 (a "Replacement Certificate Purchaser") purchase
such non-consenting Certificate Purchaser's interest in accordance with
this Section 4.3. Replacement of a Certificate Purchaser by a Replacement
Certificate Purchaser shall be subject to the following conditions
precedent (collectively, the "Certificate Purchaser Replacement
Conditions"):
(i) such replacement does not conflict with any Applicable Law;
(ii) the Replacement Certificate Purchaser shall pay to the
Certificate Purchaser being replaced the amount of its outstanding
Certificate Purchaser Amount and accrued and unpaid Certificate Return
with respect thereto plus, any funding losses incurred by the
Certificate Purchaser pursuant to Section 7.3 as a result of the
transfer, plus any other accrued and unpaid amounts owed by Deepwater to
such Certificate Purchaser under the Transaction Documents, including
any reasonable expenses relating to its replacement; if the Replacement
Certificate Purchaser does not provide sufficient funds to allow the
Certificate Purchaser being replaced to receive such amount, Deepwater
may provide funds sufficient to cover the shortfall;
(iii) the Replacement Certificate Purchaser shall have agreed
to execute the Assignment and Assumption Agreement in substantially the
form of Exhibit R hereto; and
(iv) the requirements set forth in Section 9.1 shall have been
satisfied.
SECTION 4.4 Accounting Changes. In the event that Deepwater, or its
accountants, shall determine that any change in the applicable rules and
interpretations of the Financial Accounting Standards Board and/or the
Securities Exchange Commission (the "Lease Accounting Rules") will preclude
Deepwater (or raise a substantial question as to whether Deepwater is
precluded) from continuing to account for the Charter as an operating lease
with substantially the same financial accounting benefits as before the
change in the Lease Accounting Rules, then Deepwater and the Certificate
Purchasers agree to review in good faith any proposal submitted by
Deepwater, or its accountants, and to negotiate in good faith the structure
of the transaction contemplated by the Transaction Documents.
If each Certificate Purchaser in its sole discretion approves the
proposed amendment or amendments to the Transaction Documents submitted by
Deepwater, or its acountants, the Charter Trustee shall enter into such
amendments to the Transaction Documents on the date proposed by Deepwater.
Deepwater may, in its sole discretion, elect to replace any Certificate
Purchaser that does not consent to the proposed amendment with a
Replacement Certificate Purchaser in accordance with Section 4.3 hereof.
SECTION 5
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of Deepwater. Deepwater
represents and warrants to each of the other parties hereto as of the date
hereof as follows:
(a) Due Organization, etc. Deepwater is a limited liability company
duly organized, validly existing and in good standing under the laws of
Delaware and has the power and authority and has all requisite government
licenses, permits and other approvals that are required as of the date
hereof to enter into and perform its obligations under the Transaction
Documents to which it is or will be a party and each other agreement,
instrument and document to be executed and delivered by it in connection
with, or as contemplated by, each such Transaction Document to which it is
or will be a party. Deepwater is duly qualified to transact business and
is in good standing as a foreign limited liability company in every
jurisdiction where the nature of its business requires such qualification.
(b) Authorization; No Conflict. The execution, delivery and
performance by Deepwater of each Transaction Document to which it is or
will be a party (i) is within its company powers under Delaware law and its
Certificate of Formation and LLC Agreement (collectively, the
"Organizational Documents"); (ii) has been duly authorized by all necessary
company action on the part of Deepwater and its Members; (iii) requires no
Government Action by, or filing with, any Government Authority which is
required to be obtained, given or made by Deepwater or its Members as of
the date hereof (other than such Government Action as has been duly
obtained, given or made); (iv) does not and will not contravene, or
constitute a default under, any Applicable Law or its Organizational
Documents, or of any material agreement, judgment, injunction, order,
decree or other instrument binding upon or affecting Deepwater or the
Drillship; and (v) does not and will not result in the creation, imposition
or violation of any Lien on any asset of Deepwater other than as
contemplated or permitted by the terms hereof or of the other Transaction
Documents. Deepwater has obtained all Government Actions necessary to
carry on its business as now conducted, except for those Government Actions
that are normally obtained at a later time and with respect to which
Deepwater does not anticipate any problems in obtaining.
(c) Enforceability, etc. Each of the Services Agreements, the Drilling
Contracts, the Rig Sharing Agreement and the Transaction Documents, to
which Deepwater is or will be a party has been, or on or before the date
on which such document is to be signed will be, duly executed and delivered
by Deepwater and each such document to which Deepwater is a party
constitutes, or upon execution and delivery will constitute, assuming the
due authorization, execution and delivery thereof by the other parties
thereto, a legal, valid and binding obligation enforceable against
Deepwater in accordance with the terms thereof, except as such
enforceability may be limited or denied by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights and the enforcement of debtors' obligations generally, and (ii)
general principles of equity, regardless of whether enforcement is pursuant
to a proceeding in equity or at law.
(d) Financial Information. The balance sheet of Deepwater for the
fiscal year ended December 31, 1998 fairly presents, in conformity with
GAAP consistently applied, the financial position of Deepwater as of such
date. Since December 31, 1998, no event has occurred with respect to the
assets, liabilities, operations, business or financial condition of
Deepwater which would have a Material Adverse Effect.
(e) Litigation. There is no litigation, action, proceeding, or labor
controversy to which Deepwater is a party which, if adversely determined,
would adversely affect the financial condition, operations, assets,
business, properties or prospects of Deepwater or which purports to affect
the legality, validity or enforceability of any of the Transaction
Documents, the Services Agreements, the Drilling Contracts or the Rig
Sharing Agreement.
(f) Ownership of Properties. Deepwater has good title to all of its
properties and assets, real and personal, tangible and intangible, of any
nature whatsoever (including patents, trademarks, tradenames, service marks
and copyrights) which it purports to own, free and clear of all Liens
(including infringement claims with respect to patents, trademarks,
copyrights and the like), except for Permitted Liens.
(g) Taxes. Deepwater has filed all tax returns and reports required by
law to have been filed by it and has paid all Taxes thereby shown to be
owing, except for any Taxes which are not yet due or are being contested
pursuant to a Permitted Contest.
(h) Pension and Welfare Plans. As of the date hereof, Deepwater does
not maintain any Plan for the benefit of its employees. Except as provided
in Section 6.1(o) hereof, Deepwater will not maintain any Plan for the
benefit of its employees.
(i) Investment Company Act and Public Utility Holding Company Act.
Deepwater is not an investment company or a company controlled by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended, or a "holding company" or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", within the meaning of the
Public Utility Holding Act of 1935, as amended.
(j) Securities Act. Neither Deepwater nor any Person authorized by
Deepwater to act on its behalf has offered or sold any interest in the
Certificates, or in any similar security relating to the transactions
contemplated by the Transaction Documents, or in any security the offering
of which for the purposes of the Securities Act would be deemed to be part
of the same offering as the offering thereof, or solicited any offer to
acquire any of the same from, any Person other than the parties hereto and
not more than 70 other Institutional Investors, and neither Deepwater nor
any Person authorized by Deepwater to act on its behalf will take any
action which would subject the issuance or sale of any interest in the
Trust Estate, the Charter Trust, the Investment Trust or the Certificates
or in any similar security relating to the Drillship to the provisions of
Section 5 of the Securities Act or require the qualification of any
Transaction Document under the Trust Indenture Act of 1939, as amended.
The only Person which has been authorized to act on behalf of Deepwater for
this purpose is Bank of America National Trust and Savings Association.
The representation in this paragraph (j) is being given in reliance on the
certificate delivered pursuant to Section 3.2(w) hereof.
(k) Chief Place of Business. Deepwater's chief place of business,
chief executive office and office where the documents, accounts and records
relating to the transactions contemplated by this Agreement and each other
Transaction Document is kept and is located at 901 Threadneedle, Suite 200,
Houston, Texas 77079.
(l) Business of Deepwater. (i) Deepwater has engaged in no business
activity other than as contemplated by, or in connection with, the
Construction Contract, the Drilling Contracts, the Rig Sharing Agreement,
the Services Agreements, the Drilling Contract Guaranties and the
Transaction Documents; (ii) Deepwater has no subsidiaries; (iii) as of the
Closing Date, all of the membership interests in Deepwater are owned by the
Members; and (iv) from and after the Closing Date, Deepwater will have no
Indebtedness except for Permitted Indebtedness.
(m) Bankruptcy. Deepwater has not filed a voluntary petition in
bankruptcy or been adjudicated as bankrupt or insolvent, or filed any
petition or answer seeking any reorganization, liquidation, dissolution or
similar relief under any federal or state bankruptcy, insolvency or other
law relating to relief for debtors, or sought or consented to or acquiesced
in the appointment of any trustee, receiver, conservator or liquidator of
all or any part of its properties or its interest in the Drillship. No
court of competent jurisdiction has entered an order, judgment or decree
approving a petition filed against Deepwater seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under federal bankruptcy or insolvency act or other law relating to
relief for debtors, and no other liquidator has been appointed for
Deepwater or of all or any part of its properties or its interest in the
Drillship and no such action is pending. Deepwater has not given notice
to any Government Authority of insolvency or pending insolvency, or
suspension or pending suspension of operations.
(n) Certain Contracts. From and after the Closing Date, the Services
Agreements, the Drilling Contracts, the Drilling Contract Guaranties, the
Rig Sharing Agreement and the Warranties arising under the Construction
Contract are in full force and effect and have not been amended except as
permitted or contemplated by the Transaction Documents. Deepwater is not
in default under, and, to the knowledge of Deepwater, no other Person is
in default under, any of the Construction Contract, the Services
Agreements, the Drilling Contracts, the Drilling Contract Guaranties or the
Rig Sharing Agreement. The execution, delivery and performance by
Deepwater of its obligations under the Construction Contract, the Services
Agreements, the Drilling Contracts, the Rig Sharing Agreement, this
Agreement and the other Transaction Documents to which it is a party, will
not violate in any material respect any provisions of any Applicable Law.
(o) Federal Reserve Regulations. Deepwater is not engaged in, and does
not have as one of its activities, the business of extending credit for the
purpose of purchasing or carrying any margin stock, and no proceeds of any
Advances will be used for a purpose which violates, or would be
inconsistent with, the rules and regulations of the Federal Reserve Board.
Terms for which meanings are provided in Federal Reserve Board Regulations
U or X or any regulations substituted therefor, as from time to time in
effect, are used in this clause (o) with such meanings.
(p) Absence of Events. No Default or Event of Default has occurred and
is continuing and Deepwater is not in default in, nor has any non-permanent
waiver been granted to Deepwater with respect to, the performance,
observance or fulfillment of any of the obligations, conditions or
covenants contained in the Construction Contract, the Drilling Contracts,
the Rig Sharing Agreement or the Services Agreements.
(q) Subject to Government Regulation. None of the Investment Trust,
the Trustees, the Agent or any Certificate Purchaser, solely by reason of
entering into the Transaction Documents or the consummation of the
transactions contemplated thereby, will become subject to ongoing
regulation of its operations by any Government Authority having
jurisdiction over the ownership or operations of the Drillship solely by
reason of any of Deepwater's business activities or the nature of the
Drillship.
(r) Solvency. Deepwater does not have capital unreasonably small in
relation to its business, will not be rendered insolvent by the execution,
delivery and performance of its obligations under the Transaction
Documents, and does not intend to hinder, delay or defraud its creditors
by or through the execution, delivery and performance of the Transaction
Documents to which it is a party, including the Charter. As of the date
hereof and as of the Closing Date, there are no outstanding unsatisfied
judgments, liens for Taxes or bankruptcy proceedings against Deepwater.
(s) Appraisal Disclosure. As of the date hereof, the information
listed on Schedule 4 and provided by Deepwater or any Affiliates thereof
in writing to the Appraiser in connection with the Appraisal, when taken
as a whole, does not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained therein not materially misleading under the circumstances in
which such statements were made.
(t) Accuracy of Information. The cash flow projections contained in
Appendix 5 of the Offering Memorandum, dated as of November 1998, were
prepared by Deepwater in good faith on the basis of reasonable
investigation, information, assumptions and procedures which Deepwater
believed were reasonable under the facts and circumstances then existing,
and since the date of such projections there has been no change in any of
the facts on which such projections were based that would result in a
material adverse change in such projections.
(u) Title to the Drillship; Documentation; Condition. On the Delivery
Date, after giving effect to the transactions to be effected on the
Delivery Date, the Charter Trustee (or the Head Lessor) will have valid
title to the Drillship (including the OFE) and the Drillship will be duly
provisionally documented in the name of the Charter Trustee (or the Head
Lessor) under the laws of the Republic of Panama free and clear of all
liens, charges, encumbrances and security interests other than Permitted
Liens.
(v) Recording of Ship Mortgage. On the Delivery Date, after giving
effect to the transactions to be effected on the Delivery Date, (i) the
Ship Mortgage shall have been duly provisionally recorded with the
appropriate Panamanian authorities in Panama City, Republic of Panama
(which office is the only place in which such recording is necessary), (ii)
the Ship Mortgage shall constitute a first naval mortgage on the Drillship
in favor of the Investment Trust, the Hedging Agreement Counterparties, if
any, and, if the Head Lessor is the mortgagor under the Ship Mortgage, the
Charter Trustee, and (iii) no other recordings or periodic rerecording or
filing or periodic filing of the Ship Mortgage is necessary under existing
law to constitute the lien of the Ship Mortgage on the Drillship (including
the OFE), except final recordation of the Ship Mortgage following the
granting of the Permanent Patente by the Panamanian authorities within six
(6) months of the provisional recording of the Ship Mortgage.
(w) Other Recordings and Filings. On the Delivery Date, all filings
and recordings (including all filings of financing statements under the
Uniform Commercial Code) will have been duly made in each jurisdiction in
which such filings and recordings are required or reasonably requested by
the Charter Trustee or the Investment Trust in order to perfect the
security interests granted by the Deepwater Assignment, the Ship Mortgage
and the other Security Documents and to make such security interests valid
and enforceable; provided, that Deepwater makes no representation or
warranty with respect to any security interest in the Construction Contract
or any Construction Document.
(x) Drillship Construction. Deepwater has in all material respects
caused the Drillship to be constructed in accordance with the Construction
Contract and the other Construction Documents and, subject to any Permitted
Contests, in compliance in all material respects with Applicable Laws.
(y) Mobilization Complete. "Mobilization" of the Drillship, as such
term is used in Section 4.1 of each of the Drilling Contracts, has been
completed in all respects.
SECTION 5.2 Representations and Warranties of Members. Each Member,
severally and not jointly, represents and warrants to each of the other
parties hereto as of the date hereof as follows:
(a) Due Organization, etc. Such Member is a corporation duly
organized, validly existing and in good standing under the laws of the
respective jurisdiction of its organization and has the power and authority
and has all requisite government licenses, permits and other approvals
currently necessary to enter into and perform its obligations under the
Transaction Documents to which it is or will be a party and each other
agreement, instrument and document to be executed and delivered by it in
connection with, or as contemplated by, each such Transaction Document to
which it is or will be a party. Such Member is duly qualified to transact
business in every jurisdiction where the nature of its business requires
such qualification.
(b) Authorization; No Conflict. The execution, delivery and
performance by such Member of each Transaction Document to which it is or
will be a party (i) is within its corporate powers; (ii) has been duly
authorized by all necessary corporate action; (iii) requires no Government
Action by, or filing with, any Government Authority; (iv) does not
contravene, or constitute a default under, any Applicable Law or its
organizational documents, or of any material agreement, judgment,
injunction, order, decree or other instrument binding upon or affecting it;
and (v) does not result in the creation, imposition or violation of any
Lien on any of its assets. Such Member possesses all government licenses,
authorizations, consents and approvals required to carry on its business
as now conducted.
(c) Enforceability, etc. Each Transaction Document to which the Member
is or will be a party has been, or on or before the Closing Date or the
Delivery Date on which such Transaction Document is to be signed will be,
duly executed and delivered by such Member and each such Transaction
Document to which such Member is a party constitutes, or upon execution and
delivery will constitute, assuming the due authorization, execution and
delivery thereof by the other parties thereto, a legal, valid and binding
obligation of such Member enforceable against such Member in accordance
with the terms thereof, except as such enforceability may be limited or
denied by (i) applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws effecting creditors' rights and the enforcement of debtors'
obligations generally, and (ii) general principles of equity, regardless
of whether enforcement is pursuant to a proceeding in equity or at law.
(d) Securities Act. Neither such Member nor any Person authorized by
such Member to act on its behalf has offered or sold any interest in
Deepwater, or in any security relating to the Drillship, or in any security
the offering of which for the purposes of the Securities Act would be
deemed to be part of the same offering as the offering thereof, or
solicited any offer to acquire any of the same from, any Person other than
the parties hereto and not more than 70 other Institutional Investors, and
neither such Member nor any Person authorized by such Member to act on its
behalf will take any action which would subject the issuance or sale of any
interest in Deepwater to the provisions of Section 5 of the Securities Act
or require the qualification of any Transaction Document under the Trust
Indenture Act of 1939, as amended. The representation in this paragraph
(d) is being given in reliance on the certificate delivered pursuant to
Section 3.2(w) hereof.
(e) Litigation. To such Member's Actual Knowledge, there is no action
or proceeding pending or threatened to which the Charter Trustee or the
Investment Trust is or will be a party before any court or arbitrator or
Government Authority that, if adversely determined, would reasonably be
expected to have a material adverse effect on the property, operations or
financial condition of Deepwater.
(f) Assignment. From and after the Closing Date, such Member will not
assign or transfer to any Person that is not a party hereto, any of its
right, title or interest in or under Deepwater, the Charter, the Drillship,
or the Collateral or any other Transaction Document, except as contemplated
by the Transaction Documents.
(g) Absence of Events. To such Member's Actual Knowledge, no Default
or Event of Default has occurred and is continuing, and Deepwater is not
in default in, nor has any non-permanent waiver been granted to Deepwater
with respect to, the performance, observance or fulfillment of any of the
obligations, conditions or covenants contained in the Construction
Contract, Drilling Contracts, the Rig Sharing Agreement or the Services
Agreements.
(h) Compliance With Laws. To such Member's Actual Knowledge, Deepwater
is currently in compliance, in all material respects, with all Applicable
Laws with respect to the conduct of its business and the ownership of its
properties.
SECTION 5.3 Representations and Warranties of the Investment Trust.
The Investment Trust represents and warrants to each of the other parties
hereto as of the date hereof as follows:
(a) Due Organization, etc. It is a business trust duly formed and
validly existing and in good standing under the laws of the jurisdiction
of its organization and has the power and authority to enter into and
perform its obligations under the Transaction Documents to which it is or
will be a party and each other agreement, instrument and document to be
executed and delivered by it in connection with, or as contemplated by,
each such Transaction Document to which it is or will be a party.
(b) Authorization; No Conflict. The execution, delivery and
performance by it of each Transaction Document to which it is or will be
a party (i) is within its powers; (ii) has been duly authorized by all
necessary action; (iii) requires no Government Action by, or filing with,
any Government Authority; (iv) does not contravene, or constitute a default
under, any Applicable Law or its organizational documents, or of any
material agreement, judgment, injunction, order, decree or other instrument
binding upon it; and (v) does not result in the creation, imposition or
violation of any Lien on any of its assets. It possesses all government
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
(c) Enforceability, etc. Each Transaction Document to which it is or
will be a party has been, or on or before the date on which such
Transaction Document is to be signed will be, duly executed and delivered
by it and each such Transaction Document to which it is a party
constitutes, or upon execution and delivery will constitute, assuming the
due authorization, execution and delivery hereof and thereof by the other
parties hereto and thereto, a legal, valid and binding obligation
enforceable against it in accordance with the terms thereof, except as such
enforceability may be limited or denied by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights and the enforcement of debtors' obligations generally, and (ii)
general principles of equity, regardless of whether enforcement is pursuant
to a proceeding in equity or at law.
(d) Assignment. It has not assigned or transferred any of its right,
title or interest in or under the Charter, the Drillship, or the Collateral
or any other Transaction Document, except as expressly contemplated by the
Transaction Documents.
(e) Securities Act. Neither it nor any Person authorized by it to act
on its behalf has offered or sold any interest in the Trust Estate, the
Charter Trust, the Investment Trust or the Certificates, or in any similar
security relating to the Drillship, or in any security the offering of
which for the purposes of the Securities Act would be deemed to be part of
the same offering as the offering thereof, or solicited any offer to
acquire any of the same from, any Person other than the parties hereto, and
neither it nor any Person authorized by it to act on its behalf will take
any action which would subject the issuance or sale of any interest in the
Trust Estate, the Charter Trust, the Investment Trust or the Certificates
or in any similar security related to the Drillship to the provisions of
Section 5 of the Securities Act or require the qualification of any
Transaction Document under the Trust Indenture Act of 1939, as amended.
(f) Chief Place of Business. The Investment Trust's chief place of
business, chief executive office and office where the documents, accounts
and records relating to the transactions contemplated by this Agreement and
each other Transaction Document are and will be kept is located at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001.
(g) No Other Activities. It does not hold any assets, conduct any
business nor is it party to any document, agreement or instrument other
than the Transaction Documents to which it is, or will be, a party.
SECTION 5.4 Representations and Warranties of the Certificate
Purchasers. Each Certificate Purchaser, individually and not jointly,
represents and warrants to each of the other parties hereto as of the date
hereof as follows:
(a) Due Organization, etc. Such Certificate Purchaser is duly
organized, validly existing and in good standing (to the extent relevant
under Applicable Law) in the jurisdiction of its organization and has the
power and authority to enter into and perform its obligations under the
Transaction Documents to which it is or will be a party and each other
agreement, instrument and document to be executed and delivered by it in
connection with, or as contemplated by, each such Transaction Document to
which it is or will be a party.
(b) Authorization; No Conflict. The execution, delivery and
performance by such Certificate Purchaser of each Transaction Document to
which it is or will be a party (i) is within its powers; (ii) has been duly
authorized by all necessary action; (iii) requires no Government Action by,
or filing with, any Government Authority (it being understood that such
Certificate Purchaser makes no representation or warranty relating to the
Drillship or the Applicable Laws pertaining thereto); (iv) does not
contravene, or constitute a default under, any Applicable Law or its
organizational documents, or of any material agreement, judgment,
injunction, order, decree or other instrument binding upon such Certificate
Purchaser; and (v) does not result in the creation, imposition or violation
of any Lien on any asset of such Certificate Purchaser.
(c) Enforceability, etc. Each Transaction Document to which such
Certificate Purchaser is or will be a party has been, or on or before the
Closing Date will be, duly executed and delivered by such Certificate
Purchaser and each such Transaction Document to which such Certificate
Purchaser is a party constitutes, or upon execution and delivery will
constitute, assuming the due authorization, execution and delivery hereof
and thereof by the other parties hereto and thereto, a legal, valid and
binding obligation enforceable against such Certificate Purchaser in
accordance with the terms thereof, except as such enforceability may be
limited or denied by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws effecting creditors' rights and the enforcement
of debtors' obligations generally, and (ii) general principles of equity,
regardless of whether enforcement is pursuant to a proceeding in equity or
at law.
(d) ERISA. Either (x) such Certificate Purchaser is not and will not
be making any Advance with the assets of an "employee benefit plan" (as
defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or
a "plan" (as defined in Section 4975(e)(1) of the Code) or (y) the source
of funds for any Advance made by such Certificate Purchaser is an insurance
company general account (as such term is defined in PTE 95-60 (issued July
12, 1995) in respect of which the reserves and liabilities (as defined by
the annual statement for life insurance companies approved by the National
Association of Insurance Commissioners) (the "NAIC Annual Statement")) for
the general account contract(s) held by or on behalf of any employee
benefit plan, together with the amount of the reserves and liabilities for
the general account contract(s) held by or on behalf of any other employee
benefit plans maintained by the same employer (or affiliate thereof as
defined in PTE 95-60) or by the same employee organization in the general
account, do not exceed 10% of the total reserves and liabilities of the
general account (exclusive of separate account liabilities) plus surplus
as set forth in the NAIC Annual Statement filed with such Certificate
Purchaser's state of domicile.
(e) Securities Act. Neither such Certificate Purchaser nor any Person
authorized by such Certificate Purchaser to act on its behalf has offered
or sold any interest in the Trust Estate, the Charter Trust, the Investment
Trust or the Certificates, or in any similar security relating to the
Drillship, or in any security the offering of which for the purposes of the
Securities Act would be deemed to be part of the same offering as the
offering thereof, or solicited any offer to acquire any of the same from,
any Person other than the parties hereto, and neither such Certificate
Purchaser nor any Person authorized by such Certificate Purchaser to act
on its behalf will take any action which would subject the issuance or sale
of any interest in the Trust Estate, the Charter Trust, Investment Trust
or the Certificates or in any similar security relating to the Drillship
to the provisions of Section 5 of the Securities Act or require the
qualification of any Transaction Document under the Trust Indenture Act of
1939, as amended.
(f) Litigation. To such Certificate Purchaser's Actual Knowledge,
there is no action or proceeding pending or threatened to which the Charter
Trustee, the Trust Estate or the Investment Trust is or will be a party
before any court or arbitrator or Government Authority that, if adversely
determined, would reasonably be expected to have a material adverse effect
on the property, operations or financial condition of the Charter Trustee
or the Investment Trust.
(g) No Other Documents. Such Certificate Purchaser has not authorized,
or voted to authorize, the Charter Trustee or the Investment Trust to
execute any document, agreement or instrument other than the Transaction
Documents to which either the Charter Trustee or the Investment Trust is
or will be a party.
SECTION 5.5 Representations and Warranties of the Trustees. Each of
the Trustees in their respective individual capacities (and where
indicated, as trustee) represents and warrants, severally and not jointly,
to each of the other Participants as of the date hereof as follows:
(a) Due Organization, etc. It is a banking corporation or a Federal
savings bank (as applicable), duly organized, validly existing and in good
standing under the laws of the state of its incorporation or the United
States (as applicable), has full corporate power and authority to enter
into and perform its obligations under the Transaction Documents to which
it (individually or as trustee, as the case may be) is or will be a party
and each other agreement, instrument and document to be executed and
delivered by it (individually or as trustee, as the case may be) in
connection with, or as contemplated by, each such Transaction Document to
which it is or will be a party.
(b) Authorization; No Conflict. The execution, delivery and
performance by it of each Transaction Document to which it (individually
or as trustee, as the case may be) is or will be a party (i) is within its
powers; (ii) has been duly authorized by all necessary action; (iii)
requires no Government Action by, or filing with, any Government Authority;
(iv) does not contravene, or constitute a default under, any Applicable Law
or its organizational documents, or of any material agreement, judgment,
injunction, order, decree or other instrument binding upon it (individually
or as trustee); and (v) does not result in the creation, imposition or
violation of any Lien on any of its assets (individually or as trustee).
(c) Enforceability, etc. Each Transaction Document to which it is or
will be a party (individually or as trustee, as the case may be) has been,
or on or before the Closing Date or the Delivery Date on which such
Transaction Document is to be signed will be, duly executed and delivered
by it and each such Transaction Document to which it is a party
constitutes, or upon execution and delivery will constitute, assuming the
due authorization, execution and delivery hereof and thereof by the other
parties hereto and thereto, a legal, valid and binding obligation
enforceable against it in accordance with the terms thereof, except as such
enforceability may be limited or denied by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights and the enforcement of debtors' obligations generally, and (ii)
general principles of equity, regardless of whether enforcement is pursuant
to a proceeding in equity or at law.
(d) Litigation. There is no action, suit or proceeding pending or, to
its knowledge (individually or as trustee, as the case may be) threatened
to which it (individually or as trustee), or, in the case of the Investment
Trustee, the Investment Trust is or will be a party, before any court or
arbitrator or any Government Authority that, if adversely determined, would
reasonably be expected to materially and adversely affect the ability of
it (individually or as trustee, as the case may be), or, in the case of the
Investment Trustee, the Investment Trust to perform their respective
obligations under each of the Transaction Documents to which it
(individually or as trustee, as the case may be), or, in the case of the
Investment Trustee, the Investment Trust is or is to be a party.
(e) Assignment. It has not assigned or transferred any of its right,
title or interest in or under the Charter, the Drillship or the Collateral,
except as expressly contemplated by the Transaction Documents.
(f) Securities Act. Neither it (individually or as trustee) nor any
Person authorized by it (individually or as trustee) to act on its behalf
has offered or sold any interest in the Trust Estate, the Investment Trust
or the Certificates, or in any similar security relating to the Drillship,
or in any security the offering of which for the purposes of the Securities
Act would be deemed to be part of the same offering as the offering
thereof, or solicited any offer to acquire any of the same from, any Person
other than the parties hereto, and neither it (individually or as trustee)
nor any Person authorized by it (individually or as trustee) to act on its
behalf will take any action which would subject the issuance or sale of any
interest in the Trust Estate, the Investment Trust or the Certificates to
the provisions of Section 5 of the Securities Act or require the
qualification of any Transaction Document under the Trust Indenture Act of
1939, as amended.
(g) Chief Place of Business. The Charter Trustee's chief place of
business and the office where the documents, accounts and records relating
to the Drillship and the transactions contemplated by this Agreement and
the other Transaction Documents are and will be kept is located at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001.
The Investment Trustee's chief place of business, chief executive office
and the office where the documents, accounts and records relating to the
Drillship and the transactions contemplated by this Agreement and the other
Transaction Documents are and will be kept is located at 3773 Howard Hughes
Parkway, Suite 300 North, Las Vegas, Nevada 89109.
(h) No Other Documents. The Charter Trustee has not executed, and the
Investment Trustee has not authorized, or voted to authorize, the
Investment Trust to execute, any document, agreement or instrument other
than the Transaction Documents to which either the Charter Trustee or the
Investment Trust is or will be a party.
SECTION 6
CERTAIN COVENANTS AND AGREEMENTS
SECTION 6.1 Covenants of Deepwater.
(a) No Other Business. From the date hereof to the expiration or
termination of the Charter Term, Deepwater shall not (i) engage in any
business other than as expressly contemplated by the Transaction Documents,
the Head Lease Documents (if any), the Drilling Contracts, the Rig Sharing
Agreement or the Services Agreements; (ii) become a party to any agreement
other than this Agreement, the other Transaction Documents, the Drilling
Contracts, the Rig Sharing Agreement, the Drilling Contract Guaranties, the
Services Agreements, the Construction Contract, the Construction Documents,
the Head Lease Documents (if any), and any other agreements incidental to
the performance of its obligations hereunder or thereunder; (iii) amend,
modify or supplement the Drilling Contracts, the Rig Sharing Agreement, the
Drilling Contract Guaranties, or the Services Agreements in any manner that
would have an adverse effect on the rights or interests of the Charter
Trustee, the Investment Trust or the Certificate Purchasers without the
prior written consent of the Majority Certificate Purchasers; (iv) make any
distributions to its Members so long as an Event of Loss has occurred or
a Material Default or Event of Default has occurred and is continuing; or
(v) incur any Indebtedness other than Permitted Indebtedness. Deepwater
shall provide the Charter Trustee with substantially final drafts of any
amendments, modifications or supplements to the Drilling Contracts, the Rig
Sharing Agreement, the Drilling Contract Guaranties or the Services
Agreements at least ten (10) Business Days prior to the effectiveness of
such amendments, modifications or supplements.
(b) No Profit-Sharing. From the date hereof to the expiration or
termination of the Charter Term, Deepwater shall not enter into any
partnership, profit-sharing or royalty arrangement or other similar
arrangement whereby Deepwater's income or profits are, or might be, shared
with any other Person, or enter into any management contract or similar
arrangement whereby its business or operations are managed by any other
Person, in each case other than as provided in the Transaction Documents,
the Head Lease Documents, the LLC Agreement, the Drilling Contracts, the
Rig Sharing Agreement, the Services Agreements or any other agreement
incidental to the performance of its obligations under the Transaction
Documents; provided that, notwithstanding the foregoing, this Section
6.1(b) shall not prohibit profit-sharing arrangements made pursuant to a
Plan maintained by Deepwater in accordance with Section 6.1(o).
(c) No Merger. Deepwater shall not, from the date hereof to the
expiration or termination of the Charter Term, merge with any other entity
or sell all or substantially all of its assets.
(d) No Subsidiaries. Deepwater shall not, from the date hereof to the
expiration or termination of the Charter Term, form, or cause to be formed,
or own any interest in, any Subsidiaries.
(e) No Abandonment. Deepwater shall not, from the date hereof to the
expiration or termination of the Charter Term, abandon or agree to abandon
the Drillship other than a tender of an abandonment to an insurer in
connection with obtaining payment from such insurer for an Event of Loss.
(f) Corporate Existence, Etc. Deepwater shall, from the date hereof to
the expiration or termination of the Charter Term, do or cause to be done,
in all material respects, all things necessary to preserve and keep in full
force and effect its rights and powers and franchises as a limited
liability company and its power and authority to perform its obligations
under the Transaction Documents, the Drilling Contracts and the Rig Sharing
Agreement, including any necessary qualification or licensing in any
foreign jurisdiction.
(g) Compliance With Laws. Deepwater shall, from the date hereof to the
expiration or termination of the Charter Term, comply in all material
respects with all Applicable Laws with respect to the conduct of its
business and the ownership of its properties except in connection with a
Permitted Contest.
(h) Change of Name or Location. Deepwater shall, from the date hereof
to the expiration or termination of the Charter Term, furnish to the
Charter Trustee and each Certificate Purchaser notice before any relocation
of its chief executive officer, principal place of business or the office
where it keeps its records concerning its accounts or change of its name,
identity or limited liability structure.
(i) No Disposition of the Drillship. Deepwater shall, from the date
hereof to the expiration or termination of the Charter Term, not sell,
contract to sell, assign, transfer, convey or otherwise dispose of or
permit to be sold, assigned, leased, transferred, conveyed or otherwise
disposed of the Drillship or any part thereof except as otherwise
contemplated by the Transaction Documents.
(j) Brokers Fees. Deepwater shall hold the Charter Trustee, the
Investment Trust and each Certificate Purchaser harmless from and against
any claim, demand or liability for any brokers, finders, or placement fees
or commissions incurred as a result of any action by Deepwater in
connection with the transactions contemplated by the Transaction Documents,
except for any such fee or commission included in Construction Costs;
provided, that the covenant contained in this Section 6.1(j) shall not
apply to any claim, demand or liability for any brokers, finders or
placement fees or commissions: (i) due and payable to Bank of America in
connection with the transactions contemplated by the Transaction Documents;
(ii) due and payable to any broker engaged by the Trustees, Investment
Trust, Certificate Purchasers or Affiliate thereof; or (iii) due and
payable to any broker retained after Deepwater's election of the Return
Option pursuant to Section 20.3 of the Master Charter.
(k) Notice of Material Default, Event of Default or Environmental
Claim; Other Certificates. If a Responsible Officer of Deepwater has
Actual Knowledge of a Material Default, Event of Default or Environmental
Claim with respect to the Drillship (to the extent that Deepwater
reasonably expects the cost to remediate or liability to be incurred with
respect to all such Environmental Claims then outstanding to exceed
$2,000,000 individually or in the aggregate), Deepwater shall promptly give
notice thereof to each other party to this Agreement.
Deepwater shall, upon the request of the Charter Trustee, (i) advise the
Charter Trustee in writing in reasonable detail of its response to any
Environmental Claim with respect to the Drillship and (ii) provide to the
Charter Trustee prompt notice of the date and location of the next
scheduled dry-docking, if any, of the Drillship prior to such date.
If a default occurs and is continuing with respect to Deepwater's
obligations under any Permitted Indebtedness of the type specified in
clause (iii) of the definition of Permitted Indebtedness, Deepwater shall
notify the Trustees of such default promptly after Deepwater obtains Actual
Knowledge of such default and, upon receiving such notice, either of the
Trustees may cure such default at Deepwater's expense.
Deepwater shall furnish to the Charter Trustee and the Investment Trust
(with copies for the Certificate Purchasers) within ninety (90) days after
each anniversary of the Delivery Date, the annual confirmation of
classification of the Drillship issued by the Classification Society, and
at any other time upon the request of the Charter Trustee, copies of all
certificates issued by the U.S. Coast Guard or the Classification Society
with respect to the Drillship.
(l) Documentation of Drillship and Ship Mortgage. Deepwater shall
obtain a Permanent Patente from the Panamanian authorities and shall cause
the Drillship to be duly permanently documented and the Ship Mortgage to
be duly permanently recorded under the laws of Panama at least ten (10)
Business Days before the end of six (6) months following the issuance of
the Provisional Patente. In the event that a successor trustee to the
Charter Trustee shall have been appointed pursuant to Section 5.10 of the
Charter Trust Agreement and Section 12.18, or the Charter Trustee shall
merge or consolidate with any Person in accordance with Section 5.12 of the
Charter Trust Agreement and Section 12.18, Deepwater, at its sole expense,
shall cause the Drillship to be provisionally documented (if the Head Lease
Transaction has not been entered into) and the Ship Mortgage to be
provisionally recorded under the laws of Panama in the name of any
successor trustee within fifteen (15) Business Days of the receipt of
written notice of any such appointment, merger or consolidation; provided
that Deepwater shall not be deemed to be in violation of the covenant
contained in this sentence to the extent that any delay in procuring such
provisional documentation or recordation results from the failure of any
of the Participants to execute any necessary documents or instruments
promptly upon receipt from Deepwater or to take any other action necessary
to effectuate such documentation or recording promptly upon request by
Deepwater. Deepwater, at its sole expense, shall thereafter cause the
Drillship to be duly permanently documented (if the Head Lease Transaction
has not been entered into) and the Ship Mortgage to be duly permanently
recorded at least 10 Business Days prior to the end of the six (6) months
following the issuance of the provisional documentation.
(m) Financial Statements. Deepwater shall, from the date hereof to the
expiration or termination of the Charter Term, provide to the Charter
Trustee and each Certificate Purchaser financial statements as follows:
(i) for each fiscal year ended on and after December 31, 1999,
within 90 days after the end of such fiscal year, annual financial
statements including a statement of earnings, a statement of cash flows
and a balance sheet of Deepwater for the fiscal year then ended prepared
in conformity with GAAP, consistently applied, and audited by its
independent outside auditors;
(ii) for each fiscal quarter of Deepwater, within 45 days after the
end of such fiscal quarter, unaudited financial statements, including a
statement of earnings, a statement of cash flows and a balance sheet of
Deepwater for the fiscal quarter then ended prepared in conformity with
GAAP, consistently applied; and
(iii) together with the financial statements required to be
delivered under clauses (i) and (ii) above, a certificate from a
member's representative of Deepwater certifying that no Material Default
or Event of Default has occurred and is then continuing.
(n) Subordinated Operating Expenses. Deepwater shall, from the date
hereof to the expiration or termination of the Charter Term, maintain the
Services Agreements in effect and shall ensure that to the extent that
Operation and Maintenance Expenses incurred during each Return Period of
the Charter Term (or portion thereof) exceed the total Unsubordinated
Operating Expense Amount for such period, such expenses shall be payable
by Deepwater under the Services Agreements as Subordinated Operating
Expenses. In the event that on any Charter Hire Payment Date there are
insufficient funds in the Operating Account to pay all Subordinated
Operating Expenses then due and payable in accordance with Section 3.4(b)
of the Depository Agreement, Deepwater shall be entitled to issue
Subordinated Debt to the Person to whom such Subordinated Operating
Expenses are due in the amount of such shortfall.
(o) Plans. Deepwater shall not, from the date hereof to the expiration
or termination of the Charter Term, maintain any Plan for the benefit of
its employees; provided, however, that, notwithstanding the foregoing,
Deepwater may adopt one or more Plans for the benefit of its employees
which are, in the aggregate, comparable to the Plans maintained by other
employers engaged in the same or similar industry. With respect to any
such Plan adopted by Deepwater:
(i) such Plan shall be operated and administered by Deepwater in
compliance with its terms and with the requirements of any and all
Applicable Laws, in all material respects;
(ii) no material liability pursuant to Titles I or IV of ERISA or
the penalty or excise tax provisions of the Code shall be incurred; and
(iii) no lien pursuant to Titles I or IV of ERISA or Section
412 of the Code shall be imposed on any of the rights, properties or
assets of Deepwater.
(p) Y2K Compliance. Deepwater shall use its best efforts to cause the
computer programs used as part of the OFE, when used in accordance with the
pertinent user documentation and when the input to them is formatted in
accordance with such documentation, to comply with the following: (i) such
programs shall accurately and completely process (including but not limited
to calculation, comparison and sequencing, and including without limitation
leap year calculations) date-related data for dates prior to the year 2000,
date-related data for dates after the year 1999, and date-related data for
dates both before the year 2000 and after the year 1999; and (ii) such
programs shall not, as a consequence of the change of centuries or the fact
that data from more than one century is being processed, cause an abnormal
termination of execution, an endless loop, incorrect values or invalid
results, or otherwise fail to perform accurately and completely those
functions set forth in such user documentation. All date-related data
generated by or embodied in such programs shall include an indication of
century.
(q) Punch List. Deepwater shall deliver a punch list to the Charter
Trustee within a reasonable period of time after the Delivery Date and use
reasonable good faith efforts to complete (or cause to be completed) the
items on the punch list in all material respects as soon as commercially
reasonable.
SECTION 6.2 Certain Covenants of the Charter Trustee, the Investment
Trustee and the Investment Trust. Each of the Charter Trustee, the
Investment Trustee and the Investment Trust, severally and not jointly,
covenants as follows:
(a) Maintenance of Existence. The Investment Trust shall maintain its
existence as a Delaware business trust and its qualification to do business
in each jurisdiction in which the failure to have such a qualification may
have a material adverse effect on the performance of its obligations under
the Transaction Documents. The Charter Trustee and the Investment Trustee
shall each maintain its existence and its qualification to do business in
each jurisdiction in which the failure to have such qualification may have
a material adverse effect on the performance of its obligations under the
Transaction Documents.
(b) Indebtedness; Other Business. Neither the Investment Trust nor the
Trustees shall contract for, create, incur or assume any Indebtedness, or
enter into any business or other activity, other than pursuant to, or as
contemplated by, the Transaction Documents and the Head Lease Documents.
(c) Change of Chief Place of Business. Each of the Trustees in their
respective individual capacities shall give prompt notice to Deepwater if
any of the Investment Trust's or Trustees' chief place of business or chief
executive office or the office where the records concerning the accounts
or contract rights relating to the Drillship are kept, shall cease to be
located at the address set forth in Section 12.3.
(d) No Voluntary Bankruptcy by Investment Trust. The Investment Trust
shall not (i) commence any case, proceeding or other action under any
existing or future law, relating to bankruptcy, insolvency, reorganization,
arrangement, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, (ii) seek appointment of a
receiver, trustee, custodian or other similar official for them or for all
or any substantial part of its assets or property or (iii) take any action
in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in this Section 6.2.
(e) No Voluntary Bankruptcy by Charter Trustee. The Charter Trustee,
in its individual capacity or as trustee, shall not (i) commence any case,
proceeding or other action under any existing or future law, relating to
bankruptcy, insolvency, reorganization, arrangement, winding-up,
liquidation, dissolution, composition or other relief with respect to it,
its debts, (ii) seek appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets
or property or (iii) take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in
this Section 6.2.
(f) No Voluntary Bankruptcy by Investment Trustee. The Investment
Trustee, in its individual capacity or as trustee, shall not (i) commence
any case, proceeding or other action under any existing or future law,
relating to bankruptcy, insolvency, reorganization, arrangement, winding-
up, liquidation, dissolution, composition or other relief with respect to
it, its debts, the Investment Trust or the Investment Trust's debts, (ii)
seek appointment of a receiver, trustee, custodian or other similar
official for all or any substantial part of its or the Investment Trust's
assets or property or (iii) take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in this Section 6.2.
(g) No Sale of Drillship. Neither the Trustees nor the Investment
Trust shall transfer all or any of its interest in the Drillship or the
Transaction Documents except as expressly permitted in the Transaction
Documents.
(h) Trust Agreements. Without prejudice to any right of either of the
Trustees under the Trust Agreements to resign as trustee, or the right of
the Certificate Purchasers under the Trust Agreements to remove either of
the Trustees as trustee, and in each case subject to the terms of the
Transaction Documents, neither the Trustees nor the Investment Trust shall
(i) terminate or revoke the trusts created by the Trust Agreements before
the later of the expiration or termination of the Charter or the payment
in full of the obligations under the Certificates, (ii) amend, modify,
supplement, terminate or revoke or otherwise modify any provision of any
Transaction Document (other than the Ship Mortgage) or any Head Lease
Document in any manner that would have an adverse effect on the rights or
interests of Deepwater without the prior written consent of Deepwater, or
(iii) amend, modify or supplement the Ship Mortgage without Deepwater's
prior written consent.
(i) Liens. Neither Trustee (in its individual capacity or as trustee)
shall create or suffer to exist (and shall discharge promptly) any Trust
Lien; provided, however, that such Trustee shall not be required to remove
a Trust Lien if it is being contested pursuant to a Permitted Contest and
is bonded to the satisfaction of Deepwater.
(j) Change of Jurisdiction of the Trustees. Neither Trustee (in its
individual capacity) shall (i) without sixty (60) days' prior written
notice to Deepwater and the Participants, change its jurisdiction of
incorporation or organization (individually or as trustee) or (ii) change
the jurisdiction of the Investment Trust or the trust created by the
Charter Trust Agreement, in any case, without the consent of Deepwater and
the Documentation Agent.
(k) Quiet Enjoyment. So long as no Charter Event of Default shall have
occurred and be continuing and Deepwater shall have received no notice
thereof, neither the Investment Trustee (in its individual and trustee
capacities) nor the Investment Trust shall take any action to interfere
with or otherwise disturb Deepwater's, its agents' or its permitted
subcharterers' full use and possession of the Drillship or do or cause to
be done any act which would deprive Deepwater, its agents, or its permitted
subcharterers of the full use and possession of the Drillship on the terms
provided for in the Transaction Documents.
(i) Notices. The Charter Trustee shall deliver a copy of any notices,
financial statements or any other documents, received by the Charter
Trustee from Deepwater, any guarantor under the R&B Falcon Guaranty or
Conoco Guaranty or any Drilling Party, to each Certificate Purchaser at its
address set forth in Schedule 5.
SECTION 6.3 Covenants of the Certificate Purchasers.
Each Certificate Purchaser, individually and not jointly, covenants as
follows:
(a) Trust Agreements. Without prejudice to any right of the Trustees
under the Trust Agreements to resign as Trustees, or the right of the
Certificate Purchasers under the Trust Agreements to remove the Trustees,
and in each case subject to the terms of the Transaction Documents, such
Certificate Purchaser hereby agrees with Deepwater (i) not to terminate or
revoke the trusts created by the Trust Agreements before the later of the
expiration or termination of the Charter Term or the payment in full of the
obligations under the Certificates, and (ii) not to amend, modify,
supplement, terminate or revoke or otherwise modify any provision of any
Transaction Document or any Head Lease Document in any manner that would
have an adverse effect on the rights or interests of Deepwater without the
prior written consent of Deepwater; provided, however, that the consent
requirement contained in clause (ii) of this Section 6.3(a) shall only
apply to amendments, supplements revocations or other modifications which
can be made legally effective without Deepwater's execution.
(b) Compliance by Charter Trustee and Investment Trust. Subject to the
terms of Section 12.13, each of the Certificate Purchasers agrees that it
shall not instruct, or vote to instruct, the Charter Trustee or the
Investment Trust to take any action inconsistent with, contrary to or in
violation of the Transaction Documents or the Charter Trustee's or the
Investment Trust's obligations thereunder, and each of the Certificate
Purchasers agrees that it shall instruct, or vote to instruct, the
Investment Trust and the Charter Trustee to take any affirmative action
necessary to satisfy the Investment Trust's and the Charter Trustee's
obligations under the Drilling Consent (including any obligation to enter
into an assumption agreement, replacement drilling contracts or similar
arrangement and with respect to a Non-Defaulting Drilling Party, the Cross-
Default cure provision and the assignment of rights and interests upon
election and satisfaction of the Purchase Option, all in accordance with
the terms of the Drilling Consent).
(c) Each of the Certificate Purchasers agrees that it shall not create
or suffer to exist (and shall discharge promptly) any Certificate Purchaser
Lien attributable to it; provided, however, that no Certificate Purchaser
shall be required to remove a Certificate Purchaser Lien attributable to
it if it is being contested pursuant to a Permitted Contest and is bonded
to the satisfaction of Deepwater.
(d) No Voluntary Bankruptcy. Each of the Certificate Purchasers agrees
that it shall not (i) commence any case, proceeding or other action under
any existing or future law, relating to bankruptcy, insolvency,
reorganization, arrangement, winding-up, liquidation, dissolution,
composition or other relief with respect to the Charter Trustee's or
Investment Trust's debts, or (ii) seek appointment of a receiver, trustee,
custodian or other similar official for the Charter Trustee or the
Investment Trust or for all or any substantial part of either or both of
their assets or property and each of the Certificate Purchasers shall not
take any action in furtherance of, or indicating its consent to, approval
of, any of the acts set forth in this Section 6.3(d).
(e) Quiet Enjoyment. Each of the Certificate Purchasers agrees that so
long as no Charter Event of Default shall have occurred and be continuing
and Deepwater shall have received no notice thereof, such Certificate
Purchaser shall not take any action to interfere with or otherwise disturb
Deepwater's, its agents' or its permitted subcharterers' full use and
possession of the Drillship or do or cause to be done any act which would
deprive Deepwater, its agents, or its permitted subcharterers of the full
use and possession of the Drillship on the terms provided for in the
Transaction Documents.
SECTION 6.4 Covenants of the Members. As the sole obligation of the
Members under this Agreement, each of the Members, severally and not
jointly, covenants as follows:
(a) Bankruptcy. Such Member agrees that it shall not (i) commence 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 Deepwater or its debts; (ii)
seek appointment of a receiver, trustee, custodian or other similar
official for Deepwater or for all or any substantial part of its property;
or (iii) vote its interest as a member of Deepwater to, or to otherwise,
cause Deepwater to file a voluntary petition in bankruptcy or an answer
seeking reorganization in a proceeding under any bankruptcy, insolvency or
similar laws or an answer admitting the material obligations of a petition
filed against Deepwater in any such proceeding.
(b) No Amendment to LLC Agreement. Other than in connection with a
transfer of an ownership interest permitted by Section 6.4(c) or a
transaction permitted by Section 6.1(c), such Member agrees that it will
not amend the LLC Agreement as in effect on the Closing Date, in a manner
that has an adverse effect on the rights or interests of the Trustees, the
Investment Trust, the Certificate Purchasers, or their respective rights
under the Transaction Documents or the obligations of Deepwater thereunder,
in each case, without the prior written consent of the Charter Trustee,
such consent not to be unreasonably withheld.
(c) Maintenance of Membership Interests. Such Member agrees that it
shall not sell, assign or transfer any of its interest in Deepwater if the
result of such sale, assignment or transfer is to cause the aggregate
membership interests in Deepwater of such Member and its Affiliates to be
less than 40% of all of the Membership interests in Deepwater.
(d) Compliance by Deepwater. Subject to the terms of Section 12.13,
such Member agrees that it shall not instruct Deepwater to take any action
inconsistent with, contrary to or in violation of the Transaction Documents
or Deepwater's obligations thereunder.
SECTION 6.5 Hedging Agreements. At any time after the Delivery Date,
if Deepwater has arranged for one or more interest rate swaps in an
aggregate notional principal amount of up to $195,000,000 in substantially
the form of Exhibit S-1 hereto (the "Hedging Agreements") to be entered
into by one or more Hedging Agreement Counterparties, then upon the written
request from Deepwater the Charter Trustee shall enter into such Hedging
Agreements and, concurrently therewith, Deepwater and the Charter Trustee
shall enter into one or more matching interest rate swaps in substantially
the form of Exhibit S-2 hereto (the "Deepwater Hedging Agreements");
provided that, at the time the Hedging Agreements are entered into, each
of the Hedging Agreement Counterparties shall be a Certificate Purchaser
or an Affiliate thereof and each of the Hedging Agreement Counterparties
shall have executed acknowledgments to the Depository Agreement, the
Charter Trustee Assignment and any other appropriate Transaction Document.
The Charter Trustee is hereby instructed and agrees to deposit all amounts
owed to Deepwater under the Deepwater Hedging Agreements (the "Deepwater
Hedge Payments") and all amounts paid to the Charter Trustee under the
Hedging Agreements (x) into the Trustee's Account pursuant to Section 2.10
or (y) with the Depository to be applied pursuant to the Depository
Agreement, as applicable. All Deepwater Hedge Payments deposited pursuant
to the preceding sentence shall satisfy, to the extent so deposited, the
obligations of the Charter Trustee under the Deepwater Hedging Agreements.
All payments made to the Hedging Agreement Counterparties of amounts owed
to the Hedging Agreement Counterparties under the Hedging Agreements
pursuant to the Depository Agreement shall satisfy the corresponding
obligations of Deepwater under the Deepwater Hedging Agreements. If a
Responsible Officer of Deepwater has Actual Knowledge of an Event of
Default or Event of Loss, Deepwater shall promptly give notice thereof to
each of the Hedging Agreement Counterparties. In addition, Deepwater shall
provide to each of the Hedging Agreement Counterparties a copy of any
notice of its election to exercise its Special Purchase Right under Section
16.4 of the Master Charter. The Charter Trustee shall provide to each of
the Hedging Agreement Counterparties a copy of any notice given to
Deepwater under Article XVI of the Master Charter.
SECTION 6.6 [Intentionally Omitted]
SECTION 6.7 Charter Extension Option. In the event that Deepwater
elects the Charter Extension Option in accordance with Section 20.2 of the
Master Charter, Deepwater may, in its sole discretion, elect to replace any
Certificate Purchaser that does not submit an offer to extend or whose
offer to extend is rejected by Deepwater by having a Replacement
Certificate Purchaser purchase such non-consenting Certificate Purchaser's
interest in accordance with this Agreement. Replacement of a Certificate
Purchaser by a Replacement Certificate Purchaser shall be accomplished in
accordance with Section 4.3 hereto.
SECTION 6.8 Excessive Use Indemnity. In the event that (a) Deepwater
elects the Return Option and (b) after paying to the Charter Trustee all
amounts due under Section 20.3 of the Master Charter, including Net Sales
Proceeds and the Residual Guaranty Amount, the Charter Trustee has not
received sufficient funds to reduce the Certificate Purchaser Balance
(excluding any Purchasing Party Amount) to zero, then Deepwater shall
deliver a report from an independent appraiser acceptable to the Required
Certificate Purchasers establishing whether or not the decline in the fair
market value of the Drillship from the anticipated fair market value of the
Drillship as of the Scheduled Charter Expiration Date in the Appraiser's
report delivered pursuant to Section 3.2(f) was due to wear and tear on the
Drillship in excess of ordinary wear and tear. Deepwater shall pay to the
Charter Trustee promptly after receipt of such report an amount equal to
the amount, if any, of the decline in the fair market value of the
Drillship that the appraiser has attributed to such excess wear and tear;
provided, however, that the amount owed by Deepwater pursuant to this
Section 6.8 shall in no event exceed the amount of funds necessary to
reduce the Certificate Purchaser Balance (excluding any Purchasing Party
Amount) to zero and to pay all accrued and unpaid Certificate Return after
Deepwater's payment of all amounts due under Section 20.3 of the Master
Charter. The appraiser's determination shall be absolute and final and not
contested by any of the parties hereto, absent manifest error.
SECTION 6.9 Letter of Credit. R&B Falcon covenants that, at all
times from the Closing Date until the twentieth (20th) Business Day
following the last day of the Charter Term, it shall maintain a Letter of
Credit in favor of the Charter Trustee (on behalf of the Certificate
Purchasers) to secure the obligations of Deepwater under the R&B Falcon
Charter in an aggregate stated amount not less than $50 million minus any
amounts then held in the Letter of Credit Collateral Account or which have
been transferred from such Letter of Credit Collateral Account to the Event
of Loss Proceeds Account or the Termination Proceeds Account in accordance
with the terms of the Depository Agreement.
In the event the issuer of any Letter of Credit ceases to be a Qualified
Bank, R&B Falcon shall not be deemed in violation of the covenant contained
in this Section if it obtains a Letter of Credit (otherwise meeting the
requirements of this Section) from a Qualified Bank within thirty (30) days
of a Responsible Officer of R&B Falcon having Actual Knowledge of such
event at which time the prior Letter of Credit shall be cancelled and
surrendered by the Charter Trustee to R&B Falcon.
Each Letter of Credit used to satisfy the obligations of R&B Falcon
under this Section shall be drawable where a demand shall have been made
under the R&B Falcon Guaranty or the R&B Falcon Drilling Contract Guaranty,
which demand shall not have been satisfied within five (5) Business Days
of the receipt thereof (the "Drawing Condition").
If any such Letter of Credit shall be drawable pursuant to the terms of
the preceding paragraph, the Certificate Purchasers hereby authorize and
require the Charter Trustee to, and the Charter Trustee shall immediately,
draw on such Letter of Credit and remit the proceeds thereof to the
Depository for deposit into the Letter of Credit Collateral Account.
SECTION 7
CERTAIN PROCEDURES
SECTION 7.1 Illegality. If after the date of this Agreement the
adoption of any Applicable Law, or any change in any Applicable Law, or in
the interpretation or administration by any central bank or other
Government Authority of any Applicable Law, has made it unlawful, or it is
asserted by any central bank or other Government Authority that it is
unlawful, for any Certificate Purchaser or its Applicable Office to make
Base Rate Advances (an "Illegality Event") then, on written notice thereof
by such Certificate Purchaser to Deepwater and the Charter Trustee, any
obligation of such Certificate Purchaser to make Base Rate Advances shall
be suspended to the extent necessary to comply with any such Applicable Law
until such Certificate Purchaser notifies the Charter Trustee and Deepwater
that such Illegality Event no longer exists.
If an Illegality Event occurs, upon written notice of such Illegality
Event from the affected Certificate Purchaser to Deepwater (with a copy to
the Charter Trustee), all Base Rate Advances of that Certificate Purchaser
then outstanding shall automatically be converted to an Alternate Rate
Advance, either on the last day of the Return Period thereof, if the
Certificate Purchaser may lawfully continue to maintain such Base Rate
Advances to such day, or immediately, if the Certificate Purchaser may not
lawfully continue to maintain such Base Rate Advance.
If the obligation of any Certificate Purchaser to make or maintain Base
Rate Advances has been terminated or suspended in accordance with this
Section 7.1, Deepwater may elect, by giving notice to such Certificate
Purchaser through the Charter Trustee or the Investment Trust that all
Advances which would otherwise be made by such Certificate Purchaser as
Base Rate Advances shall be made instead as Alternate Rate Advances.
Before giving any notice to Deepwater, the Charter Trustee or the
Investment Trust under this Section 7.1, the affected Certificate Purchaser
shall designate a different Applicable Office with respect to its Base Rate
Advances if such designation will avoid or cure the Illegality Event and
will not, in the judgment of the Certificate Purchaser, be illegal or
otherwise disadvantageous to the Certificate Purchaser.
SECTION 7.2 Increased Costs and Reduction of Return. (a) If due to
either (i) the adoption of or any change in or in the interpretation by any
Government Authority of any law or regulation or (ii) the compliance by any
Certificate Purchaser with any guideline or request from any central bank
or other Government Authority (whether or not having the force of law), any
Certificate Purchaser becomes subject to any Tax, duty or other charge
(other than Taxes for which indemnification is provided under Section 10.4)
such that there shall be any increase in the cost to any Certificate
Purchaser of agreeing to make or making, funding or maintaining any Base
Rate Advances, then, subject to Section 7.6, Deepwater shall be liable for,
and shall from time to time, upon written demand from such Certificate
Purchaser (with a copy of such demand to be sent to the Charter Trustee),
pay to the Charter Trustee for the account of such Certificate Purchaser,
additional amounts equal to the amount of such increased costs.
(b) If (i) the adoption of any Applicable Law relating to the adequacy
of the Certificate Purchaser's capital, (ii) any change in any such
Applicable Law, (iii) any change in the interpretation or administration
of any such Applicable Law by any central bank or other Government
Authority charged with the interpretation or administration thereof, or
(iv) compliance by the Certificate Purchaser (or its Applicable Office) or
any corporation controlling the Certificate Purchaser with any such
Applicable Law, affects or would affect the amount of capital required or
expected to be maintained by the Certificate Purchaser or any corporation
controlling the Certificate Purchaser such that the return on capital of
such Certificate Purchaser is reduced as a consequence of such Certificate
Purchaser's Commitment or obligations under this Agreement to a level below
that which such Certificate Purchaser could have achieved but for such
adoption or change (taking into consideration such Certificate Purchaser's
or such corporation's policies with respect to capital adequacy and such
Certificate Purchaser's reasonably expected return on capital), then upon
written notice from such Certificate Purchaser to Deepwater (with a copy
to the Charter Trustee) Deepwater shall, subject to Section 7.6, pay to the
Certificate Purchaser additional amounts sufficient to compensate the
Certificate Purchaser for such reduction in return.
(c) A Certificate Purchaser affected by a change as described in
subparagraphs (a) or (b) shall, pursuant to Section 7.6, deliver to
Deepwater and the Charter Trustee as promptly as practicable a certificate
setting forth in reasonable detail the amount actually imposed or assessed
on payments made under the Certificates in the case of the occurrence of
an event described in Section 7.2(a) or (b), setting forth in reasonable
detail such increased amounts or the amount required to compensate such
Certificate Purchaser for such reduced return and the basis for the
determination of such amounts.
SECTION 7.3 Funding Losses. Deepwater shall reimburse each
Certificate Purchaser and hold each Certificate Purchaser harmless from any
direct loss or expense (as opposed to consequential loss or expense) which
the Certificate Purchaser may sustain or incur as a consequence of: (a) the
failure of Deepwater to make on a timely basis any payment which it is
required to make under the Transaction Documents which is to be applied to
the payment of principal of any Base Rate Advance; (b) the failure of
Deepwater to accept the proceeds of any Advance; (c) the failure of
Deepwater to accept, continue or convert the proceeds of an Advance paid
to the Charter Trustee by a Certificate Purchaser after Deepwater has given
(or is deemed to have given) an Advance Request; (d) the failure of
Deepwater to make any payment which it is required to make under the
Transaction Documents which is to be applied to the prepayment of an
Advance in accordance with any notice delivered pursuant to this Agreement
or any Transaction Document; (e) the prepayment or other payment (including
after acceleration thereof) of a Base Rate Advance on a day that is not the
last day of the relevant Return Period; (f) the sale or transfer of a
Certificate pursuant to Sections 4.3, 7.7 or 9.4(a), or (g) the automatic
conversion of any Base Rate Advance to an Alternate Rate Advance on a day
that is not the last day of the relevant Return Period, including any such
loss or expense arising from the liquidation or reemployment of funds
obtained by it to maintain its Base Rate Advances or from fees payable to
terminate the deposits from which such funds were obtained. For purposes
of calculating amounts payable by Deepwater to the Certificate Purchasers
under this Section 7.3 and under Sections 2.4 and 2.8, each Base Rate
Advance made by the Certificate Purchaser (and each related reserve,
special deposit or similar requirements) shall be conclusively deemed to
have been funded at the LIBOR used in determining the Certificate Return
Rate for such Base Rate Advance by a matching deposit or other borrowing
in the interbank Eurodollar market for a comparable amount and for a
comparable period, whether or not such Base Rate Advance is in fact so
funded.
SECTION 7.4 Inability to Determine Rates. If the Charter Trustee or
the Required Certificate Purchasers determine that for any reason adequate
and reasonable means do not exist for determining the Base Rate for any
requested Return Period with respect to a proposed Base Rate Advance by
reason of any changes arising after the date of this Agreement affecting
the interbank Eurodollar market, the Charter Trustee will promptly so
notify Deepwater and each Certificate Purchaser. Thereafter, the
obligation of the Certificate Purchasers to make or maintain Base Rate
Advances hereunder shall be suspended until the Charter Trustee, upon the
instruction of the Required Certificate Purchasers, revokes such notice in
writing. Upon receipt of such notice, Deepwater may revoke any Advance
Requests then submitted by it. If Deepwater does not revoke any such
Advance Request, the Certificate Purchasers shall make, convert or continue
the Advances, as proposed by Deepwater, in the amount specified in the
applicable notice submitted by Deepwater, but such Advances shall be made,
converted or continued as Alternate Rate Advances instead of Base Rate
Advances.
SECTION 7.5 Reserves on Base Rate Advances. If after the date hereof
any Certificate Purchaser shall be required under regulations of the
Federal Reserve Board or any other applicable Government Authority to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency funds or deposits (currently known as "Eurocurrency
liabilities"), Deepwater shall pay to such Certificate Purchaser additional
costs on the unpaid principal amount of each Base Rate Advance equal to the
actual costs of such reserves maintained and allocated to such Advance by
the Certificate Purchaser, payable on each date on which interest is
payable on such Advance, provided Deepwater shall have received at least
15 days' prior written notice (with a copy to the Charter Trustee) of such
additional Certificate Return from the Certificate Purchaser. If a
Certificate Purchaser fails to give notice 15 days prior to the relevant
Payment Date, such additional Certificate Return shall be payable 15 days
from receipt of such notice.
SECTION 7.6 Certificates of Certificate Purchasers. Any Certificate
Purchaser claiming reimbursement or compensation under this Section 7 shall
deliver to Deepwater (with a copy to the Charter Trustee) a certificate
setting forth in reasonable detail the amount payable to the Certificate
Purchaser hereunder and the basis for the determination of such amount and
such certificate shall be conclusive and binding on Deepwater in the
absence of manifest error. Deepwater shall not be obligated to compensate
any Certificate Purchaser for any costs incurred more than 120 days before
the date on which such Certificate Purchaser first notifies Deepwater of
its intent to make such a claim or it notifies Deepwater of an event that
entitles it to compensation.
SECTION 7.7 Substitution of Certificate Purchasers; Change in
Applicable Office; Prepayments. Upon the receipt by Deepwater from any
Certificate Purchaser (an "Affected Certificate Purchaser") of a claim for
compensation under Section 7.2, Deepwater may: (i) request the Affected
Certificate Purchaser to use its commercially reasonable efforts to obtain
a replacement bank or financial institution satisfactory to Deepwater (a
"Substitute Certificate Purchaser") to acquire and assume all or a ratable
part of all of such Affected Certificate Purchaser's Advances and
Commitment so long as the Affected Certificate Purchaser is paid its
Certificate Purchaser Amount, accrued and unpaid Certificate Return, any
funding losses incurred by it pursuant to Section 7.3 as a result of the
substitution and any other accrued and unpaid amount owed to it by
Deepwater under the Transaction Documents; (ii) request one or more of the
other Certificate Purchasers to acquire and assume all or part of such
Affected Certificate Purchaser's Advances and Commitment; (iii) designate
a Substitute Certificate Purchaser and require the Affected Certificate
Purchaser to sell all of its interests in its Advances and Commitments to
such Substitute Certificate Purchaser for an amount equal to its
Certificate Purchaser Amount, accrued and unpaid Certificate Return, any
funding losses incurred by it pursuant to Section 7.3 as a result of the
substitution and all other accrued and unpaid amounts owed to it by
Deepwater under the Transaction Documents; (iv) request the Affected
Certificate Purchaser to designate a different Applicable Office if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not be illegal or otherwise disadvantageous to the
Affected Certificate Purchaser; or (v) make payments to the Charter Trustee
which are equal to the amounts necessary for the Charter Trustee to prepay
all or a portion of the Certificate Purchaser Amount of the Affected
Certificate Purchaser, together with accrued and unpaid Certificate Return
attributable to the amount being prepaid and any funding losses incurred
by the Affected Certificate Purchaser pursuant to Section 7.3 as a result
of the prepayment. The Affected Certificate Purchaser shall take any
commercially reasonable actions necessary to carry out a request or
election made by Deepwater in accordance with this Section 7.7 at
Deepwater's sole cost and expense. Any designation of a Substitute
Certificate Purchaser under this Section 7.7 shall be subject to the prior
written consent of the Charter Trustee which consent shall not be
unreasonably withheld, delayed or conditioned.
SECTION 7.8 Legal and Tax Representation. Deepwater acknowledges and
agrees that none of the Trustees, the Investment Trust, the Agent or any
Certificate Purchaser has made any representation or warranty concerning
the tax, accounting or legal characteristics of the Charter or any of the
other Transaction Documents, and that Deepwater has obtained and relied on
such tax, accounting and legal advice regarding the Charter and the other
Transaction Documents as its deems appropriate. Each of the Charter
Trustee, Investment Trust and each Certificate Purchaser acknowledges and
agrees that it has obtained and relied on the Transaction Documents and the
various items delivered in connection therewith, and on such tax,
accounting and legal advice regarding the Charter and the other Transaction
Documents as it deems appropriate.
SECTION 7.9 Failure of a Certificate Purchaser to Fund. If an
Advance is to be made in accordance with the terms and conditions hereof
and if the Charter Trustee determines that any Certificate Purchaser (each
such Certificate Purchaser a "Defaulting Certificate Purchaser") will not
make available all or a portion of its Commitment Percentage of such
Advance (the "Defaulted Amount"), the Charter Trustee shall promptly so
notify Deepwater and each other Certificate Purchaser (each, a "Non-
Defaulting Certificate Purchaser") and shall specify the additional amounts
required to be funded by each such Non-Defaulting Certificate Purchaser
pursuant to this Section 7.9. Each such Non-Defaulting Certificate
Purchaser as soon as practical after receipt of notice but not before the
Advance Date, shall transfer to the Charter Trustee and the Investment
Trust, as applicable, in immediately available funds, its pro rata share
of the Defaulted Amount, determined in the same proportion that such Non-
Defaulting Certificate Purchaser's Commitment bears to the aggregate
Commitments of all such Non-Defaulting Certificate Purchasers; provided,
that such amount, together with all amounts previously funded by each such
Non-Defaulting Certificate Purchaser, shall not exceed such Non-Defaulting
Certificate Purchaser's Commitment; provided, further, that any funds
advanced to the Investment Trust by any Certificate Purchaser pursuant to
this Section 7.9 shall be advanced to the Charter Trustee. If the
Defaulted Amount cannot be fully funded by the Non-Defaulting Certificate
Purchasers, the Charter Trustee shall so notify Deepwater and the Non-
Defaulting Certificate Purchasers and give to all such Non-Defaulting
Certificate Purchasers the opportunity to increase their respective
Commitments by notice in writing to the Charter Trustee; provided, that
should the aggregate proposed increased Commitments by one or more Non-
Defaulting Certificate Purchasers exceed the Defaulted Amount, the Charter
Trustee shall increase the Commitments of the participating Non-Defaulting
Certificate Purchasers on a pro-rata basis in accordance with the
respective amounts by which such Non-Defaulting Certificate Purchasers have
offered to participate, it being understood that in no event shall the
aggregate amount funded by any Certificate Purchaser exceed the amount of
such Certificate Purchaser's Commitment after giving effect to any increase
in such Commitment pursuant to this sentence. If the Non-Defaulting
Certificate Purchasers do not increase their commitments by an amount
sufficient to fund the entire Defaulted Amount, then Deepwater shall have
the right to elect to fund any such shortfall and shall thereafter be
deemed to be a Certificate Purchaser for all purposes of the Transaction
Documents and shall be entitled to receive yield on the amount so funded
in an amount equal to the applicable Certificate Return; provided, however,
that Deepwater shall not be deemed to be a Certificate Purchaser for
purposes of the definitions of "Required Certificate Purchasers" or
"Majority Certificate Purchasers".
In the event of any funding of all or a portion of the Defaulted Amount
by the Non-Defaulting Certificate Purchasers, the following rules shall
apply notwithstanding any other provision in any Transaction Document:
(i) The Commitment of the Defaulting Certificate Purchaser shall
be decreased in an amount equal to the total aggregate increase, if any,
in the Commitments of the Non-Defaulting Certificate Purchasers pursuant
to this Section 7.9 and the Commitment Percentages of the Certificate
Purchasers shall be revised accordingly; provided, that nothing shall
preclude any party from pursuing any rights or remedies it may have
against the Defaulting Certificate Purchaser in connection with its
failure to make an Advance;
(ii) [Intentionally Omitted];
(iii) A Defaulting Certificate Purchaser shall not have the
right to fund its Defaulted Amount without the written consent of
Deepwater and then only to the extent such Defaulted Amount has not been
funded by the Non-Defaulting Certificate Purchasers in a manner that
resulted in a decrease in such Defaulting Certificate Purchaser's
Commitment Percentage;
(iv) If and to the extent that the Defaulted Amount is not funded
in full by the Non-Defaulting Certificate Purchasers, the Charter
Trustee, after providing written notice thereof to Deepwater, may delete
funds from the Advance Request so that the total Advance specified in
the Advance Request equals the aggregate revised fundings for the
Advance Date and shall so notify all Certificate Purchasers thereof; and
(v) The Non-Defaulting Certificate Purchasers shall not be
responsible for any damages suffered by Deepwater or any of Deepwater's
Affiliates as a result of the Defaulting Certificate Purchaser's failure
to so fund. The Defaulting Certificate Purchasers shall not be
responsible for any consequential or special damages suffered by
Deepwater or any of Deepwater's Affiliates as a result of its failure to
fund.
SECTION 8
PAYMENT OF CERTAIN EXPENSES
SECTION 8.1 Transaction Expenses. If the transactions contemplated
by this Agreement to occur on the Closing Date are consummated, Deepwater
shall pay promptly all Transaction Expenses incurred in connection with the
negotiation, execution and delivery of this Agreement and the other
Transaction Documents on the Closing Date and the consummation of the other
transactions contemplated hereby and thereby to occur on (or in connection
with) the Closing Date or Delivery Date as and when they become due.
Deepwater may pay any such Transaction Expenses out of the proceeds of
Advances made available to Deepwater in accordance with Section 2. Any
Transaction Expenses submitted to Deepwater which were not paid on the
Closing Date shall be paid by Deepwater promptly after receipt of an
invoice therefor.
SECTION 8.2 Transaction Expenses if Closing does not Occur. If the
transactions contemplated by this Agreement to occur on the Closing Date
are not consummated for any reason Deepwater shall promptly pay all of the
Transaction Expenses submitted to Deepwater as they become due.
SECTION 8.3 On-Going Expenses. Deepwater shall, promptly upon
demand, pay or reimburse the Charter Trustee, the Investment Trust, the
Certificate Purchasers, the Agent or the other Persons entitled thereto for
all other out-of-pocket expenses (including counsel fees) reasonably
incurred in connection with: (a) entering into, or the giving or
withholding of, any future amendments, supplements, waivers or consents
with respect to the Transaction Documents, to the extent required by the
terms of the Transaction Documents, the Head Lease Documents, the Services
Agreements, the Drilling Contracts, the Rig Sharing Agreement or the
Drilling Contract Guaranties, or requested or consented to by Deepwater
(whether or not consummated); (b) the negotiation and documentation of any
restructuring or "workout" whether or not consummated, of any Transaction
Document to the extent requested or consented to by Deepwater; (c) the
enforcement, attempted enforcement or preservation of the rights or
remedies under the Transaction Documents, the Services Agreements, the
Drilling Contracts, the Rig Sharing Agreement or the Drilling Contract
Guaranties; (d) further assurances requested by Deepwater pursuant to
Section 12.11; (e) any transfer by the Charter Trustee, the Investment
Trust or any Certificate Purchaser of any interest in the Transaction
Documents during the continuance of an Event of Default; (f) the ongoing
fees (if any) and expenses of the Agent, the Trustees and the Depository
pursuant to separate agreements entered into by Deepwater with such
Persons; and (g) the costs and expenses associated with the Delivery Date
or the Advance Date, including fees and expenses of U.S. and Panamanian
counsel, recordation and recording fees and all other out-of-pocket
expenses of the parties hereto in connection with the Delivery Date and the
transactions contemplated herein (provided, that Deepwater shall only be
responsible for fees and expenses of one U.S. counsel and one Panamanian
counsel for all of the Certificate Purchasers, the Agent, the Trustees and
the Investment Trust).
SECTION 9
RESTRICTIONS ON TRANSFERS; CHANGE OF CONTROL
SECTION 9.1 Restrictions on the Certificate Purchasers. A
Certificate Purchaser, including a Purchasing Party, may transfer all or
a portion of its interest in its Series A Trust Certificates and its
Investment Trust Certificates in the following circumstances: (i) in the
case of a Certificate Purchaser that is not a Purchasing Party, such
Certificate Purchaser obtains the prior written consent of Deepwater and
transfers to a transferee that has executed an Assignment and Assumption
Agreement in substantially the form of Exhibit R hereto, by which such
transferee assumes the duties and obligations of the transferring
Certificate Purchaser under the Transaction Documents and (ii) in the case
of any Certificate Purchaser, including any Purchasing Party, such Person
transfers all or a portion of its interest in its Series A Trust
Certificates and its Investment Trust Certificates and the following
conditions are satisfied:
(a) such transfer is in respect of an aggregate outstanding Certificate
Purchaser Amount at least equal to the lesser of $5,000,000 and such
Certificate Purchaser's then outstanding Certificate Purchaser Amount;
(b) if the transferee is an Affiliate of a Certificate Purchaser and
does not otherwise qualify under clause (c) below, such Certificate
Purchaser has unconditionally and irrevocably guaranteed the payment and
performance obligations of the transferee;
(c) if the transferee is an Affiliate of a Certificate Purchaser, such
transferee has a capital and surplus of at least $250 million or a tangible
net worth at least equal to $100 million; or
(d) if the transferee is not an Affiliate of a Certificate Purchaser,
the transferee, or a party unconditionally and irrevocably guaranteeing the
payment and performance obligations of the transferee pursuant to a
guaranty in form and substance satisfactory to Deepwater, meets the
following criteria:
(i) the transferee or guarantor has a capital and surplus of at
least $400 million or a net worth of at least $150 million;
(ii) each of the transferee and the guarantor of the payment and
performance obligations of the transferee, if any, is an institutional
investor;
(iii) Deepwater, Conoco and R&B Falcon have not previously been
involved in material litigation with the proposed transferee or
guarantor, if any, and are not currently involved in material litigation
proceedings with the proposed transferee or guarantor, if any;
(iv) on the date of such transfer the transferee provides evidence
satisfactory to Deepwater that it is not subject to or is exempt from
United States withholding taxes;
(v) neither such transferee nor any of its Affiliates is a
Competitor; and
(vi) on the date of such transfer, the transferee certifies, in
writing, that no facts exist that would permit such transferee to make
a claim against Deepwater for increased costs, indemnities or other
additional amounts under Section 7.
Any transfer of an interest in a Series A Trust Certificate or an
Investment Trust Certificate by a Certificate Purchaser in violation of the
foregoing restrictions shall be null and void, and the transferor and any
guarantor thereof shall remain liable under the Transaction Documents. A
Certificate Purchaser that intends to transfer an interest in its Series
A Trust Certificates or Investment Trust Certificates (including a sale of
a participation in any such Certificate pursuant to Section 3.8(h) of the
Trust Agreement or Section 3.8(h) of the Investment Trust Agreement,
respectively, or a pledge thereof) must transfer the same percentage
interest in both its Series A Trust Certificates and Investment Trust
Certificates together to the same purchaser or transferee in a single
transaction.
Notwithstanding any other provision in this Section 9.1, any Certificate
Purchaser may at any time create a security interest in, or pledge, all or
any portion of its rights under its Investment Trust Certificate and its
Series A Trust Certificate, together with the rights evidenced by such
certificates, in favor of any Federal Reserve Bank in accordance with
Regulation A of the FRB or U.S. Treasury Regulation 31 C.F.R. Section
203.14, and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under Applicable Law.
SECTION 9.2 Restrictions on Trustees. The Charter Trustee shall not
resign as Charter Trustee and the Investment Trustee shall not resign as
Investment Trustee, unless and until a successor has been appointed which
is a Person who has agreed to act as Charter Trustee or Investment Trustee,
as applicable, and is reasonably acceptable to Deepwater.
SECTION 9.3 Expenses. All reasonable and documented costs and
expenses (including counsel fees and disbursements) of the parties thereto
in connection with any transfer permitted by Sections 9.1 or 9.2 shall be
the responsibility of the transferor.
SECTION 9.4 Change of Control.
(a) If a Prepayment Change of Control Trigger Event occurs, (i) the
Person suffering such Prepayment Change of Control Trigger Event must
notify, within ten (10) days of the occurrence such event, each Certificate
Purchaser and the Charter Trustee of the occurrence of such Prepayment
Change of Control Trigger Event and (ii) each Certificate Purchaser shall
have the right, by written notice (the "Prepayment Notice") delivered to
Deepwater, the relevant Purchasing Party, the Charter Trustee and the
Investment Trust within 10 days of receipt of the notice specified in (i)
above, to require such Purchasing Party to purchase the selling Certificate
Purchaser s Conoco Certificates (where Conoco is the Purchasing Party) or
R&B Falcon Certificates (where R&B Falcon is the Purchasing Party) on a
date set forth in the Prepayment Notice which shall be no more than 7
Business Days from the delivery of the Prepayment Notice to the Purchasing
Party. On the date set forth in the Prepayment Notice, the Purchasing
Party shall make payments to the Charter Trustee in its individual
capacity, as agent for the Purchasing Party, which will remit such amounts
to the selling Certificate Purchaser(s) in an aggregate amount equal to (i)
where R&B Falcon is Purchasing Party, in exchange for the R&B Falcon
Certificates of such Certificate Purchaser, the outstanding principal
balance of the R&B Falcon Certificates of such Certificate Purchaser,
together with the accrued and unpaid Certificate Return thereon and any
funding losses incurred by such Certificate Purchaser pursuant to Section
7.3 as a result of the prepayment of such R&B Falcon Certificates and (ii)
where Conoco is Purchasing Party, in exchange for the Conoco Certificates
of such Certificate Purchaser, the outstanding principal balance of the
Conoco Certificates of such Certificate Purchaser, together with the
accrued and unpaid Certificate Return thereon and any funding losses
incurred by such Certificate Purchaser pursuant to Section 7.3 as a result
of the prepayment of such Conoco Certificates (the amounts specified in
clauses (i) and (ii) each being, respectively, the "Change of Control
Prepayment Amount"). The Purchasing Party shall make payment to the
Charter Trustee in its individual capacity, in immediately available funds,
in the amount of the Change of Control Prepayment Amount. Upon receipt of
such payment from the Purchasing Party, the Charter Trustee, as agent for
the Purchasing Party, shall pay the Series A Portion of the Change of
Control Prepayment Amount to the Certificate Purchaser requiring prepayment
pursuant to this Section 9.4 and shall pay the Investment Portion of the
Change of Control Prepayment Amount to the Investment Trust, which, in
turn, shall pay the Investment Portion of the Change of Control Prepayment
Amount to such Certificate Purchaser.
The Commitments and any outstanding Certificate Purchaser Amounts of any
Purchasing Party receiving its interest in the Certificates pursuant to
this Section 9.4(a) shall not be counted in determining any actions which
require the vote of the "Majority Certificate Purchasers" or "Required
Certificate Purchasers," nor shall a Purchasing Party, to the extent its
interest is acquired pursuant to this Section 9.4, be considered a
Certificate Purchaser for purposes of any voting provisions of the
Transaction Documents. In addition, a Purchasing Party, to the extent it
receives its interest in the Certificates pursuant to this Section 9.4(a),
shall not be considered a "Certificate Purchaser" for the purposes of
receiving distributions under the Depository Agreement but shall instead
receive payments thereunder in respect of the Purchased Interest only as
a "Purchasing Party" thereunder. As a point of clarification only, except
to the extent provided above, the outstanding Certificate Purchaser Amounts
relating to the Certificates purchased by the Purchasing Party shall
continue to be deemed "Certificate Purchaser Amounts" and shall be included
as a part of the Certificate Purchaser Balance and, as such, shall be
included in the calculation of any Purchase Option Price, Termination
Value, Residual Guaranty Amount, or other amount having the Certificate
Purchaser Balance as a component thereof. The foregoing restrictions and
limitations with respect to voting rights and the receipt of distributions
under the Depository Agreement are applicable only in so far as the
Purchasing Party (or any of its Affiliates) remains the holder of such
Purchased Interest. Any transferee of a Purchasing Party (other than a
transferee which is, or is an Affiliate of, Conoco, R&B Falcon or
Deepwater) of its Purchased Interest shall become a "Certificate Purchaser"
for all purposes under the Transaction Documents, shall not be deemed to
be a "Purchasing Party" and shall not be subject to any such restrictions
or limitations not otherwise applicable to a Certificate Purchase.
Transferees which are Affiliates of Conoco, R&B Falcon or Deepwater
following the transfer of all or any portion of a Purchased Interest shall
be deemed to be Purchasing Parties to the extent of the interest
transferred.
If either Conoco or R&B Falcon is required to purchase all of the then
outstanding Conoco Certificates or R&B Falcon Certificates, respectively,
held by the Certificate Purchasers (excluding any Purchasing Party) then
the following events shall automatically be deemed to have occurred
immediately after such purchases:
(i) the Rig Sharing Agreement and (a) if R&B Falcon is the Purchasing
Party, the R&B Falcon Charter, the R&B Falcon Drilling Contract and
the R&B Falcon Drilling Contract Guaranty shall terminate or (b) if
Conoco is the Purchasing Party, the Conoco Charter, the Conoco
Drilling Contract and the Conoco Drilling Contract Guaranty shall
terminate;
(ii) the non-purchasing party will be treated as having entered into a
subcharter, substantially in the form attached hereto as Exhibit V,
with the Purchasing Party imposing on the Purchasing Party the
same obligations it had under the terminated Drilling Contract and
Rig Sharing Agreement;
(iii) the non-purchasing party shall have the right to exclusive
possession of the Drillship for the remainder of the Charter
Term; and
(iv) The obligations of such Purchasing Party listed in Sections
2(a)(i)(x)(A), 2(a)(i)(y)(A), 2(a)(ii)(A)(1), 2(a)(ii)(B)(1),
2(a)(vi) and 2(a)(v) of (a) the R&B Falcon Guaranty, if R&B Falcon
is the Purchasing Party or (b) the Conoco Guaranty, if Conoco is
the Purchasing Party, shall be terminated.
The rights and obligations imposed under this Section 9.4(a) shall at all
times be subject to the Special Purchase Right of Deepwater pursuant to
Section 16.4 of the Master Charter.
(b) If a Pricing Change of Control Trigger Event occurs, the
Certificate Return Rate used to determine Basic Hire due with respect to
Charter Supplement No. 1 shall increase effective as of the date of such
Pricing Change of Control Trigger Event (with such increase to be based on
the rating of R&B Falcon or the Acquiror of R&B Falcon, and in the case of
ratings that are not equivalent, the lower of the two ratings) in
accordance with the following schedule:
Credit Rating of R&B Falcon Increase of Certificate Return
or Acquiror of R&B Falcon Rate
Greater than or equal to no change
Ba1/BB+
Less than or equal to Ba2/BB additional 25 basis points
(c) If a Pricing Change of Control Trigger Event occurs and the
Certificate Return Rate has been increased as set forth in Section 9.4(b),
in the event that R&B Falcon or the Acquiror of R&B Falcon at any time
thereafter obtains upgraded ratings of at least Baa3 from Moody's and at
least BBB- from S&P, then the Certificate Return Rate used to calculate
Basic Hire under Charter Supplement No. 1 shall be adjusted downward to the
Certificate Return Rate that would have been in effect on the date such
upgraded ratings were released to the public as if no Pricing Change of
Control Trigger Event had ever occurred. Such decrease in the Certificate
Return Rate, subject to any adjustments under Section 2.4(c) hereof, if
any, shall be effective as of the first day of the Return Period which next
succeeds the date of such adjustment.
SECTION 10
INDEMNIFICATION
SECTION 10.1 General Indemnity. Deepwater hereby agrees to indemnify,
on an After-Tax Basis, each of the Trustees (in their trust and individual
capacities, respectively), the Investment Trust, the Certificate
Purchasers, the Depository, the Agent (in their agent and individual
capacities), the Hedging Agreement Counterparties (if any) and their
respective officers, directors, employees, agents and Affiliates (each an
"Indemnified Party" and, collectively, the "Indemnified Parties") from and
against any and all claims, damages, losses, liabilities, demands, suits,
judgments, causes of action, legal proceedings, whether civil or criminal,
penalties, fines and other sanctions, and any reasonable and documented
costs and expenses in connection with any of the foregoing ( Claims ),
which may be asserted against such Indemnified Party arising out of:
(a) the condition, ownership, construction, purchase, delivery,
nondelivery, subcharter, charter, acceptance, rejection, possession,
return, abandonment, disposition, use or operation of the Drillship;
(b) any defect in the Drillship arising from the material or any
articles used therein or from the design, testing, or use thereof or from
any maintenance, service, repair, overhaul or testing of the Drillship;
(c) any failure by Deepwater or either Member to perform or observe any
covenant, condition or agreement contained in any of the Transaction
Documents, or the falsity of any of Deepwater's or either Member's
representations and warranties;
(d) the transactions contemplated by the Transaction Documents;
(e) any Environmental Claims arising from or relating to the
construction, use, operation, ownership, maintenance, chartering or return
of the Drillship;
(f) the exercise by such Indemnified Party of remedies in the event of
a default under the Transaction Documents and the enforcement of any
security or other rights with respect thereto;
(g) any violation of Applicable Law by Deepwater or a Member with
respect to the transactions contemplated by the Transaction Documents;
(h) any Liens which Deepwater or any Member is required to remove; or
(i) any obligation asserted to be owed by the Indemnified Party under
any Assigned Contract as a result of the assignment of such Assigned
Contract pursuant to the Deepwater Assignment.
SECTION 10.2 General Indemnity Exclusions. Notwithstanding the
provisions of Section 10.1, Deepwater shall not be obligated to indemnify
an Indemnified Party under Section 10.1 for any Claim that is attributable
to any of the following:
(a) acts, events or circumstances occurring after the expiration or
earlier termination of the Charter and the return of the Drillship, when
required in accordance with the Charter;
(b) Taxes, loss of tax benefits and the cost and expense of tax
controversies (whether or not indemnified by Deepwater under Section 10.4
and other provisions of the Transaction Documents) (except (A) Taxes,
penalties, interest or charges of any nature whatsoever to the extent
necessary to make any required payment on an After Tax Basis, (B) Taxes
that are governmental charges incidental to any Government Action or
proceeding that is in the nature of court costs, filing fees, recording
fees, postage, stamps, duties, license fees and other similar charges);
(c) increased costs, losses or expenses for which compensation is
provided under Sections 2.8, 2.14, 6.8, 7.1, 7.2, 7.3, 7.4, 7.5, 8.1, 8.2,
8.3, 9.3 and 9.4;
(d) the gross negligence, willful misconduct or breach of any covenant,
representation or warranty under any Transaction Document by such
Indemnified Party to the extent that such Claim arises out of or is caused
by an act, misrepresentation, breach or omission of such Indemnified Party
where such act, misrepresentation, breach or omission (x) is in breach or
violation of the express covenants, representations or warranties of such
Indemnified Party under the Transaction Documents, (y) constitutes gross
negligence or willful misconduct of such Indemnified Party (other than
gross negligence or willful misconduct imputed as a matter of law to such
Indemnified Party solely by reason of entering into the Transaction
Documents or consummation of the transactions contemplated thereby) or (z)
is in violation of any Applicable Law and such violation causes such Claim;
(e) transfers (direct or indirect) by: (i) the Charter Trustee or the
Investment Trust of either of their interests in the Drillship or any
portion thereof (other than any such transfer pursuant to Sections 15.2,
16.4, 20.1 or 20.3 of the Master Charter, Sections 4.2 or 4.4 of either
Charter Supplement No. 1 or Charter Supplement No. 2 or (ii) a Certificate
Purchaser of all or any portion of its interest in the Trust Estate, the
Investment Trust or the Transaction Documents, other than a transfer upon
an exercise of remedies after a Charter Event of Default has occurred and
is continuing and either Charter Supplement No. 1 or Charter Supplement No.
2 has been declared in default;
(f) any amount for which such Indemnified Party has agreed to make
payment without a right of reimbursement from Deepwater;
(g) any Claim resulting from the imposition of any Lien which such
Indemnified Party is responsible for or is required to lift and discharge;
(h) any Claim arising out of or related to an inspection of the
Drillship by or on behalf of an Indemnified Party, unless at the time of
such inspection a Charter Event of Default has occurred and is continuing
or unless and to the extent such Claim arises from the gross negligence or
willful misconduct of Deepwater or its agents; and
(i) any Claim for an amount of Basic Hire, Termination Value,
Certificate Return, Certificate Purchaser Balance, Residual Guaranty
Amount, or Postponement Yield, or an amount due under the Deepwater Hedging
Agreements or the Hedging Agreements.
SECTION 10.3 Proceedings in Respect of Claims. With respect to any
amount that Deepwater is requested by an Indemnified Party to pay by reason
of Section 10.1, such Indemnified Party shall, if so requested by Deepwater
and prior to any payment, submit such additional information to Deepwater
as Deepwater may reasonably request and which is in the possession of such
Indemnified Party to substantiate properly the requested payment. In case
any action, suit or proceeding shall be brought against any Indemnified
Party in respect of any Claim, such Indemnified Party shall notify
Deepwater of the commencement thereof, and Deepwater shall be entitled, at
its expense, to participate in, and, to the extent that Deepwater desires
to, assume and control the defense thereof; provided, however, that
Deepwater shall have acknowledged in writing its obligation to indemnify
such Indemnified Party in respect of such action, suit or proceeding under
Section 10.1, such acknowledgment to be conditioned on the accuracy,
timeliness and completeness of the information provided to Deepwater by
such Indemnified Party with respect to the Claim; and, provided further,
that Deepwater shall not be entitled to assume and control the defense of
any such action, suit or proceeding if and to the extent that, (A) in the
reasonable opinion of such Indemnified Party (x) such action, suit or
proceeding involves any possibility of imposition of criminal liability or
any material risk of material civil liability on such Indemnified Party or
(y) the control of such action, suit or proceeding would involve a conflict
of interest (in which case each Indemnified Party may retain separate
counsel at the expense of Deepwater), (B) such proceeding involves Claims
not indemnified by Deepwater which Deepwater and the Indemnified Party have
been unable to sever from the indemnified claim(s), or (C) an Event of
Default has occurred and is continuing. Deepwater shall keep such
Indemnified Party fully apprised of the status of such action, suit or
proceeding and shall provide such Indemnified Party with all information
with respect to such action suit or proceeding as such Indemnified Party
shall reasonably request. The Indemnified Party may participate in a
reasonable manner at its own expense and with its own counsel in any
proceeding conducted by Deepwater in accordance with the foregoing.
No Indemnified Party shall enter into any settlement or other compromise
with respect to any Claim which is entitled to be indemnified under Section
10.1 without the prior written consent of Deepwater, which consent shall
not be unreasonably withheld, unless such Indemnified Party waives its
right to be indemnified under Section 10.1 with respect to such Claim.
Upon payment in full of any Claim by Deepwater pursuant to Section 10.1
to or on behalf of an Indemnified Party, Deepwater, without any further
action, shall be subrogated to any and all claims that such Indemnified
Party may have relating thereto to the extent of such payment, and such
Indemnified Party shall execute such instruments of assignment and
conveyance, evidence of claims and payment and such other documents,
instruments and agreements as may be reasonably necessary to preserve any
such claims and otherwise cooperate with Deepwater and give such further
assurances as are reasonably necessary or advisable to enable Deepwater
vigorously to pursue such claims.
Any amount payable to an Indemnified Party pursuant to Section 10.1
shall be paid to such Indemnified Party promptly upon receipt of a written
demand therefor from such Indemnified Party accompanied by a written
statement describing in reasonable detail the basis for such indemnity and
the computation of the amount so payable.
SECTION 10.4 General Tax Indemnity. (a) Without regard to any of the
exclusions set forth in Section 10.4(b), if any amount payable by Deepwater
as Charter Hire (or by the Charter Trustee to the Investment Trust or any
Certificate Purchaser) under the Transaction Documents or otherwise payable
by Deepwater under the Head Lease Documents becomes subject to any Tax
imposed by way of withholding at the source, Deepwater shall hold harmless
the Indemnified Party against such Tax, and, if such withholding is
required, shall, at the same time that any such payment is due and payable,
either (i) pay such Tax directly to the appropriate taxing authority, (ii)
indemnify such Person for such Tax, or (iii) pay an additional amount, such
that the net amount actually received by each Indemnified Party entitled
thereto, free and clear of, and without deduction for, any and all Taxes
imposed by withholding will equal the amount then due absent such
withholding and shall pay any additional Taxes payable in respect of such
payment, indemnity or additional amount, as the case may be, by each
Indemnified Party. In the event Deepwater is required to make any payment
or indemnity pursuant to this paragraph in respect of withholding Taxes on
any payment made to any Indemnified Party, Deepwater shall not be treated
as responsible for such withholding Taxes (1) if such withholding Taxes
would not have been imposed but for (x) the failure of the Indemnified
Party or a Related Indemnified Party to be incorporated in the United
States or any state in the United States (it being understood that, for
this purpose, the Charter Trust shall not be treated as failing to be
incorporated in the United States or any state in the United States merely
as a result of the organization of the Charter Trust under the laws of
Panama) or (y) the amount payable to such Indemnified Party being
attributable to a permanent establishment of the Indemnified Party or a
Related Indemnified Party in any jurisdiction other than the United States
(unless such permanent establishment results solely from the location of
all or any part of the Drillship in, such jurisdiction) (it being
understood that, for this purpose, amounts payable to the Charter Trustee
shall not be treated as attributable to a permanent establishment of the
Charter Trust in Panama merely as a result of the organization of the
Charter Trust under the laws of Panama and/or the making of payments and
the performance of its obligations by the Charter Trustee in accordance
with, and as contemplated by, the Transaction Documents ("Permitted Charter
Trustee Acts")), (2) if such withholding Tax results from a breach of any
covenant or undertaking in Section 10.4(i) of such Indemnified Party or any
of its Related Indemnified Parties, (3) with respect to any such Tax
imposed in respect of any transferee of such Indemnified Party to the
extent of the excess of such Taxes over the amount of such Taxes that would
have been imposed and indemnified hereunder had such original Indemnified
Party from which such Indemnified Party derives its interest not sold,
assigned, transferred or otherwise disposed of all or a portion of its
interest in the Drillship or Transaction Documents (unless such transferee
acquired its interest pursuant to the transferor's exercise of remedies),
(4) if such withholding Tax results from (x) the gross negligence, willful
misconduct or fraud of such Indemnified Party or any of its Related
Indemnified Parties or (y) the inaccuracy or breach of a representation,
warranty, covenant or any undertaking of such Indemnified Party or any of
its Related Indemnified Parties, (5) if such withholding Taxes are imposed
by a taxing authority of or in a country other than the United States or
Panama and would not have been imposed but for activities, property or
operations of the Indemnified Party or any of its Related Indemnified
Parties that are unrelated to the transactions contemplated by the
Transaction Documents, or (6) if such withholding Taxes are imposed by a
taxing authority in Panama as a result of the Indemnified Party's (or a
Related Indemnified Party's) direction that Deepwater make payments to an
account located in Panama (except if such direction is made while an Event
of Default exists). If, for any reason, Deepwater is required to make any
payment to an Indemnified Party or to a taxing authority on behalf of any
Indemnified Party pursuant to this Section 10.4(a) with respect to, or as
a result of, any withholding Tax imposed with respect to any payment of
Charter Hire by Deepwater (or by the Charter Trustee to the Investment
Trust or any Certificate Purchaser) pursuant to the Transaction Documents
or other payment by Deepwater under the Head Lease Documents, which
withholding Tax is not the responsibility of Deepwater under this Section
10.4(a), then such Indemnified Party shall pay to Deepwater on written
demand an amount which equals on an After-Tax Basis such additional amount
paid by Deepwater with respect to, or as a result of, such withholding Tax
plus interest at (i) the Certificate Return Rate during the period
commencing on the date Deepwater shall have paid an amount pursuant to the
first sentence of this paragraph and ending on the date Deepwater demands
in writing payment of such amount pursuant to this sentence and (ii) the
Overdue Rate from the period commencing five Business Days following the
date Deepwater shall have demanded in writing such payment to the date
Deepwater actually receives such payment.
(b) Except as provided in Section 10.4(a) and 10.4(c) hereof, Deepwater
agrees to indemnify, defend and hold harmless on an After-Tax Basis each
Indemnified Party against any and all Taxes, imposed against or payable by,
or imposed on payments to or from, Deepwater or any Indemnified Party, or
imposed against all or any part of, or interest in, the Drillship by any
federal, state or local taxing authority of or within the United States and
by any jurisdiction outside of the United States if the Drillship or
Deepwater is located in such jurisdiction, upon or with respect to or in
connection with, based upon or measured by, in whole or in part:
(i) the Drillship or any part thereof or interest therein;
(ii) the manufacture, purchase, financing, refinancing, ownership,
delivery, redelivery, transport, location, leasing, subleasing,
possession, registration, use, operation, condition, maintenance,
repair, return, abandonment, preparation, storage, transfer of title,
sale, acceptance, importation, exportation, rejection or other
disposition of or action or event with respect to the Drillship or any
part thereof or interest therein;
(iii) the hire, receipts, income or earnings arising from the
purchase, financing, ownership, delivery, redelivery, leasing,
subleasing, possession, use, operation, return, storage, transfer of
title, sale or other disposition of the Drillship or any part thereof or
interest therein;
(iv) the Advances, Certificates, their issuance, modification,
refinancing or acquisition, or the payments of any amounts thereon or
with respect thereto;
(v) the Transaction Documents or the Head Lease Documents or
amendments or supplements thereto, their execution or the transactions
contemplated thereby or any proceeds or payments under any thereof; or
(vi) otherwise with respect to or in connection with the
transactions contemplated or effected by or resulting from the
Transaction Documents or the Head Lease Documents or the exercise of
rights and remedies thereunder or the enforcement thereof.
(c) Exclusions. Except as provided in Section 10.4(a), the indemnity
provided for in Section 10.4(b) above shall not apply to any of the
following:
(i) Taxes (other than Taxes that are sales, use or rental Taxes)
imposed by the United States federal government on, based on, or
measured by or with respect to the gross or net income, or gross or net
receipts or that are in the nature of, or are imposed with respect to,
capital, net worth, excess profits, accumulated earnings, capital gains,
franchise or conduct of business of such Indemnified Party; provided,
that this Section 10.4(c)(i) shall not be interpreted to exclude any
amounts necessary to make any payment on an After-Tax Basis;
(ii) Taxes imposed by (x) any state or local taxing authority in
the United States (other than Taxes that are sales, use, rental, stamp,
property (tangible or intangible) or similar Taxes imposed as a result
of a Deepwater Person's activities in (including being incorporated in,
or making payments from), or the location of the Drillship or any
portion thereof in, such state or local jurisdiction) or (y) any
jurisdiction outside of the United States other than any Taxes imposed
as a result of a Deepwater Person's activities in (including being
incorporated in, having a permanent establishment or other residence in,
or making payments from), or the location of the Drillship or any
portion thereof in, such jurisdiction outside of the United States or
Taxes imposed by Panama merely as a result of the organization of the
Charter Trust under the laws of Panama and/or the performance by the
Charter Trustee of Permitted Charter Trustee Acts; provided, that this
Section 10.4(c)(ii) shall not be interpreted to exclude any amounts
necessary to make any payment on an After-Tax Basis;
(iii) Taxes imposed on or against or payable by such
Indemnified Party to the extent of the excess of such Taxes over the
amount of such Taxes that would have been imposed and indemnified
hereunder had there not been a transfer by the original Indemnified
Party (from which such Indemnified Party derives its interest) of any
interest in the Drillship, the Certificates, the Trust Estate, the
Investment Trust, any Indemnified Party or the Transaction Documents or
the Head Lease Documents; except (x) if such transferee acquired its
interest in connection with the exercise of remedies with respect to a
Charter Event of Default or (y) to the extent necessary to make
indemnity payments to the transferee on an After-Tax Basis;
(iv) Taxes imposed with respect to any period (except during the
exercise of remedies pursuant to the Charter in connection with the
occurrence and continuance of a Charter Event of Default) more than one
year after the expiration or earlier termination of the Charter and,
where required, the return of the Drillship pursuant to Section 20.3 of
the Master Charter (but not to the extent attributable to events
occurring on or prior to such date);
(v) Taxes resulting from (x) the gross negligence, willful
misconduct or fraud of the Indemnified Party or any of its Related
Indemnified Parties (except as solely attributed to such Party by virtue
of its having executed the Transaction Documents), (y) the inaccuracy or
breach of a representation, warranty or covenant under the Transaction
Documents or the Head Lease Documents or any undertaking required by the
Transaction Documents or the Head Lease Documents of such Indemnified
Party or any of its Related Indemnified Parties (unless such inaccuracy
or breach is caused by Deepwater's breach of any representation,
warranty or covenant under the Transaction Documents or a breach by
Deepwater or an Affiliate of Deepwater under the Head Lease Documents),
or (z) in the case of any Indemnified Party, any Liens attributable to
such Indemnified Party or a Related Indemnified Party;
(vi) Taxes that result from (x) a voluntary transfer or other
voluntary disposition by the Indemnified Party or a Related Indemnified
Party of all or any portion of its interest in the Drillship, the Trust
Estate, the Investment Trust, any Indemnified Party, the Certificates,
the Transaction Documents or the Head Lease Documents (other than a
transfer or disposition resulting from (A) any Charter, substitution, or
maintenance of, or any modification to the Drillship or any portion
thereof, (B) Deepwater's exercise of any purchase or termination option,
(C) an Event of Loss or (D) the exercise of remedies under the Charter
following a Charter Event of Default) or (y) an involuntary transfer or
other involuntary disposition by the Indemnified Party or a Related
Indemnified Party of all or any part of an interest in the Drillship,
the Trust Estate, the Investment Trust, any Indemnified Party, the
Certificates, the Transaction Documents or the Head Lease Documents
(other than any such transfer or disposition that occurs while an Event
of Default has occurred and is continuing) in connection with any
bankruptcy or other proceeding for the relief of debtors in which an
Indemnified Party is the debtor or any foreclosure by a creditor of an
Indemnified Party that is in each case unrelated to the transactions
contemplated by the Transaction Documents or the Head Lease Documents;
(vii) Taxes imposed on the Charter Trustee in its individual
capacity with respect to any fees received by or payable to the Charter
Trustee for services rendered;
(viii) Taxes that would not have been imposed but for an
amendment to any Transaction Document or Head Lease Document not
requested or consented to or acquiesced in by Deepwater in writing,
other than any amendment (A) that may be necessary or appropriate to,
and is in conformity with, any amendment to any Transaction Document or
Head Lease Document initiated or requested by or consented to by any
Deepwater Person in writing, (B) to any Transaction Document or Head
Lease Document due to, or in connection with there having occurred, an
Event of Default or (C) that is required by Applicable Law or the terms
of the Transaction Documents or the Head Lease Documents or is executed
in connection with any other amendment to the Transaction Documents or
the Head Lease Documents that is required by Applicable Law;
(ix) Taxes to the extent actually utilized on a current basis by an
Indemnified Party or an Affiliate of such Indemnified Party as a credit
against Taxes not indemnifiable by Deepwater hereunder;
(x) Taxes to the extent resulting from or measured by income,
assets, activities, or other matters of or relating to the Indemnified
Party or a Related Indemnified Party that are unrelated to the
transactions contemplated by the Transaction Documents (except to the
extent necessary to make a payment on an After-Tax Basis (which shall be
calculated assuming the Indemnified Party is taxable at the highest
marginal rate in the applicable jurisdiction));
(xi) any Taxes, while such Taxes are being contested in accordance
with the contest provisions of Section 10.4(f);
(xii) any interest, penalties or additions to Tax that result
from the failure of an Indemnified Party to file any return properly and
timely, unless such failure is caused by the failure of Deepwater to
fulfill its obligations, if any, under this Agreement with respect to
such return (including the provision of information sufficient to enable
such Indemnified Party to file such return);
(xiii) Taxes that would not have been imposed but for the
Indemnified Party or a Related Indemnified Party having its tax
residence, place of business, situs of organization, place of management
or controls, permanent establishment or other presence in the taxing
jurisdiction (unless such tax residence, place of business, situs of
organization, place of management or control, permanent establishment or
other presence results from the presence or activities of Deepwater or
any Deepwater Person (including the making of payments unless directed
by the Charter Trustee or any Certificate Holder to make payment to an
account located in Panama (except if such direction is made while an
Event of Default exists)) in such jurisdiction it being understood that,
for this purpose, the Charter Trustee shall not be treated as having any
such presence in Panama merely as a result of the trust being formed
pursuant to the Charter Trust Agreement under the laws of Panama and/or
the performance by the Charter Trustee of Permitted Charter Trustee
Acts).
(d) Calculation of Payments. Any payment that Deepwater shall be
required to make to or for the account of any Indemnified Party with
respect to any Tax that is subject to indemnification under this Section
10.4 shall be paid on an After-Tax Basis. If an Indemnified Party or any
Affiliate of such Indemnified Party who files any tax return on a combined,
consolidated, unitary or similar basis with such Indemnified Party shall
actually realize any saving of any Tax not indemnified by Deepwater
pursuant to the Transaction Documents (by way of credit (including any
foreign tax credit), deduction, exclusion from income or otherwise) by
reason of any amount with respect to which Deepwater has indemnified such
Indemnified Party pursuant to this Section 10.4, and such tax saving was
not taken into account in determining the amount payable by Deepwater on
account of such indemnification, such Indemnified Party shall pay to
Deepwater, so long as no Event of Default shall have occurred and be
continuing (but shall be required to make such payment at such time as the
Event of Default shall have been cured or at the time Deepwater shall have
fulfilled all of its obligations arising upon such Event of Default),
within 30 days after such Indemnified Party shall have actually realized
such tax saving, the amount of such saving, together with the amount of any
tax saving resulting from any payment pursuant to this sentence; provided,
that Deepwater shall not be entitled to receive an amount in excess of all
amounts previously paid by Deepwater pursuant to this Section 10.4, to such
Indemnified Party or to the relevant taxing authority on behalf of such
Indemnified Party (less the aggregate amount of all prior payments by such
Indemnified Party to Deepwater under this Section 10.4(d)) (but any excess
amount described in this proviso shall reduce pro tanto any amount that
Deepwater is subsequently obligated to pay to such Indemnified Party
pursuant to Section 10.4).
(e) Payment. Deepwater shall pay any Tax for which it is liable
pursuant to this Section 10.4 directly to the appropriate taxing authority
or upon demand of an Indemnified Party to such Indemnified Party in
immediately available funds within 30 days of a written demand, but in no
event more than two Business Days prior to the date such Tax is due
(including all extensions), or, in the case of Taxes which are being
contested, more than two Business Days prior to the time such contest is
finally resolved. Any such demand shall specify in reasonable detail the
calculation of the payment and the facts upon which the right to payment
is based. Each Indemnified Party shall promptly forward to Deepwater any
notice, bill or advice received by it from the relevant taxing authority
concerning any Tax against which Deepwater may be required to indemnify
hereunder. Deepwater upon the reasonable written request of an Indemnified
Party shall furnish such Indemnified Party with the original or a certified
copy of a receipt (if any is reasonably available to Deepwater) for
Deepwater's payment of any Tax that is subject to indemnification pursuant
to this Section 10, or such other evidence of payment of such Tax as is
reasonably acceptable to such Indemnified Party (and reasonably available
to Deepwater).
(f) Contest. If a written claim is made against an Indemnified Party
or if any proceeding shall be commenced against any Indemnified Party
(including a written notice of such proceeding), for any Taxes with respect
to which Deepwater may be liable for payment or indemnity hereunder or if
any Indemnified Party shall determine that any Tax as to which Deepwater
may have an indemnity obligation hereunder shall be payable, such
Indemnified Party shall promptly notify Deepwater in writing and shall not
take any action with respect to such claim, proceeding or Tax without the
consent of Deepwater for 30 days after the receipt of such notice by
Deepwater; provided, however, that, in the case of any such claim or
proceeding, if action shall be required by law or regulation to be taken
prior to the end of such 30-day period, such Indemnified Party shall, in
such notice to Deepwater, so inform Deepwater, and no action shall be taken
with respect to such claim or Tax without the consent of Deepwater before
the end of such shorter period. If, within 30 days of receipt of such
notice from the Indemnified Party (or such shorter period as the
Indemnified Party has notified Deepwater is required by law or regulation
for the Indemnified Party to commence such contest), Deepwater shall
request in writing that such Indemnified Party contest the imposition of
such Tax, the Indemnified Party shall, at the expense of Deepwater, in good
faith contest (including, without limitation, by pursuit of appeals), and
shall not settle without Deepwater's good faith consent (or (i) if such
contest can be pursued in the name of Deepwater and independently from any
other proceeding involving a tax liability, other than a net income or
withholding Tax, of such Indemnified Party, the Indemnified Party shall,
at Deepwater's sole discretion, allow Deepwater to contest, (ii) if such
contest involves a Tax, other than a net income or withholding Tax, which
must be pursued in the name of the Indemnified Party, but can be pursued
independently from any other proceeding involving a tax liability of such
Indemnified Party, the Indemnified Party shall allow Deepwater to contest
in the name of the Indemnified Party unless, in the good faith judgment of
the Indemnified Party, such contest by Deepwater could have a material
adverse impact on the business or operations of the Indemnified Party, in
which case the Indemnified Party may control such contest or (iii) in the
case of any contest, the Indemnified Party may request Deepwater to
contest) the validity, applicability or amount of such Taxes by, in the
sole discretion of the Person conducting such contest, (i) resisting
payment thereof, (ii) not paying the same except under protest, if protest
is necessary and proper, (iii) if the payment be made, using reasonable
efforts to obtain a refund thereof in appropriate administrative and
judicial proceedings; or (iv) taking such other action as is reasonably
requested by Deepwater from time to time.
Notwithstanding the foregoing provisions of this Section 10.4(f), such
Indemnified Party shall not be required to take any administrative or
judicial or other action and Deepwater shall not be able to contest such
claim in its own name or that of the Indemnified Party unless (A) Deepwater
shall have agreed to pay, and shall pay, to such Indemnified Party on
demand all reasonable out-of-pocket costs, losses and expenses that such
Indemnified Party may incur in connection with contesting such Taxes,
including all reasonable legal, accounting and investigatory fees and
disbursements (including reasonable allocated time charges of internal
counsel of such Indemnified Party), (B) the action to be taken will not
result in any material imminent danger of sale, forfeiture or loss of the
Drillship or any part thereof or interest therein or risk of criminal
liability, (C) if such contest shall involve the payment of the Tax prior
to the contest, Deepwater shall, at its option, either (x) pay or reimburse
the Indemnified Party for such Taxes or (y) provide to the Indemnified
Party an interest-free advance in an amount equal to the Tax which the
Indemnified Party is required to pay (with no additional net after-tax cost
to such Indemnified Party), (D) Deepwater shall have provided to such
Indemnified Party an opinion of independent tax counsel selected by
Deepwater, and reasonably satisfactory to the Indemnified Party that a
Reasonable Basis exists to contest such claim, and (E) if such contest is
controlled by Deepwater, Deepwater shall have acknowledged, in writing, its
liability for such indemnity in the event such contest is unsuccessful.
In no event shall an Indemnified Party be required to appeal an adverse
judicial determination to the United States Supreme Court. The Indemnified
Party shall consult in good faith with Deepwater regarding the conduct of
any contest controlled by such Indemnified Party and shall allow Deepwater
to participate in the conduct of any such contest unless the Indemnified
Party shall in good faith determine that allowing Deepwater to participate
in the conduct of such contest could have a material adverse impact on the
business or operations of the Indemnified Party. The parties agree that
an Indemnified Party may at any time decline to take further action with
respect to the contest of any claim for a Tax and may settle such claim,
if such Indemnified Party shall waive its rights to any indemnity from
Deepwater that otherwise would be payable in respect of such claim (or any
logically related claim) and shall pay to Deepwater any amount previously
paid or advanced by Deepwater pursuant to this Section 10.4(f) other than
clause (A) of this paragraph (by way of indemnification or advance for the
payment of a Tax) with respect to such Taxes.
If an Indemnified Party shall fail to perform its obligations under this
Section 10.4(f), such failure shall not discharge, diminish or relieve
Deepwater of any liability for indemnification that it may have to such
Indemnified Party hereunder, unless the contest of a claim is precluded as
a result of such failure; provided, that any payment by Deepwater to such
Indemnified Party pursuant hereto shall not be deemed to constitute a
waiver or release of any right or remedy (including any remedy of damages)
that Deepwater may have against such Indemnified Party.
(g) Refund. If an Indemnified Party shall receive a refund of (or
receive a credit against, or any other current reduction in, any Tax not
indemnified by Deepwater under this Section 10.4, in respect of) all or
part of any Taxes which Deepwater shall have paid on behalf of such
Indemnified Party or for which Deepwater shall have reimbursed, advanced
funds to or indemnified such Indemnified Party (or would have received such
a refund, credit or reduction but for a counterclaim or other claim not
indemnified by Deepwater hereunder (a "deemed refund")), within 30 days of
such receipt (or, in the case of a deemed refund, within 30 days of the
final determination of such deemed refund), such Indemnified Party shall
pay or repay to Deepwater an amount equal to the amount of such refund or
deemed refund, plus any net tax benefit (taking into account any Taxes
incurred by such Indemnified Party by reason of the receipt of such refund,
credit or reduction or deemed refund) realized by such Indemnified Party
as a result of any payment by such Indemnified Party made pursuant to this
sentence; provided, however, that such Indemnified Party shall not be
obligated to make any payment pursuant to this sentence to the extent that
the amount of such payment would exceed (x) the amount of all prior
payments made by Deepwater to such Indemnified Party pursuant to this
Section 10.4 less (y) the amount of all prior payments by such Indemnified
Party to Deepwater pursuant to this Section 10.4(g); provided, further,
however, that such Indemnified Party shall not be obligated to make any
payment to Deepwater pursuant to this sentence while an Event of Default
is continuing, but shall be required to make such payment at such time as
the Event of Default is cured or at the time Deepwater shall have fulfilled
all its obligations arising upon such Event of Default. If, in addition
to such refund, credit or reduction or deemed refund, as the case may be,
such Indemnified Party shall receive (or would have received but for a
counterclaim or other claim not indemnified by Deepwater hereunder) an
amount representing interest on the amount of such refund, credit or
reduction, or deemed refund, as the case may be, such Indemnified Party
shall pay to Deepwater within 30 days of such receipt or, in the case of
a deemed refund, within 30 days of the final determination of such deemed
refund, that proportion of such interest that shall be fairly attributable
to Taxes paid, reimbursed or advanced by Deepwater prior to the receipt of
such refund or deemed refund.
(h) Reports. Deepwater will provide such information as may be
available to it and reasonably requested in writing by an Indemnified Party
that is required to enable an Indemnified Party to fulfill its tax filing
requirements with respect to the transactions contemplated by the
Transaction Documents. If any return, statement or report is required to
be made or filed with respect to any Tax imposed on or indemnified against
by Deepwater under this Section 10.4, Deepwater shall promptly notify the
appropriate Indemnified Party of such requirement and (i) to the extent
permitted by law (unless otherwise requested by the Indemnified Party) or
required by law, make and file in its own name such return, statement or
report and furnish the relevant Indemnified Party with a copy of such
return, statement or report, (ii) where such return, statement or report
is required to be in the name of or filed by such Indemnified Party or the
Indemnified Party otherwise requests that such return, statement or report
be filed in its name, prepare and furnish such return, statement or report
for filing by such Indemnified Party in such manner as shall be
satisfactory to such Indemnified Party and send the same to the Indemnified
Party for filing no later than 15 days prior to the due date or (iii) where
such return, statement or report is required to reflect items in addition
to Taxes imposed on or indemnified against under this Section 10.4 as
determined by such Indemnified Party, provide such Indemnified Party with
information within a reasonable time, sufficient to permit such return,
statement or report to be properly made and timely filed with respect
thereto. If an Indemnified Party fails to file a return after it has been
properly prepared by Deepwater in accordance with this Section 10.4(h) and
furnished to such Indemnified Party at least 15 days prior to the due date
of such return, Deepwater shall not be liable for Taxes imposed as a result
of the failure to file. Each Indemnified Party shall furnish Deepwater,
at the request and expense of Deepwater, with such information, not within
the control of Deepwater, as is in such Indemnified Party's control and is
reasonably available to such Indemnified Party and necessary for Deepwater
to comply with its obligations under this Section 10.4(h).
(i) Forms, etc. Each Indemnified Party agrees to furnish to Deepwater
from time to time, at Deepwater's timely made written request and expense,
such duly executed and properly completed forms as may be necessary or
appropriate in order to claim any reduction of or exemption from any
withholding or other Tax imposed by any taxing authority in respect of any
payments otherwise required to be made by Deepwater pursuant to the
Transaction Documents, which reduction or exemption may be available to
such Indemnified Party. Each Indemnified Party agrees that it will use its
reasonable best efforts to the extent permitted by Applicable Law (and to
the extent such Indemnified Party is entitled to do so) to file returns or
tax declarations that would minimize any indemnity payable by Deepwater;
provided, that Deepwater shall indemnify the Indemnified Party for any cost
resulting from such Indemnified Party's filing of such return or
declaration. Notwithstanding the foregoing, no Indemnified Party shall be
required to furnish any form or file any return or tax declaration if it
has determined in its reasonable good faith judgment that furnishing the
form or filing the return or tax declaration could have a material adverse
impact on the business or operations of such Indemnified Party or any
Related Indemnified Party, unless the Indemnified Party is indemnified in
a manner reasonably satisfactory to such Indemnified Party by Deepwater for
such material adverse impact.
(j) Records. In addition to its obligations under the first sentence
of Section 10.4(h), Deepwater shall make available for inspection and
copying by an Indemnified Party such records that are regularly maintained
by Deepwater in the ordinary course of its business as may be reasonably
necessary to enable such Indemnified Party to fulfill its tax return filing
obligations, subject to reasonable confidentiality requirements of
Deepwater.
(k) Non-Parties. If an Indemnified Party is not a party to this
Agreement, Deepwater may require the Indemnified Party to agree in writing,
in a form reasonably acceptable to Deepwater, to the terms of this Section
10.4 prior to making any payment to such Indemnified Party under this
Section 10.4.
(l) Verification. The results of all computations required under this
Section 10.4, together with a statement describing in reasonable detail the
manner in which such computations were made, shall be delivered to
Deepwater in writing. If Deepwater so requests within 30 days after
receipt of such computations, any determination shall be reviewed by a
nationally recognized independent public accounting firm mutually
acceptable to the relevant Indemnified Party and Deepwater who shall be
asked to verify, after consulting with Deepwater and the relevant
Indemnified Party whether the relevant Indemnified Party's computations are
correct, and to report its conclusions to both Deepwater and the relevant
Indemnified Party. Subject to satisfactory confidentiality agreements, the
relevant Indemnified Party and Deepwater hereby agree to provide such
accountants with all information and materials as shall be reasonably
necessary or desirable in connection herewith. The fees of the accountants
in verifying an adjustment pursuant to this Section 10.4 shall be paid by
Deepwater, unless such verification discloses an error adverse to Deepwater
in an amount greater than 4.0% of the amount of the indemnity payment as
determined by the accounting firm, in which case such fees shall be paid
by the relevant Indemnified Party. Any information provided to such
accountants by any Person shall be and remain the exclusive property of
such Person and shall be deemed by the parties to be (and the accountants
will confirm in writing that they will treat such information as) the
private, proprietary and confidential property of such Person, and no
Person other than such Person and the accountants shall be entitled
thereto, and all such materials shall be returned to such Person. Such
accounting firm shall be requested to make its determination within 30 days
of Deepwater's request to such accounting firm for review. In the event
such independent public accounting firm shall determine that such
computations are incorrect, then such firm shall determine what it believes
to be the correct computations. The computations of the independent public
accounting firm shall be final, binding and conclusive upon, Deepwater and
the relevant Indemnified Party and Deepwater shall not have any right to
inspect the books, records, tax returns or other documents of or relating
to the relevant Indemnified Party to verify such computations or for any
other purpose. The parties hereby agree that the independent public
accounting firm's sole responsibility shall be to verify the computation
of any amounts payable under this Section 10.4 and that matters of
interpretation of this Agreement and the other Transaction Documents are
not within the scope of such independent public accounting firm's
responsibilities.
(m) Restructuring For Withholding Taxes. Each party covered by this
Section 10.4 agrees to use reasonable efforts to investigate alternatives
for reducing any withholding Taxes that are indemnified against hereunder
or imposed on Charter Hire (or payments by the Charter Trustee to the
Investment Trust or any Certificate Purchaser) (whether or not
indemnifiable hereunder) and to use reasonable efforts to reduce any
withholding Taxes that are indemnified against hereunder, including,
without limitation, negotiating in good faith to relocate or restructure
the Advance (which relocation or restructuring shall be at Deepwater's
expense) or the domicile of the Investment Trust or the Charter Trustee,
but no Party shall be obligated to take any such action as such Party
determines will be adverse to its business or financial or commercial
interest.
SECTION 11
AGENT
SECTION 11.1 Appointment of Documentation Agent; No Duties. Each
Certificate Purchaser hereby irrevocably (subject to Section 11.9)
designates, authorizes and appoints BA Leasing & Capital Corporation, as
Documentation Agent of such Certificate Purchaser under the Transaction
Documents, and each such Certificate Purchaser irrevocably authorizes BA
Leasing & Capital Corporation to act as the Documentation Agent for such
Certificate Purchaser, to take such action on its behalf under the
provisions of the Transaction Documents and to exercise such powers and
perform such duties as are expressly delegated to such Agent by the terms
of this Agreement and the other Transaction Documents, together with such
other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary herein or elsewhere in the Transaction Documents,
the Agent shall not have any duties or responsibilities except those
expressly set forth herein or therein, or any fiduciary relationship with
any Certificate Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into the
Transaction Documents or otherwise exist against the Agent.
SECTION 11.2 Delegation of Duties. The Agent may execute any of its
duties under this Agreement and the other Transaction Documents by or
through agents or attorneys-in-fact, and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
SECTION 11.3 Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action taken or omitted to be taken by it or
such Person under or in connection with the Transaction Documents (except
for its or such Person's own gross negligence or willful misconduct), or
(ii) except as expressly set forth in the Transaction Documents,
responsible in any manner to any of the Certificate Purchasers for any
recitals, statements, representations or warranties made by Deepwater or
any officer thereof contained in the Transaction Documents or in any
certificate, report, statement or other document referred to or provided
for in, or received by such Agent under or in connection with, the
Transaction Documents, or for the validity, effectiveness, genuineness,
enforceability or sufficiency of the Transaction Documents, including the
Certificates, or for any failure of Deepwater to perform its obligations
hereunder or thereunder. The Agent shall be under no obligation to any
Certificate Purchaser to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, the
Transaction Documents, or to inspect the properties, books or records of
Deepwater.
SECTION 11.4 Reliance by Agent. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex, facsimile or teletype message, statement, order
or other document or conversation reasonably believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to Deepwater), independent accountants and other
experts selected by such Agent. The Agent may deem and treat the
registered owner of any Certificate as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with such Agent. The Agent shall be fully justified
in failing or refusing to take any action under the Transaction Documents
unless it shall first receive such advice or concurrence of the Majority
Certificate Purchasers (or, where expressly required by any provision of
the Transaction Documents, the Required Certificate Purchasers) as they
deem appropriate and, if they so request, they shall first be indemnified
to their satisfaction against any and all liability and expense which may
be incurred by them by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under the Transaction Documents and the
Certificates in accordance with a request of the Majority Certificate
Purchasers (or, where expressly required by any provision of the
Transaction Documents, the Required Certificate Purchasers), and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Certificate Purchasers and all future holders of the
Certificates.
SECTION 11.5 [Intentionally Omitted]
SECTION 11.6 Non-Reliance on Agent and Other Certificate Purchasers.
Each Certificate Purchaser expressly acknowledges that neither
Documentation Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates have made any representation or warranty
to it, and that no act by the Documentation Agent hereinafter taken,
including any review of the affairs of Deepwater and its Affiliates, shall
be deemed to constitute any representation or warranty by the Documentation
Agent to any Certificate Purchaser. Each Certificate Purchaser represents
to the Documentation Agent that it has, independently and without reliance
upon the Documentation Agent, or any other Certificate Purchaser, and based
on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of Deepwater and its
Affiliates, the value of and title to any collateral, and all applicable
bank regulatory laws relating to the transactions contemplated hereby and
by the other Transaction Documents and has made its own decision to make
its Certificate Purchaser Amount available hereunder and enter into this
Agreement and the other Transaction Documents to which it is a party as a
Certificate Purchaser. Each Certificate Purchaser also represents that it
will, independently and without reliance upon the Documentation Agent, or
any other Certificate Purchaser, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Transaction Documents to which
it is a party as a Certificate Purchaser, and to make such investigation
as it deems necessary to inform itself as to the business, operations,
property, financial and other condition and creditworthiness of Deepwater
and its Affiliates. Except for notices, reports and other documents
expressly required to be furnished to the Certificate Purchasers by the
Documentation Agent hereunder, the Documentation Agent shall have no duty
or responsibility to provide any Certificate Purchaser with any credit or
other information concerning the business, operations, property, financial
and other condition or creditworthiness of Deepwater or its Affiliates, the
Documentation Agent and its Affiliates which may come into the possession
of the Documentation Agent, or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
SECTION 11.7 Indemnification. The Certificate Purchasers (excluding
any Purchasing Party) severally agree to indemnify the Documentation Agent
in its capacity as such (to the extent not reimbursed by Deepwater within
a reasonable period after demand has been made to Deepwater for those
amounts owing by Deepwater, and without limiting the obligation of
Deepwater to do so), ratably according to their respective Certificate
Purchaser Amounts, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including,
without limitation, at any time following the payment of the Certificates)
be imposed on, incurred by or asserted against the Documentation Agent in
any way relating to or arising out of the Transaction Documents, or any
documents contemplated by or referred to herein or therein or any action
taken or omitted by the Documentation Agent under or in connection with any
of the foregoing; provided that no Certificate Purchaser shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Documentation Agent's gross negligence or
willful misconduct; and provided, further, that the Documentation Agent
shall not make any claim under this Section 11.7 for any claim or expense
indemnified against by Deepwater or its Affiliates without first making
demand on such Person for payment of such claim or expense (unless such
demand shall then be prohibited by Applicable Law). Whenever, at any time
after the Documentation Agent has received from any Certificate Purchaser
such Certificate Purchaser's ratable share of amounts owing to the
Documentation Agent pursuant to this Section 11.7, the Documentation Agent
shall receive any reimbursement from Deepwater on account of such amounts,
the Documentation Agent shall distribute to such Certificate Purchaser its
ratable share thereof in like funds as received; provided, however, that
in the event that the receipt by the Documentation Agent of such
reimbursement is required by law or court or administrative order to be
returned, such Certificate Purchaser shall return to the Documentation
Agent any portion thereof previously distributed by the Documentation Agent
to it in like funds as such reimbursement is required to be returned by the
Documentation Agent.
SECTION 11.8 Agent. The Documentation Agent and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of
business with Deepwater, Conoco, R&B Falcon and their Affiliates as though
the Documentation Agent were not the Documentation Agent hereunder and
without notice to or the consent of the Certificate Purchasers. It is
understood and acknowledged by each Certificate Purchaser that an Affiliate
of the Documentation Agent may also separately be a Certificate Purchaser.
It is further understood and acknowledged by each Certificate Purchaser
that, pursuant to the activities referenced in this Section 11.8, the
Documentation Agent and its Affiliates may receive information regarding
Deepwater, Conoco, R&B Falcon and their Affiliates (including information
that may be subject to confidentiality obligations in favor of Deepwater,
Conoco, R&B Falcon and their Affiliates) and acknowledge that the
Documentation Agent shall be under no obligation to provide such
information to them. With respect to its Certificate Purchaser Amount, if
any, the Documentation Agent shall have the same rights and powers under
this Agreement as any other Certificate Purchaser and may exercise the same
as though it were not the Documentation Agent.
SECTION 11.9 Successor Agent. At any time during the term of this
Agreement, the Documentation Agent may resign upon thirty (30) days notice
to the Certificate Purchasers and Deepwater. If the Documentation Agent
resigns herewith, the Required Certificate Purchasers shall appoint from
among the Certificate Purchasers a successor documentation agent which
successor Agent shall be approved by Deepwater (which approval shall not
be unreasonably withheld or delayed). If no successor Agent is appointed
prior to the effective date of the resignation of the corresponding Agent,
such Agent may appoint, after consulting with the Certificate Purchasers
and Deepwater, a successor Agent from among the Certificate Purchasers.
Upon the successor Agent's acceptance of its appointment as successor Agent
hereunder, such successor Agent shall succeed to all the rights, powers and
duties of the retiring Agent and the term "Documentation Agent" shall mean
such successor documentation agent and such retiring Documentation Agent's
appointment, powers and duties as a Documentation Agent shall be
terminated. After the retiring Agent's resignation herewith, the
provisions of this Section 11 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was an Agent hereunder and
under the other Transaction Documents. If no successor agent has accepted
appointment by the date which is forty-five (45) days following the notice
of resignation, the resignation shall thereupon become effective and the
Certificate Purchasers shall perform all of the duties of such Agent
hereunder and under the other Transaction Documents until such time, if
any, as the Required Certificate Purchasers appoint a successor Agent as
provided for above.
SECTION 12
MISCELLANEOUS
SECTION 12.1 Survival of Agreements. The representations, warranties,
covenants, indemnities and agreements of the parties provided for in the
Transaction Documents, and the parties' obligations under any and all
thereof, shall survive the execution and delivery of this Agreement, the
transfer of the Drillship to the Head Lessor (if applicable), the lease of
the Drillship by the Head Lessor (if any) to the Charter Trustee and the
subsequent charter of the Drillship by the Charter Trustee to Deepwater,
the construction of the Drillship, any disposition of any interest of the
Charter Trustee or the Investment Trust in the Drillship, the payment of
the Advances and shall be and continue in effect notwithstanding any
investigation made by any party and the fact that any party may waive
compliance with any of the other terms, provisions or conditions of any of
the Transaction Documents. Except as expressly provided herein, it is
expressly understood and agreed that the indemnification obligations of
Deepwater under Section 10 shall survive the expiration or termination of
the Charter or either Charter Supplement and the other Transaction
Documents and the payment by Deepwater Conoco, or R&B Falcon of all amounts
due thereunder for a period of three (3) years (but shall continue in full
force and effect following such date with respect to any Claim asserted
prior to such date) and shall be separate and independent from any remedy
under the Charter or any other Transaction Document.
SECTION 12.2 No Broker; etc. Each of the parties hereto represents to
the others that it has not retained or employed any broker, finder or
financial advisor, other than Bank of America National Trust and Savings
Association, to act on its behalf in connection with this Agreement or the
transactions contemplated herein, nor has it authorized any broker, finder
or financial adviser retained or employed by any other Person so to act.
Any party who is in breach of this representation shall indemnify and hold
the other parties harmless from and against any cost or liability arising
out of such breach of this representation.
SECTION 12.3 Notices. Unless otherwise specifically provided herein,
all notices, consents, directions, approvals, instructions, requests and
other communications required or permitted by the terms hereof to be given
to any Person shall be given in writing by United States mail, by
nationally recognized courier service, by hand or by facsimile
communication and any such notice shall become effective one (1) Business
Day after delivery to a nationally recognized courier service specifying
overnight delivery or, if delivered by hand, when received, or, if sent by
facsimile communication, when confirmed by electronic or other means during
business hours on a Business Day (or, if confirmed after business hours or
on a non-Business Day, on the next Business Day) and shall be directed to
the address of such Person as indicated:
If to Deepwater, to it at:
Attn: Manager
Deepwater Drilling II L.L.C.
901 Threadneedle, Suite 200
Houston, Texas 77079
Telephone: (281) 496-5000
Telecopier: (281) 496-0285
with copies to:
Attn: Wayne K. Anderson, Esq.
Corporate Counsel
Conoco Inc. (formerly Continental Oil Company)
Charter Number 523126
600 North Dairy Ashford
Houston, Texas 77079
Telephone: (281) 293-3890
Telecopier: (281) 293-3700
Attn: Wayne K. Hillin, Esq.
Counsel
R&B Falcon Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
Telephone: (281) 496-5000
Telecopier: (281) 496-0285
If to the Investment Trust, to it at:
Attn: Corporate Trust Administration
Wilmington Trust FSB
3773 Howard Hughes Parkway, Suite 300 North
Las Vegas, Nevada 89109
Telephone: (702) 866-2200
Telecopier: (702) 866-2244
If to the Charter Trustee, to it at:
Attn: Corporate Trust Administration
Wilmington Trust Company
1100 North Market Street
Wilmington, DE, 19890
Telephone: (302) 651-1000
Telecopier: (302) 651-8882
If to the Investment Trustee, to it at:
Attn: Corporate Trust Administration
Wilmington Trust FSB
3773 Howard Hughes Parkway, Suite 300 North
Las Vegas, Nevada 89109
Telephone: (702) 866-2200
Telecopier: (702) 866-2244
If to any Member, to it at:
Conoco Development II Inc.
600 North Dairy Ashford
Houston, Texas 77079
Telephone: (281) 293-3890
Telecopier: (281) 293-3700
Attn: Assistant Secretary
or
RBF Deepwater Exploration II Inc.
901 Threadneedle, Suite 200
Houston, Texas 77079
Telephone: (281) 496-5000
Telecopier: (281) 496-0285
Attn: President
If to a Certificate Purchaser, to it at the address set forth in
Schedule 5.
SECTION 12.4 Counterparts. This Agreement 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 agreement.
SECTION 12.5 Amendments, Waivers and Consents. Except as otherwise
expressly provided herein or in any other Transaction Document, no
amendment, waiver or termination of any provision of this Agreement or any
other Transaction Document, and no consent with respect to any departure
by any Person therefrom, shall be effective unless the same shall be in
writing and signed by the Majority Certificate Purchasers and the
applicable Person and acknowledged by the Trustees, and then any such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no such
waiver, amendment or consent shall, unless in writing and signed by all
Certificate Purchasers and acknowledged by the Trustees, do any of the
following:
(a) change the Commitment of any Certificate Purchaser (except
with the written consent of such Certificate Purchaser) except as provided
in Section 7.9;
(b) postpone or delay any date fixed by any Transaction Document
for any payment of Certificate Return on the Certificates, or any fees or
other amounts due to the Certificate Purchasers (or any of them) under any
Transaction Document (except, with respect to amounts owed only to a
particular Certificate Purchaser, with the written consent of such
Certificate Purchaser);
(c) reduce (i) the amount of any outstanding Advances or the rate
of the Certificate Return on the Certificates, or (ii) any fees or other
amounts payable to Certificate Purchasers (or any of them) under any
Transaction Document (except, with respect to amounts owed only to a
particular Certificate Purchaser, with the written consent of such
Certificate Purchaser);
(d) postpone or reduce the payment obligations of Deepwater
pursuant to any Transaction Document (except, with respect to amounts owed
only to a particular Certificate Purchaser, with the written consent of
such Certificate Purchaser);
(e) change the aggregate percentage of the Certificate Purchaser
Balance or the Commitment Percentage which is required for Certificate
Purchasers (or any of them) to take any action hereunder;
(f) amend this Section or any provision herein or in any other
Transaction Document providing for consent or other action by all
Certificate Purchasers;
(g) discharge the Conoco Guaranty (other than pursuant to Section
9.4(a)(iv)), the R&B Falcon Guaranty (other than pursuant to Section
9.4(a)(iv)) or either Drilling Contract Guaranty (other than pursuant to
Section 9.4(a)(i)), or release the Lien of the Ship Mortgage or any
material portion of any other Collateral or subordinate or take any action,
including the issuance of additional instruments or documents, which
results in the subordination of the interest of any Certificate Purchaser
in any Collateral (including taking any action which has the effect of
altering the subordination of payments under the Transaction Documents made
to a Purchasing Party in any way that may be detrimental to the interests
of any Certificate Purchaser);
(h) amend the definition of "Certificate Return Rate", " Certificate
Margin", "Base Rate", "Alternate Rate", "Federal Funds Rate", "Charter
Residual Risk Amount", "Coverage Ratio", "Residual Guaranty Amount" ,
"Required Certificate Purchaser", "Certificate Return" or "Return Period" ;
or
(i) amend Section 2.4(c) hereof, Section 14.1 of the Master
Charter or Article 3 of the Depository Agreement;
and provided, further, that no amendment, waiver or consent shall, unless
in writing and signed by the Trustees in addition to the appropriate number
of Certificate Purchasers or the Hedging Agreement Counterparties, as
applicable, affect the rights or duties of the Trustees under this
Agreement or any other Transaction Document or the Hedging Agreement
Counterparties, respectively.
SECTION 12.6 Confidentiality. Each party hereto agrees to exercise
commercially reasonable efforts to keep any non-public information
delivered or made available by Deepwater to it which is indicated or stated
in writing to be confidential information, confidential from anyone other
than persons employed or retained by such Participant who are or are
expected to become engaged in evaluating, approving, structuring or
administering any of the Transaction Documents (such Persons to likewise
be under similar obligations of confidentiality with respect to such
information); provided, however, that nothing herein shall prevent any
party from disclosing such information (i) to any other party, (ii) upon
the order of any court or administrative agency, (iii) upon the request or
demand of any regulatory agency or authority having jurisdiction over such
Participant, (iv) which has been publicly disclosed, (v) to the extent
reasonably required in connection with any litigation to which any party
or its Affiliates may be a party, (vi) to the extent reasonably required
in connection with the exercise of any remedy hereunder or under any other
Transaction Document, (vii) to such party's legal counsel, independent
auditors and to such party's Affiliates, (viii) to any actual or proposed
assignee or other transferee of all or part of its rights hereunder which
has agreed in writing to be bound by the provisions of this Section 12.6
and (ix) except as otherwise required by Applicable Law; provided, however,
that, should disclosure of any such confidential information be required
by virtue of clause (ii) or (v) of the immediately preceding provisos, such
party shall notify Deepwater of the same so as to allow Deepwater to seek
a protective order or to take any other appropriate action; provided,
further, that no such party shall be required to delay compliance with any
directive to disclose beyond the last date such delay is legally
permissible any such information so as to allow Deepwater to effect any
such action and provided, further, that if Deepwater exercises the Return
Option, no Participant thereafter shall be bound by the terms of this
Section 12.6 with respect to any information regarding the Drillship
(excluding, however, any information regarding the Drilling Contracts).
SECTION 12.7 Headings; etc. The Table of Contents and headings of the
various Sections of this Agreement are for convenience of reference only
and shall not modify, define, expand or limit any of the terms or
provisions hereof.
SECTION 12.8 Parties in Interest. Except as expressly provided
herein, none of the provisions of this Agreement are intended for the
benefit of any Person except the parties hereto.
SECTION 12.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE NEW
YORK GENERAL OBLIGATIONS LAW BUT EXCLUDING, TO THE MAXIMUM EXTENT PERMITTED
BY LAW, ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAW RULES). THIS
AGREEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK.
SECTION 12.10 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 12.11 Further Assurances. The parties hereto shall promptly
cause to be taken, executed, acknowledged or delivered, at the expense of
Deepwater, all such further acts, conveyances, documents and assurances as
any of the parties may from time to time reasonably request in order to
carry out and effectuate the intent and purposes of this Agreement, the
other Transaction Documents and the transactions contemplated hereby and
thereby (including, the preparation, execution and filing of any and all
Uniform Commercial Code financing statements and other filings or
registrations which the parties hereto may from time to time request to be
filed or effected). Deepwater will, at its own expense and without need
of any prior request from any other party, take such action as may be
necessary (including any action specified in the preceding sentence), or
(if the Investment Trust or the Trustees shall so request) as so requested,
in order to (i) maintain and protect all security interests provided for
hereunder or under any other Transaction Document and (ii) allow the
Charter Trustee to accurately and correctly execute any Disbursement
Certificates allowed to be executed by it in accordance with the terms of
the Depository Agreement.
SECTION 12.12 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 12.13 Limitations on Recourse. (a) The Certificate Purchasers,
the Trustees and the Investment Trust agree that their rights in respect
of the obligations of Deepwater to pay Charter Hire, and any claim or
liability under this Agreement or any other Transaction Document shall be
limited to satisfaction out of, and enforcement against, the Collateral.
The Certificate Purchasers, the Trustees and the Investment Trust hereby
acknowledge and agree that none of the Non-Recourse Parties shall have any
liability to all or any of the Certificate Purchasers, the Trustees or the
Investment Trust for the payment of any sums now or hereafter owing by
Deepwater under this Agreement or any other Transaction Document or for the
performance of any of the obligations of Deepwater contained herein or
therein or shall otherwise be liable or responsible with respect thereto
(such liability, including such as may arise by operation of law, being
hereby expressly waived), except as provided in this Section 12.13. If (i)
any Event of Default shall occur and be continuing or (ii) any claim of any
Certificate Purchasers, the Investment Trust and the Trustees against or
alleged liability to such Persons of Deepwater shall be asserted under this
Agreement or any other Transaction Document, the Certificate Purchasers,
the Trustees and the Investment Trust agree that they shall not have the
right to proceed directly or indirectly against the Non-Recourse Parties
or against their respective properties and assets (other than the
Collateral) for the satisfaction of any of the obligations of Deepwater to
pay Charter Hire or of any such claim or liability or for any deficiency
judgment (except to the extent enforceable out of the Collateral) in
respect of such obligations or any such claim or liability. The foregoing
notwithstanding, it is expressly understood and agreed that nothing
contained in this Section 12.13 shall be deemed to (a) release any Non-
Recourse Party from liability for its fraudulent actions or willful
misconduct or (b) limit or affect the obligations of any Non-Recourse Party
in accordance with the terms of this Agreement or any other Transaction
Document creating such obligation to which such Non-Recourse Party is a
party, including, without limitation, the obligations of Conoco or R&B
Falcon under the Drilling Contract Guaranties or with respect to payment
of the Residual Guaranty Amount, or the obligations of the Drilling Parties
under the Drilling Contracts. The foregoing acknowledgments, agreements
and waivers shall be enforceable by any Non-Recourse Party.
(b) Deepwater, Conoco and R&B Falcon hereby acknowledge and agree that
none of the Documentation Agent, the Trustees and the Certificate
Purchasers shall have any personal liability whatsoever to Deepwater,
Conoco, R&B Falcon or their respective successors or assigns for any claim
based on or in respect of this Agreement or arising from the transactions
contemplated hereby. Subject to Section 6.1 of the Master Charter, the
sole recourse of Deepwater, Conoco or R&B Falcon or any Person claiming
through or on behalf thereof for any such claims arising hereunder will be
to the Trust Estate. Each of Deepwater, Conoco and R&B Falcon further
acknowledges and agrees that it has no rights (as third-party beneficiary
or otherwise) or standing under any agreement between the Trustees and any
or all of the Investment Trust, the Documentation Agent, or the Certificate
Purchasers which agreements are not by their terms intended for the benefit
of other parties other than Sections 5.2,5.3, 5.4 and 5.5 of the Charter
Trust Agreement and Sections 5.2, 5.3, 5.4 and 5.5 of the Investment Trust
Agreement.
(c) It is expressly understood and agreed by the parties hereto that
(a) this Agreement and the other Transactions Documents executed by either
Trustee, are not being executed in such Trustee s respective personal
capacities, except as expressly stated herein or therein, but solely (i)
in the case of Wilmington Trust Company, (x) as charter trustee under the
Charter Trust Agreement and, (y) solely with respect to the Depository
Agreement, as Depository and Securities Intermediary thereunder, and (ii)
in the case of Wilmington Trust FSB, as investment trustee under the
Investment Trust Agreement and (b) under no circumstances shall either
Trustee be personally liable for the payment of any indebtedness or
expenses of the Charter Trust or the Investment Trust, as applicable, or
be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the Charter Trustee or
Investment Trust, as applicable, under this Agreement, any other
Transaction Document or any related agreement, except to the extent of the
Charter Trust Estate and the Investment Trust Estate, respectively.
SECTION 12.14 Applicable Laws. Nothing in this Agreement or any other
Transaction Document shall be construed to constitute or to require either
the Trustees, Investment Trust or Deepwater to take or omit any action
which would constitute a violation of, or subject the Trustees, Investment
Trust or Deepwater to a penalty under, the laws of the United States of
America.
SECTION 12.15 Right to Inspect. Upon reasonable notice and at such
times and places as shall not unduly interfere with the commercial
utilization or operation of the Drillship (it being understood that
Deepwater shall be under no obligation to interrupt or delay any operation
of the Drillship or to otherwise incur any out-of-pocket expense or loss
of revenue), but in no event more than once in any twelve-month period,
Deepwater shall afford representatives of the Charter Trustee (together
with representatives of the Certificate Purchasers and the Trustees)
reasonable access to the Drillship, its logs and papers for the purpose of
inspecting the same. Any such inspection shall be subject to any required
Government Approvals and shall be at the sole risk and expense of the
Charter Trustee, the Certificate Purchasers and the Trustees, as
applicable, unless a Charter Event of Default has occurred and is
continuing, in which case any such inspection shall be at the expense of
Deepwater and may occur more than once per year upon reasonable notice
after such Charter Event of Default. Upon written request by the Trustees,
Deepwater shall give the Trustees prior written notice of the time and
location of the Drillship's next scheduled dry-docking.
SECTION 12.16 Accounts, Distribution of Payments and Flow of Funds.
Pursuant to the Deepwater Assignment, Deepwater has assigned its right to
receive payment of all Deposited Amounts to the Charter Trustee and the
Investment Trust. Each of the Trustees, the Investment Trust and Deepwater
hereby agrees (severally and not jointly) to deposit, or to cause to be
deposited, all Account Collateral of any kind received by it promptly (but
not later than six (6) Business Days after receipt) into the Accounts
established pursuant to the Depository Agreement to be applied as set forth
in the Depository Agreement.
SECTION 12.17 Attorneys-in-Fact. Subject to the terms of the
Transaction Documents, without in any way limiting the obligations of
Deepwater hereunder, Deepwater hereby appoints each of the Charter Trustee
and the Investment Trust as its agent and attorney-in-fact, with full power
and authority at any time during which Deepwater is obligated to deliver
possession of the Drillship to the Charter Trustee in connection with the
exercise of remedies after the occurrence of an Event of Default, to demand
and take possession of the Drillship in the name and on behalf of Deepwater
from whomsoever shall be at the time in possession thereof in accordance
with the Transaction Documents.
SECTION 12.18 Successor Trustees; Jurisdiction of Trust.
Notwithstanding the provisions of the Trust Agreement, so long as no Event
of Default shall have occurred and be continuing, (i) no successor or
replacement Charter Trustee or Investment Trustee shall be appointed
without the prior written consent of Deepwater (which consent shall not be
unreasonably withheld or delayed) and (ii) the jurisdiction in which the
trusts under the Trust Agreements are created shall not be changed without
the prior written consent of Deepwater.
SECTION 12.19 Third-Party Beneficiaries. Each of the Certificate
Purchasers agrees that the Drilling Parties shall be third-party
beneficiaries of the covenant contained in Section 6.3(b) and each shall
be entitled to rely on and enforce such covenant as though such Drilling
Party were a party to this Agreement. Each of the parties hereto agrees
that the Hedging Agreement Counterparties shall be third-party
beneficiaries of the covenant contained in Sections 10 and 12.5 and shall
be entitled to rely on and enforce such covenants as though the Hedging
Agreement Counterparties were parties to this Agreement.
SECTION 12.20 Consent to Jurisdiction. Each of the parties hereto (i)
hereby irrevocably submits to the nonexclusive jurisdiction of the Supreme
Court of the State of New York, New York County (without prejudice to the
right of any party to remove to the United States District Court for the
Southern District of New York) and to the jurisdiction of the United States
District Court for the Southern District of New York, for the purposes of
any suit, action or other proceeding arising out of this Agreement, the
other Transaction Documents, or the subject matter hereof or thereof or any
of the transactions contemplated hereby or thereby brought by any of the
parties hereto or their successors or assigns, (ii) hereby irrevocably
agrees that all claims in respect of such suit, action or proceeding may
be heard and determined in such New York State court or, to the fullest
extent permitted by Applicable Law, in such Federal court and (iii) to the
extent permitted by Applicable Law, hereby irrevocably waives, and agrees
not to assert, by way of motion, as a defense, or otherwise, in any such
suit, action or proceeding any claim that it is not personally subject to
the jurisdiction of the above-named courts, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement, the other
Transaction Documents, or the subject matter hereof or thereof may not be
enforced in or by such court. A final judgment obtained in respect of any
action, suit or proceeding referred to in this Section 12.20 shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any manner as provided by and subject to Applicable Law.
Each of the parties hereto hereby consents to service of process in
connection with the subject matter specified in the first sentence of this
Section 12.20 in connection with the above mentioned courts in New York by
registered mail, Federal Express, DHL or similar courier at the address to
which notices to it are to be given, it being agreed that service in such
manner shall constitute valid service upon such party or its respective
successors or assigns in connection with any such suit, action or
proceeding only; provided, however, that nothing in this Section 12.20(i)
shall affect the right of any of such party or its respective successors
or assigns to serve legal process in any other manner permitted by law or
affect the right of any of such parties or its respective successors or
assigns to bring any suit, action or proceeding against any other one of
such parties or its respective property in the courts of other
jurisdictions.
SECTION 12.21 Deepwater Acknowledgment With Respect to Charter Trust
Agreement. Deepwater hereby agrees and consents to the provisions of
Section 8.1(a) of the Charter Trust Agreement in respect of Deepwater's
obligations to reimburse the Charter Trustee's reasonable fees and
expenses.
SECTION 12.22 Appointment of Wilmington Trust FSB as Attorney-in-Fact
on behalf of the Beneficial Owners; Powers of Attorney. Each of the
Beneficial Owners identified in the Charter Trust Agreement, by its
respective signature below, hereby appoints Wilmington Trust FSB as
attorney-in-fact solely for the purpose of, in its name, place and stead,
executing and delivering the Charter Trust Agreement. Wilmington Trust FSB
is further authorized and directed by each such Beneficial Owner to execute
and deliver the power of attorney substantially in the form attached hereto
as Exhibit W-1, in favor of the Persons listed therein, for the purpose of
having the Charter Trust Agreement duly executed and delivered by each such
Beneficial Owner. Such appointment shall not be construed to be a
"statutory short form power of attorney" as defined in Section 5-1501 of
the New York General Obligations Law. Further, Wilmington Trust Company
shall execute and deliver the Power of Attorney attached hereto as Exhibit
W-2, both in its individual capacity, as expressly provided in such Exhibit
W-2, and as Charter Trustee.
SECTION 12.23 Non-Defaulting Drilling Party s Right to Pursue Contests.
Where a Non-Defaulting Drilling Party has exercised its Assumption Cure
Right, if the Charter Trustee, Investment Trust and the Certificate
Purchasers have opted not to pursue remedies against (i) where Frontier
Deepwater Drilling is a Defaulting Drilling Party, Conoco for any failure
to make payments due under the Conoco Guaranty or the Conoco Drilling
Contract Guaranty following a demand for payment thereunder, or (ii) where
R&B Falcon Drilling (International & Deepwater) Inc. is a Defaulting
Drilling Party, R&B Falcon for any failure to make payments due under the
R&B Falcon Guaranty or the R&B Falcon Drilling Contract Guaranty following
a demand for payment thereunder, such Non-Defaulting Drilling Party shall
have the right to pursue any and all claims of the Charter Trustee,
Investment Trust and the Certificate Purchasers under any such Guaranty;
provided, however that such Non-Defaulting Drilling Party shall not have
the right in any way to settle or compromise any such claim pursued under
this Section for less than the full amount owed under any such Guaranty
unless each of the Certificate Purchasers has consented to such settlement
or compromise. Notwithstanding anything to the contrary in this Section,
all amounts received by the Non-Defaulting Drilling Party as a result of
the pursuit of any claims hereunder shall be deposited into the appropriate
Account under the Depository Agreement, as though such amounts had been
paid by, where clause (i) above applies, Conoco and, where clause (ii)
above applies, R&B Falcon.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this PARTICIPATION
AGREEMENT to be duly executed by their respective officers and thereunto
duly authorized as of the day and year first above written.
DEEPWATER DRILLING II L.L.C.
By:
Name:
Title:
DEEPWATER INVESTMENT TRUST 1999-A
By: WILMINGTON TRUST FSB, not in its
individual capacity, but solely as
Investment Trustee
By:
Name:
Title:
WILMINGTON TRUST FSB, not in its
individual capacity, except as specified
herein, but solely as Investment Trustee
By:
Name:
Title:
WILMINGTON TRUST COMPANY, not in its
individual capacity, except as specified
herein, but solely as Charter Trustee
By:
Name:
Title:
R&B FALCON CORPORATION,
with respect to Sections 2.15, 6.4, 9.4(a)
and 12.13(b) only
By:
Name:
Title:
CONOCO INC.,
with respect to Sections 2.15, 6.4,
9.4(a) and 12.13(b) only
By:
Name:
Title:
RBF DEEPWATER EXPLORATION II INC.,
with respect to Sections 5.2 and 6.4 only
By:
Name:
Title:
CONOCO DEVELOPMENT II INC., with
respect to Sections 5.2 and 6.4 only
By:
Name:
Title:
BA LEASING & CAPITAL CORPORATION,
as Documentation Agent
By:
Name:
Title:
By:
Name:
Title:
Certificate Purchasers:
BA LEASING & CAPITAL CORPORATION
By:
Name:
Title:
By:
Name:
Title:
BANK ONE, LOUISIANA, NATIONAL
ASSOCIATION
By:
Name:
Title:
By:
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:
Name:
Title:
THE DAI-ICHI KANGYO BANK, LTD.
By:
Name:
Title:
By:
Name:
Title:
DIME COMMERCIAL CORP.
By:
Name: Michael E. Evans
Title: Senior Vice President
FLEET CAPITAL CORPORATION
By:
Name:
Title:
By:
Name:
Title:
FBTC LEASING CORP.
By:
Name:
Title:
By:
Name:
Title:
MEES PIERSON CAPITAL CORP.
By:
Name:
Title:
By:
Name:
Title:
NATIONAL WESTMINSTER BANK PLC
By:
Name: Patricia J. Dundee
Title: Senior Vice President, National
Westminster Bank Plc, New York Branch
By:
Name: Patricia J. Dundee
Title: Senior Vice President, National
Westminster Bank Plc, Nassau Branch
THE ROYAL BANK OF SCOTLAND PLC
By:
Name: Scott Barton
Title: Vice President
SIEMENS CREDIT CORPORATION
By:
Name: Jeffrey L. Knoop
Title: Vice President
EXHIBIT A
Form of Funding Indemnity Letter
EXHIBIT B
Opinion of White & Case LLP, special counsel to Deepwater
SEE TABS 60 AND 61
Exhibit C
[Intentionally Omitted]
Exhibit D
Opinion of Wayne K. Anderson, in-house counsel to Conoco
SEE TAB 63
Exhibit E
Opinion of Wayne K. Hillin, counsel to R&B Falcon
SEE TAB 62
Exhibit F
Officer's and Manager's Certificates
SEE TABS 40, 44, 47, 49 AND 52
Exhibit G
Officer's Certificates
SEE TABS 54 AND 57
Exhibit H-1
Amended and Restated Drilling Contracts
SEE TABS 22 AND 24
Exhibit H-2
Amended and Restated Drilling Contract Guaranties
SEE TABS 23 AND 24
Exhibit I
Drilling Consent
SEE TAB 26
Exhibit J
[Intentionally Omitted]
Exhibit K
[Intentionally Omitted]
Exhibit L
[Intentionally Omitted]
Exhibit M
Bill of Sale
SEE TAB 32
Exhibit N
Form of Advance Request
SEE TAB 35
Exhibit O
Opinion of Haight, Gardner, Holland & Knight
SEE TABS 68 AND 69
Exhibit P
Opinion of Arias, Fabrega & Fabrega, Panamanian Counsel
SEE TAB 70
Exhibit Q
Form of Notice of Certificate Return Rate
Exhibit R
Certificate Purchaser Assignment and Assumption Agreement
Exhibit S-1
Form of Hedging Agreements
Exhibit S-2
Form of Deepwater Hedging Agreements
Exhibit T
Form of Ship Mortgage
SEE TAB 21
Exhibit U
Opinions of Cynthia L. Corliss, Vice President and Trust Counsel of
Wilmington Trust Company and Richards, Layton & Finger
SEE TABS 64 AND 67
Exhibit W
Form of Subcharter
Exhibit W-1
Special Power of Attorney for Executing the Charter Trust Agreement and
Ship Mortgage on Behalf of Wilmington Trust FSB and the Beneficial
Owners
SEE TAB 16
Exhibit W-2
Special Power of Attorney for Executing the Charter Trust Agreement and
Ship Mortgage on Behalf of Wilmington Trust Company
SEE TAB 15
Exhibit X
SEE TAB 27
Form of Letter of Credit
Schedule 1
List of Transaction Documents
Schedule 2
Facility Fee Rate
Schedule 3
List of UCC and Other Necessary Security Filings
Schedule 4
Information Relied Upon by Appraiser
1. Description & General Design Specifications for the Drillship
2. Construction Cost Data
3. Participation Agreement
Schedule 5
Certificate Purchaser Notice Addresses,
Payment Instructions and Responsible Officers
BA LEASING & CAPITAL CORPORATION
Full Legal Name of
Bank:___________________________________________________
Name of Person(s) signing
Documents:_____________________Title:_______________
_____________________Title:_______________
General Information:
Domestic Lending Office: Eurodollar Lending Office:
- ----------------------- -------------------------
Name: Name:
Address: Address:
Address for Notices:
Name:_____________________
Address:
Tel #:
Fax #:
Administrative Contact Person:
Name:_____________________
Address:
Tel #:
Fax #:
Taxpayer ID #:______________
Payment Instructions (for US Dollars):
BANK ONE, LOUISIANA, N.A.
- -------------------------
Full Legal Name of Bank: Bank One, Louisiana, N.A.
Name of Person(s)
signing Documents: J. Charles Freel Title: First Vice President
________________ Title: _______________
General Information:
- -------------------
Domestic Lending Office: Eurodollar Lending Office:
- ----------------------- -------------------------
Name: Bank One, Louisiana, N.A. Name: Same as for Notices
Address: 201 St. Charles Ave, Address: Same as for Notices
29th Floor
New Orleans, LA 70170
Address for Notices:
- -------------------
Name: J. Charles Freel
Address: 201 St. Charles Ave, 29th Floor
New Orleans, LA 70170
Tel #: 504-623-1638
Fax #: 504-623-6555
Administrative Contact Person:
- -----------------------------
Name: Lidia Martinez
Address: 500 Throckmorton St. PG6
Ft. Worth, TX 76102
Tel #: 817-884-4635
Fax #: 817-884-5370
Taxpayer ID #: 75 227 0994
Payment Instructions (for US Dollars):
Bank One, N.A.
ABA 065400137
Account# 552 9616 151010
Attn: Southern Region Coml. Special Services
Ref: Deepwater Drilling II L.L.C.
CREDIT LYONNAIS NEW YORK BRANCH
- -------------------------------
Full Legal Name of Bank: Credit Lyonnais New York Branch
Name of Person(s) signing Documents: Philippe Soustra Title: Sr. Vice President
________________ Title:_______________
General Information:
Domestic Lending Office: Eurodollar Lending Office:
- ----------------------- -------------------------
Name: Credit Lyonnais New York Branch Name: Same as Domestic
Lending Office
Address: 1301 Avenue of the Americas Address: Same as Domestic
New York, NY 10019 Lending Office
Address for Notices:
- -------------------
Name: Bernadette Archie
Address: 1000 Louisiana, Suite 5360
Houston, TX 77002
Tel #: 713-753-8723
Fax #: 713-759-9766
Administrative Contact Person:
- -----------------------------
Name: Bernadette Archie
Address: 1000 Louisiana, Suite 5360
Houston, TX 77002
Tel #: 713-753-8723
Fax #: 713-759-9766
Taxpayer ID #: 13-2674617
Payment Instructions (for US Dollars):
Credit Lyonnais New York
ABA#: 026008073
Account #: 01-88179-3701-00-179
Ref: Deepwater II Synthetic Lease
THE DAI-ICHI KANGYO BANK, LTD.
- -----------------------------
Full Legal Name of Bank: The Dai-Ichi Kangyo Bank, Ltd.
Name of Person(s) signing Documents: ________________ Title:_______________
________________ Title:_______________
General Information:
Domestic Lending Office: Eurodollar Lending Office:
- ----------------------- -------------------------
Name: The Dai-Ichi Kangyo Bank, Name: Same as Domestic Lending Office
Ltd.
Address: 1 World Trade Center, Address: Same as Domestic Lending Office
48th Floor
New York, NY 10048
Address for Notices:
- -------------------
Name: Dawnmarie Matos
Address: 1 World Trade Center, 48th Floor
New York, NY 10048
Tel #: 212-432-6643
Fax #: 212-432-8887
Administrative Contact Person:
- -----------------------------
Name: Dawnmarie Matos
Address: 1 World Trade Center, 48th Floor
New York, NY 10048
Tel #: 212-432-6643
Fax #: 212-432-8887
Taxpayer ID #: ___________
Payment Instructions (for US Dollars):
Dai-Ichi Kangyo Bank, New York
Fedwire ABA No: 026004307
Attn: Loan Admin. Asst. General Manager
Re: Deepwater II Synthetic Lease
Account #: N/A
DIME COMMERCIAL CORP.
- --------------------
Full Legal Name of Bank: Dime Commercial Corp.
Name of Person(s) signing Documents: Michael E. Evans Title: Senior
Vice President
________________ Title: ______________
General Information:
Domestic Lending Office: Eurodollar Lending Office:
- ----------------------- -------------------------
Name: Dime Commercial Corp. Name: Dime Commercial Corp.
Address: 1180 Avenue of the Americas Address: 1180 Avenue of the Americas
Suite 510 Suite 510
New York, NY 10036 New York, NY 10036
Address for Notices:
- -------------------
Name: Dime Commercial Corp.
Address: 1180 Avenue of the Americas
Suite 510
New York, NY 10036
Tel #:
Fax #:
Administrative Contact Person:
- -----------------------------
Name: Michael E. Evans
Address: 1180 Avenue of the Americas
Suite 510
New York, NY 10036
Tel #: 212-382-4992
Fax #: 212-382-8349
Taxpayer ID #: 11-3415529
Payment Instructions (for US Dollars):
FLEET CAPITAL CORPORATION
- -------------------------
Full Legal Name of Bank: Fleet Capital Corporation
Name of Person(s) signing Documents: Steven Criscione Title: Vice President
Edward O Brien Title: Vice President
General Information:
Domestic Lending Office: Eurodollar Lending Office:
- ----------------------- -------------------------
Name: See Address for Notices Name: See Address for Notices
Address: See Address for Notices Address: See Address for Notices
Address for Notices:
- -------------------
Name: Fleet Capital Corp.
Address: 50 Kennedy Plaza, 5th Floor
Providence, RI 02903
Attn: Senior Credit Officer
Tel #: 401-278-5060
Fax #: 401-453-2536
Administrative Contact Person:
- -----------------------------
Name: Rhonda Maggiacomo
Address: See Address for Notices
Tel #: 401-278-5060
Fax #: 401-453-2536
Taxpayer ID #: 05-0342167
Payment Instructions (for US Dollars):
Fleet Bank RI
ABA#: 011500010
for the account of Fleet Capital Leasing
Account # 015-5527767
upon reciept contact: Leslie Tordoff, (401) 278-3152
FBTC LEASING CORP.
- -----------------
Full Legal Name of Bank: FBTC Leasing Corp.
Name of Person(s) signing Documents: ________________ Title:________________
________________ Title:________________
General Information:
Domestic Lending Office: Eurodollar Lending Office:
- ----------------------- -------------------------
Name: See Administrative Name: See Administrative
Contact Person Contact Person
Address: See Administrative Address: See Administrative
Contact Person Contact Person
Address for Notices:
- -------------------
Name: See Administrative Contact Person
Address: See Administrative Contact Person
Tel #:
Fax #:
Administrative Contact Person:
- -----------------------------
Name: Paula Kamuda (Backup: Gail Hall)
Address: Two World Trade Center, 79th Floor
New York, NY 10048
Tel #: 212-898-2532 (212-898-2441)
Fax #: 212-775-7276
Taxpayer ID #: 13-3747048
Payment Instructions (for US Dollars):
Bank Name: Fuji Bank and Trust Company
ABA Number: 02600-8905
Acct. Name: FBTC Leasing Corp.
Acct Number: 001-900269
MEES PIERSON CAPITAL CORP.
- -------------------------
Full Legal Name of Bank: Mees Pierson Capital Corp.
Name of Person(s) signing Documents: ________________ Title:________________
________________ Title:________________
General Information:
Domestic Lending Office: Eurodollar Lending Office:
- ----------------------- -------------------------
Name: See Administrative Name: See Administrative
Contact Person Contact Person
Address: See Administrative Address: See Administrative
Contact Person Contact Person
Address for Notices:
- -------------------
Name: See Administrative Contact Person
Address: See Administrative Contact Person
Tel #:
Fax #:
Administrative Contact Person:
- -----------------------------
Name: Marlene Ellis
Address: 3 Stamford Plaza
301 Tresser Boulevard, 9th Floor
Stamford, CT 06901-3239
Tel #: 203-705-5755
Fax #: 203-705-5888
Taxpayer ID #: ______________
Payment Instructions (for US Dollars):
Bank Name: Chase Manhattan Bank
ABA#: 021 000 021
Beneficiary: Mees Pierson Capital Corp.
A/C #: 001-1624418
Reference: Deepwater Drilling
A/C #: 100980351
Schedule 6
[Intentionally Omitted]
Schedule 7
Terms of Subordination for Subordinated Debt
EXHIBIT 10.10
Execution Copy
APPENDIX 1
to
Participation Agreement
DEFINITIONS AND INTERPRETATION
I. RULES OF INTERPRETATION
A. General Rules of Interpretation. In each Transaction
Document, unless a clear contrary intention appears:
(i) the singular number includes the plural number and
vice versa;
(ii) reference to any Person (individually or in any
particular capacity) includes such Person's legal
representatives, successors and assigns but, if applicable,
only if such legal representatives, successors and assigns
are permitted by the Transaction Documents, and reference to
a Person in a particular capacity excludes such Person in
any other capacity or individually;
(iii) reference to any gender includes the other
gender;
(iv) reference to any agreement (including any
Transaction Document), document or instrument means such
agreement, document or instrument as amended or modified and
in effect from time to time in accordance with the terms
thereof and, if applicable, the terms of the other
Transaction Documents and reference to any promissory note,
certificate or other instrument includes any promissory
note, certificate or other instrument which is an extension
or renewal thereof or a substitute or replacement therefor;
(v) reference to any Applicable Law means such
Applicable Law as amended, modified, codified, replaced or
reenacted, in whole or in part, and in effect from time to
time, including rules and regulations promulgated thereunder
and reference to any section or other provision of any
Applicable Law means that provision of such Applicable Law
from time to time in effect and constituting the substantive
amendment, modification, codification, replacement or
reenactment of such section or other provision;
(vi) reference in any Transaction Document to any
Article, Section, Appendix, Schedule or Exhibit means such
Article or Section thereof or Appendix, Schedule or Exhibit
thereto;
(vii) "hereunder", "hereof", "hereto" and words of
similar import shall be deemed references to a Transaction
Document as a whole and not to any particular Article,
Section or other provision thereof;
(viii) "including" (and with correlative meaning
"include") means including without limiting the generality
of any description preceding such term; and
(ix) relative to the determination of any period of
time, "from" means "from and including" and "to" means "to
and excluding";
B. Accounting Terms. In each Transaction Document, unless
expressly otherwise provided, accounting terms shall be construed
and interpreted, and accounting determinations and computations
shall be made, in accordance with GAAP.
C. Legal Representation of the Parties. The Transaction
Documents were negotiated by the parties with the benefit of
legal representation and any rule of construction or
interpretation otherwise requiring the Transaction Document to be
construed or interpreted against any party shall not apply to any
construction or interpretation hereof or thereof.
D. Defined Terms. Unless a clear contrary intention
appears, terms defined herein have the respective indicated
meanings when used in each Transaction Document.
II. DEFINITIONS
"Account" means each of the Deferred Construction Costs
Reserve Account, the Event of Loss Proceeds Account, the
Reimbursement and Proceeds Account, the Operating Account, the
Permitted Contest Reserve Account, the Drillship Sales Proceeds
Account, the R&B Falcon Subcharter Proceeds Account, the Letter
of Credit Collateral Account and the Termination Proceeds
Account.
"Account Collateral" has the meaning specified in Section
2.2 of the Depository Agreement.
"Accredited Investor" has the meaning specified in Rule
501(a) of the Securities Act.
"Acquiror" means an entity that acquires all or
substantially all of the assets or outstanding Voting Stock of a
Person.
"Actual Knowledge" means the actual awareness of a
Responsible Officer.
"Adjustment Date" means the Initial Certificate Margin
Adjustment Date and every sixth Payment Date thereafter.
"Advance" has the meaning specified in Section 2.3 of the
Participation Agreement.
"Advance Date" means the Closing Date or, if the Advances
are postponed under Section 2.8 of the Participation Agreement,
any Postponed Advance Date.
"Advance Request" means each of the Advance Request issued
in connection with the Closing Date or, if the Advances are
postponed under Section 2.8 of the Participation Agreement, the
Advance Request issued under such Section, in each case in
substantially the form of Exhibit N to the Participation
Agreement with appropriate provisions and insertions.
"Affected Certificate Purchaser" is defined in Section 7.7
of the Participation Agreement.
"Affiliate" means, when used with respect to any Person, any
other Person directly or indirectly controlling or controlled by
or under direct or indirect common control with such Person. As
used in this definition, the term "control" shall mean (including
the correlative meanings of the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any
Person, the possession directly or indirectly, of the power to
direct or cause the direction of the management policies of such
Person, whether through the ownership of voting securities or by
contract or otherwise.
"After Tax Basis" means, with respect to any payment to be
received, the amount of such payment increased so that, after
deduction of the amount of all Taxes required to be paid by the
recipient calculated at the maximum United States federal rates
then generally applicable to large widely held corporations and
at the marginal state and local rates certified by the recipient
as then applicable to such recipient (less any tax savings
realized and the present value of any tax savings projected to be
realized by the recipient as a result of the payment of the
indemnified amount), with respect to the receipt by the recipient
of such amount, such increased payment (as so reduced) is equal
to the payment otherwise required to be made.
"Agent" means the Documentation Agent.
"Alternate Rate" means, for any day, the higher of: (a)
0.50% per annum above the latest Federal Funds Rate; and (b) the
rate of interest in effect for such day as publicly announced
from time to time by Bank of America National Trust and Savings
Association ("BofA"), a national banking association, in San
Francisco, California, as its "reference rate." (The reference
rate is a rate set by BofA based upon various factors including
BofA's costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some
loans, which may be priced at, above or below such announced
rate.) Any change in the reference rate announced by BofA shall
take effect at the opening of business on the day specified in
the public announcement of such change.
"Alternate Rate Advance" means any Advance for which any
Certificate Return on any related Certificates is calculated with
reference to the Alternate Rate.
"Applicable Law" means all applicable laws, rules,
regulations (including Environmental Laws), statutes, treaties,
conventions (including, if applicable, the Safety of Life at Sea
Convention) codes, ordinances, permits, certificates, orders and
licenses of, and interpretations by, all Government Authorities,
and applicable judgments, decrees, injunctions, writs, orders or
like action of any court, arbitrator or other administrative,
judicial or quasi-judicial tribunal agency of competent
jurisdiction (including those pertaining to health and safety and
those pertaining to the construction, use or operation of the
Vessel, the OFE and any Modifications).
"Applicable Office" means, with respect to each Certificate
Purchaser, the office, branch or Affiliate of such Certificate
Purchaser specified as its "Applicable Office" to Deepwater, the
Charter Trustee and the Investment Trust.
"Applicable Percentage" means:
(i) with respect to payments made or obligations
guaranteed by (A) R&B Falcon or its Affiliates (other than
Deepwater) or (B) Deepwater pursuant to the terms of Charter
Supplement No. 1, 60%; or
(ii) with respect to payments made or obligations
guaranteed by (A) Conoco or its Affiliates (other than
Deepwater) or (B) Deepwater pursuant to the terms of Charter
Supplement No. 2, 40%.
"Appraisal" means, with respect to the Drillship, an
appraisal delivered on the Closing Date, prepared by the
Appraiser.
"Appraiser" means American Appraisal Incorporated.
"Assumption Cure Right" has the meaning set forth in Section
9(a) of the Drilling Consent.
"Bank of America" has the meaning specified in Section
3.2(o) of the Participation Agreement.
"Bankruptcy Default" means a Default described in Section
4.1(e) or (f) of either Charter Supplement No. 1 or Charter
Supplement No. 2.
"Base Charter Term" has the meaning specified in Section 2.3
of the Master Charter.
"Base Rate" means a rate per annum equal to LIBOR.
"Base Rate Advance" means any Advance for which Certificate
Return is calculated with reference to the Base Rate.
"Basic Hire" has the meaning specified in Section 3.1 of the
Master Charter.
"Beneficial Owners" means those financial institutions who
are parties to the Charter Trust Agreement and identified therein
as "Beneficial Owners".
"Bill of Sale" means the instrument substantially in the
form set forth on Exhibit M to the Participation Agreement to be
delivered by Deepwater to the Charter Trustee.
"Blackout Period" means that period (1) beginning on the
earlier to occur of (i) the exercise of the Non-Assumption Cure
Right by a Non-Defaulting Drilling Party and (ii) the lending of
Credit Support, directly or indirectly, by a Non-Defaulting
Drilling Party to the other Drilling Party, and (2) ending on the
later to occur of (i) the first anniversary of the cure payment
or the provision of such Credit Support and (ii) the first day
following the Defaulting Drilling Party's sixth consecutive Day
Rate payment in accordance with the terms of its Drilling
Contract following the most recent exercise of the Non-Assumption
Cure Right or provision of Credit Support, as applicable.
"Board of Governors" means the Board of Governors of the
Federal Reserve System of the United States of America.
"Builder" means, collectively, Samsung Heavy Industries Co.,
Ltd., a Korean corporation, and Samsung Corporation, a Korean
corporation, as Builder under the Construction Contract.
"Builder's Bank" means the guarantor of any refund
obligations that the Builder may incur under the Construction
Contract.
"Business Day" means (i) except as set forth in clause (ii)
below, any day excluding (x) Saturday, (y) Sunday, and (z) any
day on which banks in New York, New York, Wilmington, Delaware,
or Houston, Texas, are authorized by law to close, and (ii) with
respect to all notices and determinations in connection with and
payments of Certificate Return any day which is a Business Day
described in (i) above and which is also a day for trading by and
between banks in U.S. dollar deposits in the London interbank
Eurodollar market.
"Buyer" means the "Buyer" under the Construction Contract.
"Casualty" means any damage or destruction of all or any
portion of the Drillship as a result of a fire or other casualty
which does not constitute an Event of Loss.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. ' 9601 et
seq., and its implementing regulations and amendments.
"Certificate" means each Investment Trust Certificate, each
Series A Trust Certificate and each Series B Trust Certificate.
"Certificate Margin" has the meaning specified in Section
2.4(c) of the Participation Agreement.
"Certificate Purchaser Amount" means, with respect to each
Certificate Purchaser, at any given time, the aggregate amount of
all Advances made by such Certificate Purchaser plus accrued but
unpaid Postponement Yield, if any, minus the amount of any
distributions paid to such Certificate Purchaser in reduction of
the Certificate Purchaser Amount.
"Certificate Purchaser Balance" means, at any given time,
the aggregate amount of all Advances made by the Certificate
Purchasers minus the amount of any distributions paid to the
Certificate Purchasers in reduction of the Certificate Purchaser
Balance.
"Certificate Purchaser Liens" means Liens on or against any
or all of the Drillship, the Trust Estate, the Investment Trust,
the Charter or any payment of Charter Hire which results from (a)
any act or omission of, or any Claim against any Certificate
Purchaser in any case unrelated to the transactions contemplated
by the Transaction Documents (including any Liens arising as a
result of a voluntary transfer of all or any portion of either
Trust Estate, other than any voluntary transfer after a Charter
Event of Default or a transfer to Deepwater pursuant to the
Charter), (b) any Tax owed by any such Person, except for any Tax
required to be paid by Deepwater under the Transaction Documents,
including any Tax for which Deepwater is obligated to indemnify
such Person under the General Tax Indemnity, or (c) any act or
omission of such Person that is in breach of any of the covenants
or agreements of the Transaction Documents.
"Certificate Purchaser Replacement Conditions" has the
meaning specified in Section 4.3 of the Participation Agreement.
"Certificate Purchasers" means those financial institutions
who are identified in the Charter Trust Agreement as "Beneficial
Owners" and in the Investment Trust Agreement as "Certificate
Purchasers."
"Certificate Return" means:
(i) except where clause (ii) of this definition is
applicable, for any Return Period, an amount equal to the
product of the applicable Certificate Return Rate times the
Certificate Purchaser Balance (or portion thereof) allocable
to such Return Period or
(ii) where one, but not both, of the Charter Supplements has
been accelerated pursuant to Section 4.2(a) thereof,
Certificate Return accruing after the termination of the
accelerated Charter Supplement shall be calculated as, for
any Return Period, an amount equal to the product of the
applicable Certificate Return Rate times the Certificate
Purchaser Balance that would have been in effect on such
date, but for the acceleration (such Certificate Purchaser
Balance being the amount set forth on Schedule I to the
Master Charter opposite the Charter Hire Payment Date under
the column marked "Charter Balance").
"Certificate Return Rate" means the Base Rate plus the
Certificate Margin or, to the extent that the Base Rate is
unavailable or illegal, the Alternate Rate plus the Certificate
Margin.
"Change of Control" means (i) as to any Person (including
Conoco and R&B Falcon), a sale, assignment or transfer by its
Affiliates of all or substantially all of the assets of such
Person and its Subsidiaries taken as a whole (whether in a single
transaction or a series of related transactions) to any "person"
or "group" (as the ultimate purchaser, assignee or transferee)
within the meaning of Section 13(d)(3) and Section 14(d)(2) of
the Securities Exchange Act of 1934 other than to its Affiliates;
(ii) as to any Person (including Conoco and R&B Falcon), its
Affiliates, directly or indirectly cease to beneficially own more
than 50% of the outstanding voting stock of such Person; (iii)
after the occurrence of the event described in clause (ii), the
first date on which the individuals who are directors of the
Relevant Entity and whose election or nomination for election by
the stockholders of the Relevant Entity is approved, or who were
elected by the affirmative vote of, at least two-thirds of the
directors who were members of the Board of Directors of the
Relevant Entity at the time of such nomination or election, will
cease to constitute a majority of the Board of Directors of the
Relevant Entity or its successor by merger, consolidation or sale
of assets; or (iv) the liquidation or dissolution of such Person.
For purposes of this definition, Relevant Entity means either
Conoco or R&B Falcon, or, if there is a Parent of such respective
Person, the Parent.
"Charter" means both charters created by the Master Charter,
as supplemented by Charter Supplement No. 1 and Charter
Supplement No. 2.
"Charter Commencement Date" means the Delivery Date.
"Charter Default" means any event or condition which, with
the lapse of time or the giving of notice, or both, would
constitute a Charter Event of Default.
"Charter Event of Default" has the meaning specified in
Section 16.1 of the Master Charter.
"Charter Extension Option" has the meaning specified in
Section 20.2 of the Master Charter.
"Charter Hire" means Basic Hire and Supplemental Hire.
"Charter Hire Payment Date" means the last Business Day of
each calendar month, commencing on the Initial Charter Hire
Payment Date, and the last day of the Charter Term.
"Charter Hire Payment Date Certificate" has the meaning
specified in Section 3.4(b) of the Depository Agreement.
"Charter Residual Risk Amount" means 18% of the Certificate
Purchaser Balance at the commencement of the Base Charter Term.
"Charter Supplement" means Charter Supplement No. 1 or
Charter Supplement No. 2.
"Charter Supplement No. 1" means that Charter Supplement No.
1 dated as of the Closing Date, between the Charter Trustee and
Deepwater.
"Charter Supplement No. 1 Event of Default" has the meaning
specified in Section 4.1 of Charter Supplement No. 1.
"Charter Supplement No. 1 Payment Date" has the meaning
specified in Section 3.1 of Charter Supplement No. 1.
"Charter Supplement No. 2" means that Charter Supplement No.
2 dated as of the Closing Date, between the Charter Trustee and
Deepwater.
"Charter Supplement No. 2 Event of Default" has the meaning
specified in Section 4.1 of Charter Supplement No. 2.
"Charter Supplement No. 2 Payment Date" has the meaning
specified in Section 3.1 of Charter Supplement No. 2.
"Charter Supplement Prepayment Amount" has the meaning
specified in Section 4.2(c) of the Depository Agreement.
"Charter Term" has the meaning specified in Section 2.3 of
the Master Charter.
"Charter Trust" means the trust created pursuant to the
Charter Trust Agreement.
"Charter Trust Agreement" means that Charter Trust Agreement
(Deepwater Charter Trust 1999-A), dated as of the Closing Date,
between the Charter Trustee, the Certificate Purchasers and the
Investment Trust.
"Charter Trustee" means Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity, except as
otherwise provided, but solely as trustee under the Charter Trust
Agreement.
"Charter Trustee Assignment" means the Charter Trustee
Assignment, dated as of the Closing Date, between the Charter
Trustee, the Investment Trustee and the Hedging Agreement
Counterparties (if any).
"Claims" has the meaning specified in Section 10.1 of the
Participation Agreement.
"Classification Society" has the meaning specified in
Section 10.1 of the Master Charter.
"Closing Date" means the date which each of the conditions
precedent set forth in Sections 3.2 and 4.1 of the Participation
Agreement have been satisfied or waived and the actions
contemplated in Sections 2.1 and 2.2 of the Participation
Agreement have been carried out.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means the Charter Trustee's rights in the
Drillship, the Account Collateral, the Collateral Documents and
all other assets or property over which a Lien or security
interest has purported to have been granted under the Security
Documents.
"Collateral Documents" has the meaning specified in Section
2.1 of the Depository Agreement.
"Commitment" means, with respect to each Certificate
Purchaser, the amount set forth on Schedule I to the Trust
Agreements opposite the name of each Certificate Purchaser, which
amount may be adjusted pursuant to Section 7.7, 7.9 or 9.1 of the
Participation Agreement.
"Commitment Percentage" means, with respect to each
Certificate Purchaser, the percentage beneficial interest held by
such Certificate Purchaser under the Charter Trust Agreement and
the Investment Trust Agreement from time to time determined in
accordance with the respective Trust Agreement.
"Competitor" means a Person who either (i) is engaged in the
exploration, development, production, refinement, marketing or
retailing of crude oil, petroleum products, natural gas or gas
liquids or in providing marine contract drilling services for
oil, gas or other hydrocarbons or (ii) has a material interest
(whether held directly or indirectly) in, or is otherwise an
Affiliate of, a Person that is engaged in the exploration,
development, production, refinement, marketing or retailing of
crude oil, petroleum products, natural gas or gas liquids or in
providing marine contract drilling services for oil, gas or other
hydrocarbons; provided, however, that a Person who is an
institutional investor or lender which is a passive investor or
lender in the financing of equipment or facilities used in the
exploration, development, production, refinement, marketing or
retailing of crude oil, petroleum products, natural gas or gas
liquids or in providing marine contract drilling services for
oil, gas or other hydrocarbons or a passive investor in any
Person described in clauses (i) or (ii) above shall not, solely
by the reason of such investment or loan (including by reason of
foreclosing on any facilities used by such Person), be deemed to
be a "Competitor".
"Condemnation" means (x) the permanent and complete
condemnation, requisition, confiscation, arrest, seizure or other
taking of title or leasehold interest to the Drillship or any
transfer made in lieu of any such actual or threatened action or
proceeding or (y) any condemnation other than a requisition of
temporary use or requisition of use for a period scheduled to
last beyond the end of the Charter Term or which in fact is
continuing on the Charter Termination Date even if not scheduled
to last beyond the Charter Term, in either case resulting in the
loss of use or possession of substantially all of the Drillship.
A "Condemnation" shall be deemed to have occurred on the earliest
of the dates that use, title or a leasehold interest is taken.
"Conoco" means Conoco Inc. (formerly Conoco Energy Company),
a Delaware corporation.
"Conoco Certificates" means the Conoco Series A Trust
Certificates and the Conoco Investment Trust Certificates.
"Conoco Charter" means the charter created by the Master
Charter, as supplemented by Charter Supplement No. 2.
"Conoco Drilling Contract" means that Deepwater Drillship
Contract, dated as of April 30, 1997, as assigned, amended and
restated, between Frontier Deepwater Drilling Inc. and Deepwater.
"Conoco Drilling Contract Guaranty" means the Amended and
Restated Deepwater Drillship Project, Conoco Inc. Guaranty, dated
as of August 31, 1999, given by Conoco Inc. in favor of
Deepwater.
"Conoco Drilling Party" means Frontier Deepwater Drilling
Inc.
"Conoco Guaranty" means the Conoco Guaranty, dated as of the
Closing Date, given by Conoco in favor of the Trustees, the
Investment Trust, the Agent, the Certificate Purchasers, the
Hedging Agreement Counterparties, if any, and the other
beneficiaries named therein.
"Conoco Investment Trust Certificate" means each certificate
issued to a Certificate Purchaser from the Investment Trust
pursuant to Section 2.1(d) of the Participation Agreement and in
accordance with the Investment Trust Agreement to evidence 40% of
the Investment Portion of the Certificate Purchaser Amount of
each such Certificate Purchaser.
"Conoco Series A Trust Certificate" means each certificate
issued to a Beneficial Owner from the Charter Trustee pursuant to
Section 2.1(b) of the Participation Agreement and in accordance
with the Charter Trust Agreement to evidence 40% of the Series A
Portion of the Certificate Purchaser Amount of each such
Beneficial Owner.
"Conoco Usage" means the number of days, rounded to the
nearest day, the Drillship has been utilized under the Conoco
Drilling Contract.
"Construction Contract" means the Contract for Construction
and Sale of a 103,000 Metric Tons Displacement Drillship (Hull
No. 1231), dated February 7, 1997, between the Buyer and the
Builder.
"Construction Costs" means, collectively: (i) the
installment payments under Article II, Section 4 of the
Construction Contract, (ii) costs of acquisition of any OFE,
(iii) [intentionally omitted], (iv) all amounts to be paid under
the Construction Contract or any Construction Document after the
Closing Date and any other costs or expenses relating to
completing construction of the Drillship, including Deferred
Construction Costs, (v) any Transaction Expenses, (vi)
[intentionally omitted], (vii) any Postponement Yield payable
under Section 2.8 of the Participation Agreement and (viii) all
fees, costs, expenses and other amounts (including interest on
the notional principal but excluding amounts payable in
connection with an early termination of the Deepwater Hedging
Agreements (if any)) due and payable prior to the commencement of
the Initial Charter Hire Payment Date to the Charter Trustee
under the Deepwater Hedging Agreements (if any).
"Construction Documents" means such agreements in addition
to the Construction Contract, which Deepwater deemed necessary or
desirable for the design, construction, testing and performance
of the Drillship in accordance with the Construction Contract and
the Transaction Documents.
"Consumer Price Index" means the Consumer Price Index all
Items for all Urban Consumers (1981-1983 = 100) published by the
Bureau of Labor Statistics of the United States Department of
Labor, as reported by the Wall Street Journal. If for any reason
the Bureau of Labor Statistics does not furnish the Consumer
Price Index, the parties instead shall mutually select, accept
and use such other index or comparable statistics on the cost of
living in Washington, D.C. that is computed and published by an
agency of the United States or a responsible financial periodical
of recognized authority.
"Counterpart Investment Trust Certificate" has the meaning
specified in Section 2.4(d) of the Participation Agreement.
"Counterpart Series A Trust Certificate" has the meaning
specified in Section 2.4(d) of the Participation Agreement.
"Coverage Ratio" means, (i) as of any Charter Hire Payment
Date occurring on or prior to the third Charter Hire Payment
Date, the ratio of (x) the projected Revenues for the next three
calendar months (beginning with the month following the month in
which such Charter Hire Payment Date occurs) to (y) the aggregate
amount of all payments (including projected Operation and
Maintenance Expenses) that will be required to be made under
clauses "first" through "eighth" of Section 3.4(b) of the
Depository Agreement during such three-month period, and (ii)
thereafter, as of any Charter Hire Payment Date, the ratio of (A)
the actual Revenues for the immediately preceding three calendar
months (including the month in which such Charter Hire Payment
Date occurs) to (B) the aggregate amount of all payments under
clauses "first" through "seventh" of Section 3.4(b) of the
Depository Agreement that were actually made during such three-
month period or that would have been made during such period if
there had been sufficient funds in the Operating Account at the
time such payments were required to be made.
"Credit Support" means (i) any direct or indirect payment by
one Drilling Party or its Affiliates to the other Drilling Party
for the purpose of allowing such payee Drilling Party to meet its
obligations under its respective Drilling Contract or (ii) any
guaranty or other credit support by one Drilling Party or its
Affiliates of the obligations of the other Drilling Party or its
Affiliates for the purpose of allowing such benefitted Drilling
Party to meet its obligations under its respective Drilling
Contract.
"Cross Charter Default" means, with respect to a Charter
Supplement, the Charter Event of Default listed in Sections
4.1(k) thereof.
"Day Rate" means the daily rate payable to Deepwater under
the Drilling Contracts for the use of the Drillship.
"Day Rate Commencement Date" means March 31, 1999.
"Deepwater" means Deepwater Drilling II L.L.C., a Delaware
limited liability company.
"Deepwater Assignment" means the Assignment Agreement, dated
as of the Closing Date, between Deepwater and the Charter
Trustee.
"Deepwater Hedging Agreements" has the meaning specified in
Section 6.5 of the Participation Agreement.
"Deepwater Obligations" means all of Deepwater's obligations
(monetary or otherwise) arising under, or in connection with, the
Transaction Documents.
"Deepwater Person" means Deepwater, any permitted
subcharterer or any other Person (other than the Charter Trustee,
the Investment Trustee, the Investment Trust or any Certificate
Purchaser) using or in possession of the Drillship or any
officer, director, employee or agent of any of the foregoing.
"Default" means any event or condition which, with the lapse
of time or the giving of notice, or both, would constitute an
Event of Default.
"Defaulting Drilling Party" means (i) Frontier Deepwater
Drilling Inc., where a Charter Supplement No. 2 Event of Default
exists (but not a Charter Supplement No.1 Event of Default, other
than a Cross Charter Default thereunder) or would exist but for
the exercise of the Assumption Cure Right, the Non-Assumption
Cure Right or the provision of Credit Support (except such Event
of Default arising solely from the Cross Charter Default
thereunder) or (ii) R&B Falcon Drilling (International &
Deepwater) Inc., where a Charter Supplement No. 1 Event of
Default exists (but not a Charter Supplement No.2 Event of
Default, other than a Cross Charter Default thereunder) or would
exist but for the exercise of the Assumption Cure Right, the Non-
Assumption Cure Right or the provision of Credit Support (except
such Event of Default arising solely from a Cross Charter Default
thereunder).
"Deferred Construction Costs" means (i) any costs of
mobilization of the Drillship to the port designated pursuant to
the Drilling Contracts and the Rig Sharing Agreement reasonably
likely to be incurred following the Closing Date, (ii) any
remaining Construction Costs reasonably likely to be incurred
following the Closing Date, and (iii) the reimbursement of any
Transaction Expenses reasonably likely to be paid by Deepwater
out of its own funds after the Closing Date.
"Deferred Construction Costs Disbursement Certificate" has
the meaning specified in Section 3.1(b) of the Depository
Agreement.
"Deferred Construction Costs Reserve Account" has the
meaning specified in Section 3.1(a) of the Depository Agreement.
"Delivery Date" means the Closing Date.
"Deposited Amounts" has the meaning specified in Section 2.1
of the Depository Agreement.
"Depository" means Wilmington Trust Company, a Delaware
banking corporation, as securities intermediary and depository
under the Depository Agreement.
"Depository Agreement" means the Depository Agreement, dated
as of the Closing Date, among Deepwater, the Charter Trustee, the
Investment Trust and the Depository.
"Disbursement Certificate" means a Deferred Construction
Costs Disbursement Certificate, a Prepayment Certificate, an
Event of Loss Certificate, a Reimbursement and Proceeds
Certificate, a Payment Date Certificate, a Permitted Contest
Reserve Certificate, a Trustee Default Notice, a Hedging
Agreement Default Notice, a Drillship Sales Proceeds Certificate,
a Termination Proceeds Certificate, a Letter of Credit Collateral
Certificate or a Permitted Contest Reserve Certificate.
"Disbursement Information" has the meaning specified in
Section 4.3 of the Depository Agreement.
"Documentation Agent" means BA Leasing & Capital
Corporation, a California corporation.
"Dollars", "US$" and "$" means dollars in lawful currency of
the United States.
"Drawing Condition" has the meaning ascribed thereto in
Section 6.9 of the Participation Agreement.
"Drilling Consent" means the Acknowledgment and Consent
Agreement, dated as of the Closing Date, by and among R&B Falcon
Drilling (International & Deepwater) Inc., Frontier Deepwater
Drilling Inc., Deepwater, the Charter Trustee and the Investment
Trust, substantially in the form of Exhibit I to the
Participation Agreement.
"Drilling Contract" means the Conoco Drilling Contract or
the R&B Falcon Drilling Contract.
"Drilling Contract Guaranty" means the Conoco Drilling
Contract Guaranty or the R&B Falcon Drilling Contract Guaranty.
"Drilling Party" means Frontier Deepwater Drilling Inc. or
R&B Falcon Drilling (International & Deepwater) Inc. or, when
used in the plural, both Frontier Deepwater Drilling Inc. and R&B
Falcon Drilling (International & Deepwater) Inc.
"Drilling Services Agreement Contractor" means R&B Falcon
Drilling Co.
"Drillship" has the meaning specified in the recitals to the
Participation Agreement.
"Drillship Cost" means the Certificate Purchaser Balance
immediately prior to the Initial Charter Hire Payment Date, which
in no event shall exceed the Maximum Drillship Cost.
"Drillship Sales Proceeds" has the meaning specified in
Section 3.6(a) of the Depository Agreement.
"Drillship Sales Proceeds Account" has the meaning specified
in Section 3.6(a) of the Depository Agreement.
"Drillship Sales Proceeds Certificate" has the meaning
specified in Section 3.6(b) of the Depository Agreement.
"Effective Date" has the meaning specified in Section 3.1(a)
of the Participation Agreement.
"Environmental Claim" means any Claim arising out of or
attributable to any Environmental Event, or Hazardous Activity.
"Environmental Event" means (i) any activity, occurrence or
condition that violates or results in noncompliance with any
Environmental Law; (ii) any release of or potential release of
any Hazardous Substance or Oil from the Drillship; (iii) any
incident in which any Hazardous Substance or Oil is released or
threatened to be released from a vessel other than the Drillship
and which involves a collision between the Drillship and such
other vessel or some incident of navigation or operation, in
either case, in connection with which the Drillship is actually
or potentially liable to be arrested and/or the Drillship or
Deepwater and/or any operator or manager is at fault or allegedly
at fault or otherwise liable to any legal or administrative
action; or (iv) any other incident in which any Hazardous
Substance or Oil is released or threatened to be released
otherwise than from the Drillship in connection with which the
Drillship is actually or potentially liable to be arrested and/or
where Deepwater and/or any operator or manager of the Drillship
is at fault or allegedly at fault or otherwise liable to any
legal or administrative action.
"Environmental Law" means all applicable international,
foreign, federal, state and local laws, regulations, conventions,
treaties, written governmental agreements and written
governmental policies that are legally binding, statutes,
ordinances, codes, rules, directives, orders, decrees, judicial
and administrative judgments and rules of common law, whether now
or hereafter in effect, that relate in any way to Oil or any
Hazardous Substance in connection with the regulation or
protection of human health, natural resources or the environment.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"Event of Default" means a Charter Event of Default.
"Event of Loss" means a Condemnation or the occurrence of an
event that results or would result in the termination of either
Drilling Contract pursuant to Section 2.2.2 thereof.
"Event of Loss Certificate" has the meaning specified in
Section 3.2(b) of the Depository Agreement.
"Event of Loss Proceeds Account" has the meaning specified
in Section 3.2(a) of the Depository Agreement.
"Excess Certificate Return" means, for any Return Period, an
amount equal to the excess of (i) an amount equal to the product
of the applicable Certificate Return Rate times the Certificate
Purchaser Balance set forth on Schedule I to the Master Charter
opposite the Charter Hire Payment Date under the heading "Charter
Balance" over (ii) an amount equal to the product of the
applicable Certificate Return Rate times the actual Certificate
Purchaser Balance (or portion thereof) allocable to such Return
Period as of the first day of such Return Period.
"Excluded Accounts" means (i) the Permitted Contest Reserve
Account; (ii) the Event of Loss Proceeds Account, (iii) the
Reimbursement and Proceeds Account and (iv) unless a Charter
Supplement No. 1 Event of Default has occurred and is continuing,
the R&B Falcon Subcharter Proceeds Account and the Letter of
Credit Collateral Account.
"Extension Notice" has the meaning specified in Section 20.2
of the Master Charter.
"Extension Term" means any period which immediately follows
the end of the Base Charter Term with respect to which Deepwater
has requested an extension of the Charter Term pursuant to
Section 20.2 of the Master Charter, and such request has been
granted pursuant to such Section 20.2.
"Facility Fee" has the meaning specified in Section 2.14 of
the Participation Agreement.
"Federal Funds Rate" means, for any day, the rate set forth
in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of
New York (including any such successor AH.15(519)") on the
preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such
day shall be the arithmetic mean as determined by the Charter
Trustee of the rates for the last transaction in overnight
Federal Funds arranged prior to 9 a.m. (New York City time) on
that day by each of the three leading brokers of Federal Funds
transactions in New York City selected by the Charter Trustee.
"Force Majeure Event" means any excused or permissible delay
under the Construction Contract or the Drilling Contracts, if
fulfillment has been delayed, hindered or prevented by any
circumstance of whatsoever nature, including financial or
economic conditions in general, hostilities, restraints of rulers
or people, revolution, civil commotion, strike, labor
disturbances, epidemic, accident, fire, lightning, flood, wind,
storm, earthquake, explosion, blow-out, crater, blockade,
embargo, lack of or failure of transportation facilities,
inability, despite Deepwater's best efforts, to arrange or secure
importation, exportation or permits, or any law, proclamation,
regulation, ordinance, demand or requirement of any government or
any government agency having or claiming to have jurisdiction
over the operations of or with respect to the Drillship or any
part thereof or the construction or manufacture of the Drillship
or any part thereof, or over Deepwater or the Builder or any act
of God, or any other act of government, act or omission of a
supplier or a construction contractor.
"Frontier Deepwater Drilling Inc." means Frontier Deepwater
Drilling Inc., a Delaware corporation.
"Frontier Portion" means with respect to any Return Period,
a fraction, the numerator of which is the number of hours,
rounded to the nearest half hour, the Drillship has been utilized
under the Conoco Drilling Contract during the relevant Return
Period and the denominator of which is the product of the actual
number of days in such Return Period and 24 hours.
"GAAP" means United States generally accepted accounting
principles (including principles of consolidation and
characterization), in effect from time to time, consistently
applied.
"General Indemnity" means the indemnity provided by
Deepwater to various parties pursuant to Section 10.1 (subject to
Section 10.2) of the Participation Agreement.
"General Tax Indemnity" means the indemnity provided by
Deepwater to various parties pursuant to Section 10.4 of the
Participation Agreement.
"Government Action" means all permits, authorizations,
registrations, consents, approvals, waivers, exceptions,
variances, orders, judgments, decrees, licenses, exemptions,
publications, filings, notices to and declarations of or with, or
required by, any Government Authority, or required by any
Applicable Law, and shall include, without limitation, all
environmental and operating permits and licenses that are
required for the full use and operation of the Drillship (or any
part thereof).
"Government Authority" means any nation or government, any
state, county, province, municipality or other political
subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Guaranty" by any Person, means any obligation or
arrangement, contingent or otherwise, of such Person directly or
indirectly guaranteeing or otherwise becoming contingently liable
upon any Indebtedness or other obligation of any other Person
and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or other
obligation of such other Person (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to provide collateral
security, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) to the extent that such an
arrangement would be considered to be a guaranty under GAAP,
entered into for the purpose of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment
thereof or to protect such obligee against loss in respect
thereof (in whole or in part); provided, that the term Guaranty
shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guaranty" used as a verb
has a corresponding meaning.
"Guarantor's Percentage" means
(i) with respect to Conoco, (a) its Applicable Percentage of
the Certificate Purchaser Balance minus the Certificate
Purchaser Amounts purchased by Conoco pursuant to Section
9.4 of the Participation Agreement divided by (b) 100% of
the Certificate Purchaser Balance; provided, however, that
in no event shall the percentage calculated by this clause
(i) be less than 0%; and
(ii) with respect to R&B Falcon,(a) its Applicable
Percentage of the Certificate Purchaser Balance minus the
Certificate Purchaser Amounts purchased by R&B Falcon
pursuant to Section 9.4 of the Participation Agreement
divided by (b) 100% of the Certificate Purchaser Balance;
provided, however, that in no event shall the percentage
calculated by this clause (ii) be less than 0%.
"Hazardous Activity" means any activity, process, procedure
or undertaking that directly or indirectly (i) produces,
generates or creates any Hazardous Substance; (ii) causes or
results in (or threatens to cause or result in) the Release of
any Hazardous Substance into the environment (including air,
surface water, groundwater, drinking water, land (including
surface or subsurface) and plant, aquatic and animal life); (iii)
involves the containment or storage of any Hazardous Substance;
or (iv) would be regulated as hazardous waste treatment, storage
or disposal within the meaning of any Environmental Law.
"Hazardous Substance" means any of the following: (i)
explosives, radioactive materials, asbestos, polychlorinated
biphenyls, lead and radon gas; or (ii) any substance, material,
product, derivative, compound, mixture, mineral, chemical, waste,
gas, medical waste, or pollutant, in each case whether naturally
occurring, human-made or the by-product of any process, that is
considered under any applicable Environmental Law to be toxic,
corrosive, flammable, carcinogenic, mutagenic or hazardous to the
environment or human health; provided, however, that the term
"Hazardous Substance" specifically does not include Oil.
"Head Lease" means the lease agreement (if any) under which
the Charter Trustee leases the Drillship from the Head Lessor in
accordance with Section 4.2 of the Participation Agreement.
"Head Lease Defeasance Arrangements" has the meaning
specified in Section 4.2 of the Participation Agreement.
"Head Lease Documents" means the Head Lease, the Head Lease
Loan, the Head Lease Defeasance Agreement and any other documents
entered into in connection with the Head Lease Transaction.
"Head Lease Loan" has the meaning specified in Section 4.2
of the Participation Agreement.
"Head Lease Transaction" has the meaning specified in
Section 4.2 of the Participation Agreement.
"Head Lessor" means the lessor under the Head Lease.
"Hedging Agreements" has the meaning specified in Section
6.5 of the Participation Agreement.
"Hedging Agreement Counterparty" means the counterparty
under any Hedging Agreement.
"Hedging Agreement Default Notice" has the meaning specified
in Section 4.2 of the Depository Agreement.
"Hedging Agreement Obligations" means all of the obligations
(monetary or otherwise) of the Charter Trustee arising under or
in connection with the Hedging Agreements.
"Illegality Event" has the meaning specified in Section 7.1
of the Participation Agreement.
"Indebtedness" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money; (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments; (iii) whether or not so
included as liabilities in accordance with GAAP, all obligations
of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary
course of business; (iv) all obligations of such Person to
reimburse any bank or other Person in respect of amounts payable
under a banker's acceptance; (v) all obligations of such Person,
contingent or otherwise, relative to the face amount of all
letters of credit, whether or not drawn; (vi) all indebtedness
(including indebtedness arising under title retention or
conditional sales agreements) secured by a Lien on any asset of
any Person, whether or not such indebtedness is assumed by such
Person or is of limited recourse (provided, that, for purposes of
this clause (vi), non-recourse indebtedness in excess of the
value of the asset securing such indebtedness shall not be
counted); (vii) all obligations of such Person as lessee under
leases which have been or should be, in accordance with GAAP,
recorded as capital or operating leases; and (viii) all
indebtedness of others Guaranteed by such Person.
"Indemnified Party" has the meaning specified in Section
10.1 of the Participation Agreement.
"Independent Marine Surveyor" means Merrill Marine Services,
Inc.
"Initial Certificate Margin Adjustment Date" means October
1, 2001.
"Initial Charter Hire Payment Date" means the last Business
Day of the first full calendar month following the Closing Date.
"Institutional Investor" means any Accredited Investor,
excluding any individual or natural person.
"Insurance Beneficiary" has the meaning specified in Section
14.2(d) of the Master Charter.
"Insurance Requirements" means all terms and conditions of
any insurance policy either required by the Master Charter to be
maintained by Deepwater or required by the Construction Contract
to be maintained (or caused to be maintained) by the Builder, and
all requirements of the issuer of any such policy; provided,
however, that if Deepwater is entitled to self-insure certain
risks in lieu of maintaining the insurance coverages required
under Article XIV of the Master Charter, "Insurance Requirements"
means the standard terms of any insurance policies (including
casualty and general liability) and all requirements commonly
prescribed by the issuers of such policies which otherwise would
be required to be maintained by Deepwater absent the permitted
self-insurance.
"Interim Class Certificate" means a certificate issued by
the Classification Society evidencing the class of the Drillship
to be delivered by the Builder to Deepwater.
"Inverse R&B Usage Ratio" means the R&B Usage Ratio minus
one.
"Investment Balance" means, at any given time, the
Investment Portion of the Certificate Purchaser Balance.
"Investment Portion" means, with respect to any amount,
ninety seven percent (97%) of such amount.
"Investment Trust" means Deepwater Investment Trust 1999-A,
a Delaware business trust.
"Investment Trust Agreement" means the Investment Trust
Agreement (Deepwater Investment Trust 1999-A) dated as of August
23, 1999, between Wilmington Trust FSB, as trustee, and the
Certificate Purchasers.
"Investment Trust Amount" means, with respect to the
Investment Trust, at any given time, the aggregate amount of all
advances made by the Investment Trust to the Charter Trustee
pursuant to Section 2.6 of the Participation Agreement minus the
Investment Portion of any distributions paid to the Certificate
Purchasers to the extent that such distributions reduce the
Certificate Purchaser Balance.
"Investment Trust Certificates" means the Conoco Investment
Trust Certificates and the R&B Falcon Investment Trust
Certificates.
"Investment Trustee" means Wilmington Trust FSB, a Federal
savings bank, not in its individual capacity, except as otherwise
expressly provided, but solely as trustee under the Investment
Trust Agreement.
"Letter of Credit" means an irrevocable standby letter of
credit issued by a Qualified Bank substantially in form and
substance as attached to the Participation Agreement as Exhibit X
and which otherwise meets the requirements set forth in Section
6.9 of the Participation Agreement.
"Letter of Credit Collateral Account" has the meaning
specified in Section 3.16(a) of the Depository Agreement.
"Letter of Credit Collateral Certificate" has the meaning
specified in Section 3.16(b) of the Depository Agreement.
"LIBOR" means, for any Return Period, the rate per annum
equal to the offered rate (rounded upwards, if necessary, to the
next higher 1/100th of 1%) which appears on the Telerate Page
3750, British Bankers Association Interest Settlement Rates (or
such other system for the purpose of displaying rates of leading
reference banks in the London interbank market that replaces such
system) as of 11:00 a.m. (London time) for deposits in Dollars on
the day two (2) Business Days prior to the first day of such
Return Period in an amount approximately equal to the principal
amount of the Certificate Purchaser Amounts to which such Return
Period is to apply and for a period corresponding as nearly as
possible to such Return Period; provided, that, if no such rate
appears on Telerate Page 3750 it shall be (i), so long as any
Hedging Agreements are in effect, the "Floating Rate" as defined
in the Hedging Agreements or (ii) if no Hedging Agreements are in
effect, the rate of interest then offered to prime banks in the
London interbank Eurodollar market by Bank of America for
deposits in U.S. Dollars.
"Lien" means any mortgage, pledge, lien, charge,
encumbrance, lease, sublease, charter, subcharter, right,
security interest, rights in rem of any kind or claim of whatever
nature or description against any property or asset.
"LLC Agreement" means the LLC Agreement, dated as of
April 30, 1997, between the Members, as amended on or prior to
the Closing Date.
"Majority Certificate Purchasers" means, as of the date of
determination, Certificate Purchasers that hold, in the
aggregate, Certificates representing more than 50% of the sum of
the Certificate Purchaser Amounts of all Certificate Purchasers,
or, if no such amounts are outstanding, Certificate Purchasers
having, in the aggregate, obligations to make amounts available
which total more than 50% of the total of such obligations for
all such Certificate Purchasers. For purposes of this
definition, no Purchasing Party shall be considered a
"Certificate Purchaser" and no interest of any Purchasing Party
shall be considered to be "Certificate Purchaser Amounts."
"Marketing Period" means the period commencing on the date
which is 180 days prior to the Scheduled Charter Expiration Date
and ending on the Scheduled Charter Expiration Date.
"Master Charter" means the bareboat Master Charter, dated as
of the Closing Date, among Deepwater and the Charter Trustee,
excluding both Charter Supplement No. 1 and Charter Supplement
No. 2.
"Material Adverse Effect" means, with respect to Conoco, R&B
Falcon or Deepwater, an event or events, condition or conditions,
circumstance or circumstances which individually or in the
aggregate could be reasonably expected to:
(i) have a material adverse effect on the financial
condition, business, assets or operations of Conoco, R&B
Falcon or Deepwater;
(ii) have a material adverse effect on Deepwater's,
Conoco's or R&B Falcon's ability to perform its respective
obligations under the Transaction Documents to which it is a
party;
(iii) have a material adverse effect on the title,
priority or perfection of the Participants' interest in the
Drillship;
(iv) have a material adverse effect on the validity,
legality or enforceability of any material provision of any
Transaction Document or on the rights or remedies of any of
the Participants under the Transaction Documents;
(v) have a material adverse effect on the value,
utility or remaining useful life of the Drillship; or
(vi) result in criminal liability or material civil
liability to any Indemnitee or forfeiture or loss of the
Drillship.
"Material Default" means a Charter Default described in
Section 4.1(a), (e) or (f) of either Charter Supplement No. 1 or
Charter Supplement No. 2.
"Maximum Certificate Purchaser Commitment" means
$270,000,000.
"Maximum Drillship Cost" means the Maximum Certificate
Purchaser Commitment.
"Maximum Residual Guaranty Amount" means as of any date the
sum of:
(i) the Certificate Purchaser Balance on such date (reduced
by any payment of Charter Supplement Prepayment Amount of
Termination Value under Section 4.2(c) of the Depository
Agreement), plus any accrued and unpaid Certificate Return,
minus the Charter Residual Risk Amount as of such date; and
(ii) all accrued and unpaid Supplemental Hire (not included
in clause (i)).
"Member" means each of RBF Deepwater Exploration II Inc. and
Conoco Development II Inc.
"Minimum Specifications" means each of the following
criteria with respect to the Drillship: (i) upon final sea
trial, speed shall not be more than two (2) knots lower than the
guaranteed speed specified in Paragraph 2 of Article I of the
Construction Contract; (ii) actual fuel consumption shall not be
more than ten percent (10%) in excess of the guaranteed fuel
consumption specified in Paragraph 2 of Article I of the
Construction Contract; (iii) the capacity of the "Extended Well
Test" tanks, including slop tanks, shall not be less than 14,310
cubic meters; and (iv) the actual displacement of the Drillship
shall not vary by more than 3,500 metric tons (whether higher or
lower) from the guaranteed displacement of the Drillship
specified in Paragraph 2 of Article I of the Construction
Contract.
"Modifications" has the meaning specified in Section 11.1 of
the Master Charter.
"Moody's" means Moody's Investors Service, Inc.
"Net Sales Proceeds" has the meaning specified in Section
20.3 of the Master Charter.
"Non-Assumption Cure Right" has the meaning specified in
Section 16.5(a) of the Master Charter.
"Non-Defaulting Drilling Party" means (i) Frontier Deepwater
Drilling Inc., provided that no Charter Supplement No. 2 Event of
Default exists (except such Event of Default arising solely from
the Cross Charter Default thereunder) or (ii) R&B Falcon Drilling
(International & Deepwater) Inc., provided that no Charter
Supplement No. 1 Event of Default exists (except such Event of
Default arising solely from the Cross Charter Default
thereunder).
"Non-Recourse Party" means any Member, its respective
Affiliates and its past, present or future officers, directors,
employees, shareholders, agents or representatives.
"OFE" means owner-furnished equipment, which is the
equipment to be furnished by the Buyer under the Construction
Contract, such equipment being more specifically listed in
Schedule 6 to the Participation Agreement.
"Officer's Certificate" means a certificate signed by any
individual holding the office of vice president, treasurer,
assistant treasurer or higher, which certificate shall certify as
true and correct the subject matter being certified to in such
certificate.
"Oil" means oil of any kind or in any form, including but
not limited to petroleum, fuel oil, sludge, oil refuse, and oil
mixed with wastes other than dredged spoil, but not including
petroleum (including crude oil or any fraction thereof) which is
specifically listed or designated as a hazardous substance under
subparagraphs (A) through (F) of Section 101(14) of CERCLA.
"Operating Account" has the meaning specified in Section
3.4(a) of the Depository Agreement.
"Operation and Maintenance Expenses" means all amounts
necessary for Deepwater to man, victual, navigate, operate,
supply, fuel, repair, maintain the Drillship in accordance with
the requirements of the Drilling Contracts and the Charter and
shall include, without limitation, payments under Deepwater's
contracts for marine and drilling services, payments to any
Permitted Service Provider, premiums on insurance policies, fees,
costs and expenses in connection with any Deepwater Hedging
Agreements or Hedging Agreements (excluding amounts payable in
connection with an early termination), property and other taxes
(other than income taxes), costs of fuel and fuel supply, waste
disposal, expenses for repairs and maintenance required in order
to maintain the Drillship in accordance with the Drilling
Contracts and in accordance with the Charter (including expenses
for inspections and drydocking maintenance), the costs of all
Modifications required or permitted under the Charter and all
shore-based support expenses and warehouse costs attributable to
any of the foregoing; provided, however, that Operation and
Maintenance Expenses shall not include any amounts for which
Deepwater is entitled to a Reimbursement.
"Optional Modifications" has the meaning specified in
Section 11.1 of the Master Charter.
"Other Supplement" (i) when used in Charter Supplement No.
1, means Charter Supplement No. 2 or (ii) when used in Charter
Supplement No. 2, means Charter Supplement No. 1.
"Overdue Rate" means the Certificate Return Rate plus two
percent (2%) per annum.
"Parent" means, with respect to any Person, a corporation
that is the direct or indirect beneficial owner of more than 50%
of the outstanding Voting Stock of such Person and that has
reporting obligations under Section 13 of the Securities Exchange
Act of 1934, as amended.
"Partial Condemnation" means the condemnation, requisition
for use, confiscation, arrest, seizure or other taking of title
or leasehold interest to the Drillship or any transfer made in
lieu of any such actual or threatened action or proceeding which
does not constitute a Condemnation.
"Participants" means the Certificate Purchasers, the
Trustees and the Investment Trust, collectively.
"Participation Agreement" means the Participation Agreement,
dated as of August 31, 1999 among Deepwater, the Trustees, the
Investment Trust, the Documentation Agent, the Certificate
Purchasers, solely with respect to Sections 2.15, 6.9, 9.4(a) and
12.13(b) thereof, R&B Falcon and Conoco, and solely with respect
to Sections 5.2 and 6.4, RBF Deepwater Exploration II Inc. and
Conoco Development II Inc.
"Payment Date" means the Initial Charter Hire Payment Date,
the last Business Day of each calendar month thereafter and the
last day of the Charter Term.
"Payment Date Certificate" has the meaning specified in
Section 3.4(b) of the Depository Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Charterer" means any Person that is or should be
consolidated with Conoco or R&B Falcon for financial reporting
purposes in accordance with GAAP.
"Permitted Contest" means a test, challenge, appeal or
proceeding for review of any Applicable Law, so long as (x) such
test, challenge, appeal or proceeding shall be prosecuted
diligently and in good faith in appropriate proceedings and (y)
such test, challenge, appeal or proceeding and any non-compliance
with Applicable Law during the pendency thereof does not (i) pose
any significant risk of foreclosure, forfeiture or loss of the
Drillship or any material part thereof, (ii) pose any material
risk of a loss of priority of the Lien of the Ship Mortgage (or
any other Lien on the Drillship) or any other Collateral, (iii)
pose any material risk of any criminal liability or any material
civil liability being imposed on either Trustee, the Investment
Trust, the Agent or any Certificate Purchaser, (iv) interfere in
any material manner with the use or operation of the Drillship or
(v) pose any material risk of interference with the payment of
Charter Hire.
"Permitted Contest Reserve Account" has the meaning
specified in Section 3.5(a) of the Depository Agreement.
"Permitted Contest Reserve Amount" means, as of the date of
calculation, an amount equal to Deepwater's reasonable estimate
of its potential or actual liability or additional costs and
expenses that it will be required to incur but only to the extent
that (a) such liability or costs and expenses exceed $500,000
with respect to a single Permitted Contest or $2,000,000 with
respect to all pending Permitted Contests and (b) such Claims are
not covered by insurance policies required to be maintained by
Deepwater under the Master Charter which are then in effect
(except that all Claims as to which the insurer has issued a
denial of coverage or as to which it has reserved its rights,
shall be deemed not to be covered by insurance for the purposes
of this clause (b)).
"Permitted Contest Reserve Certificate" has the meaning
specified in Section 3.5(b) of the Depository Agreement.
"Permitted Indebtedness" means (i) Subordinated Debt, (ii)
Indebtedness arising under the Transaction Documents and (iii)
any other Indebtedness owed to any Person other than a Member or
Affiliate of a Member in an aggregate amount not to exceed
$500,000 (provided that, (x) if such Indebtedness is in the form
of a loan, such limit shall be calculated by reference to the
principal of such loan and (y) if such Indebtedness is in the
form of a lease, such limit shall be calculated by reference to
the present value as of the date of determination of all lease
payments discounted at the then applicable Federal Funds Rate
plus sixty (60) basis points).
"Permitted Investments" has the meaning specified in Section
5.1 of the Depository Agreement.
"Permitted Liens" means (i) the respective rights and
interests of the Participants, as provided in any of the
Transaction Documents; (ii) any Lien as permitted and
contemplated by the Transaction Documents; (iii) Liens for Taxes
either not yet due or being contested pursuant to a Permitted
Contest (iv) Liens of suppliers, mechanics, crew, repairers,
employees, or operators of port authorities, Liens for salvage,
general or particular average, or other similar Liens securing
the payment of the price of goods or services rendered arising in
the ordinary course of business and for amounts the payment of
which is either not yet delinquent or is being diligently
contested pursuant to a Permitted Contest; (v) Liens arising out
of judgments or awards which are being appealed in good faith or
with respect to which at the time there shall have been secured a
stay of execution; (vi) salvage and similar rights of insurers
under policies of insurance maintained with respect to the
Drillship; (vii) Liens securing Permitted Indebtedness; (viii)
any other Lien with respect to which a bond or other security
shall have been provided either (x) through a normal and
customary letter of undertaking issued by the protection and
indemnity club providing the coverage maintained under Section
14.1(f) of the Master Charter or (y) by a surety and in a form,
both of which are acceptable to the Required Certificate
Purchasers in their sole discretion; (ix) Trust Liens; and (x)
Certificate Purchaser Liens.
"Permitted Service Provider" has the meaning specified in
Section 7(b) of the Drilling Consent.
"Person" means any individual, corporation, partnership,
joint venture, limited liability company, association, joint-
stock company, trust, unincorporated organization, Government
Authority or any other entity.
"Placement Agent" means Bank of America National Trust and
Savings Association.
"Plan" means at any time an employee pension benefit plan
which is covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Code.
"Plans and Specifications" means, with respect to the
Drillship, the plans and specifications, as amended, pursuant to
which the Drillship is to be constructed under the Construction
Contract.
"Postponed Advance" has the meaning specified in Section 2.8
of the Participation Agreement.
"Postponed Advance Date" has the meaning specified in
Section 2.8 of the Participation Agreement.
"Postponement Yield" has the meaning specified in Section
2.8 of the Participation Agreement.
"Prepayment Certificate" means the Prepayment Certificate
described in Section 3.1 of the Depository Agreement.
"Prepayment Notice" has the meaning specified in Section
9.4(a) of the Participation Agreement.
"Prepayment Change of Control Trigger Event" means the
occurrence of a Change of Control of either Conoco or R&B Falcon
unless (a) the rating of such person is not less than (i) in the
case of Conoco, Baa2 from Moody's and BBB from S&P or (ii) in the
case of R&B Falcon, is not less than Ba2 from Moody's and BB from
S&P or (b) in the event that such person is merged into or
acquired by an Acquiror (i) in the case of an Acquiror of Conoco,
such Acquiror has a rating of not less than Baa2 from Moody's and
not less than BBB from S&P (ii) in the case an Acquiror of R&B
Falcon, such Acquiror has a rating of not less than Ba2 from
Moody's and BB from S&P, provided that the Acquiror assumes the
obligations of the acquired company under the Transaction
Documents pursuant to an assumption agreement and delivers an
opinion of counsel in connection therewith, each in substantially
the form of those attached to the Participation Agreement as
Exhibit K, or (c) Conoco or R&B Falcon, as applicable, will
provide to the Required Certificate Purchasers simultaneous with
a Change of Control credit support acceptable to the Required
Certificate Purchasers for any obligations of such person under
the Transaction Documents reasonably equivalent to that in effect
immediately prior to the Change of Control.
"Pricing Change of Control Trigger Event" means the
occurrence of a Change of Control with respect to R&B Falcon
unless (a) R&B Falcon has a rating of not less than Baa3 from
Moody's and BBB- from S&P, or (b) in the event that R&B Falcon is
merged into or acquired by an Acquiror, such Acquiror has a
rating of not less than Baa3 from Moody's and BBB- from S&P,
provided that the Acquiror assumes R&B Falcon's obligations under
the Transaction Documents pursuant to an assumption agreement and
delivers an opinion of counsel in connection therewith, each in
substantially the form of those attached to the Participation
Agreement as Exhibit K, or (c) R&B Falcon will provide to the
Required Certificate Purchasers simultaneous with a Change of
Control credit support meeting the criteria acceptable to the
Required Certificate Purchasers for any of its obligations under
the Transaction Documents reasonably equivalent to that in effect
immediately prior to the Change of Control.
"Protocol of Delivery and Acceptance" shall have the meaning
as set forth in Section 4.1(a)(i) of the Participation Agreement.
"Provisional Patente" shall have the meaning as set forth in
Section 4.1(a)(iii) of the Participation Agreement.
"Purchase Notice" has the meaning specified in Section 20.1
of the Master Charter.
"Purchase Option" has the meaning specified in Section 20.1
of the Master Charter.
"Purchase Option Price" has the meaning specified in Section
20.1 of the Master Charter.
"Purchased Interest" means (i) where R&B Falcon is a
Purchasing Party, the Certificate Purchaser Amounts relating to
the R&B Falcon Certificates purchased by R&B Falcon pursuant to
Section 9.4 of the Participation Agreement or (ii) where Conoco
is a Purchasing Party, the Certificate Purchaser Amounts relating
to the Conoco Certificates purchased by Conoco pursuant to
Section 9.4 of the Participation Agreement .
"Purchasing Party" means (i) Conoco or R&B Falcon, if and
only if such Person has suffered a Prepayment Change of Control
Trigger Event and has or is required to purchase any Purchased
Interest under Section 9.4(a) of the Participation Agreement or
(ii) Deepwater or any Affiliate of any of the foregoing to the
extent such Person obtains an interest, directly or indirectly,
in a Purchased Interest.
"Purchasing Party Amount" means, at any given time with
respect to any Purchasing Party, its Purchased Interest minus the
amount of any distributions paid to such Purchasing Party in
reduction of its allocated portion of the Certificate Purchaser
Amounts or the Certificate Purchaser Balance.
"Qualified Bank" means a bank or other financial institution
with a long term unsecured debt rating of not less than AA- from
S&P and Aa3 from Moody's.
"Qualifying Letter of Credit" means a letter of credit in a
stated amount of not less than sixty percent (60%) of the Maximum
Residual Guaranty Amount, issued by a bank or other financial
institution with a long-term unsecured credit rating of not less
than A and A2 from S&P and Moody's, respectively; provided, that
if such issuer is downgraded below such rating of A or A2, such
letter of credit shall be replaced with a letter of credit issued
by a bank or other financial institution having such rating
within 30 days of the notice from S&P or Moody's to the issuer of
such letter of credit R&B Falcon or Deepwater of such downgrade.
"R&B Falcon" means R&B Falcon Corporation, a Delaware
corporation.
"R&B Falcon Certificates" means the R&B Falcon Series A
Trust Certificates and the R&B Falcon Investment Trust
Certificates.
"R&B Falcon Charter" means the charter created by the Master
Charter, as supplemented by Charter Supplement No. 1.
"R&B Falcon Drilling Contract" means that Deepwater
Drillship Contract, dated as of April 30, 1997, as amended and
restated, between R&B Falcon Drilling (International & Deepwater)
Inc. and Deepwater
"R&B Falcon Drilling Contract Guaranty" means that Deepwater
Drillship Project, R&B Falcon Guaranty, dated as of August 31,
1999 given by R&B Falcon in favor of Deepwater.
"R&B Falcon Drilling (International & Deepwater) Inc." means
R&B Falcon Drilling (International & Deepwater) Inc., a Delaware
corporation.
"R&B Falcon Drilling Party" means R&B Falcon Drilling
(International & Deepwater) Inc.
"R&B Falcon Guaranty" means the R&B Falcon Guaranty, dated
as of the Closing Date, given by R&B Falcon in favor of the
Trustees, the Investment Trust, the Agent and the Certificate
Purchasers and the other beneficiaries named therein.
"R&B Falcon Investment Trust Certificate" means each
certificate issued to a Certificate Purchaser from the Investment
Trust pursuant to Section 2.1(d) of the Participation Agreement
and in accordance with the Investment Trust Agreement to evidence
60% of the Investment Portion of the Certificate Purchaser Amount
of each such Certificate Purchaser.
"R&B Falcon Series A Trust Certificate" means each
certificate issued to a Beneficial Owner from the Charter Trustee
pursuant to Section 2.1(b) of the Participation Agreement and in
accordance with the Charter Trust Agreement to evidence the 60%
of the Series A Portion of the Certificate Purchaser Amount of
each such Beneficial Owner.
"R&B Falcon Subcharter Proceeds Account" shall have the
meaning specified in Section 3.15(a) of the Depository Agreement.
"R&B Portion" means, with respect to any Return Period, a
fraction, the numerator of which is the number of hours, rounded
to the nearest half hour, the Drillship has been utilized under
the R&B Falcon Drilling Contract during the relevant Return
Period and the denominator of which is the product of the actual
number of days in such Return Period and 24 hours.
"R&B Usage" means the number of days, rounded to the nearest
full day, the Drillship has been utilized under the R&B Falcon
Drilling Contract.
"R&B Usage Ratio" means, from time to time, a fraction
(expressed as a percentage) the numerator of which is the maximum
number of days during which R&B Falcon Drilling (International &
Deepwater) Inc. is obligated, pursuant to the terms of the Rig
Sharing Agreement, to use the Drillship commencing on the most
recent Adjustment Date preceding the date the rate of the
Certificate Margin is to be determined and ending on the
scheduled termination of the Drilling Contracts divided by the
total number of days remaining during such period under the
Drilling Contracts.
"Reasonable Basis" means a reasonable basis within the
meaning of Section 6662(d)(2)(B)(ii)(II) of the Code or any
regulations thereunder.
"Reimbursement and Proceeds Account" has the meaning
specified in Section 3.3(a) of the Depository Agreement.
"Reimbursement and Proceeds Certificate" has the meaning
specified in Section 3.3(b) of the Depository Agreement.
"Reimbursements" has the meaning specified in Section 3.3(a)
of the Depository Agreement.
"Related Indemnified Party" means the Affiliates of an
Indemnified Party, the officers, directors, employees and agents
of the Indemnified Party and its Affiliates and, in the case of
the Certificate Purchasers and their Related Indemnified Parties,
the Charter Trustee and, in the case of the Charter Trustee and
the Investment Trust, the Certificate Purchasers and their
Related Indemnified Parties.
"Related Party" means (i) with respect to Charter Supplement
No. 1 and the charter created thereby, R&B Falcon and its
Affiliates (other than Deepwater) or (ii) with respect to Charter
Supplement No. 2 and the charter created thereby, Conoco and its
Affiliates (other than Deepwater).
"Release" means any release, pumping, pouring, emptying,
injecting, escaping, leaching, dumping, seepage, spill, leak,
flow, discharge, disposal or emission of Oil or a Hazardous
Substance.
"Replacement Certificate Purchaser" has the meaning
specified in Section 4.2 of the Participation Agreement.
"Replacement Certificate Purchaser Conditions" has the
meaning specified in Section 4.2 of the Participation Agreement.
"Required Certificate Purchasers" means, as of the date of
determination, Certificate Purchasers that hold, in the
aggregate, Certificates representing more than 2/3 of the sum of
the Certificate Purchaser Amounts of all Certificate Purchasers,
or, if no such amounts are outstanding, Certificate Purchasers
having, in the aggregate, obligations to make amounts available
which total more than 2/3 of the total of such obligations for
all such Certificate Purchasers. For purposes of this
definition, no Purchasing Party shall be considered a
"Certificate Purchaser" and no interest of any Purchasing Party
shall be considered to be "Certificate Purchaser Amounts."
"Required Modifications" has the meaning specified in
Section 11.1 of the Master Charter.
"Residual Guaranty Amount" means, (i) upon sale of the
Charter Trustee's interest in the Drillship pursuant to
Deepwater's exercise of its Return Option, the sum of:
(A) the Certificate Purchaser Balance on such date (reduced
by any payment of Charter Supplement Prepayment Amount of
Termination Value under Section 4.2(c) of the Depository
Agreement), plus any accrued and unpaid Certificate Return,
minus the Net Sales Proceeds; and
(B) all accrued and unpaid Supplemental Hire;
provided, however, that in no event shall the amount calculated
in this clause (i) exceed the Maximum Residual Guaranty Amount;
or (ii) if the Charter Trustee's interest in the Drillship is not
sold on or prior to the Scheduled Charter Expiration Date in
accordance with Section 20.3 of the Master Charter, the Maximum
Residual Guaranty Amount.
"Responsible Officer" means, with respect to any matter (i)
if a natural Person, such Person; or (ii) if not a natural
Person, a senior financial or legal officer or such other officer
of such Person who in the normal course of his operational duties
would have knowledge of such matter.
"Return Notice" has the meaning specified in Section 20.3 of
the Master Charter.
"Return Option" has the meaning specified in Section 20.3 of
the Master Charter.
"Return Period" means with respect to any determination of
Certificate Return (i) the period commencing on and including the
Advance Date and ending on but excluding the Initial Charter Hire
Payment Date, and (ii) thereafter with respect to the Certificate
Purchaser Balance, a period commencing on a Payment Date and
ending on but excluding the next succeeding Payment Date;
provided, that the last Return Period shall end on the last day
of the Charter Term.
"Revenues" means all amounts received by Deepwater from
whatever source, including all revenues from the Drilling
Contracts but excluding (i) those amounts to be deposited,
pursuant to the Depository Agreement, into the Deferred
Construction Costs Reserve Account, Event of Loss Proceeds
Account, Reimbursement and Proceeds Account, Permitted Contest
Reserve Account, Drillship Sales Proceeds Account or the
Termination Proceeds Account, (ii) those amounts which, on the
date of payment or receipt, may be properly distributed to
Deepwater (or as directed by Deepwater) under the Depository
Agreement, (iii) those amounts received by Deepwater from the
Members as capital contributions and (iv) those amounts received
by Deepwater that constitute proceeds of Subordinated Debt.
"Rig Sharing Agreement" means that Rig Sharing Agreement,
dated as of April 30, 1997, among the Conoco Drilling Party, the
R&B Falcon Drilling Party and Deepwater.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"Scheduled Charter Expiration Date" means, the fifth
anniversary of the Day Rate Commencement Date and, with respect
to any Extension Term, the scheduled expiration of the such
Extension Term.
"Securities Act" means the Securities Act of 1933, as
amended, together with the rules and regulations promulgated
thereunder.
"Securities Intermediary" means Wilmington Trust Company, a
Delaware banking corporation, as securities intermediary and
depository under the Depository Agreement
"Security Documents" means the collective reference to the
Ship Mortgage, the Deepwater Assignment, the Depository
Agreement, the Drilling Contract Guaranties, the Charter Trustee
Assignment and all other security documents granting a Lien on
any asset or assets of any Person to secure the Deepwater
Obligations, the Series A Obligations or the Series B
Obligations.
"Series A Balance" means, as of the date of determination,
the Series A Portion of the Certificate Purchaser Balance.
"Series A Obligations" means the obligations (monetary or
otherwise) owed by the Charter Trustee to the Beneficial Owners
as evidenced by the Series A Trust Certificates.
"Series A Portion A means, with respect to any amount, three
percent (3%) of such amount.
"Series A Trust Certificates" means the Conoco Series A
Trust Certificates and the R&B Falcon Series A Trust
Certificates.
"Series B Obligations" means those obligations owed by the
Charter Trustee to the Investment Trust as evidenced by the
Series B Trust Certificates. Any event which reduces the
obligations owed by Deepwater to the holders of the Investment
Trust Certificates shall reduce the Series B Obligations to the
same extent.
"Series B Trust Certificate" means each certificate issued
to the Investment Trust from the Charter Trustee pursuant to
Section 2.1(f) of the Participation Agreement and in accordance
with the Trust Agreements to evidence the Investment Trust
Amount.
"Services Agreements" means the Marine Services Agreement,
dated as of October 31, 1996, between Deepwater and Conoco
Shipping Company, and the Drilling Services Agreement, dated as
of April 30, 1997, between Deepwater and R&B Falcon Drilling Co.
"Settlement Date" has the meaning specified in Section 15.2
of the Master Charter.
"Ship Mortgage" means (x) if the Head Lease Transactions are
not consummated, a mortgage substantially in the form set forth
in Exhibit T to the Participation Agreement given by the Charter
Trustee in favor of the Investment Trust and the Hedging
Agreement Counterparties and (y) if the Head Lease Transactions
are consummated on or prior to the Delivery Date (or after the
Delivery Date if reasonably required by the Certificate
Purchasers to protect their interests in the Drillship), a
mortgage securing the Deepwater Obligations given by the Head
Lessor in favor of the Charter Trustee and the Hedging Agreement
Counterparties and providing for the assignment thereof to the
Investment Trust and the Hedging Agreement Counterparties to
secure the Series B Obligations and the Hedging Agreement
Obligations, and otherwise substantially in the form set forth in
Exhibit T to the Participation Agreement (with appropriate
modifications to reflect the Head Lessor as mortgagor).
"Special Purchase Right" has the meaning specified in
Section 16.4 of the Master Charter.
"Subordinated Debt" means Indebtedness of Deepwater to its
Members or Affiliates of its Members which is by its terms
expressly subordinate to all payments of Charter Hire (including
Basic Hire and all amounts due and owing by Deepwater to the
other parties under the Transaction Documents) (as more fully set
forth on Schedule 7 to the Participation Agreement) and is
payable only out of funds available for distribution under
clauses "eighth" and "ninth" of Section 3.4(b) of the Depository
Agreement.
"Subordinated Notes" means promissory notes or other
instruments evidencing Subordinated Debt.
"Subordinated Operating Expenses" means those fees, costs
and expenses payable to Affiliates of R&B Falcon and Conoco under
the Services Agreements.
"Subsidiary" means, with respect to a Person, any
corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by
such Person.
"Substitute Certificate Purchaser" is defined in Section 7.7
of the Participation Agreement.
"Supplemental Hire" means all amounts, liabilities and
obligations (other than Basic Hire) which Deepwater assumes,
agrees or is otherwise obligated to pay to the Charter Trustee,
the Investment Trust, any Certificate Purchaser or any other
Person under the Charter or any of the other Transaction
Documents, including breakage costs, indemnities, damages and
expenses. "Supplemental Hire" shall include all fees, costs and
expenses and other amounts payable by Deepwater during the Base
Charter Term to the Charter Trustee under the Deepwater Hedging
Agreements.
"Swap Termination Amount" means an amount due and payable by
the Charter Trustee under Section 6(d) or (e) of the Hedging
Agreements.
"Tax" or "Taxes" means any and all license, registration,
mortgage or security filing fee, stamp duties and documentation
fees and all taxes, assessments, levies, sales, use or transfer
tax, imposts, duties, charges, fees or withholdings of any nature
whatsoever, together with all penalties, fines or interest
thereon or other additions thereto, imposed by any federal, state
or local government, political subdivision, or taxing authority
in the United States, or by any governmental or taxing authority
of or in a foreign country or possession or territory or any
international authority.
"Tax Claim" means a claim for Taxes under the General Tax
Indemnity.
"Termination Proceeds" has the meaning specified in Section
3.7(a) of the Depository Agreement.
"Termination Proceeds Account" has the meaning specified in
Section 3.7(a) of the Depository Agreement.
"Termination Proceeds Certificate" has the meaning specified
in Section 3.7(b) of the Depository Agreement.
"Termination Value" means on any date, an amount equal to
the Certificate Purchaser Balance.
"Transaction Documents" means:
(i) the Participation Agreement;
(ii) the Trust Agreements;
(iii) intentionally omitted;
(iv) intentionally omitted;
(v) the Deepwater Hedging Agreements, if any;
(vi) the Hedging Agreements, if any;
(vii) the Drilling Consent;
(viii) the Charter;
(ix) the Protocol of Delivery and Acceptance;
(x) the Security Documents;
(xi) the Certificates;
(xii) the Conoco Guaranty; and
(xiii) the R&B Falcon Guaranty.
"Transaction Expenses" means:
(i) the fees and expenses of J&H Marsh & McLennan,
Inc., if any;
(ii) [intentionally omitted]
(iii) the fees and expenses of the Appraiser;
(iv) the fees and expenses of Mayer, Brown & Platt,
special counsel, Haight Gardner Holland &
Knight, maritime counsel, and Arias, Fabrega &
Fabrega, Panamanian counsel, to the Certificate
Purchasers (subject, in each case, to any
separate agreements between the Documentation
Agent and Deepwater);
(v) the fees and expenses of White & Case LLP,
special lease counsel to Deepwater;
(vi) the fees and expenses of the Placement Agent
other than legal fees and expenses;
(vii) the fees of the Documentation Agent other than
legal fees and expenses;
(viii) [Intentionally Omitted];
(ix) the fees and expenses of the Trustees;
(x) the fees and expenses of Delaware counsel to
the Investment Trustee, the Charter Trustee and
the Depository;
(xi) certain other expenses incurred in connection
with the negotiation and execution of the
Transaction Documents and the transactions
contemplated thereby (including fees or
expenses incurred in connection with the
translation, documentation or recordation of
the Ship Mortgage);
(xii) the fees and expenses of one local counsel, if
any, to the Certificate Purchasers, the
Trustees, the Investment Trust and the Agent in
connection with the review of the Head Lease
Documents, if any; and
(xiii) the fees and expenses of the Independent Marine
Surveyor.
"Transfer Restrictions" means the restrictions on transfer
of interest imposed on the Trustees and Certificate Purchasers
pursuant to Section 9 of the Participation Agreement.
"Trust Agreements" means the Charter Trust Agreement and the
Investment Trust Agreement.
"Trust Estate" means the sum of $1.00 (receipt of which from
the Certificate Purchasers is hereby acknowledged by the Charter
Trustee) and all estate, right, title and interest of the Charter
Trustee and/or the Investment Trust in, to and under (1) the
Charter, (2) the Depository Agreement, (3) the Drillship and (4)
each other Transaction Document to which the Charter Trustee
and/or the Investment Trust is a party.
"Trust Liens" means Liens on or against any or all of the
Drillship, the Trust Estate, the Charter Trust, the Investment
Trust, the Charter or any payment of Charter Hire which results
from (a) any act or omission of, or any Claim against, the
Investment Trust or the Trustees in any case unrelated to the
transactions contemplated by the Transaction Documents (including
any Liens arising as a result of a voluntary transfer of the
Drillship or all or any portion of the Trust Estate other than
any voluntary transfer after a Charter Event of Default), (b) any
Tax owed by any such Person, except for any Tax required to be
paid by Deepwater under the Transaction Documents, including any
Tax for which Deepwater is obligated to indemnify such Person
under the General Tax Indemnity, or (c) any act or omission of
such Person that is in breach of any of the covenants or
agreements of the Transaction Documents.
"Trustee Default Notice" has the meaning specified in
Section 4.2 of the Depository Agreement.
"Trustee's Account" has the meaning specified in Section
2.10 of the Participation Agreement.
"Trustees" means the Charter Trustee and the Investment
Trustee.
"Uniform Commercial Code" and "UCC" means the Uniform
Commercial Code as in effect in any applicable jurisdiction.
"United States" and "U.S." shall mean the United States of
America.
"Unsubordinated Operating Expense Amount" means, for each
day during any Return Period (or portion thereof) during the
Charter Term, $12,000 of Operation and Maintenance Expenses to be
adjusted from time to time as follows: (i) commencing in the
year 2000 on every January 1 during the Charter Term the
"Unsubordinated Operating Expense Amount" shall be adjusted
upwards or downwards by an amount determined in accordance with
the following equation: (a) the Consumer Price Index for
December 31 of the most recently ended calendar year shall be
divided by the Consumer Price Index for December 31 of the
calendar year immediately preceding the most recently ended
calendar year and (b) the quotient obtained through the
calculation set forth in clause (a) (expressed as a percentage)
shall be multiplied by the "Unsubordinated Operating Expense
Amount" (taking into account all prior adjustments) for the
immediately preceding calendar year; and (ii) for any period
during which the Day Rate is reduced pursuant to the Drilling
Contract during the Charter Term, the Unsubordinated Operating
Expense Amount shall be adjusted downwards by an amount
determined in accordance with the following equation: (x) the
Day Rate after such reduction divided by the Day Rate before such
reduction and (y) the quotient (expressed as a percentage)
determined in clause (x) shall be multiplied by the
Unsubordinated Operating Expense Amount (taking into account all
prior adjustments) in effect immediately prior to the reduction
of Day Rate.
"Vessel" means the 727-foot double-hulled vessel, bearing
Hull No. 1231, without the OFE, constructed pursuant to the
Construction Contract.
"Voting Stock" means the shares of capital stock of a
corporation having ordinary voting power to elect a majority of
the board of directors of such corporation, but excluding any
other class or classes of stock that have or might have voting
power upon the occurrence of a contingency.
"Warranties" means all of the right, title and interest in,
to and under any warranty, covenant, representation, service life
policy, performance guaranty, indemnity or product support
agreement of any contractor, subcontractor, manufacturer,
materialman, supplier, vendor or any other Person (excluding
Conoco, Frontier Deepwater Drilling Inc., R&B Falcon Drilling
(International & Deepwater) Inc., R&B Falcon, Deepwater, the
Members, the Investment Trust, the Trustees and the Certificate
Purchasers) (collectively, the "Warrantors") contained in any
contract or agreement, including the Construction Contract, to
the extent that such contracts and agreements relate to the
Vessel, the OFE or any part thereof; provided, however, that the
definition of "Warranties" shall not include adjustments to the
contract price pursuant to Article III of the Construction
Contract.
"Warrantors" has the meaning specified in the definition
"Warranties".
EXHIBIT 10.11
Bank One BANK1ONE
APPLICATION AND AGREEMENT FOR
IRREVOCABLE STANDBY LETTER OF CREDIT
Date: August 30, 1999
TO: Bank One Louisiana, N.A. ("Issuer")
201 St. Charles Street, 28th Floor
New Orleans, Louisiana 70170
Please issue an Irrevocable Standby Letter of Credit as set forth
below and forward same to your correspondent for delivery to the
Beneficiary or, at your option, forward same directly to the
Beneficiary by:
Delivery to Relationship Manager
Advising Bank (Name and Address) For account of Applicant(s)
(Issuer use only unless (Name and Address)
Applicant designates R & B Falcon Corporation
advising bank) 901 Threadneedle
Houston, Texas 77079
N/A Phone 281-496-5000
To Beneficiary (Name and Address) Amount: (Figures) $50,000,000.00
(In Words) Fifty Million and
No/100 Dollars
Insert Rider 1 from Exhibit A attached
hereto
Expiry Date: September ___,2004
at the counters of the Banc One
LC Processing Center, Dallas, Texas
Available against Beneficiary's draft(s) at sight drawn on Issuer
and accompanied by the following documents:
Original of Beneficiary's manually signed statement stating that:
See attached form of letter of credit (Exhibit B hereto)
(Complete only when the Beneficiary's bank or correspondent is to
issue its guarantee or undertaking based on the Issued Standby
Letter of Credit)
Request Beneficiary's bank to issue and deliver their_________
(specify type of bid or performance bond, guarantee, undertaking,
or other)
In favor of (Name/Attention):
(Address/Street):
(Address/City):
(Country):
(Telephone/Fax):
For an amount not exceeding that specified above, effective
immediately and expiring at their office on ____________________
covering________________________________________________ .
(specify number of bid or performance bond. etc.)
Partial drawings permitted? [ ] Yes [x] No
If drawings are allowed in installments within given periods and
no drawing is made for an installment within the applicable
period, the Letter of Credit, [] is [] is not available for
subsequent installments.
All banking charges other than Issuer's are for [ ] Beneficiary
[x] Applicant.
We hereby certify that transactions covered by the Application
are not prohibited under the Foreign Assets Control Regulations
of the United States Treasury Department or the Department of
Commerce, Export Administration Regulations and that any
transaction covered by this Application conforms in every respect
with all existing United States Government and other applicable
regulations.
We hereby authorize you to issue this Letter of Credit in
substantially the form attached hereto as Exhibit B with such
variations from the above terms as you may, in your discretion,
determine are necessary and are not materially inconsistent with
this Application. The Letter of Credit to be opened hereunder
will be subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision). International Chamber of
Commerce Publication No. 500, except that as to matters not
governed by the Uniform Customs and Practice, the laws of the
State o New York shall apply. By signing at the place provided
on the last page of the Application and Agreement, the Applicant
agrees to the terms and conditions set forth in the Agreement on
the reverse side of this Application and the following pages.
AGREEMENT FOR
STANDBY LETTER OF CREDIT
The undersigned ("Applicant") agrees with Issuer that in
consideration of the issuance of each irrevocable standby letter
of credit (a "Credit") at the request of Applicant. the following
terms and conditions will govern each such Credit, unless they
are expressly changed In the Credit or the Application for the
Credit, as approved by Issuer, and, with regard to the provisions
of Section 6 and 7 herein, regardless of whether the Credit or
the Application provide otherwise:
1. REIMBURSEMENTS. Applicant agrees to pay on demand, in U.S.
dollars, to Issuer at the Banc One LC Processing Center, 1717
Main Street (11 Ith Floor), Dallas, Texas, the amount of each
draft drawn under or purporting to be drawn under the Credit.
Demand may be made in advance of payment at the request of
Issuer.
2. FEES AND INTEREST. Applicant agrees to pay Issuer:
(a) On demand, Issuer's customary commissions and fees
in effect from time to time and all costs and expenses,
including reasonable attorneys' fees. paid or incurred by
Issuer in connection with the administration or
enforcement of this Agreement or the Credit. and any
adviser, confirmer or other nominated person's fees and
costs that are chargeable to or paid by Issue in
connection with this Agreement on the Credit.
(b) Interest on all sums advanced by Issuer without
reimbursement by Applicant at the per annum rate equal to
the lesser of
(i) eighteen percent (18%) or
(ii) the Prime Rate on the date of advance by the
Issuer, provided that such rate of interest shall not
exceed the maximum rate of interest which may be charged
under applicable law. The "Prime Rate" shall mean the
rate of interest announced by the Issuer from time to
time as its prime rate for interest rate determinations
(which may or may not be the lowest interest rate charged
by such bank), to be computed for actual days unpaid on a
360-day year basis;
(c) In the event any change in any law or regulation, or
in any interpretation by court or administrative or
governmental authority charged with the administration
thereof shall either:
(i) impose, modify or make applicable any reserve,
special deposit, or similar requirement against letters
of credit issued by the Issuer; or
(ii) impose on Issuer any other condition regarding
this Agreement or the Credit;
and the result of any event referred to above shall
be to increase the cost to Issuer of issuing or
maintaining the Credit, then upon demand by Issuer,
Applicant shall immediately pay to Issuer, such
additional amounts as shall, in the judgment of Issuer,
be sufficient to compensate Issuer for such increased
cost, together with interest on each such amount from the
date demanded until payment In full at the rate provided
in subsection (b) above; and Insert Rider 2 from Exhibit
A attached hereto.
3. PAYMENTS.
(a) Payments due from Applicant hereunder shall be made
without withholding, deduction, or set-off and shall be
made free and clear of any taxes other than taxes
directly imposed on Issuer.
(b) To effect any payment due hereunder, Applicant
authorizes Issuer to debit any account that Applicant may
have with Issuer or any direct or Indirect subsidiary of
BANK ONE CORPORATION (each such subsidiary referred to
herein as "Banc One Affiliate").
4. REPRESENTATIONS AND WARRANTIES. In order to induce Issuer to
issue the Credit, Applicant:
(a) Represents and warrants to Issuer that each financial
statement of Applicant furnished to Issuer was correct and
complete and truly presented the financial condition of
Applicant as of the date thereof and, since the date of
the last such financial statement, there has been no
material adverse change in the financial condition of
Applicant, and
(b) Makes to Issuer the following representations and
warranties:
(i) Applicant is (check one); [x] A corporation organized
under the laws of the State of Delaware
(ii) Applicant has the power and is duly authorized to
execute and deliver this Agreement and is and will be
duly authorized to execute and deliver each Application
for a Credit and each collateral document furnished to
Issuer in connection with the Credit or in the
Application for the Credit. This Agreement, each
Application for the Credit and each document creating or
granting a security interest in Collateral (as
hereinafter defined), when executed and delivered, will
constitute the valid and binding obligations of
Applicant, enforceable in accordance with their terms,
except as limited by bankruptcy. insolvency or similar
laws of general application affecting the enforcement of
creditors' rights generally and except to the extent that
general principles of equity might affect the specific
enforcement of this Agreement or such collateral
documents.
(iii) There is no litigation or administrative proceeding
pending or threatened against Applicant which might, if
adversely determined, materially affect Applicant's
ability to perform its obligations under this Agreement
(iv) No default exists, nor has any event, act or
omission occurred which, with the giving of notice or the
passage of time, would constitute a default under any
instrument or agreement evidencing or securing any
indebtedness or liability of Applicant to any person.
(v) Applicant has no indebtedness for borrowed money,
nor any obligation contingent or otherwise, directly
or indirectly guaranteeing or in any manner providing
for the payment of the indebtedness of another, except
those disclosed on the most recent financial statements
of Applicant furnished to Issuer and except for
endorsements for collection or deposit in the ordinary
course of business.
(vi) Applicant has good and marketable title to all
of the Collateral (as hereinafter defined), subject to no
lien, security Interest, mortgage, encumbrance or charge
of any kind except as provided herein.
5. COVENANTS. Applicant agrees that so long as drawing is
available under the Credit, and until Issuer has been
reimbursed for all drafts honored by it under any Credit,
Applicant will comply in a timely manner with:
(a) Its obligations hereunder and under all security
agreements, mortgages, deeds of trust, or assignments
securing the Obligations as defined In Section 8, herein
and
(b) The following covenants:
(i) Applicant shall furnish to Issuer such financial
information regarding Applicant as Issuer may from time
to time reasonably request and shall permit
representatives of Issuer to visit and inspect the
properties and books and records of Applicant at any
reasonable time and as often as may reasonably be
desired.
(ii) Applicant shall pay all lawful taxes, assessments and
governmental charges upon it or against its properties
prior to the date of which penalties attach, unless
and to the extent only that the same shall be contested
in good faith and by appropriate proceedings.
(iii) Applicant shall not sell, lease, transfer or
otherwise dispose of all or a substantial part of its
assets (other than sales made in the ordinary course of
business).
(iv) If Applicant is a corporation, Applicant shall
maintain its corporate existence and not merge or
consolidate with or into any other corporaiton.
6. RESPONSIBILITY OF ISSUER
(a) Delivery to Issuer or any of its correspondents of any
documents purporting to comply with the requirements of
the Credit shall be sufficient evidence of the validity,
genuineness and sufficiency thereof and of the good faith
and proper performance of drawers and user of the Credit,
their agents and assignees, and Issuer and its
correspondents may rely thereon without liability or
responsibility with respect thereto, even if such
documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged.
(b) Issuer is expressly authorized and directed to honor any
request for payment which is made under and in compliance
with the terms of the Credit without regard to, and
without any duty on Issuer's part to inquire into, the
existence of any disputes or controversies between
Applicant, any beneficiary of the Credit or any other
person, firm or corporation or the rights, duties or
liabilities of any of them.
(c) Issuer shall not be liable to Applicant or any third party
for:
(i) the use which may be made of the Credit or for any act
or omission of any beneficiary thereof,
(ii) any delay in giving or failing to give any notice,
(iii) any error, neglect or default of any of its
correspondents,
(iv) the validity, sufficiency or genuineness of any
document assigning or purporting to assign the Credit or
any benefits thereunder or any act in reliance thereon,
(v) errors in translation or in the interpretation
of any of the terms of the Credit, or
(vi) errors, delays, misdeliveries or losses in the
transmission of notices and communications by means of
SWIFT, electronic mail, telex, twx, tefecopy, telefax or
computer generated telecommunications or documents or
items forwarded in connection with the Credit or any
relevant draft.
(d) Any action taken or omitted by Issuer or its
correspondents in connection with the Credit, any
instructions of Applicant or any drafts, documents or
merchandise relative thereto shall, if in good faith, be
conclusively deemed authorized by Applicant, whether
expressly so or not.
(e) If the Credit shall have been requested by Applicant
for the accommodation of a third party, any instruction,
consent, approval and other action or inaction of such
third party with respect to the Credit or transactions
thereunder shall be deemed to be the act or omission of
Applicant for all purposes hereof, and Issuer shall be
entitled to rely thereon.
7. LIMITATION ON LIABILITY. Specifically, but without limitation,
Issuer shall not be responsible to Applicant for, and Issuer's
rights and remedies against Applicant shall not be impaired by:
(a) Insert Rider 5 from Exhibit A attached hereto.
(i) the New York Uniform Commercial Code or the Uniform
Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication
No. 500 (the "Uniform Customs"),
(ii) the law or published practice rules to which the
Credit is subject,
(iii) an applicable standard practice of banks that
regularly issue letters of credit,
(iv) an applicable order, ruling, or regulation of any
court, arbitrator, or government agency,
(v) a published statement or interpretation on a matter of
applicable standard bank practice, or
(vi) an opinion received from Issuers legal counsel on a
matter of law or from an expert engaged by Issuer ' on a
matter of practice,
(b) Honor of any presentation that substantially or
reasonably complies with the terms and conditions of the
Credit, even if the Credit requires strict colateral
compliance by the beneficiary,
(c) Honor of a nonnegotiable or informal or unmarked demand
or of a demand by the beneficiary presented
electronically, even if the Credit requires that the
beneficiary's demand be in the form of a draft and states
that it is drawn under the Credit,
(d) Honor of documents signed or presented by or on behalf of,
or requesting payment to, the beneficiary's purported
successor by operation of law,
(e) Honor of a presentation without regard to any non-
documentary condition(s) in the Credit,
(f) Honor or other recognition of a presentation or
other demand that later is determined to have included
forged or fraudulent documents or that was otherwise
affected by the fraudulent, bad faith, or illegal conduct
of the beneficiary or other person (excluding Issuer's
employees), including payment to a person who later is
determined to have forged the signature of a beneficiary,
nominated bank, or assignee of letter of credit proceeds,
(g) Honor of a presentation up to the amount available
under the Credit against a draft or other documents
claiming amount(s) in excess of the amount available,
(h) Reimbursement of a nominated bank that does not give
value or that misrepresents the basis on which it claims
reimbursement, or
(i) Dishonor of any presentation that does not strictly
comply or that is fraudulent, forged, or otherwise not
entitled to honor.
8. SECURITY INTEREST. As security for the prompt and
unconditional payment of all obligations and liabilities of
Applicant to Issuer and all Issuer's claims against Applicant,
whether arising or incurred under this Agreement or otherwise,
whether now existing or hereafter incurred, and whether now or
hereafter owing to or acquired in any manner by Issuer
("Obligations"), Applicant hereby grants to Issuer a first
priority security interest in Applicant's present and future
rights in Insert Rider 3 from Exhibit A attached hereto.
Applicant agrees to sign and/or deliver to Issuer, upon Issuer's
request, such security agreements, mortgages, deeds of trust,
assignments, documents, instruments or financing statements as
Issuer may require to perfect, register or record a security
interest in any item of Collateral or to foreclose upon any such
item and to reimburse Issuer for all costs relating thereto.
Issuer may, at its option, require Applicant to provide
additional security for the Obligations, whether caused by a
decline in the value of the existing Collateral or any other
reason. The Obligations of Applicant are secured by all
Collateral provided for under this Agreement as well as any
additional security furnished to Issuer now or hereafter pursuant
to any and all security agreements, mortgages, and assignments
executed by Applicant in favor of Issuer.
Upon the occurrence of any Event of Default, as hereinafter
defined, Issuer may, upon ten calendar days' prior written notice
where notice is required by law, Sell or in any other way collect
or realize upon any part of the Collateral. Any such sale may be
public or private and at any such sale Issuer may be the
purchaser of the property sold. Applicant shall remain liable to
Issuer for any deficiency of the net proceeds in meeting the
Obligations. Applicant further agrees to reimburse Issuer for all
expenses (including attorneys' fees) incurred by Issuer in
selling or otherwise realizing upon or attempting to sell or
realize upon any item of Collateral.
For purposes of this Section 8, the term "Issuer" shall include
Issuer and any Banc One Affiliate.
9. COMPLIANCE WITH LAWS. Applicant agrees to comply with all
applicable foreign and domestic laws and regulations with respect
to the transaction covered by the Credit.
10. POWER OF ATTORNEY. Applicant irrevocably appoints Issuer its
attorney in fact to execute, in the name of Applicant,
assignments, endorsements or other instruments or documents of
any kind or description coming into the possession of Issuer
under a Credit or instructions of Applicatn, to execute, file,
register or record any document or instrument and to do such
other acts as Applicant may be required to do hereunder, upon
failure of Applicant to so act.
11. EVENTS OF DEFAULT. If any one or more of the following Events
of Default shall occur;
(a) Applicant fails to comply with any of the provisions
of this Agreement or of any security documents referred
to in Section 8; or
(b) Applicant dies, ceases to exist, becomes insolvent or is
the subject of bankruptcy or insolvency proceedings; or
(c) Any representation by Applicant in the Agreement or
otherwise, made to induce Issuer to issue the Credit, is
incorrect in any material respect when made; or
(d) Applicant defaults in any other obligation owing to Issuer
or to any Banc One Affiliate; or
(e) Any other event occurs which causes Issuer, in good faith,
to deem itself insecure;
then, all of the Obligations shall, at Issuer's option and
without notice or demand, mature and become immediately due and
payable, with interest at the per annum rate which is three
percentage points in excess of the Base Rate as herein defined
(provided such interest rate does not exceed the maximum rate
of interest which may be charged under applicable law), and
Issuer shall have all rights and remedies for default provided
in the security documents described in Section 8, as well as
applicable law.
12. INDEMNITY. Applicant hereby agrees to indemnify Issuer and
its officers, employees, agents and correspondents against any
loss, cost, damage, expense (including any reasonable charges for
legal services), and/or liability whatsoever which they, or any
of them, may sustain or incur on account of Issuance of the
Credit, payment or acceptance of any draft relative thereto,
refusal or failure to pay or accept any such draft, any action or
inaction respecting the Credit. instructions of Applicant or an
accommodated party, drafts, documents or merchandise relative to
the Credit or any action or inaction in reliance on the
provisions hereof; except that, Applicant shall have a claim
against Issuer, and Issuer shall be liable to Applicant, to the
extent, but only to the extent of any direct, as opposed to
consequential, damages suffered by Applicant which Applicant
proves were caused by
(a) issuer's willful misconduct or gross negligence in
determining whether documents presented under a Credit
comply with the terms of the Credit, or
(b) Issuer's willful failure to pay under the Credit after the
presentation to it by the beneficiary of the Credit of a
draft and documentation strictly corn with the terms and
conditions of the Credit.
13. CROSSED OUT
14. WAIVER. TO THE EXTENT THE PREVIOUS SECTION DOES NOT RESTRICT
A PARTY'S ABILI TY TO EMPLOY JUDICIAL REMEDIES. ISSUER,
APPLICANT, CORRESPONDENT AND EACH GUARANTOR VOLUNTARILY.
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, BETWEEN THE PARTIES ARISING OUT OF,
IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO A CREDIT. THIS
APPLICATION ANDIOR ANY DOCUMENT EVIDENCING AND/OR SECURING A
CREDIT OR THIS AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT
TO ISSUER AGREEING TO ENTER INTO THIS AGREEMENT AND ISSUE CREDITS
HEREUNDER.
15. LIMITATION OF INTEREST AND OTHER CHARGES. Applicant and
Issuer intend to conform strictly to the applicable usury laws
now or hereafter in force with respect to this Agreement. To such
end:
(a) the aggregate of all interest and other charges
constituting interest under such applicable usury laws
and contracted for, chargeable or receivable under this
Agreement shall never exceed the maximum amount of
interest, nor produce a rate in excess of the maximum
contract rate of Interest, that Issuer is authorized to
charge Applicant under such applicable usury laws;
(b) if any excess interest is provided for, it shall be
deemed a mistake, and the excess shall, at the option of
Issuer, either be refunded to Applicant or credited on
the unpaid principal balance of Issuer's reimbursement
obligation, and this Agreement shall be automatically
reformed to permit only the collection of the maximum
legal contract rate and the maximum amount of interest,
and
(c) in determining the maximum amount of interest that
Issuer may charge to Applicant, all interest shall be
amortized, prorated, allocated and spread over the entire
term of Applicant's reimbursement obligation (as
extended, if applicable) to the full extent permitted by
applicable usury laws. Reference herein to usury laws
shall also include any applicable federal or state usury
statutes or laws from time to time in effect to the
extent the same may govern and control transactions
covered hereunder.
16. CROSSED OUT.
17. CROSSED OUT.
18. NONWAIVER. Issuer shall have no duty to exercise any rights
hereunder or otherwise with respect to any documents or
instruments relative to the Credit and shall not be liable for
any failure or delay in doing so. Issuer shall not be deemed to
have waived any of its rights hereunder unless Issuer shall have
signed such waiver in writing.
19. NOTICES AND COMMUNCIATIONS. Any notice or demand to either
party given by the other party shall be deemed to have been
delivered when deposited in the mail or transmitted by a
telegraph, telex or facsimile to the last address of such party
which has previously been furnished to such other party.
Applicant acknowledges and agrees that, at the discretion of
Issuer, Issuer may accept and/or transmit notices and
communciaiton under the Application and this Agreement (including
issuance of the Credit) by means of SWIFT, electronic mail,
telex, twx, telecopy, telefax or computer generated
telecommunications.
20. MISCELLANEOUS.
(a) If this Agreement is signed by more than one party,
Applicant' shall be deemed to refer to all of the under
resigned, all Obligations of Applicant hereunder shall
be joint and several and the liabilities of each shall be
absolute and unconditional. regardless of the liability
of any other party hereto.
(b) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Except as otherwise expressly provided herein or in the
Credit, Issuer may rely for Interpretation of the Credit
or Instructions or documents related thereto or issued
under or in purported compliance with the above, on the
Uniform Customs.
(c) The invalidity or unenforceability of any provision
or portion of this Agreement or any instrument, document.
or agreement executed or made pursuant to or by virtue of
this Agreement, shall not affect the validity or
enforceability of any other provision or portion.
(d) This Agreement may only be amended upon the written
consent of all the parties hereto.
(e) This Agreement confers no right or benefit upon any
person other than the parties to this Agreement and their
respective successors and assigns.
(f) Applicant agrees that in the event of any extension
of the maturity or time for presentation of drafts,
acceptances or documents, or any other modification of
the terms of the Credit, or in the event of any increase
in the amount of the Credit, this Agreement shall be
binding upon Applicant with regard to the Credit so
increased or otherwise modified, to drafts, documents and
property covered thereby, and to any action taken by
Issuer or any of its correspondents in accordance with
such extension, increase or other modification.
21. DURATION AND EFFECT OF AGREEMENT. This Agreement shall remain
in full force and effect until such time as Applicant has
discharged in full its go ons hereunder Notwithstanding the
foregoing sentence, if the Credit is issued in favor of a
sovereign or commercial entity which Is to Issue a guarantee or
undertaking on Applicant's behalf in connection therewith, the
Applicant shall remain liable on the Credit until Issuer Is fully
released in writing by such entity. This Agreement shall be
binding upon Applicant, its successors and assigns and shall
inure to the benefit of Issuer, Its successors and assigns.
Issuer may grant participations in this Agreement and the
Credit issued hereunder to one or more financial Institutions.
22. EFFECT OF OTHER AGREEMENT. If Applicant is a party to another
financial agreement with the Issuer or any Banc One Affiliates,
and such other financial agreement provides for the issuance of
standby letters of credit on behalf of Applicant, then the
provisions of such other financial agreement as they relate to
letters of credit shall prevail over any inconsistent provisions
of this Agreement.
23. BANC ONE AFFILIATES. Applicant hereby authorizes and consents
to the issuance of Credits her . sunder by any Banc One Affiliate
acting at the direction of the Issuer. In such event, once the
Issuer has funded draws under any such Credit, it shall have the
right, remedies security Interests and
other liens provided herein to Issuer, and Applicant shall be
obligated to make the payments due Issuer herein as if the Issuer
had issued the Credit.
EXCEPT AS PROVIDED FOR HEREIN, THIS WRITTEN AGREEMENT REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO ITS
SUBJECT MATTER 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.
THIS AGREEMENT IS SUPPORTED BY OTHER SECURITY DOCUMENTS. IF
OTHER SECURITY DOCUMENTS, INDICATE TYPE OF COLLATERAL: Insert
Rider 4 from Exhibit A attached hereto.
APPLICANT:
R & B FALCON CORPORATION
Printed Name of Applicant
By:
-----------------------
Authorized Signataure - Title
By: Executive Vice President and
Chief Financial Officer
-----------------------
Authorized Signature - Title
I/We Authorize you to debit for payment and charges
Account Number:
BANK ONE LOUISIANA, N.A.
By:
Name (Please Print):
Title:
Officer's Number:
Officer's Cost Center:
Branch Name:
Phone Number:
EXHIBIT "A"
Attached to and Forming a Part of
Application and Agreement for
Irrevocable Standby Letter of Credit
dated August 30, 1999 between
Bank One Louisiana. N.A.
and R&B Falcon Corporaiton
Rider 1:
Wilmington Trust Company,
not in its individual capacity but solely as
Charter Trustee under Charter Trust Agreement
(Deepwater Charter Trust 1999-A)
dated as of August 31, 1999
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Attention Corporate Trust Administration
Rider 2:
(d) Applicant shall pay to Issuer a letter of credit fee at the
rate of 0. 15% per annum (calculated for the actual number
of days elapsed on the basis of a year consisting of 360
days) on the average daily undrawn amount of the Credit,
such fee to be payable in arrears on the last day of each
March, June, September and December hereafter and on
the date on which the Credit is terminated or expires in
accordance with its terms.
Rider 3:
the account and other Collateral covered by that certain Pledge
Agreement dated as of August 30, 1999 between Applicant and
Issuer.
Rider 4:
Pledge Agreement dated as of August 30, 1999 between Applicant
and Issuer
Rider 5:
(a) actions which Issuer takes, or any inaction by Issuer,
pursuant to or in accordance with:
EXHIBIT "B"
Attached to and Forming a Part of
Application and Agreement for
Irrevocable Standby Letter of Credit
dated August 30, 1999 between
Bank One Louisiana, NA
and R&B Falcon Corporation
FORM OF LETTER OF CREDIT TO BE ISSUED
BANK ONE, LOUISIANA, NATIONAL ASSOCIATION
TIN 72-0279635
1717 MAIN STREET, 11 TH FLOOR
DALLAS, TEXAS 75201
TELEPHONE: 1-800-924-5435
TRANSFERABLE IRREVOCABLE
STANDBY LETTER OF CREDIT NO.
DATE OF ISSUE: DATE AND PLACE OF EXPIRY:
AUGUST 30,1999 APRIL 28, 2004, IN DALLAS, TEXAS
APPLICANT: AMOUNT:
R&B FALCON CORPORATION FIFTY MILLION DOLLARS ($50,000,000)
TIN 76-0544217
901 Threadneedle
Houston, Texas 77079
Tel: (281) 496-5000
Fax: (281) 496-0285
BENEFICIARY:
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as
Charter Trustee under Charter Trust Agreement
(Deepwater Charter Trust 1999-A)
dated as of August 31, 1999
I 100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Tel: (302) 651-1000
Fax: (302) 651-8882
Ladies and Gentlemen:
At the request, on the instructions and for the account of
R&B Falcon Corporation (the "Applicant"), Bank One, Louisiana,
National Association hereby establishes its Transferable
Irrevocable Standby Letter of Credit No. ___________________
("Letter of Credit") in favor of Wilmington Trust Company, not
in its individual capacity but solely as Charter Trustee under
Charter Trust Agreement (Deepwater Charter Trust 1999-A) dated as
of August 31, 1999 (the "Charter Trust Agreement") among the
persons from time to time party thereto as Beneficial Owners,
Wilmington Trust Company, not in its individual capacity except as
expressly stated therein, but solely as Charter Trustee, and
Deepwater Investment Trust 1999-A, a Delaware business trust, or
any successor trustee under the Charter Trust Agreement to whom
this Transferable Irrevocable Standby Letter of Credit shall have
been transferred in accordance with the terms hereof (the
"Beneficiary"), in the aggregate amount not exceeding Fifty
Million Dollars ($50,000,000), effective immediately and expiring
on April 28, 2004 unless terminated earlier in accordance with the
provisions hereof. The amount of this Letter of Credit shall be
available by the Beneficiary's draft on us in accordance with the
terms and conditions hereinafter set forth.
Partial draws are not permitted.
Subject to the foregoing and the further provisions of this Letter
of Credit, a single demand for payment may be made by the
Beneficiary by presentation to Bank One, Texas, N.A., National
Standby Letter of Credit Department, at 1717 Main Street, I Ith
Floor, Dallas, Texas 75201, of the original of the Beneficiary's
manually signed sight draft drawn under this Letter of Credit in
the form of Annex A attached hereto (which Annex A forms an
integral part of this Letter of Credit), and accompanied by the
original of this Letter of Credit and the original of the
Beneficiary's manually signed drawing certificate in the form of
Annex B attached hereto (which Annex B forms an integral part of
this Letter of Credit).
Such sight draft and certificate shall have all blanks
appropriately filled in and shall be signed by a person purporting
to be one of the Beneficiary's Vice Presidents, Assistant Vice
Presidents, Trust Officers, Assistant Trust Officers or Authorized
Representatives (each an "Authorized Officer"), and such sight
draft and certificate may be in the form of a letter on the
Beneficiary's letterhead.
Demand for payment may be made by the Beneficiary under this Letter
of Credit prior to the expiration hereof at any time during the
regular business hours of Bank One, Texas, N.A. at its address set
forth above on any Business Day. As used herein the term "Business
Day" means (a) a day on which Bank One, Texas, N.A. (at its above
address) is open for the purpose of conducting a commercial banking
business, and (b) a day on which banking institutions in the States
of Louisiana and Texas generally are open for the purpose of
conducting a commercial banking business. If demand for payment is
made by the Beneficiary hereunder at or prior to 3:00 p.m., Dallas,
Texas time, on a Business Day, and provided that such demand for
payment and the documents presented in connection therewith conform
to the terms and conditions hereof, payment shall be made to the
Beneficiary of the amount demanded, in immediately available funds,
not later than 3:00 P.M., Dallas, Texas time, on the next
succeeding Business Day, and if demand for payment is made by the
Beneficiary hereunder after 3:00 p.m., Dallas, Texas time, on a
Business Day, and provided that such demand for payment and the
documents presented in connection therewith conform to the terms
and conditions hereof, payment shall be made to the Beneficiary
of the amount demanded, in immediately available funds, not later
than 3:00 p.m., Dallas, Texas time, on the second succeeding
Business Day.
Payment under this Letter of Credit may be made by wire transfer
of immediately available funds to any account maintained by the
Beneficiary at any bank that participates in the Federal Reserve
wire system.
This Letter of Credit shall terminate at 5:00 P.M. (Dallas, Texas
time) on the date that is the earliest of (i) the honoring by us
of the drawing available to be made hereunder, (ii) the date on
which this Letter of Credit is surrendered by the Beneficiary to
us for cancellation, and (iii) April 28, 2004.
If a demand for payment does not conform to the terms and
conditions of this Letter of Credit, we will notify the
Beneficiary thereof within a reasonable time after such delivery
of such demand for payment, but in any event within three (3)
Business Days after such delivery, such notice to be promptly
confirmed in writing, and we shall hold all documents at the
Beneficiary's disposal or return the same to the Beneficiary.
Only you, as Beneficiary, in your capacity as holder hereof on
behalf of the Certificate Purchasers (as such term is defined in
the Participation Agreement dated as of August 31, 1999, among the
Beneficiary, the Applicant and others), may make a drawing under
this Letter of Credit. Upon the payment to the Beneficiary or the
Beneficiary's account of the amount specified in a sight draft
drawn hereunder, we shall be fully discharged on our obligation
under this Letter of Credit with respect to such draft, and we
shall not thereafter be obligated to make any further payments
under this Letter of Credit in respect of such draft to the
Beneficiary or to any other person, firm, corporation or other
entity who may have made to the Beneficiary or who subsequently
makes to the Beneficiary a demand for payment.
Notwithstanding anything to the contrary in Article 48 of the UCP,
this Letter of Credit is transferable in its entirety (but not in
part) to any transferee who has succeeded you as Charter Trustee
under the Charter Trust Agreement and may be successively
transferred. Transfer of this Letter of Credit to such a
transferee shall be effected by the presentation to us of this
Letter of Credit accompanied by a certificate substantially in the
form of Annex C attached hereto (which Annex C forms an integral
part of this Letter of Credit) purportedly signed by an Authorized
Officer. Upon receipt of the foregoing, we shall affix an
appropriate endorsement to this Letter of Credit reflecting the
transfer and issue an amendment to this Letter of Credit to such
successor Charter Trustee.
This Letter of Credit shall be subject to the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 (the "UCP"). As to matters
not governed by the UCP, this Letter of Credit shall be governed
by, and construed and enforced in accordance with, the laws of the
State of New York.
All notices and other communications to us in respect of this
Letter of Credit (other than documents presented to us in
connection with your demand for payment which shall be presented
as provided in this Letter of Credit), shall be in writing and
addressed and presented to us at the address set forth in this
Letter of Credit, in each case specifically referring to the
number of this Letter of Credit.
This Letter of Credit sets forth in full our undertaking, and
such undertaking shall not in any way be modified, amended,
amplified or limited by reference to any document, instrument or
agreement referred to herein except only the Annexes hereto; and
any such reference shall not be deemed to incorporate herein by
reference any document instrument or agreement except as set
forth above.
Very truly yours,
BANK ONE, LOUISIANA, NATIONAL ASSOCIATION
By:___________________
Title:________________
Name:_________________
ANNEX A
to Letter of Credit
FORM OF SIGHT DRAFT
[Date]
Pay to the account of_________, not in its individual capacity
but solely as Charter Trustee under Charter Trust Agreement (Deepwater
Charter Trust 1999-A) dated as of August 31, 1999,Dollars ($[amount]),
drawn under Bank One, Louisiana, National Association, Transferable
Irrevocable Standby Letter of Credit No.____________.
Bank One, Louisiana, National Association ___________________________,
c/o Bank One, Texas, N.A. not in its individual capacity
National Standby Letter of Credit Department but solely as Charter Trustee
1717 Main Street, 11th Floor under Charter Trust Agreement
Dallas, Texas 75201 (Deepwater Charter Trust 1999-A)
dated as pf August 31, 1999
By:___________________
Title:________________
Name:_________________
ANNEX B
to Letter of Credit
FORM OF
CERTIFICATE FOR DRAWING
[Date]
Bank One, Louisiana, National Association
c/o Bank One, Texas, N.A.
National Standby Letter of Credit Department
1717 Main Street, 11th Floor
Dallas, Texas 75201
Dear Sir or Madam:
The undersigned, an Authorized Officer of , not
in its individual capacity but solely as Charter Trustee under
Charter Trust Agreement (Deepwater Charter Trust 1999-A) dated as
of August 31, 1999, as Beneficiary (the "Beneficiary"), hereby
certifies to Bank One, Louisiana, National Association (the
"Issuing Bank"), with reference to Transferable Irrevocable
Standby Letter of Credit No. (the "Letter of Credit",
any capitalized term used herein and not defined shall have its
respective meaning as set forth in the letter of Credit) issued
by the Issuing Bank in favor of the Beneficiary that:
1. The undersigned is the Charter Trustee or a successor
Charter Trustee under the Charter Trust Agreement;
2. The Beneficiary is the beneficiary under the R&B Falcon
Drilling Contract Guaranty (as defined in Appendix 1 to the
Participation Agreement referred to in the Charter Trust
Agreement) and a beneficiary under the R&B Falcon Guaranty (as
defined in Appendix 1 to the Participation Agreement referred to
in the Charter Trust Agreement);
3. The Beneficiary has made a demand (a copy of which is
attached hereto, together with proof of delivery), under the R&B
Falcon Drilling Contract Guaranty and/or the R&B Falcon Guaranty;
which demand has not been satisfied in full within five (5)
Business Days of the receipt thereof; and
4. All funds drawn under the Letter of Credit shall be
transferred by you in the form of wire transfer to:
Bank: __________________________
ABA Number:______________________
Account Number:__________________
Reference:_______________________
IN WITNESS WHEREOF, the Beneficiary has executed and deliered
this Certificate as of the {_____} day of [month], [year].
________________________,
not in its individual capacity but
solely as Charter Trustee under Charter
Trust Agreement (Deepwater Charter
Trust 1999-A) dated as of August 31, 1999
By:_______________________
Title:____________________
Name:_____________________
ANNEX C
to Letter of Credit
FORM OF
TRANSFER CERTIFICATE
[Date]
Bank One, Louisiana, National Association
c/o Bank One, Texas, N.A.
National Standby Letter of Credit Department
1717 Main Street, 11th Floor
Dallas, Texas 75201
Dear Sir or Madam:
We refer to Transferable Irrevocable Standby Letter of
Credit No._________________ (the "Letter of Credit") issued by Bank
One, Louisiana, National Association in favor of________________,
not in its individual capacity but solely as Charter Trustee under
Charter Trust Agreement (Deepwater Charter Trust 1999-A) dated as
of August 31, 1999 (the "Charter Trust Agreement") among the persons
from time to time party thereto as Beneficial Owners, Wilmington
Trust Company, not in its individual capacity except as expressly
stated therein, but solely as Charter Trustee, and Deepwater
Investment Trust 1999-A, a Delaware business trust.
For value received we hereby irrevocably transfer to__________
(hereinafter referred to as the "Transferee") all rights of the
undersigned to draw under the Letter of Credit in its entirety.
By this transfer, all rights of the undersigned in the
Letter of Credit are transferred to the Transferee and the
Transferee shall have the sole rights relating to any amendments
whether increases or extensions or other amendments and whether
now existing or hereafter made. All amendments are ot be advised
to the Transferee without necessity of any consent of or notice
to the undersigned.
The Letter of Credit is returned herewith for endorsement
and delivery to the Transferee.
Very truly yours,
___________________________
By:_____________________
Title:__________________
Name:___________________
SIGNATURE AUTHENTICATED
_______________________
(Bank)
_______________________
(Authorized Signature)
EXHIBIT 10.12
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is made as of the 30th day of August,
1999, by R&B Falcon Corporation, a Delaware corporation, in
accordance with a resolution of the Board of Directors of said
corporation, a copy of which is attached hereto, in favor of Bank
One, Louisiana, National Association. Pledgor hereby agrees with
Secured Party as follows:
1. Definitions. As used in this Agreement, the following
terms shall have the meanings indicated below:
(a) The term "Account" shall mean the following
described deposit account:
Bank One, Louisiana, N.A. Certificate of Deposit
Account # 1582816250 issued by Bank One, Louisiana,
N.A. dated August 27, 1999 in an original principal
amount of Fifty Million dollars ($50,000,000.00)
(b) The term "Agreement" shall mean this pledge
agreement, as it may be amended, supplemented or otherwise
modified and in effect from time to time.
(c) The term "Application" shall mean, collectively,
the Application and Agreement for Irrevocable Standby Letter
of Credit dated August 30, 1999 between Pledgor and Secured
Party under which Pledgor is the applicant and requests Bank
One, Louisiana, N.A. to issue a $50,000,000 letter of
credit, as such Application and Agreement for Irrevocable
Letter of Credit may be amended, supplemented or otherwise
modified and in effect from time to time.
(d) The term "Code" shall mean the Louisiana
Commercial Laws (La. R.A. 10:9-101, et. seq.) as adopted and
in effect in the State of Louisiana on the date of this
Agreement or as it may hereafter be amended from time to
time.
(e) The term "Collateral" shall mean the Account
together with (i) all interest, whether now accrued or
hereafter accruing, on the Account, (ii) all additional
deposits hereafter made to the Account, (iii) all
instruments, certificates, passbooks, documents, agreements
and other writings evidencing the Account, (iv) all records
relating to the Account, (v) all renewals, replacements and
substitutions for any of the foregoing, and (vi) all
proceeds of any or all of the foregoing. The designation of
proceeds does not authorize Pledgor to sell, transfer or
otherwise convey any of the foregoing property.
(f) The term "Indebtedness" shall mean (i) all
indebtedness, obligations and liabilities (including,
without limitation, fees payable to Secured Party
thereunder) of Pledgor to Secured Party of any kind or
character, now existing or hereafter arising, under the
Application or this Agreement, whether direct, indirect,
related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, (ii) all
accrued but unpaid interest on any of the indebtedness,
obligations or liabilities described in (i) above, (iii) all
obligations of Pledgor to Secured Party under any documents
evidencing, securing, governing and/or pertaining to all or
any part of the indebtedness described in (i) and (ii)
above, (iv) all costs and expenses incurred by Secured Party
in connection with the collection and administration of all
or any part of the indebtedness and obligations described in
(i), (ii) and (iii) above or the protection or preservation
of, or realization upon, the collateral securing all or any
part of such indebtedness and obligations, including without
limitation all reasonable attorneys' fees, and (v) all
renewals, extensions, modifications and rearrangements of
the indebtedness and obligations described in (i), (ii),
(iii) and (iv) above.
(g) The term "Obligated Party" shall mean any party
other than Pledgor who secures, guarantees and/or is
otherwise obligated to pay all or any portion of the
Indebtedness.
(h) The term "Pledgor" shall mean R & B Falcon
Corporation, a Delaware corporation, TIN 76-0544217, and its
successors and assigns.
(i) The term "Related Documents" shall mean this
Agreement, the Application and all instruments and documents
evidencing, securing, governing, guaranteeing and/or
pertaining to the Indebtedness.
(j) The term "Secured Party" shall mean Bank One,
Louisiana, N.A., TIN 72-0279635, its successors and assigns,
including without limitation, any party to whom Bank One
Louisiana, N.A., or any of its successors or assigns, may
assign its rights and interests under this Agreement.
All words and phrases used herein which are expressly defined in
the Code shall have the meaning provided for therein.
2. Security Interest. As security for the prompt and
punctual payment and satisfaction of the Indebtedness, Pledgor,
for value received, hereby grants to Secured Party a continuing
security interest in the Collateral. This Agreement shall remain
in full force and effect, and Secured party shall have the right
to continue to retain possession of the Collateral until such
time as this Agreement and the security interest created hereby
are terminated and cancelled by the Secured Party under a written
cancellation instrument in favor of the Pledgor.
3. Maintenance of Collateral. As long as this Agreement
remains in effect, Secured Party shall have the right (but in
accordance with the terms of this Section, no obligation) to
renew the Account from time to time for a similar term and at
then offered interest rate(s). Other than the exercise of
reasonable care to ensure the safe custody of any Collateral in
Secured Party's possession from time to time, Secured Party does
not have any obligation, duty or responsibility with respect to
the Collateral. Without limiting the generality of the
foregoing, Secured Party shall not have any obligation, duty or
responsibility to do any of the following: (a) ascertain any
maturities, calls, conversions, exchanges, offers, tenders or
similar matters relating to the Collateral or informing Pledgor
with respect to any such matters; (b) fix, preserve or exercise
any right, privilege or option (whether conversion, redemption or
otherwise) with respect to the Collateral unless (i) Pledgor
makes written demand to Secured Party to do so, (ii) such written
demand is received by Secured Party in sufficient time to permit
Secured Party to take the action demanded in the ordinary course
of its business, and (iii) Pledgor provides additional
collateral, acceptable to Secured Party in its sole discretion;
(c) collect any amounts payable in respect of the Collateral
(Secured Party being liable to account to Pledgor only for what
Secured Party may actually receive or collect thereon); (d) sell
all or any portion of the Collateral to avoid market loss; (e)
sell all or any portion of the Collateral unless and until (i)
Pledgor makes written demand upon Secured Party to sell the
Collateral, and (ii) Pledgor provides additional collateral,
acceptable to Secured Party in its sole discretion; or (f) hold
the Collateral for or on behalf of any party other than Pledgor.
4. Representations and Warranties. Pledgor hereby
represents and warrants the following to Secured Party:
(a) Due Authorization. The execution, delivery and
performance of this Agreement and all of the other Related
Documents by Pledgor have been duly authorized by all necessary
corporate action of Pledgor.
(b) Enforceability. This Agreement and the other Related
Documents constitute legal, valid and binding obligations of
Pledgor, enforceable in accordance with their respective terms,
except as limited by bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors'
rights and except to the extent specific remedies may generally
be limited by equitable principles.
(c) Ownership and Liens. Pledgor has good and marketable
title to the Collateral free and clear of all liens, security
interests, encumbrances or adverse claims, except for the
security interest created by this Agreement. No dispute, right
of setoff, counterclaim or defense exists with respect to all or
any part of the Collateral. Pledgor has not executed any other
security agreement currently affecting the Collateral and no
financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any
recording office except as may have been executed or filed in
favor of Secured Party.
(d) No Conflicts or Consents. Neither the ownership, the
intended use of the Collateral by Pledgor, the grant of the
security interest by Pledgor to Secured Party herein nor the
exercise by Secured Party of its rights or remedies hereunder,
will (i) conflict with any provision of (A) any domestic or
foreign law, statute, rule or regulation, (B) the articles or
certificate of incorporation, bylaws of Pledgor or (C) any
agreement, judgment, license, order or permit applicable to or
binding upon Pledgor or otherwise affecting the Collateral, or
(ii) result in or require the creation of any lien, charge or
encumbrance upon any assets or properties of Pledgor or of any
person except as may be expressly contemplated in the Related
Documents. Except as expressly contemplated in the Related
Documents, no consent, approval, authorization or order of, and
no notice to or filing with any court, governmental authority or
third party is required in connection with the grant by Pledgor
of the security interest herein or the exercise by Secured Party
of its rights and remedies hereunder.
(e) Security Interest. Pledgor has and will have at all
times full right, power and authority to grant a security
interest in the Collateral to Secured Party in the manner
provided herein, free and clear of any lien, security interest or
other charge or encumbrance. This Agreement creates a legal,
valid and binding security interest in favor of Secured Party in
the Collateral.
(f) Location. Pledgor's residence or chief executive
office, as the case may be, and the office where the records
concerning the Collateral are kept is located at its address set
forth on the signature page hereof.
(g) Solvency of Pledgor. As of the date hereof, and after
giving effect to this Agreement and the completion of all other
transactions contemplated by Pledgor at the time of the execution
of this Agreement, (i) Pledgor is and will be solvent, (ii) the
fair saleable value of Pledgor's assets exceeds and will continue
to exceed Pledgor's liabilities (both fixed and contingent),
(iii) Pledgor is paying and will continue to be able to pay its
debts as they mature, and (iv) if Pledgor is not an individual,
Pledgor has and will have sufficient capital to carry on
Pledgor's businesses and all businesses in which Pledgor is about
to engage.
(h) To the extent applicable, Pledgor has delivered to
Secured Party the certificate or passbook issued under or with
respect to the Account, and such certificate or passbook, if any,
shall remain in Secured Party's possession until such time as
this Agreement is terminated in accordance with the terms hereof.
5. Affirmative Covenants. Pledgor will comply with the
covenants contained in this Section at all times during the
period of time this Agreement is effective unless Secured Party
shall otherwise consent in writing.
(a) Ownership and Liens. Pledgor will maintain good and
marketable title to all Collateral free and clear of all liens,
security interests, encumbrances or adverse claims, except for
the security interest created by this Agreement and the security
interests and other encumbrances expressly permitted by the
Related Documents. Pledgor will not permit any dispute, right of
setoff, counterclaim or defense to exist with respect to all or
any part of the Collateral. Pledgor will cause any financing
statement or other security instrument with respect to the
Collateral to be terminated, except as may exist or as may have
been filed in favor of Secured Party. Pledgor will defend at its
expense Secured Party's right, title and security interest in and
to the Collateral against the claims of any third party.
(b) Inspection of Books and Records. Pledgor will keep
adequate records concerning the Collateral and will permit
Secured Party and all representatives and agents appointed by
Secured Party to inspect Pledgor's books and records of or
relating to the Collateral at any time during normal business
hours, to make and take away photocopies, photographs and
printouts thereof and to write down and record any such
information.
(c) Adverse Claim. Pledgor covenants and agrees to
promptly notify Secured Party of any claim, action or proceeding
affecting title to the Collateral, or any part thereof, or the
security interest created hereunder and, at Pledgor's expense,
defend Secured Party's security interest in the Collateral
against the claims of any third party. Pledgor also covenants
and agrees to promptly deliver to Secured Party a copy of all
written notices received by Pledgor with respect to the
Collateral, including without limitation, notices received form
the issuer of any securities pledged hereunder as Collateral.
(d) Further Assurances. Pledgor will contemporaneously
with the execution hereof and from time to time thereafter at its
expense promptly execute and deliver all further instruments and
documents and take all further action necessary or appropriate or
that Secured Party may request in order (i) to perfect and
protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to
enable Secured Party to exercise and enforce its rights and
remedies hereunder in respect of the Collateral, and (iii) to
otherwise effect the purposes of this Agreement, including
without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining
written confirmation from the issuer of any securities pledged as
Collateral of the pledge of such securities, in form and
substance satisfactory to Secured Party; (C) cooperating with
Secured Party in registering the pledge of any securities pledged
as Collateral with the issuer of such securities; (D) delivering
notice of Secured Party's security interest in any securities
pledged as Collateral to any financial intermediary, clearing
corporation or other party required by Secured Party, in form and
substance satisfactory to Secured Party; and (E) obtaining
written confirmation of the pledge of any securities constituting
Collateral from any financial intermediary, clearing corporation
or other party required by Secured Party, in form and substance
satisfactory to Secured Party. If all or any part of the
Collateral is securities issued by an agency or department of the
United States, Pledgor covenants and agrees, at Secured Party's
request, to cooperate in registering such securities in Secured
Party's name or with Secured Party's account maintained with a
Federal Reserve Bank. At the option of the Secured Party, a
carbon, photographic, facsimile or other reproduction or type of
copy of this Agreement or of a financing statement covering the
Collateral shall be sufficient as a financing statement and may
be filed as a financing statement.
(e) Should Pledgor ever obtain possession of the
certificate or passbook issued under or with respect to the
Account while this Agreement remains in effect, Pledgor agrees to
immediately deliver such certificate or passbook to Secured
Party, and Pledgor's obligations to Secured Party under this
Agreement shall not be modified or terminated as a result of
Pledgor's possession (whether temporary or otherwise) of any
certificate, passbook or other document or agreement issued under
or with respect to the Account.
6. Negative Covenants. Pledgor will comply with the
covenants contained in this Section at all times during the
period of time this Agreement is effective, unless Secured Party
shall otherwise consent in writing.
(a) Transfer or Encumbrance. Pledgor will not (i) sell,
assign (by operation of law or otherwise) or transfer Pledgor's
rights in any of the Collateral, (ii) grant a lien or security
interest in or execute, file or record any financing statement or
other security instrument with respect to the Collateral to any
party other than Secured Party, or (iii) deliver actual or
constructive possession of any certificate, instrument or
document evidencing and/or representing any of the Collateral to
any party other than Secured Party.
(b) Impairment of Security Interest. Pledgor will not take
or fail to take any action which would in any manner impair the
value or enforceability of Secured Party's security interest in
any Collateral.
7. Rights of Secured Party. Secured Party shall have the
rights contained in this Section at all times during the period
of time this Agreement is effective.
(a) Power of Attorney. Pledgor hereby irrevocably appoints
Secured Party as Pledgor's attorney-in-fact, such power of
attorney being coupled with an interest, with full authority in
the place and stead of Pledgor and in the name of Pledgor or
otherwise, upon the occurrence of an Event of Default, to take
any action and to execute any instrument which Secured Party may
from time to time in Secured Party's discretion deem necessary or
appropriate to accomplish the action: (i) transfer any
securities, instruments, documents or certificates pledged as
Collateral in the name of Secured Party or its nominee; (ii) use
any interest, premium or principal payments, conversion or
redemption proceeds or other cash proceeds received in connection
with any Collateral to reduce any of the Indebtedness; (iii)
exchange any of the securities pledged as Collateral for any
other property upon any merger, consolidation, reorganization,
recapitalization or other readjustment of the issuer thereof,
and, in connection therewith, to deposit and deliver any and all
of such securities with any committee, depository, transfer
agent, registrar or other designated agent upon such terms and
conditions as Secured Party may deem necessary or appropriate;
(iv) exercise or comply with any conversion, exchange,
redemption, subscription or any other right, privilege or option
pertaining to any securities pledged as Collateral; provided,
however, except as provided herein, Secured Party shall not have
duty to exercise or comply with any such right, privilege or
option (whether conversion, redemption or otherwise) and shall
not be responsible for any delay or failure to do so; and (v)
file any claims or take any action or institute any proceedings
which Secured Party may deem necessary or appropriate for the
collection and/or preservation of the Collateral or otherwise to
enforce the rights of Secured Party with respect to the
Collateral.
(b) Performance by Secured Party. If Pledgor fails to
perform any agreement or obligation provided herein, Secured
Party may itself perform, or cause performance of, such agreement
or obligation, and the expenses of Secured Party incurred in
connection therewith shall be a part of the Indebtedness, secured
by the Collateral and payable by Pledgor on demand.
Notwithstanding any other provision herein to the contrary,
Secured Party does not have any duty to exercise or continue to
exercise any of the foregoing rights and shall not be responsible
for any failure to do so or for any delay in doing so.
8. Events of Default. Each of the following constitutes an
"Event of Default" under this Agreement:
(a) Failure to Pay Indebtedness. The failure, refusal or
neglect of Pledgor to make any payment of principal or interest
on the Indebtedness, or any portion thereof, within three (3)
business days after the same shall become due and payable; or
(b) Non-Performance of Covenants. The failure of Pledgor
or any Obligated Party to timely and properly observe, keep or
perform any covenant, agreement, warranty or condition required
herein or in any of the other Related Documents and such failure
continues for a period of 30 days or more after written notice by
the Secured Party to the Pledgor or any Obligated Party; or
(c) Default Under Other Related Documents. The occurrence
of an event of default under any of the other Related Documents;
or
(d) False Representation. Any representation contained
herein or in any of the other Related Documents made by Pledgor
or any Obligated Party shall prove to be false or misleading in
any material respect at the time made; or
(e) Default to Third Party. The occurrence of any event
which results in the acceleration of the maturity of any
indebtedness amounting in the aggregate to $5,000,000 or more
owing by Pledgor or any Obligated Party to any third party under
any agreement or undertaking; or
(f) Bankruptcy or Insolvency. If Pledgor or any Obligated
Party: (i) becomes insolvent, or makes a transfer in fraud of
creditors, or makes an assignment for the benefit of creditors,
or admits in writing its inability to pay its debts as they
become due; (ii) generally is not paying its debts as such debts
become due; (iii) has a receiver, trustee or custodian appointed
for, or take possession of, all or substantially all of the
assets of such party or any of the Collateral, either in a
proceeding brought by such party or in a proceeding brought
against such party and such appointment is not discharged or such
possession is not terminated within sixty (60) days after the
effective date thereof or such party consents to or acquiesces in
such appointment or possession; (iv) files a petition for relief
under the United States Bankruptcy Code or any other present or
future federal or state insolvency, bankruptcy or similar law
(all of the foregoing hereinafter collectively called "Applicable
Bankruptcy Law") or an involuntary petition for relief so filed
against such party under any Applicable Bankruptcy Law and such
involuntary petition is not dismissed within sixty (60) days
after the filing thereof, or an order for relief naming such
party is entered under any Applicable Bankruptcy Law, or any
composition, rearrangement, extension, reorganization or other
relief of debtors now or hereafter existing is requested or
consented to by such party; (v) fails to have discharged within a
period of sixty (60) days any attachment, sequestration or
similar writ levied upon any property of such party; or (vi)
fails to pay within thirty (30) days any final money judgment
against such party; or
(g) Execution on Collateral. The Collateral or any portion
thereof is taken on execution or other process of law in any
action against Pledgor; or
(h) Abandonment. Pledgor abandons the Collateral or any
portion thereof; or
(i) Action by Other Lienholder. The holder of any lien or
security interest on any of the assets of Pledgor, including
without limitation, the Collateral (without hereby implying the
consent of Secured Party to the existence or creation of any such
lien or security interest on the Collateral), declares a default
thereunder or institutes foreclosure or other proceedings for the
enforcement of its remedies thereunder; or
(j) Liquidation, Death and Related Events. If Pledgor or
any Obligated Party is an entity, the liquidation, dissolution,
merger or consolidation of any such entity; or
(k) Bankruptcy of Issuer. (i) The issuer of any securities
constituting Collateral files a petition for relief under any
Applicable Bankruptcy Law, (ii) an involuntary petition for
relief is filed against any such issuer under any Applicable
Bankruptcy Law and such involuntary petition is not dismissed
within thirty (30) days after the filing thereof, or (iii) an
order for relief naming any such issuer is entered under any
Applicable Bankruptcy Law; provided, however, that the events
described in clauses (i), (ii) and (iii) of this Section 8 shall
not constitute an Event of Default if Pledgor provides substitute
or additional collateral within 30 days after being notified by
Secured Party that an event described in clauses (i), (ii) or
(iii) has occurred.
9. Remedies and Related Rights. If an Event of Default
shall have occurred and be continuing, and without limiting any
other rights and remedies provided herein, under any of the other
Related Documents or otherwise available to Secured Party,
Secured Party may exercise one or more of the rights and remedies
provided in this Section.
(a) Remedies. Secured Party may from time to time at its
discretion, without limitation and without notice except as
expressly provided in any of the Related Documents:
(i) exercise in respect of the Collateral all the
rights and remedies of a secured party under the Code
(whether or not the Code applies to the affected
Collateral);
(ii) reduce its claim to judgment or foreclose or
otherwise enforce, in whole or in part, the security
interest granted hereunder by any available judicial
procedure;
(iii) surrender the Account to the issuer thereof and
obtain payment thereunder subject to any early withdrawal
penalty, where applicable;
(iv) sell or otherwise dispose of, at its office, on
the premises of Pledgor or elsewhere, the Collateral, as a
unit or in parcels, by public or private proceedings, and by
way of one or more contracts (it being agreed that the sale
or other disposition of any part of the Collateral shall not
exhaust Secured Party's power of sale, but sales or other
disposition of any part of the Collateral shall not exhaust
Secured Party's power of sale, but sales or other
dispositions may be made from time to time until all of the
Collateral has been sold or disposed of or until the
Indebtedness has been paid and performed in full), and at
any such sale or other disposition it shall not be necessary
to exhibit any of the Collateral;
(v) buy the Collateral, or any portion thereof, at any
public sale;
(vi) buy the Collateral, or any portion thereof, at any
private sale if the Collateral is of a type customarily sold
in a recognized market or is of a type which is the subject
of widely distributed standard price quotations;
(vii) apply for the appointment of a receiver for the
Collateral, and Pledgor hereby consents to any such
appointment; and
(viii) at its option, retain the Collateral in
satisfaction of the Indebtedness whenever the circumstances
are such that Secured Party is entitled to do so under the
Code or otherwise.
Pledgor agrees that in the event Pledgor is entitled to receive
any notice under the Code of the sale or other disposition of any
Collateral, reasonable notice shall be deemed given when such
notice is deposited in a depository receptacle under the care and
custody of the United States Postal Service, postage prepaid, at
Pledgor's address set forth on the signature page hereof, five
(5) days prior to the date of any public sale, or after which a
private sale, of any of such Collateral is to be held. Secured
Party shall not be obliged to make any sale of Collateral
regardless of notice of sale having been given. Secured Party
may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to
which it was so adjourned. Pledgor further acknowledges and
agrees that the redemption by Secured Party of any certificate of
deposit pledged as Collateral shall be deemed to be a
commercially reasonable disposition under Section 10:9-504(3) of
the Code.
(b) Application of Proceeds. If any Event of Default shall
have occurred and be continuing, Secured Party may at its
discretion apply or use any cash held by Secured Party as
Collateral, and any cash proceeds received by Secured Party in
respect of any sale or other disposition of, collection from, or
other realization upon, all or any part of the Collateral as
follows in such order and manner as Secured Party may elect:
(i) to the repayment or reimbursement of the reasonable
costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred by Secured
Party in connection with (A) the administration of the
Related Documents, (B) the custody, preservation, use or
operation of, or the sale of collection form, or other
realization upon, the Collateral, and (C) the exercise or
enforcement of any of the rights and remedies of Secured
Party hereunder;
(ii) to the payment or other satisfaction of any liens
and other encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) by holding such cash and proceeds as Collateral;
(v) to the payment of any other amounts required by
applicable law (including without limitation, Section 10:9-
504(1)(c) of the Code or any other applicable statutory
provision).
(c) Deficiency. In the event that the proceeds of any sale
of, collection from, or other realization upon, all or any part
of the Collateral by Secured Party are insufficient to pay all
amounts to which Secured Party is legally entitled, Pledgor and
any party who guaranteed or is otherwise obligated to pay all or
any portion of the Indebtedness shall be liable for the
deficiency, together with interest thereon as provided in the
Related Documents.
(d) Non-Judicial Remedies. In granting to Secured Party
the power to enforce its rights hereunder without prior judicial
process or judicial hearing, Pledgor expressly waives, renounces
and knowingly relinquishes any legal right which might otherwise
require Secured Party to enforce its rights by judicial process.
Pledgor recognizes and concedes that non-judicial remedies are
consistent with the usage of trade, are responsive to commercial
necessity and are the result of a bargain at arm's length.
Nothing herein is intended to prevent Secured Party or Pledgor
from resorting to judicial process at either party's option.
(e) Other Recourse. Pledgor waives any right to require
Secured Party to proceed against any third party, exhaust any
Collateral or other security for the Indebtedness, or to have any
third party joined with Pledgor in any suit arising out of the
Indebtedness or any of the Indebtedness or any of the Related
Documents, or pursue any other remedy available to Secured Party.
Pledgor further waives any and all notice of acceptance of this
Agreement and of the creation, modification, rearrangement,
renewal or extension of the Indebtedness. Pledgor further waives
any defense arising by reason of any disability or other defense
of any third party or by reason of the cessation from any cause
whatsoever of the liability of any third party. Until all of the
Indebtedness shall have been paid in full, Pledgor shall have no
right of subrogation and Pledgor waives the right to enforce any
remedy which Secured Party has or may hereafter have against any
third party, and waives any benefit of and any right to
participate in any other security whatsoever now or hereafter
held by Secured Party. Pledgor authorizes Secured Party, and
without notice or demand and without any reservation of rights
against Pledgor and without affecting Pledgor's liability
hereunder or on the Indebtedness, to (i) take or hold any other
property of any type from any third party as security for the
Indebtedness, and exchange, enforce, waive and release any or all
of such other property, (ii) apply such other property and direct
the order or manner of sale thereof as Secured Party may in its
discretion determine, (iii) renew, extend, accelerate, modify,
compromise, settle or release any of the Indebtedness or other
security for the Indebtedness, (iv) waive, enforce or modify any
of the provisions of any of the Related Documents executed by any
third party, and (v) release or substitute any third party.
(f) Secured Party's rights under this Agreement are in
addition to any statutory rights of offset granted to Secured
Party under applicable Louisiana law.
10. Indemnity. Pledgor hereby indemnifies and agrees to
hold harmless Secured Party, and its officers, directors,
employees, agents and representatives (each an "Indemnified
Person") from and against any and all liabilities, obligations,
claims, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature
(collectively, the "Claims") which may be imposed on, incurred
by, or asserted against, any Indemnified Person (whether or not
caused by any Indemnified Person's sole, concurrent or
contributory negligence) arising in connection with the Related
Documents, the Indebtedness or the Collateral (including without
limitation, the enforcement of the Related Documents and the
defense of any Indemnified Person's actions and/or inactions in
connection with the Related Documents), except to the limited
extent the Claims against an Indemnified Person are proximately
caused by such Indemnified Person's gross negligence or willful
misconduct. The indemnification provided for in this Section
shall survive the termination of this Agreement and shall extend
and continue to benefit each individual or entity who is or has
at any time been an Indemnified Person hereunder.
11. Miscellaneous.
(a) Entire Agreement. This Agreement contains the entire
agreement of Secured Party and Pledgor with respect to the
Collateral. If the parties hereto are parties to any prior
agreement, either written or oral, relating to the Collateral,
the terms of this Agreement shall amend and supersede the terms
of such prior agreements as to transactions on or after the
effective date of this Agreement, but all security agreements,
financing statements, guaranties, other contracts and notices for
the benefit of Secured Party shall continue in full force and
effect to secure the Indebtedness unless Secured Party
specifically releases its rights thereunder by separate release.
(b) Amendment. No modification, consent or amendment of
any provision of this Agreement or any of the other Related
Documents shall be valid or effective unless the same is in
writing and signed by the party against whom it is sought to be
enforced.
(c) Actions by Secured Party. The lien, security interest
and other security rights of Secured Party hereunder shall not be
impaired by (i) any renewal, extension, increase or modification
with respect to the Indebtedness, (ii) any surrender, compromise,
release, renewal, extension, exchange or substitution which
Secured Party may grant with respect to the Collateral, or (iii)
any release or indulgence granted to any endorser, guarantor or
surety of the Indebtedness. The taking of additional security by
Secured Party shall not release or impair the lien, security
interest or other security rights of Secured Party hereunder or
affect the obligations of Pledgor hereunder.
(d) Waiver by Secured Party. Secured Party may waive any
Event of Default without waiving any other prior or subsequent
Event of Default. Secured Party may remedy any default without
waiving the Event of Default remedied. Neither the failure by
Secured Party to exercise, nor the delay by Secured Party in
exercising, any right or remedy upon any Event of Default shall
be construed as a waiver of such Event of Default or as a waiver
of the right to exercise any such right or remedy at a later
date. No single or partial exercise by Secured Party of any
right or remedy hereunder shall exhaust the same or shall
preclude any other or further exercise thereof, and every such
right or remedy hereunder may be exercised at any time. No
waiver of any provision hereof or consent to any departure by
Pledgor therefrom shall be effective unless the same shall be in
writing and signed by Secured Party and then such waiver or
consent shall be effective only in the specific instances, for
the purpose for which given and to the extent therein specified.
No notice to or demand on Pledgor in any case shall of itself
entitle Pledgor to any other or further notice or demand in
similar or other circumstances.
(e) Costs and Expenses. Pledgor will upon demand pay to
Secured Party the amount of any and all costs and expenses
(including without limitation, attorneys' fees and expenses),
which Secured Party may incur in connection with (i) the
transactions which give rise to the Related Documents, (ii) the
preparation of this Agreement and the perfection and preservation
of the security interests granted under the Related Documents,
(iii) the administration of the Related Documents, (iv) the
custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, the Collateral, (v)
the exercise or enforcement of any of the rights of Secured Party
under the Related Documents, or (vi) the failure by Pledgor to
perform or observe any of the provisions hereof.
(f) CONSENT TO JURISDICTION. PLEDGOR HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR LOUISIANA STATE COURT SITTING IN NEW ORLEANS,
LOUISIANA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OF THE OTHER RELATED DOCUMENTS AND
PLEDGOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF
SECURED PARTY TO BRING PROCEEDINGS AGAINST PLEDGOR IN THE COURTS
OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY PLEDGOR
AGAINST SECURED PARTY OR ANY AFFILIATE OF SECURED PARTY
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY OTHER
RELATED DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW ORLEANS,
LOUISIANA.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA
WITHOUT REGARD TO ANY CONFLICT OF LAWS RULES OR PROVISIONS
THEREOF AND APPLICABLE FEDERAL LAWS, EXCEPT TO THE EXTENT
PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE
SECURITY INTEREST GRANTED HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN
THE STATE OF LOUISIANA.
(h) JURY WAIVER. PLEDGOR AND SECURED PARTY (BY ITS
ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND
UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT, OR
OTHERWISE) BETWEEN PLEDGOR AND SECURED PARTY ARISING OUT OF OR IN
ANY WAY RELATED TO THIS AGREEMENT, OR ANY OTHER RELATED DOCUMENT,
OR ANY RELATIONSHIP BETWEEN SECURED PARTY AND PLEDGOR. THIS
PROVISION IS A MATERIAL INDUCEMENT TO SECURED PARTY TO PROVIDE
THE FINANCING DESCRIBED HEREIN OR IN THE OTHER RELATED DOCUMENTS.
(i) Severability. If any provision of this Agreement is
held by a court of competent jurisdiction to be illegal, invalid
or unenforceable under present or future laws, such provision
shall be fully severable, shall not impair or invalidate the
remainder of this Agreement and the effect thereof shall be
confined to the provision held to be illegal, invalid or
unenforceable.
(j) No Obligation. Nothing contained herein shall be
construed as an obligation on the part of Secured Party to extend
or continue to extend credit to Pledgor.
(k) Notices. All notices, requests, demands or other
communications required or permitted to be given pursuant to this
Agreement shall be in writing and given by (i) personal delivery,
(ii) expedited delivery service with proof of delivery, or (iii)
United States mail, postage prepaid, registered or certified
mail, return receipt requested, sent to the intended addressee at
the address set forth on the signature page hereof or to such
different address as the addressee shall have designated by
written notice sent pursuant to the terms hereof and shall be
deemed to have been received either, in the case of expedited
delivery services as of the date of first attempted delivery at
the address and in the manner provided herein, or in the case of
mail, upon deposit in a depository receptacle under the care and
custody of the United States Postal Service. Either party shall
have the right to change its address for notice hereunder to any
other location within the continental United States by notice to
the other party of such new address at least thirty (30) days
prior to the effective date of such new address.
(l) Binding Effects and Assignment. This Agreement (i)
creates a continuing security interest in the Collateral, (ii)
shall be binding on Pledgor and the heirs, executors,
administrators, personal representatives, successors and assigns
of Pledgor and (iii) shall inure to the benefit of Secured Party
and its successors and assigns. Without limiting the generality
of the foregoing, Secured Party may pledge, assign or otherwise
transfer the Indebtedness and its rights under this Agreement and
any of the other Related Documents to any other party. Pledgor's
rights and obligations hereunder may not be assigned or otherwise
transferred without the prior written consent of Secured Party.
(m) Termination. It is contemplated by the parties hereto
that from time to time there may be no outstanding Indebtedness,
but notwithstanding such occurrences, this Agreement shall remain
valid and shall be in full force and effect as to subsequent
outstanding Indebtedness. Upon (i) the satisfaction in full of
the Indebtedness, (ii) the termination or expiration of any
commitment of Secured Party to extend credit to Pledgor, (iii)
written request for the termination hereof delivered by Pledgor
to Secured Party, and (iv) written release delivered by Secured
Party to Pledgor, this Agreement and the Security Interests
created hereby shall terminate. Upon termination of this
Agreement and Pledgor's written request, Secured Party will, at
Pledgor's sole cost and expense, return to Pledgor such of the
Collateral as shall not have been sold or otherwise disposed of
or applied pursuant to the terms hereof and execute and deliver
to Pledgor such documents as Pledgor shall reasonably request to
evidence such termination.
(n) Cumulative Rights. All rights and remedies of Secured
Party hereunder are cumulative of each other and of every other
right or remedy which Secured Party may otherwise have at law or
in equity or under any of the other Related Documents, and the
exercise of one or more of such rights or remedies shall not
prejudice or impair the concurrent or subsequent exercise of any
other rights or remedies.
(o) Gender and Number. Within this Agreement, words of any
gender shall be held and construed to include the other gender,
and words in the singular number shall be held and construed to
include the plural and words in the plural number shall be held
and construed to include the singular, unless in each instance
the context requires otherwise.
(p) Descriptive Headings. The headings in this Agreement
are for convenience only and shall in no way enlarge, limit or
define the scope or meaning of the various and several provisions
hereof.
(q) NO ORAL AGREEMENTS. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES HERETO. THIS WRITTEN PLEDGE
AGREEMENT, THE WRITTEN APPLICATION AND THE OTHER WRITTEN RELATED
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.
[REMAINDER OF THIS PAGE LEFT BLANK]
EXECUTED as of the date first written above.
Pledgor:
Pledgor's Address: R&B FALCON CORPORATION
901 Threadneedle By:
Houston, Texas 77079
Title:
ACCEPTED: Secured Party:
Secured Party's Address: BANK ONE, LOUISIANA,
NATIONAL ASSOCIATION
201 St. Charles Street, 28th Floor
New Orleans, Louisiana 70170 By:
Title:
EXHIBIT 10.13
Employment and Change in Control
Agreement
R&B Falcon Corporation
August 25, 1999
Contents
Section 1. Term of Employment 1
Section 2. Position and Responsibilities 2
Section 3. Standard of Care 2
Section 4. Compensation 3
Section 5. Expenses 5
Section 6. Employment Terminations 5
Section 7. Change in Control 10
Section 8. Confidentiality and Noncompetition 13
Section 9. Indemnification 14
Section 10. Outplacement Assistance 14
Section 11. Assignment 14
Section 12. Dispute Resolution and Notice 15
Section 13. Miscellaneous 15
Section 14. Governing Law 16
R&B Falcon Corporation
Employment and Change in Control Agreement
This EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT ("Agreement")
is made, entered into, and is effective as of this 25th day of
August, 1999 (hereinafter referred to as the "Effective Date"),
by and between R&B Falcon Corporation (hereinafter referred to as
the "Company"), a Delaware corporation having its principal
offices at Houston, Texas, and Paul B. Loyd, Jr. (hereinafter
referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company
in the capacity of Chairman and Chief Executive Officer and
serves as a member of the Board of Directors of the Company; and
WHEREAS, the Executive previously entered into an employment
agreement with the Company dated as of March 25, 1998 and it is
now in the best interest of the Company and the Executive to
enter into this new Agreement; and
WHEREAS, the Executive possesses considerable experience and
an intimate knowledge of the business and affairs of the Company,
its policies, methods, personnel, and operations; and
WHEREAS, the Company recognizes that the Executive's
contribution has been substantial and meritorious and, as such,
the Executive has demonstrated unique qualifications to act in an
executive capacity for the Company; and
WHEREAS, the Company is desirous of assuring the continued
employment of the Executive in the above stated capacity, and
Executive is desirous of having such assurance.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
Section 1. Term of Employment
The Company hereby agrees to employ the Executive and the
Executive hereby agrees to continue to serve the Company, in
accordance with the terms and conditions set forth herein, for an
initial period of three (3) years, commencing as of the Effective
Date of this Agreement, as indicated above; subject, however, to
earlier termination as expressly provided in Section 6 herein.
The initial three (3) year Employment Term (as defined below)
of this Agreement shall be extended automatically for one (1)
additional month beginning with the first day of the eleventh
(11th) month of the initial three (3) year term, and on the first
day of each month thereafter the Employment Term of this
Agreement automatically shall be extended one additional month;
provided, however, either party may give the other party written
notice that, beginning with the first of the month that is at
ninety (90) days after the date of the notice, the Employment
Term shall cease to be extended with respect to any termination
of the Executive's employment other than a termination occurring
during the Window Period (as defined in Section 6.7 herein).
In the event such notice of intent not to renew is properly
delivered by either party, then the Employment Term of this
Agreement, along with all corresponding rights, duties, and
covenants with respect thereto, shall automatically expire ninety
(90) days following the end of the later of the initial three-
year Employment Term or, if applicable, the extended Employment
Term then in effect; provided, however, that notwithstanding the
termination of the Employment Term (i) the provisions contained
in Section 8 herein shall survive such expiration and (ii) the
provisions and protections of this Agreement concerning a Change
in Control of the Company (as defined in Section 7 herein),
including, without limitation, a Change in Control that occurs
after the termination of the Employment Term, shall continue
without interruption or change.
This Agreement provides (x) for the employment of the
Executive for an initial fixed term, which may be extended, (such
term, as it may be extended, is referred to herein as the
"Employment Term"), and (y) separately, whether or not the
Employment Term has expired before a Change in Control of the
Company occurs, for Change in Control employment protection for
the Executive for as long as the Executive remains an employee of
the Company (or any parent or subsidiary), and also with respect
to certain terminations of the Executive's employment occurring
during the Window Period prior to a Change in Control.
Further, notwithstanding anything in this Agreement to the
contrary, termination of this Agreement shall not alter or impair
any rights or benefits of the Executive (or the Executive's
beneficiaries) that have arisen (contingently or otherwise) under
this Agreement on or prior to such termination.
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to
serve as the Chairman and Chief Executive Officer of the Company.
In his capacity as the Chairman and Chief Executive Officer of
the Company, the Executive shall report directly to the Company's
Board of Directors, and shall maintain the level of duties and
responsibilities as in effect as of the Effective Date, as set
forth on Appendix A, or such higher level of duties and
responsibilities as he may be assigned during the term of this
Agreement. The Executive shall have the same status, privileges,
and responsibilities normally inherent in such capacities in
corporations of similar size and character.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to
devote substantially his full time, attention, and energies to
the Company's business and shall not be engaged in any other
business activity, whether or not such business activity is
pursued for gain, profit, or other pecuniary advantage; provided,
however, subject to the restrictions of Section 8, the Executive
may serve as a director of other companies so long as such
service is not injurious to the Company, may continue the conduct
of the business activities listed on Appendix B (to the extent
conducted before the Effective Date), and may engage in the
conduct of such other business activities that are substantially
similar in nature and scope to those listed on Appendix B,
provided that such other business activities do not materially
interfere with the Executive's duties and obligations under this
Agreement. The Executive covenants, warrants, and represents that
he shall:
(a) Devote his full and best efforts to the fulfillment of
his employment obligations; and
(b) Act in the same manner as a competent executive in a
comparable company.
This Section 3 shall not be construed as preventing the
Executive from investing assets in such form or manner as will
not require his services in the daily operations of the affairs
of the companies in which such investments are made.
Section 4. Compensation
As remuneration for all services to be rendered by the
Executive during the term of this Agreement, and as consideration
for complying with the covenants herein, the Company shall pay
and provide to the Executive the following:
4.1Base Salary. The Company shall pay the Executive a Base
Salary in an amount which shall be established from time to time
by the Board of Directors of the Company or the Board's designee;
provided, however, that the Executive's Base Salary may be
decreased by the Board (other than during a Window Period) as
part of a program that is applicable equally (as a percentage of
base salary) to all executives of the Company and is determined
by the Board to be necessary and appropriate in light of the
Company's then financial condition. Base Salary shall be paid to
the Executive in equal semi-monthly installments throughout the
year, consistent with the normal payroll practices of the
Company.
The annual Base Salary shall be reviewed at least annually
following the Effective Date of this Agreement, while this
Agreement is in force, to ascertain whether, in the judgment of
the Board or the Board's designee, such Base Salary should be
increased, based primarily on the performance of the Executive
during the year and on the then current rate of inflation. If so
increased, the Base Salary as stated above shall, likewise, be
increased for all purposes of this Agreement.
4.2Annual Bonus. The Company shall provide the Executive with
the opportunity to earn an annual bonus, at a level which is
commensurate with the opportunity typically offered to executives
having the same or similar duties and responsibilities as the
Executive at companies similar in size and character to the
Company. The Executive shall be notified in writing by the
Company prior to the beginning of each fiscal year as to what the
Executive's target bonus will be for such fiscal year.
Nothing in this section shall be construed as obligating the
Company to refrain from changing and/or amending any annual
incentive plan so long as such changes are similarly applicable
to all executives generally.
4.3Long-Term Incentives. The Company shall provide the
Executive the opportunity to earn long-term incentive awards, at
a level which is commensurate with the opportunity typically
offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size
and in character to the Company.
Nothing in this section shall be construed as obligating the
Company to refrain from changing, and/or amending any long-term
incentive plan, so long as such changes are similarly applicable
to all executives generally.
4.4Retirement Benefits. The Company shall provide to the
Executive participation in all Company qualified defined benefit
and defined contribution retirement plans, subject to the
eligibility and participation requirements of such plans. In
addition, the Company shall provide to the Executive
participation in all other nonqualified retirement and welfare
programs typically offered by companies similar in size and
character to the Company to executives having the same or similar
duties and responsibilities including any supplemental retirement
plans.
Nothing in this section shall be construed as obligating the
Company to refrain from changing, and/or amending the
nonqualified programs, so long as such changes are similarly
applicable to all executives generally.
4.5Supplemental Life Insurance. The Company, at its cost,
shall provide the Executive with supplemental life insurance in
the face amount of $100,000 per child for each child under age
21(twenty-one) years old.
4.6Employee Benefits. During the term of this Agreement, and
as otherwise provided within the provisions of each of the
respective plans, the Company shall provide to the Executive all
benefits to which other executives and employees of the Company
are entitled to receive, as commensurate with the Executive's
position. Such benefits shall include, but not be limited to,
group term life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and
long-term disability.
The Executive shall be entitled to paid vacation in
accordance with the standard written policy of the Company with
regard to vacations of employees.
The Executive shall likewise participate in any additional
benefit as may be established during the term of this Agreement,
by standard written policy of the Company.
4.7Perquisites. The Company shall provide to the Executive,
at the Company's cost, all perquisites to which other executives
of the Company are entitled to receive and such other perquisites
which are suitable to the character of Executive's position with
the Company and adequate for the performance of his duties
hereunder.
4.8Right to Change Plans. By reason of Sections 4.5 and 4.6
herein, the Company shall not be obligated to institute,
maintain, or refrain from changing, amending, or discontinuing
any benefit plan, program, or perquisite, so long as such changes
are similarly applicable to executive employees generally.
4.9Physical Exams. The Executive shall be entitled to an
annual physical exam paid for by the Company.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all
ordinary and necessary expenses, in a reasonable amount, which
the Executive incurs in performing his duties under this
Agreement including, but not limited to, travel, entertainment,
professional dues and subscriptions, and all dues, fees, and
expenses associated with membership in various professional,
business, social, and civic clubs, associations and societies of
which the Executive's participation is in the best interest of
the Company.
Section 6. Employment Terminations
6.1Termination Due to Retirement. In the event the
Executive's employment is terminated during the Employment Term
or Window Period by reason of retirement, the Executive's
benefits shall be determined in accordance with the Company's
qualified retirement, supplemental retirement, survivor's
benefits, insurance, and other applicable programs of the Company
then in effect.
Upon the effective date of such termination, the Company will pay
the Executive a pro rata portion of his Highest Annual Bonus (as
defined below in Section 7.1) and the Executive will be
immediately vested in all long-term incentive awards. Further,
upon the effective date of the termination, the Company's
obligation to pay and provide to the Executive any future Base
Salary, annual bonus, and long-term incentive awards (as provided
in Sections 4.1, 4.2, and 4.3 herein, respectively) shall
immediately expire. However, the Executive shall receive all
rights and benefits that he is vested in pursuant to other plans
and programs of the Company, including, but not limited to, the
retirement benefits as described in Section 4.4 herein.
6.2Termination Due to Death. In the event of the death of the
Executive during the Employment Term or Window Period, or during
any period of Disability during which he is receiving
compensation pursuant to Section 6.3 herein, the Company shall
(i) pay to the Executive's surviving spouse, or other beneficiary
as so designated by the Executive during his lifetime, or to the
Executive's estate, as appropriate, a lump sum amount equal to
the sum of the Executive's (x) Base Salary otherwise payable for
the remaining Employment Term and (y) an amount equal to the sum
of the Highest Annual Bonus for each fiscal year ending during
the remaining Employment Term, plus for the fiscal year in which
the remaining Employment Term would expire, a prorata portion of
the Highest Annual Bonus for such partial fiscal year, (ii) vest
all long-term incentive awards of the Executive, and (iii)
continue, at the Company's cost, all health and welfare benefits
for the Executive's spouse and dependents for the remaining term
of this Agreement.
Further, the Company shall pay and provide all other benefits
to which the Executive has a vested right at the time, according
to the provisions of the governing plan or program. The Company
thereafter shall have no further obligations under this
Agreement.
6.3Suspension Due to Disability. In the event that the
Executive becomes disabled during the Employment Term or Window
Period and is, therefore, unable to perform his duties herein for
a period of more than one hundred-eighty (180) calendar days in
the aggregate during any period of twelve (12) consecutive
months, or in the event of the Board's reasonable expectation
that the Executive's Disability will exist for more than a period
of one hundred-eighty (180) calendar days, the Company shall have
the right to suspend the Executive's active employment as
provided in this Agreement and place him on Disability. However,
the Board shall deliver written notice to the Executive of the
Company's intent to suspend for Disability at least thirty (30)
calendar days prior to the effective date of such suspension.
A suspension for Disability shall become effective upon the
end of the thirty (30) day notice period. Upon such effective
date, the Company will pay the Executive any Base Salary through
the effective date of the suspension for Disability, a pro rata
portion of the Highest Annual Bonus for the fiscal year in which
such suspension occurs, and the Executive will be immediately
vested in all long-term incentive awards, provided however, that
if the Executive's Disability is due to alcohol or drug
dependence, he will vest ratably in any long-term incentive
awards. Further, upon the effective date of the suspension, the
Company's obligation to pay and provide to the Executive any
future Base Salary, annual bonus, and long-term incentive awards
(as provided in Sections 4.1, 4.2, and 4.3, respectively) shall
immediately be suspended. However, the Executive shall receive
all rights and benefits that he is vested in, pursuant to other
plans and programs of the Company, including, but not limited to,
short- and long-term disability benefits, and retirement benefits
as described in Section 4.4.
Under no circumstance will the Executive, if suspended due to
Disability, receive less than 60% of his Base Salary in effect at
the time of his suspension for Disability through age 65. The
Company agrees to make such payments to the Executive in the
event that the benefit is not available for any reason.
The term "Disability" shall mean, for all purposes of this
Agreement, the incapacity of the Executive, due to injury,
illness, disease, alcohol or drug dependency, or bodily or mental
infirmity, to engage in the performance of substantially all of
the usual duties of employment with the Company as contemplated
by Section 2 herein, such Disability to be determined by the
Board of Directors of the Company upon receipt and in reliance on
competent medical advice from one or more individuals, selected
by the Board, who are qualified to give such professional medical
advice.
If the Executive and the Company shall not be in agreement as
to whether the Executive has suffered a Disability for the
purposes of this Agreement, the matter shall be referred to a
panel of three medical doctors, one of which shall be selected by
the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two doctors as so selected,
and the decision of a majority of the panel with respect to the
question of whether the Executive has suffered a Disability shall
be binding upon the Executive and the Company. The expenses of
any such referral shall be borne by the Company. The Executive
may be required by the Company to submit to medical examination
at any time during the period of his employment hereunder, but
not more often than quarter-annually, to determine whether a
Disability exists for the purposes of this Agreement.
It is expressly understood that the Disability of the
Executive for a period of one hundred-eighty (180) calendar days
or less in the aggregate during any period of twelve (12)
consecutive months, in the absence of any reasonable expectation
that his Disability will exist for more than such a period of
time, shall not constitute a failure by him to perform his duties
hereunder and shall not be deemed a breach or default and the
Executive shall receive full compensation and benefits for any
such period of Disability or for any other temporary illness or
incapacity during the term of this Agreement. If the Executive
recovers from any Disability, his suspension shall terminate and
the Executive shall resume his duties with full compensation and
benefits.
6.4Voluntary Termination by the Executive. The Executive may
terminate this Agreement at any time by giving the Board of
Directors of the Company written notice of intent to terminate,
delivered at least thirty (30) calendar days prior to the
effective date of such termination (such period not to include
vacation). The termination automatically shall become effective
upon the expiration of the thirty (30) day notice period.
Upon the effective date of such termination, the Company
shall pay to the Executive his full Base Salary, at the rate then
in effect as provided in Section 4.1 herein, through the
effective date of termination, plus all other benefits, including
long-term incentive awards, to which the Executive has a vested
right to at that time including, but not limited to, accrued
vacation pay. The Company also shall provide to the Executive the
vested retirement benefits described in Section 4.4 herein. With
the exception of the covenants contained in Section 8 herein
(which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this
Agreement.
6.5Involuntary Termination by the Company Without Cause. At
all times during the Employment Term and outside the Window
Period, the Board may terminate the Executive's employment, as
provided under this Agreement, at any time for reasons other than
a suspension for Disability or a termination for Cause, by
notifying the Executive in writing of the Company's intent to
terminate, at least thirty (30) calendar days prior the effective
date of such termination.
Upon the effective date of such termination, following the
expiration of the thirty (30) day notice period, the Company
shall (i) pay the Executive a lump sum amount equal to the sum of
(x) the Executive's Base Salary otherwise payable for the
remaining Employment Term and (y) an amount equal to the sum of
the Highest Annual Bonus for each fiscal year ending during the
remaining Employment Term plus for the fiscal year in which the
remaining Employment Term would expire, a prorata portion of the
Highest Annual Bonus for such partial fiscal year, (ii) vest all
long-term incentive awards of the Executive, and (iii) continue,
at the Company's cost, all health and welfare benefits for the
Executive's spouse and dependents for the remaining Employment
Term.
Further, the Company shall pay the Executive all other
benefits to which the Executive has a vested right at the time,
according to the provisions of the governing plan or program. The
Company will also provide outplacement services or will reimburse
the Executive for the cost of such services as described in
Section 10 herein. The Company and the Executive thereafter shall
have no further obligations under this Agreement.
If the Executive's employment is terminated during the Window
Period by the Board for reasons other than a suspension for
Disability or a termination for Cause, the Executive shall be
entitled to receive the benefits provided in Section 7.1 herein
in lieu of the benefits set forth in this Section 6.5.
6.6 Termination For Cause. Nothing in this Agreement shall be
construed to prevent the Board from terminating the Executive's
employment under this Agreement for "Cause."
"Cause" means the Executive's:
(a) deliberate act of proven fraud having a
material adverse impact on the business or
consolidated financial condition or results of
operations of the Company and its subsidiaries;
(b) deliberate and continuing failure to
comply with applicable laws and regulations having a
material adverse impact on the business or
consolidated financial condition or results of
operations of the Company and its subsidiaries; or
(c) conviction of a criminal offense
constituting a felony.
For purposes of this Section 6.6, no act or omission by
the Executive shall be considered "willful" unless it is done or
omitted in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the
Company. Any act or failure to act based upon (i) authority given
pursuant to a resolution duly adopted by the Board, or (ii)
advice of counsel for the Company, shall be conclusively presumed
to be done or omitted to be done by the Executive in good faith
and in the best interests of the Company. For purposes of
subsections (a) and (b) above, the Executive shall not be deemed
to be terminated for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than the entire membership to
the Board at a meeting called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard
before the Board) finding that in the good faith opinion of the
Board (x) the Executive is guilty of the conduct described in
subsection (a) or (b) above, (y) the Executive has been provided
a 30-day period in which to "cure" such specified violation
following a detailed written notice from the Board of the
Executive's violation of subsection (a) or (b) above and (z) the
Executive has failed to "cure" such violation, specifying the
particulars thereof in detail. The Executive, if a member of the
Board, will be not be counted for purposes of such a vote.
In the event this Agreement is terminated by the Board for
Cause, the Company shall pay the Executive his Base Salary
through the effective date of the employment termination and the
Executive shall immediately thereafter forfeit all rights and
benefits (other than vested benefits) he would otherwise have
been entitled to receive under this Agreement. The Executive will
lose any right to supplemental retirement benefits provided by
the Company. The Company and the Executive thereafter shall have
no further obligations under this Agreement.
During the Window Period, as described herein, if any
litigation arises out of a termination for Cause, to the extent
permitted by law, the Company shall pay all legal fees, costs of
litigation, prejudgment interest and other expenses incurred in
good faith by the Executive.
6.7Termination for Good Reason. At any time during the
Employment Term or Window Period, the Executive may terminate
this Agreement for Good Reason (as defined below) by giving the
Board of Directors of the Company thirty (30) calendar days
written notice of intent to terminate, which notice sets forth in
reasonable detail the facts and circumstances claimed to provide
a basis for such termination.
Upon the expiration of the thirty (30) day notice period, the
Good Reason termination shall become effective, and the Company
shall pay, in a lump sum, and provide to the Executive the
benefits set forth in this Section 6.7 (or, in the event of
termination for Good Reason during the Window Period, the
benefits set forth in Section 7.1 herein).
Good Reason shall mean, without the Executive's express
written consent, the occurrence of any one or more of the
following:
(a) The assignment of the Executive to duties materially
inconsistent with the Executive's authorities, duties,
responsibilities, and status (including offices, titles,
and reporting relationships) as an officer of the
Company, or a reduction or alteration in the nature or
status of the Executive's authorities, duties, or
responsibilities from those in effect during the
immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a
location which is at least fifty (50) miles further from
the Executive's current primary residence than is such
residence from the Company's current headquarters, except
for required travel on the Company's business to an
extent substantially consistent with the Executive's
business obligations as of the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary
except as permitted in Section 4.1;
(d) A material reduction in the Executive's level of
participation in any of the Company's short- and/or long-
term incentive compensation plans, or employee benefit or
retirement plans, policies, practices, or arrangements in
which the Executive participates as of the Effective
Date; provided, however, that reductions in the levels of
participation in any such plans shall not be deemed to be
"Good Reason" if the Executive's reduced level of
participation in each such program remains substantially
consistent with the average level of participation of
other executives who have positions commensurate with the
Executive's position; or
(e) The failure of the Company to obtain a satisfactory
agreement from any successor to the Company to assume and
agree to perform this Agreement, as contemplated in
Section 11.1 herein.
Upon a termination of the Executive's employment for Good
Reason at any time during the Employment Term, other than during
the Window Period, with the "Window Period" being (x) the twelve
(12) full calendar month period prior to the effective date of a
Change in Control that occurs during the initial three (3) year
term of the Employment Term, (y) the six (6) full calendar month
period prior to the effective date of a Change in Control that
occurs after the initial three (3) year Employment Term, and (z)
the twenty-four (24) month period beginning on the effective date
of a Change in Control, the Executive shall be entitled to
receive the same payments and benefits as he is entitled to
receive following an involuntary termination of his employment by
the Company during the Employment Term without Cause, as
specified in Section 6.5 herein. Upon a termination of the
Executive's employment for Good Reason within the Window Period,
regardless of whether the Change in Control occurs during the
Employment Term, the Executive shall be entitled to receive the
payments and benefits set forth in Section 7.1 herein in lieu of
those set forth in this Section 6.7.
The Executive's right to terminate employment for Good Reason
shall not be affected by the Executive's incapacity due to
physical or mental illness; provided, however, the Executive may
not terminate for Good Reason during any period that the
Executive's employment is suspended due to Disability.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason herein.
Section 7. Change in Control
7.1Employment Terminations in Connection with a Change in
Control. In the event of a Qualifying Termination (as defined
below) within the Window Period, then in lieu of all other
benefits provided to the Executive under the provisions of this
Agreement, the Company shall pay to the Executive in a lump sum
amount, and provide him with the following severance benefits
(hereinafter referred to as the "Severance Benefits"):
(a) An amount equal to three (3) times the highest rate of
the Executive's annualized Base Salary rate in effect at
any time up to and including the effective date of
termination;
(b) An amount equal to three (3) times the "Highest Annual
Bonus", which shall mean the greater of (i) Executive's
highest annual bonus earned over the fiscal years,
beginning with the 1998 fiscal year, prior to the Change
in Control (with respect to the 1998 fiscal year, the
Executive received a bonus of $492,524) and (ii) the
Executive's targeted annual bonus for such fiscal year of
termination;
(c) An amount equal to the Executive's unpaid Base Salary and
accrued vacation pay through the effective date of
termination;
(d) An amount equal to the Executive's Highest Annual Bonus
multiplied by a fraction, the numerator of which is the
number of completed days in the then-existing fiscal year
through the effective date of termination, and the
denominator of which is three hundred sixty-five (365);
(e) A continuation of the welfare benefits of medical
insurance, dental insurance, and group term life
insurance for three (3) full years after the effective
date of termination. These benefits shall be provided to
the Executive at the same premium cost, and at the same
coverage level, as in effect as of the Executive's
effective date of termination. However, in the event the
premium cost and/or level of coverage shall change for
all employees of the Company, the cost and/or coverage
level, likewise, shall change for the Executive in a
corresponding manner.
The continuation of these welfare benefits shall be
discontinued prior to the end of the three (3) year
period in the event the Executive has available
substantially similar benefits from a subsequent
employer, as determined by the Company's Board of
Directors or the Board's designee.
Upon the termination of these welfare benefits, the
Executive shall be provided a COBRA continuation election
under the Company's group health plans;
(f) A lump-sum cash payment of the actuarial present value
equivalent (as determined pursuant to Section 417 of the
Internal Revenue Code) of the aggregate benefits accrued
by the Executive as of the effective date of termination
under the terms of any and all supplemental retirement
plans in which the Executive participates. For this
purpose, such benefits shall be calculated under the
assumption that the Executive's employment continued
following the effective date of termination for three (3)
full years (i.e., three (3) additional years of service
credits shall be added); provided, however, that for
purposes of determining "final average pay" under such
programs, the Executive's actual pay history as of the
effective date of termination shall be used;
(g) Reimbursement for outplacement services costs (as
provided in Section 10 herein); and
(h) Immediate vesting of all outstanding long-term incentive
awards.
For purposes of this Section 7, a Qualifying Termination
shall mean any termination of the Executive's employment other
than: (1) by the Company for Cause (as provided in Section 6.6
herein); (2) by reason of death or suspension for Disability (as
provided in Section 6.2 herein); or (3) by the Executive without
Good Reason (as provided in Section 6.7 herein).
7.2Definition of "Change in Control." A Change in Control of
the Company shall be deemed to have occurred as of the first day
any one or more of the following conditions shall have been
satisfied:
(a) Any individual, corporation (other than the Company),
partnership, trust, association, pool, syndicate, or any
other entity or any group of persons acting in concert
becomes the beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, of
securities of the Company possessing twenty-five percent
(25%) or more of the voting power for the election of
directors of the Company;
(b) There shall be consummated any consolidation, merger, or
other business combination involving the Company or the
securities of the Company in which holders of voting
securities of the Company immediately prior to such
consummation own, as a group, immediately after such
consummation, voting securities of the Company (or, if
the Company does not survive such transaction, voting
securities of the corporation surviving such transaction)
having less than sixty percent (60%) of the total voting
power in an election of directors of the Company (or such
other surviving corporation);
(c) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the directors of the Company cease for any
reason to constitute at least a majority thereof unless
the election, or the nomination for election by the
Company's shareholders, of each new director of the
Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in
office who were directors of the Company at the beginning
of any such period; or
(d) There shall be consummated any sale, lease, exchange, or
other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets
of the Company (on a consolidated basis) to a party which
is not controlled by or under common control with the
Company.
7.3 Excise Tax Equalization Payment. In the event that the
Executive becomes entitled to Severance Benefits or any
other payment or benefit under this Agreement, or under
any other agreement with or plan of the Company (in the
aggregate, the "Total Payments"), if any of the Total
Payments will be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Code (or any similar tax
that may hereafter be imposed), the Company shall pay to
the Executive in cash an additional amount (the "Gross-Up
Payment") such that the net amount retained by the
Executive after deduction of any Excise Tax upon the
Total Payments and any federal, state and local income
tax and Excise Tax upon the Gross-Up Payment provided for
by this Section 7.3 (including FICA and FUTA), shall be
equal to the Total Payments. Such payment shall be made
by the Company to the Executive as soon as practical
following the effective date of termination, but in no
event beyond thirty (30) days from such date.
7.4Tax Computation. For purposes of determining whether any
of the Total Payments will be subject to the Excise Tax and
the amounts of such Excise Tax:
(a) Any other payments or benefits received or to be received
by the Executive in connection with a Change in Control
of the Company or the Executive's termination of
employment (whether pursuant to the terms of this Plan or
any other plan, arrangement, or agreement with the
Company, or with any person (which shall have the meaning
set forth in Section 3(a)(9) of the Securities Exchange
Act of 1934, including a "group" as defined in
Section 13(d) therein) whose actions result in a Change
in Control of the Company or any person affiliated with
the Company or such persons) shall be treated as
"parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall
be treated as subject to the Excise Tax, unless in the
opinion of tax counsel as supported by the Company's
independent auditors and acceptable to the Executive,
such other payments or benefits (in whole or in part) do
not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in
excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not
subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated
as subject to the Excise Tax shall be equal to the lesser
of: (i) the total amount of the Total Payments; or (ii)
the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (a)
above); and
(c) The value of any noncash benefits or any deferred payment
or benefit shall be determined by the Company's
independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of Federal income taxation in
the calendar year in which the Gross-Up Payment is to be made,
and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence
on the effective date of termination, net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
7.5Subsequent Recalculation. In the event the Internal
Revenue Service adjusts the computation of the Company under
Section 7.4 herein so that the Executive did not receive the
greatest net benefit, the Company shall reimburse the Executive
for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Committee.
7.6Payment of Legal Fees. To the extent permitted by law, the
Company shall pay all legal fees, costs of litigation,
prejudgment interest, and other expenses incurred in good faith
by the Executive as a result of the Company's refusal to provide
the severance benefits under this Section 7 to which the
Executive becomes entitled under this Agreement, or as a result
of the Company's contesting the validity, enforceability, or
interpretation of this Agreement, or as a result of any conflict
(including conflicts related to the calculation of parachute
payments) between the parties pertaining to this Agreement.
Section 8. Confidentiality and Noncompetition
8.1Confidentiality. During the term of this Agreement and
thereafter in perpetuity, the Executive will not directly or
indirectly disclose to any third party not a member of the
Company Group, its or their legal counsel or independent
accountants, Confidential Information and Trade Secrets of the
Company and its subsidiaries and affiliates (collectively, the
"Company Group"), except as to any of the Confidential
Information or Trade Secrets which shall be or become in the
public domain other than by breach by the Executive of his
obligations set out in this Section 8.1 or shall be required to
be disclosed by applicable laws or regulations, any judicial or
administrative authority or stock exchange rule or regulation.
For the purposes of this Section 8.1 "Confidential Information"
shall mean: (i) internal policies and procedures, (ii) financial
information, (iii) marketing strategies, (iv) secret discoveries,
inventions, formulae, designs and know-how not constituting Trade
Secrets, and (v) other non-public information relating to the
Company Group's business, the disclosure of which would
materially adversely affect the Company Group's business or
financial condition. For the purposes of this Section 8.1 "Trade
Secrets" shall mean all secret discoveries, inventions, formulae,
designs, methods, processes and know-how entitled to protection
as trade secrets under the laws of the state of Texas.
8.2Noncompetition. In the event the Executive breaches his
obligations under Section 8.1 of this Agreement during the one
(1) year period following the Executive's termination of
employment, during the remainder of such one (1) year period (the
"Restricted Period") the Executive shall not engage in
Competition with the Company. For purposes of this Section 8.2,
"Competition" shall mean the Executive engaging in or otherwise
being a director, officer, employee, principal, agent,
stockholder, member, owner or partner of, or permitting his name
to be used in connection with the activities of any business or
organization in the international offshore contract drilling
industry in direct competition with the Company Group, but shall
not preclude the Executive becoming the registered or beneficial
owner of up to two percent (2%) of any class of capital stock of
any such corporation which is registered under the Securities
Exchange Act of 1934, as amended, provided the Executive does not
actively participate in the business of such corporation until
the end of the Restricted Period.
Section 9. Indemnification
The Company hereby covenants and agrees to indemnify and hold
harmless the Executive fully, completely, and absolutely against
and in respect to any and all actions, suits, proceedings,
claims, demands, judgments, costs, expenses (including attorney's
fees), losses, and damages resulting from the Executive's good
faith performance of his duties and obligations under the terms
of this Agreement.
Section 10. Outplacement Assistance
Following a termination of the Executive's employment as
described in Sections 6.5, 6.7, or 7.1 herein, the Executive
shall be reimbursed by the Company for the costs of all
outplacement services obtained by the Executive within the two
(2) year period after the effective date of termination;
provided, however, that the total reimbursement shall be limited
to an amount equal to fifteen percent (15%) of the Executive's
Base Salary as of the effective date of termination.
Section 11. Assignment
11.1. Assignment by Company. This Agreement may and shall be
assigned or transferred to, and shall be binding upon and shall
inure to the benefit of, any successor of the Company, and any
such successor shall be deemed substituted for all purposes of
the "Company" under the terms of this Agreement. As used in this
Agreement, the term "successor" shall mean any person, firm,
corporation, or business entity that at any time, causes a Change
in Control as described in Section 7.2. Notwithstanding such
assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall immediately entitle the Executive to
compensation from the Company in the same amount and on the same
terms as the Executive would be entitled in the event of an
involuntary termination by the Company, as provided in
Section 7.1 herein. Notice of such agreement shall be provided to
the Executive within thirty (30) days after a Change in Control.
Except as herein provided, the Company may not otherwise
assign this Agreement.
11.2 Assignment by Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive
should die while any amounts payable to the Executive hereunder
remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee
or, in the absence of such designee, to the Executive's estate.
This Agreement is not otherwise assignable by the Executive.
Section 12. Dispute Resolution and Notice
12.1 Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled by
arbitration, conducted before a panel of three (3) arbitrators
sitting in a location selected by the Executive within fifty (50)
miles from the location of his employment with the Company, in
accordance with the rules of the American Arbitration Association
then in effect.
Judgment may be entered on the award of the arbitrator in any
court having proper jurisdiction. All expenses of such
arbitration, including the fees and expenses of the counsel for
the Executive, shall be borne by the Company, exclusive of
Section 7.6.
12.2. Notice. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient
if in writing and if sent by registered or certified mail to the
Executive at the last address he has filed in writing with the
Company or, in the case of the Company, at its principal offices.
Section 13. Miscellaneous
13.1. Gender and Number. Except where otherwise indicated by
the context, any masculine term used herein also shall include
the feminine; the plural shall include the singular and the
singular shall include the plural.
13.2. Entire Agreement. This Agreement supersedes any prior
agreements or understandings, oral or written, between the
parties hereto or between the Executive and the Company, with
respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect thereto.
13.3. Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended
except by mutual agreement of the parties in a written instrument
executed by the parties hereto or their legal representatives.
13.4. Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect.
13.5. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original, but all of which together will constitute one and the
same Agreement.
13.6. Tax Withholding. The Company may withhold from any
benefits payable under this Agreement all federal, state, city,
or other taxes as may be required pursuant to any law or govern-
mental regulation or ruling.
13.7. Beneficiaries. The Executive may designate one or more
persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing
acceptable to the Board or the Board's designee. The Executive
may make or change such designation at any time.
Section 14. Governing Law
To the extent not preempted by federal law, the provisions of
this Agreement shall be construed and enforced in accordance with
the laws of the state of Texas.
IN WITNESS WHEREOF, the Executive and the Company (pursuant
to a resolution adopted at a duly constituted meeting of its
Board of Directors) have executed this Agreement, as of the day
and year first above written.
Executive:
___________________________
ATTEST R&B Falcon Corporation:
___________________________
EXHIBIT 10.14
Employment and Change in Control
Agreement
R&B Falcon Corporation
August 25, 1999
Contents
Section 1. Term of Employment 1
Section 2. Position and Responsibilities 2
Section 3. Standard of Care 2
Section 4. Compensation 3
Section 5. Expenses 5
Section 6. Employment Terminations 5
Section 7. Change in Control 10
Section 8. Confidentiality and Noncompetition 13
Section 9. Indemnification 14
Section 10. Outplacement Assistance 14
Section 11. Assignment 14
Section 12. Dispute Resolution and Notice 15
Section 13. Miscellaneous 15
Section 14. Governing Law 16
R&B Falcon Corporation
Employment and Change in Control Agreement
This EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT ("Agreement")
is made, entered into, and is effective as of this 25th day of
August, 1999 (hereinafter referred to as the "Effective Date"),
by and between R&B Falcon Corporation (hereinafter referred to as
the "Company"), a Delaware corporation having its principal
offices at Houston, Texas, and Charles R. Ofner (hereinafter
referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company
in the capacity of Senior Vice President, Business Development
and Investor Relations; and
WHEREAS, the Executive previously entered into an employment
agreement with the Company dated as of March 25, 1998 and it is
now in the best interest of the Company and the Executive to
enter into this new Agreement; and
WHEREAS, the Executive possesses considerable experience and
an intimate knowledge of the business and affairs of the Company,
its policies, methods, personnel, and operations; and
WHEREAS, the Company recognizes that the Executive's
contribution has been substantial and meritorious and, as such,
the Executive has demonstrated unique qualifications to act in an
executive capacity for the Company; and
WHEREAS, the Company is desirous of assuring the continued
employment of the Executive in the above stated capacity, and
Executive is desirous of having such assurance.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
Section 1. Term of Employment
The Company hereby agrees to employ the Executive and the
Executive hereby agrees to continue to serve the Company, in
accordance with the terms and conditions set forth herein, for an
initial period of three (3) years, commencing as of the Effective
Date of this Agreement, as indicated above; subject, however, to
earlier termination as expressly provided in Section 6 herein.
The initial three (3) year Employment Term (as defined below)
of this Agreement shall be extended automatically for one (1)
additional month beginning with the first day of the twenty-third
(23rd) month of the initial three (3) year term, and on the first
day of each month thereafter the Employment Term of this
Agreement automatically shall be extended one additional month;
provided, however, either party may give the other party written
notice that, beginning with the first of the month that is at
ninety (90) days after the date of the notice, the Employment
Term shall cease to be extended with respect to any termination
of the Executive's employment other than a termination occurring
during the Window Period (as defined in Section 6.7 herein).
In the event such notice of intent not to renew is properly
delivered by either party, then the Employment Term of this
Agreement, along with all corresponding rights, duties, and
covenants with respect thereto, shall automatically expire ninety
(90) days following the end of the later of the initial three-
year Employment Term or, if applicable, the extended Employment
Term then in effect; provided, however, that notwithstanding the
termination of the Employment Term (i) the provisions contained
in Section 8 herein shall survive such expiration and (ii) the
provisions and protections of this Agreement concerning a Change
in Control of the Company (as defined in Section 7 herein),
including, without limitation, a Change in Control that occurs
after the termination of the Employment Term, shall continue
without interruption or change.
This Agreement provides (x) for the employment of the
Executive for an initial fixed term, which may be extended, (such
term, as it may be extended, is referred to herein as the
"Employment Term"), and (y) separately, whether or not the
Employment Term has expired before a Change in Control of the
Company occurs, for Change in Control employment protection for
the Executive for as long as the Executive remains an employee of
the Company (or any parent or subsidiary), and also with respect
to certain terminations of the Executive's employment occurring
during the Window Period prior to a Change in Control.
Further, notwithstanding anything in this Agreement to the
contrary, termination of this Agreement shall not alter or impair
any rights or benefits of the Executive (or the Executive's
beneficiaries) that have arisen (contingently or otherwise) under
this Agreement on or prior to such termination.
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to
serve as the Senior Vice President, Business Development and
Investor Relations of the Company. In his capacity as the Senior
Vice President, Business Development and Investor Relations of
the Company, the Executive shall report directly to the Chairman
and Chief Executive Officer, and shall maintain the level of
duties and responsibilities as in effect as of the Effective
Date, as set forth on Appendix A, or such higher level of duties
and responsibilities as he may be assigned during the term of
this Agreement. The Executive shall have the same status,
privileges, and responsibilities normally inherent in such
capacities in corporations of similar size and character.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to
devote substantially his full time, attention, and energies to
the Company's business and shall not be engaged in any other
business activity, whether or not such business activity is
pursued for gain, profit, or other pecuniary advantage; provided,
however, subject to the restrictions of Section 8, the Executive
may serve as a director of other companies so long as such
service is not injurious to the Company, may continue the conduct
of the business activities listed on Appendix B (to the extent
conducted before the Effective Date), and may engage in the
conduct of such other business activities that are substantially
similar in nature and scope to those listed on Appendix B,
provided that such other business activities do not materially
interfere with the Executive's duties and obligations under this
Agreement. The Executive covenants, warrants, and represents that
he shall:
(a) Devote his full and best efforts to the fulfillment of
his employment obligations; and
(b) Act in the same manner as a competent executive in a
comparable company.
This Section 3 shall not be construed as preventing the
Executive from investing assets in such form or manner as will
not require his services in the daily operations of the affairs
of the companies in which such investments are made.
Section 4. Compensation
As remuneration for all services to be rendered by the
Executive during the term of this Agreement, and as consideration
for complying with the covenants herein, the Company shall pay
and provide to the Executive the following:
4.1Base Salary. The Company shall pay the Executive a Base
Salary in an amount which shall be established from time to time
by the Board of Directors of the Company or the Board's designee;
provided, however, that the Executive's Base Salary may be
decreased by the Board (other than during a Window Period) as
part of a program that is applicable equally (as a percentage of
base salary) to all executives of the Company and is determined
by the Board to be necessary and appropriate in light of the
Company's then financial condition. Base Salary shall be paid to
the Executive in equal semi-monthly installments throughout the
year, consistent with the normal payroll practices of the
Company.
The annual Base Salary shall be reviewed at least annually
following the Effective Date of this Agreement, while this
Agreement is in force, to ascertain whether, in the judgment of
the Board or the Board's designee, such Base Salary should be
increased, based primarily on the performance of the Executive
during the year and on the then current rate of inflation. If so
increased, the Base Salary as stated above shall, likewise, be
increased for all purposes of this Agreement.
4.2Annual Bonus. The Company shall provide the Executive with
the opportunity to earn an annual bonus, at a level which is
commensurate with the opportunity typically offered to executives
having the same or similar duties and responsibilities as the
Executive at companies similar in size and character to the
Company. The Executive shall be notified in writing by the
Company prior to the beginning of each fiscal year as to what the
Executive's target bonus will be for such fiscal year.
Nothing in this section shall be construed as obligating the
Company to refrain from changing and/or amending any annual
incentive plan so long as such changes are similarly applicable
to all executives generally.
4.3Long-Term Incentives. The Company shall provide the
Executive the opportunity to earn long-term incentive awards, at
a level which is commensurate with the opportunity typically
offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size
and in character to the Company.
Nothing in this section shall be construed as obligating the
Company to refrain from changing, and/or amending any long-term
incentive plan, so long as such changes are similarly applicable
to all executives generally.
4.4Retirement Benefits. The Company shall provide to the
Executive participation in all Company qualified defined benefit
and defined contribution retirement plans, subject to the
eligibility and participation requirements of such plans. In
addition, the Company shall provide to the Executive
participation in all other nonqualified retirement and welfare
programs typically offered by companies similar in size and
character to the Company to executives having the same or similar
duties and responsibilities including any supplemental retirement
plans.
Nothing in this section shall be construed as obligating the
Company to refrain from changing, and/or amending the
nonqualified programs, so long as such changes are similarly
applicable to all executives generally.
4.5Supplemental Life Insurance. The Company, at its cost,
shall provide the Executive with supplemental life insurance in
the face amount of $100,000 per child for each child under age
21(twenty-one) years old.
4.6Employee Benefits. During the term of this Agreement, and
as otherwise provided within the provisions of each of the
respective plans, the Company shall provide to the Executive all
benefits to which other executives and employees of the Company
are entitled to receive, as commensurate with the Executive's
position. Such benefits shall include, but not be limited to,
group term life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and
long-term disability.
The Executive shall be entitled to paid vacation in
accordance with the standard written policy of the Company with
regard to vacations of employees.
The Executive shall likewise participate in any additional
benefit as may be established during the term of this Agreement,
by standard written policy of the Company.
4.7Perquisites. The Company shall provide to the Executive,
at the Company's cost, all perquisites to which other executives
of the Company are entitled to receive and such other perquisites
which are suitable to the character of Executive's position with
the Company and adequate for the performance of his duties
hereunder.
4.8Right to Change Plans. By reason of Sections 4.5 and 4.6
herein, the Company shall not be obligated to institute,
maintain, or refrain from changing, amending, or discontinuing
any benefit plan, program, or perquisite, so long as such changes
are similarly applicable to executive employees generally.
4.9Physical Exams. The Executive shall be entitled to an
annual physical exam paid for by the Company.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all
ordinary and necessary expenses, in a reasonable amount, which
the Executive incurs in performing his duties under this
Agreement including, but not limited to, travel, entertainment,
professional dues and subscriptions, and all dues, fees, and
expenses associated with membership in various professional,
business, social, and civic clubs, associations and societies of
which the Executive's participation is in the best interest of
the Company.
Section 6. Employment Terminations
6.1Termination Due to Retirement. In the event the
Executive's employment is terminated during the Employment Term
or Window Period by reason of retirement, the Executive's
benefits shall be determined in accordance with the Company's
qualified retirement, supplemental retirement, survivor's
benefits, insurance, and other applicable programs of the Company
then in effect.
Upon the effective date of such termination, the Company will pay
the Executive a pro rata portion of his Highest Annual Bonus (as
defined below in Section 7.1) and the Executive will be
immediately vested in all long-term incentive awards. Further,
upon the effective date of the termination, the Company's
obligation to pay and provide to the Executive any future Base
Salary, annual bonus, and long-term incentive awards (as provided
in Sections 4.1, 4.2, and 4.3 herein, respectively) shall
immediately expire. However, the Executive shall receive all
rights and benefits that he is vested in pursuant to other plans
and programs of the Company, including, but not limited to, the
retirement benefits as described in Section 4.4 herein.
6.2Termination Due to Death. In the event of the death of the
Executive during the Employment Term or Window Period, or during
any period of Disability during which he is receiving
compensation pursuant to Section 6.3 herein, the Company shall
(i) pay to the Executive's surviving spouse, or other beneficiary
as so designated by the Executive during his lifetime, or to the
Executive's estate, as appropriate, a lump sum amount equal to
the sum of the Executive's (x) Base Salary otherwise payable for
the remaining Employment Term and (y) an amount equal to the sum
of the Highest Annual Bonus for each fiscal year ending during
the remaining Employment Term, plus for the fiscal year in which
the remaining Employment Term would expire, a prorata portion of
the Highest Annual Bonus for such partial fiscal year, (ii) vest
all long-term incentive awards of the Executive, and (iii)
continue, at the Company's cost, all health and welfare benefits
for the Executive's spouse and dependents for the remaining term
of this Agreement.
Further, the Company shall pay and provide all other benefits
to which the Executive has a vested right at the time, according
to the provisions of the governing plan or program. The Company
thereafter shall have no further obligations under this
Agreement.
6.3Suspension Due to Disability. In the event that the
Executive becomes disabled during the Employment Term or Window
Period and is, therefore, unable to perform his duties herein for
a period of more than one hundred-eighty (180) calendar days in
the aggregate during any period of twelve (12) consecutive
months, or in the event of the Board's reasonable expectation
that the Executive's Disability will exist for more than a period
of one hundred-eighty (180) calendar days, the Company shall have
the right to suspend the Executive's active employment as
provided in this Agreement and place him on Disability. However,
the Board shall deliver written notice to the Executive of the
Company's intent to suspend for Disability at least thirty (30)
calendar days prior to the effective date of such suspension.
A suspension for Disability shall become effective upon the
end of the thirty (30) day notice period. Upon such effective
date, the Company will pay the Executive any Base Salary through
the effective date of the suspension for Disability, a pro rata
portion of the Highest Annual Bonus for the fiscal year in which
such suspension occurs, and the Executive will be immediately
vested in all long-term incentive awards, provided however, that
if the Executive's Disability is due to alcohol or drug
dependence, he will vest ratably in any long-term incentive
awards. Further, upon the effective date of the suspension, the
Company's obligation to pay and provide to the Executive any
future Base Salary, annual bonus, and long-term incentive awards
(as provided in Sections 4.1, 4.2, and 4.3, respectively) shall
immediately be suspended. However, the Executive shall receive
all rights and benefits that he is vested in, pursuant to other
plans and programs of the Company, including, but not limited to,
short- and long-term disability benefits, and retirement benefits
as described in Section 4.4.
Under no circumstance will the Executive, if suspended due to
Disability, receive less than 60% of his Base Salary in effect at
the time of his suspension for Disability through age 65. The
Company agrees to make such payments to the Executive in the
event that the benefit is not available for any reason.
The term "Disability" shall mean, for all purposes of this
Agreement, the incapacity of the Executive, due to injury,
illness, disease, alcohol or drug dependency, or bodily or mental
infirmity, to engage in the performance of substantially all of
the usual duties of employment with the Company as contemplated
by Section 2 herein, such Disability to be determined by the
Board of Directors of the Company upon receipt and in reliance on
competent medical advice from one or more individuals, selected
by the Board, who are qualified to give such professional medical
advice.
If the Executive and the Company shall not be in agreement as
to whether the Executive has suffered a Disability for the
purposes of this Agreement, the matter shall be referred to a
panel of three medical doctors, one of which shall be selected by
the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two doctors as so selected,
and the decision of a majority of the panel with respect to the
question of whether the Executive has suffered a Disability shall
be binding upon the Executive and the Company. The expenses of
any such referral shall be borne by the Company. The Executive
may be required by the Company to submit to medical examination
at any time during the period of his employment hereunder, but
not more often than quarter-annually, to determine whether a
Disability exists for the purposes of this Agreement.
It is expressly understood that the Disability of the
Executive for a period of one hundred-eighty (180) calendar days
or less in the aggregate during any period of twelve (12)
consecutive months, in the absence of any reasonable expectation
that his Disability will exist for more than such a period of
time, shall not constitute a failure by him to perform his duties
hereunder and shall not be deemed a breach or default and the
Executive shall receive full compensation and benefits for any
such period of Disability or for any other temporary illness or
incapacity during the term of this Agreement. If the Executive
recovers from any Disability, his suspension shall terminate and
the Executive shall resume his duties with full compensation and
benefits.
6.4Voluntary Termination by the Executive. The Executive may
terminate this Agreement at any time by giving the Board of
Directors of the Company written notice of intent to terminate,
delivered at least thirty (30) calendar days prior to the
effective date of such termination (such period not to include
vacation). The termination automatically shall become effective
upon the expiration of the thirty (30) day notice period.
Upon the effective date of such termination, the Company
shall pay to the Executive his full Base Salary, at the rate then
in effect as provided in Section 4.1 herein, through the
effective date of termination, plus all other benefits, including
long-term incentive awards, to which the Executive has a vested
right to at that time including, but not limited to, accrued
vacation pay. The Company also shall provide to the Executive the
vested retirement benefits described in Section 4.4 herein. With
the exception of the covenants contained in Section 8 herein
(which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this
Agreement.
6.5Involuntary Termination by the Company Without Cause. At
all times during the Employment Term and outside the Window
Period, the Board may terminate the Executive's employment, as
provided under this Agreement, at any time for reasons other than
a suspension for Disability or a termination for Cause, by
notifying the Executive in writing of the Company's intent to
terminate, at least thirty (30) calendar days prior the effective
date of such termination.
Upon the effective date of such termination, following the
expiration of the thirty (30) day notice period, the Company
shall (i) pay the Executive a lump sum amount equal to the sum of
(x) the Executive's Base Salary otherwise payable for the
remaining Employment Term and (y) an amount equal to the sum of
the Highest Annual Bonus for each fiscal year ending during the
remaining Employment Term plus for the fiscal year in which the
remaining Employment Term would expire, a prorata portion of the
Highest Annual Bonus for such partial fiscal year, (ii) vest all
long-term incentive awards of the Executive, and (iii) continue,
at the Company's cost, all health and welfare benefits for the
Executive's spouse and dependents for the remaining Employment
Term.
Further, the Company shall pay the Executive all other
benefits to which the Executive has a vested right at the time,
according to the provisions of the governing plan or program. The
Company will also provide outplacement services or will reimburse
the Executive for the cost of such services as described in
Section 10 herein. The Company and the Executive thereafter shall
have no further obligations under this Agreement.
If the Executive's employment is terminated during the Window
Period by the Board for reasons other than a suspension for
Disability or a termination for Cause, the Executive shall be
entitled to receive the benefits provided in Section 7.1 herein
in lieu of the benefits set forth in this Section 6.5.
6.6 Termination For Cause. Nothing in this Agreement shall be
construed to prevent the Board from terminating the Executive's
employment under this Agreement for "Cause."
"Cause" means the Executive's:
(a) deliberate act of proven fraud having a
material adverse impact on the business or
consolidated financial condition or results of
operations of the Company and its subsidiaries;
(b) deliberate and continuing failure to
comply with applicable laws and regulations having a
material adverse impact on the business or
consolidated financial condition or results of
operations of the Company and its subsidiaries; or
(c) conviction of a criminal offense
constituting a felony.
For purposes of this Section 6.6, no act or omission by
the Executive shall be considered "willful" unless it is done or
omitted in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the
Company. Any act or failure to act based upon (i) authority given
pursuant to a resolution duly adopted by the Board, or (ii)
advice of counsel for the Company, shall be conclusively presumed
to be done or omitted to be done by the Executive in good faith
and in the best interests of the Company. For purposes of
subsections (a) and (b) above, the Executive shall not be deemed
to be terminated for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than the entire membership to
the Board at a meeting called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard
before the Board) finding that in the good faith opinion of the
Board (x) the Executive is guilty of the conduct described in
subsection (a) or (b) above, (y) the Executive has been provided
a 30-day period in which to "cure" such specified violation
following a detailed written notice from the Board of the
Executive's violation of subsection (a) or (b) above and (z) the
Executive has failed to "cure" such violation, specifying the
particulars thereof in detail. The Executive, if a member of the
Board, will be not be counted for purposes of such a vote.
In the event this Agreement is terminated by the Board for
Cause, the Company shall pay the Executive his Base Salary
through the effective date of the employment termination and the
Executive shall immediately thereafter forfeit all rights and
benefits (other than vested benefits) he would otherwise have
been entitled to receive under this Agreement. The Executive will
lose any right to supplemental retirement benefits provided by
the Company. The Company and the Executive thereafter shall have
no further obligations under this Agreement.
During the Window Period, as described herein, if any
litigation arises out of a termination for Cause, to the extent
permitted by law, the Company shall pay all legal fees, costs of
litigation, prejudgment interest and other expenses incurred in
good faith by the Executive.
6.7Termination for Good Reason. At any time during the
Employment Term or Window Period, the Executive may terminate
this Agreement for Good Reason (as defined below) by giving the
Board of Directors of the Company thirty (30) calendar days
written notice of intent to terminate, which notice sets forth in
reasonable detail the facts and circumstances claimed to provide
a basis for such termination.
Upon the expiration of the thirty (30) day notice period, the
Good Reason termination shall become effective, and the Company
shall pay, in a lump sum, and provide to the Executive the
benefits set forth in this Section 6.7 (or, in the event of
termination for Good Reason during the Window Period, the
benefits set forth in Section 7.1 herein).
Good Reason shall mean, without the Executive's express
written consent, the occurrence of any one or more of the
following:
(a) The assignment of the Executive to duties materially
inconsistent with the Executive's authorities, duties,
responsibilities, and status (including offices, titles,
and reporting relationships) as an officer of the
Company, or a reduction or alteration in the nature or
status of the Executive's authorities, duties, or
responsibilities from those in effect during the
immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a
location which is at least fifty (50) miles further from
the Executive's current primary residence than is such
residence from the Company's current headquarters, except
for required travel on the Company's business to an
extent substantially consistent with the Executive's
business obligations as of the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary
except as permitted in Section 4.1;
(d) A material reduction in the Executive's level of
participation in any of the Company's short- and/or long-
term incentive compensation plans, or employee benefit or
retirement plans, policies, practices, or arrangements in
which the Executive participates as of the Effective
Date; provided, however, that reductions in the levels of
participation in any such plans shall not be deemed to be
"Good Reason" if the Executive's reduced level of
participation in each such program remains substantially
consistent with the average level of participation of
other executives who have positions commensurate with the
Executive's position; or
(e) The failure of the Company to obtain a satisfactory
agreement from any successor to the Company to assume and
agree to perform this Agreement, as contemplated in
Section 11.1 herein.
Upon a termination of the Executive's employment for Good
Reason at any time during the Employment Term, other than during
the Window Period, with the "Window Period" being (x) the twelve
(12) full calendar month period prior to the effective date of a
Change in Control that occurs during the initial three (3) year
term of the Employment Term, (y) the six (6) full calendar month
period prior to the effective date of a Change in Control that
occurs after the initial three (3) year Employment Term, and (z)
the twenty-four (24) month period beginning on the effective date
of a Change in Control, the Executive shall be entitled to
receive the same payments and benefits as he is entitled to
receive following an involuntary termination of his employment by
the Company during the Employment Term without Cause, as
specified in Section 6.5 herein. Upon a termination of the
Executive's employment for Good Reason within the Window Period,
regardless of whether the Change in Control occurs during the
Employment Term, the Executive shall be entitled to receive the
payments and benefits set forth in Section 7.1 herein in lieu of
those set forth in this Section 6.7.
The Executive's right to terminate employment for Good Reason
shall not be affected by the Executive's incapacity due to
physical or mental illness; provided, however, the Executive may
not terminate for Good Reason during any period that the
Executive's employment is suspended due to Disability.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason herein.
Section 7. Change in Control
7.1Employment Terminations in Connection with a Change in
Control. In the event of a Qualifying Termination (as defined
below) within the Window Period, then in lieu of all other
benefits provided to the Executive under the provisions of this
Agreement, the Company shall pay to the Executive in a lump sum
amount, and provide him with the following severance benefits
(hereinafter referred to as the "Severance Benefits"):
(a) An amount equal to three (3) times the highest rate of
the Executive's annualized Base Salary rate in effect at
any time up to and including the effective date of
termination;
(b) An amount equal to three (3) times the "Highest Annual
Bonus", which shall mean the greater of (i) Executive's
highest annual bonus earned over the fiscal years,
beginning with the 1998 fiscal year, prior to the Change
in Control (with respect to the 1998 fiscal year, the
Executive received a bonus of $86,138) and (ii) the
Executive's targeted annual bonus for such fiscal year of
termination;
(c) An amount equal to the Executive's unpaid Base Salary and
accrued vacation pay through the effective date of
termination;
(d) An amount equal to the Executive's Highest Annual Bonus
multiplied by a fraction, the numerator of which is the
number of completed days in the then-existing fiscal year
through the effective date of termination, and the
denominator of which is three hundred sixty-five (365);
(e) A continuation of the welfare benefits of medical
insurance, dental insurance, and group term life
insurance for three (3) full years after the effective
date of termination. These benefits shall be provided to
the Executive at the same premium cost, and at the same
coverage level, as in effect as of the Executive's
effective date of termination. However, in the event the
premium cost and/or level of coverage shall change for
all employees of the Company, the cost and/or coverage
level, likewise, shall change for the Executive in a
corresponding manner.
The continuation of these welfare benefits shall be
discontinued prior to the end of the three (3) year
period in the event the Executive has available
substantially similar benefits from a subsequent
employer, as determined by the Company's Board of
Directors or the Board's designee.
Upon the termination of these welfare benefits, the
Executive shall be provided a COBRA continuation election
under the Company's group health plans;
(f) A lump-sum cash payment of the actuarial present value
equivalent (as determined pursuant to Section 417 of the
Internal Revenue Code) of the aggregate benefits accrued
by the Executive as of the effective date of termination
under the terms of any and all supplemental retirement
plans in which the Executive participates. For this
purpose, such benefits shall be calculated under the
assumption that the Executive's employment continued
following the effective date of termination for three (3)
full years (i.e., three (3) additional years of service
credits shall be added); provided, however, that for
purposes of determining "final average pay" under such
programs, the Executive's actual pay history as of the
effective date of termination shall be used;
(g) Reimbursement for outplacement services costs (as
provided in Section 10 herein); and
(h) Immediate vesting of all outstanding long-term incentive
awards.
For purposes of this Section 7, a Qualifying Termination
shall mean any termination of the Executive's employment other
than: (1) by the Company for Cause (as provided in Section 6.6
herein); (2) by reason of death or suspension for Disability (as
provided in Section 6.2 herein); or (3) by the Executive without
Good Reason (as provided in Section 6.7 herein).
7.2Definition of "Change in Control." A Change in Control of
the Company shall be deemed to have occurred as of the first day
any one or more of the following conditions shall have been
satisfied:
(a) Any individual, corporation (other than the Company),
partnership, trust, association, pool, syndicate, or any
other entity or any group of persons acting in concert
becomes the beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, of
securities of the Company possessing twenty-five percent
(25%) or more of the voting power for the election of
directors of the Company;
(b) There shall be consummated any consolidation, merger, or
other business combination involving the Company or the
securities of the Company in which holders of voting
securities of the Company immediately prior to such
consummation own, as a group, immediately after such
consummation, voting securities of the Company (or, if
the Company does not survive such transaction, voting
securities of the corporation surviving such transaction)
having less than sixty percent (60%) of the total voting
power in an election of directors of the Company (or such
other surviving corporation);
(c) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the directors of the Company cease for any
reason to constitute at least a majority thereof unless
the election, or the nomination for election by the
Company's shareholders, of each new director of the
Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in
office who were directors of the Company at the beginning
of any such period; or
(d) There shall be consummated any sale, lease, exchange, or
other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets
of the Company (on a consolidated basis) to a party which
is not controlled by or under common control with the
Company.
7.3 Excise Tax Equalization Payment. In the event that the
Executive becomes entitled to Severance Benefits or any
other payment or benefit under this Agreement, or under
any other agreement with or plan of the Company (in the
aggregate, the "Total Payments"), if any of the Total
Payments will be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Code (or any similar tax
that may hereafter be imposed), the Company shall pay to
the Executive in cash an additional amount (the "Gross-Up
Payment") such that the net amount retained by the
Executive after deduction of any Excise Tax upon the
Total Payments and any federal, state and local income
tax and Excise Tax upon the Gross-Up Payment provided for
by this Section 7.3 (including FICA and FUTA), shall be
equal to the Total Payments. Such payment shall be made
by the Company to the Executive as soon as practical
following the effective date of termination, but in no
event beyond thirty (30) days from such date.
7.4Tax Computation. For purposes of determining whether any
of the Total Payments will be subject to the Excise Tax and
the amounts of such Excise Tax:
(a) Any other payments or benefits received or to be received
by the Executive in connection with a Change in Control
of the Company or the Executive's termination of
employment (whether pursuant to the terms of this Plan or
any other plan, arrangement, or agreement with the
Company, or with any person (which shall have the meaning
set forth in Section 3(a)(9) of the Securities Exchange
Act of 1934, including a "group" as defined in
Section 13(d) therein) whose actions result in a Change
in Control of the Company or any person affiliated with
the Company or such persons) shall be treated as
"parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall
be treated as subject to the Excise Tax, unless in the
opinion of tax counsel as supported by the Company's
independent auditors and acceptable to the Executive,
such other payments or benefits (in whole or in part) do
not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in
excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not
subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated
as subject to the Excise Tax shall be equal to the lesser
of: (i) the total amount of the Total Payments; or (ii)
the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (a)
above); and
(c) The value of any noncash benefits or any deferred payment
or benefit shall be determined by the Company's
independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of Federal income taxation in
the calendar year in which the Gross-Up Payment is to be made,
and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence
on the effective date of termination, net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
7.5Subsequent Recalculation. In the event the Internal
Revenue Service adjusts the computation of the Company under
Section 7.4 herein so that the Executive did not receive the
greatest net benefit, the Company shall reimburse the Executive
for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Committee.
7.6Payment of Legal Fees. To the extent permitted by law, the
Company shall pay all legal fees, costs of litigation,
prejudgment interest, and other expenses incurred in good faith
by the Executive as a result of the Company's refusal to provide
the severance benefits under this Section 7 to which the
Executive becomes entitled under this Agreement, or as a result
of the Company's contesting the validity, enforceability, or
interpretation of this Agreement, or as a result of any conflict
(including conflicts related to the calculation of parachute
payments) between the parties pertaining to this Agreement.
Section 8. Confidentiality and Noncompetition
8.1Confidentiality. During the term of this Agreement and
thereafter in perpetuity, the Executive will not directly or
indirectly disclose to any third party not a member of the
Company Group, its or their legal counsel or independent
accountants, Confidential Information and Trade Secrets of the
Company and its subsidiaries and affiliates (collectively, the
"Company Group"), except as to any of the Confidential
Information or Trade Secrets which shall be or become in the
public domain other than by breach by the Executive of his
obligations set out in this Section 8.1 or shall be required to
be disclosed by applicable laws or regulations, any judicial or
administrative authority or stock exchange rule or regulation.
For the purposes of this Section 8.1 "Confidential Information"
shall mean: (i) internal policies and procedures, (ii) financial
information, (iii) marketing strategies, (iv) secret discoveries,
inventions, formulae, designs and know-how not constituting Trade
Secrets, and (v) other non-public information relating to the
Company Group's business, the disclosure of which would
materially adversely affect the Company Group's business or
financial condition. For the purposes of this Section 8.1 "Trade
Secrets" shall mean all secret discoveries, inventions, formulae,
designs, methods, processes and know-how entitled to protection
as trade secrets under the laws of the state of Texas.
8.2Noncompetition. In the event the Executive breaches his
obligations under Section 8.1 of this Agreement during the one
(1) year period following the Executive's termination of
employment, during the remainder of such one (1) year period (the
"Restricted Period") the Executive shall not engage in
Competition with the Company. For purposes of this Section 8.2,
"Competition" shall mean the Executive engaging in or otherwise
being a director, officer, employee, principal, agent,
stockholder, member, owner or partner of, or permitting his name
to be used in connection with the activities of any business or
organization in the international offshore contract drilling
industry in direct competition with the Company Group, but shall
not preclude the Executive becoming the registered or beneficial
owner of up to two percent (2%) of any class of capital stock of
any such corporation which is registered under the Securities
Exchange Act of 1934, as amended, provided the Executive does not
actively participate in the business of such corporation until
the end of the Restricted Period.
Section 9. Indemnification
The Company hereby covenants and agrees to indemnify and hold
harmless the Executive fully, completely, and absolutely against
and in respect to any and all actions, suits, proceedings,
claims, demands, judgments, costs, expenses (including attorney's
fees), losses, and damages resulting from the Executive's good
faith performance of his duties and obligations under the terms
of this Agreement.
Section 10. Outplacement Assistance
Following a termination of the Executive's employment as
described in Sections 6.5, 6.7, or 7.1 herein, the Executive
shall be reimbursed by the Company for the costs of all
outplacement services obtained by the Executive within the two
(2) year period after the effective date of termination;
provided, however, that the total reimbursement shall be limited
to an amount equal to fifteen percent (15%) of the Executive's
Base Salary as of the effective date of termination.
Section 11. Assignment
11.1. Assignment by Company. This Agreement may and shall be
assigned or transferred to, and shall be binding upon and shall
inure to the benefit of, any successor of the Company, and any
such successor shall be deemed substituted for all purposes of
the "Company" under the terms of this Agreement. As used in this
Agreement, the term "successor" shall mean any person, firm,
corporation, or business entity that at any time, causes a Change
in Control as described in Section 7.2. Notwithstanding such
assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall immediately entitle the Executive to
compensation from the Company in the same amount and on the same
terms as the Executive would be entitled in the event of an
involuntary termination by the Company, as provided in
Section 7.1 herein. Notice of such agreement shall be provided to
the Executive within thirty (30) days after a Change in Control.
Except as herein provided, the Company may not otherwise
assign this Agreement.
11.2 Assignment by Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive
should die while any amounts payable to the Executive hereunder
remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee
or, in the absence of such designee, to the Executive's estate.
This Agreement is not otherwise assignable by the Executive.
Section 12. Dispute Resolution and Notice
12.1 Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled by
arbitration, conducted before a panel of three (3) arbitrators
sitting in a location selected by the Executive within fifty (50)
miles from the location of his employment with the Company, in
accordance with the rules of the American Arbitration Association
then in effect.
Judgment may be entered on the award of the arbitrator in any
court having proper jurisdiction. All expenses of such
arbitration, including the fees and expenses of the counsel for
the Executive, shall be borne by the Company, exclusive of
Section 7.6.
12.2. Notice. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient
if in writing and if sent by registered or certified mail to the
Executive at the last address he has filed in writing with the
Company or, in the case of the Company, at its principal offices.
Section 13. Miscellaneous
13.1. Gender and Number. Except where otherwise indicated by
the context, any masculine term used herein also shall include
the feminine; the plural shall include the singular and the
singular shall include the plural.
13.2. Entire Agreement. This Agreement supersedes any prior
agreements or understandings, oral or written, between the
parties hereto or between the Executive and the Company, with
respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect thereto.
13.3. Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended
except by mutual agreement of the parties in a written instrument
executed by the parties hereto or their legal representatives.
13.4. Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect.
13.5. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original, but all of which together will constitute one and the
same Agreement.
13.6. Tax Withholding. The Company may withhold from any
benefits payable under this Agreement all federal, state, city,
or other taxes as may be required pursuant to any law or govern-
mental regulation or ruling.
13.7. Beneficiaries. The Executive may designate one or more
persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing
acceptable to the Board or the Board's designee. The Executive
may make or change such designation at any time.
Section 14. Governing Law
To the extent not preempted by federal law, the provisions of
this Agreement shall be construed and enforced in accordance with
the laws of the state of Texas.
IN WITNESS WHEREOF, the Executive and the Company (pursuant
to a resolution adopted at a duly constituted meeting of its
Board of Directors) have executed this Agreement, as of the day
and year first above written.
Executive:
___________________________
ATTEST R&B Falcon Corporation:
___________________________
APPENDIX A
R&B Falcon Corporation
Job Description
Job Title: Senior Vice President, Business Development &
Investor Relations
Reports to: Chairman & Chief Executive Officer
Department: Executive
Location: Houston
Basic Function
Responsible for communications and contact with all segments of
the investment community such as shareholders, research analysts,
portfolio managers, and stockbrokers, with the purpose of
improving the interest in the company from the financial
community. Performs duties such as development of long- and
short-term investor relations strategies, arranging for analyst
visits to the Company.
Works to develop incremental business opportunities for the
Company, primarily in non-traditional geographic areas.
Participates in the day-to-day management and decision making at
the Company.
Duties and Responsibilities
1. Serves as the Company's chief contact with the investment
community - both the "buy side" and the "sell side". Primary
communicator regarding current state of business and near and
long term strategies with US, European, and, eventually,
Southeast Asia and Japan financial centers.
2. Primary contact with equity analysts and portfolio managers
as well as dialog with high-yield debt community; both sell and
buy side.
3. Provides guidance to sell side analysts for quarterly and
yearly earnings estimates with the objective of pro-actively
representing the Company in all circumstances.
4. Works with sell side analysts to ensure ratings
(buy/sell/hold or variations) on the stock reflect latest
disclosable information and are consistent with Company's peer
ratings based on macro assumptions made by individual analysts.
5. Makes presentations, either alone or with other Executives,
at various equity conferences hosted by investment banks or
various other organizations. Serves the same function at high-
yield debt conferences.
6. In consultation with other executives (primarily CEO and
CFO) prepares presentations for conferences. E-mails
presentations and arranges for analyst meetings to provide in-
depth information on Company business and outlook.
7. Arranges field trips, primarily to the ultra deepwater
units, for the financial and media communities.
8. In consultation with COO, CFO, General Counsel and CEO,
responsible for preparation of Company press releases. Overseas
distribution of releases and arrangements for quarterly earnings
conference calls. Works with CFO, COO and CEO to develop scripts
for conference calls.
9. Assists with Company's contacts with debt rating agencies,
in concert with CFO.
10.Participates, with CFO and CEO, in raising of finance in the
public or private markets. Plays active role in development and
presentation of the "road show" presentations.
11.Business Development: Works to develop incremental business
opportunities for Company primarily in non-traditional geographic
areas where we are not currently established. Works with DEVCO
to develop opportunities as well as identification of potential
business combination candidates.
12.Member of Strategy Team: As a part of the Strategy Team,
develops near and long-term goals and strategies as well as day-
to-day decision making. Role, as part of senior management of the
Company, helps establish personal credibility with financial
community.
13.Participates in entertainment of executives from financial
and client communities; traditional lunches, dinners, golf,
shooting outings, symphony, opera and ballet.
14.Shares responsibility with the Marketing Department for
Company's advertising.
15.Largely responsible for administration of Company's various
charity activities (not including United Way).
Supervision
Direct 1
Indirect 1
Total 2
EXHIBIT 10.15
Employment and Change in Control
Agreement
R&B Falcon Corporation
August 25, 1999
Contents
Section 1. Term of Employment 1
Section 2. Position and Responsibilities 2
Section 3. Standard of Care 2
Section 4. Compensation 3
Section 5. Expenses 5
Section 6. Employment Terminations 5
Section 7. Change in Control 10
Section 8. Confidentiality and Noncompetition 13
Section 9. Indemnification 14
Section 10. Outplacement Assistance 14
Section 11. Assignment 14
Section 12. Dispute Resolution and Notice 15
Section 13. Miscellaneous 15
Section 14. Governing Law 16
R&B Falcon Corporation
Employment and Change in Control Agreement
This EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT ("Agreement")
is made, entered into, and is effective as of this 25th day of
August, 1999 (hereinafter referred to as the "Effective Date"),
by and between R&B Falcon Corporation (hereinafter referred to as
the "Company"), a Delaware corporation having its principal
offices at Houston, Texas, and Ron Toufeeq (hereinafter referred
to as the "Executive").
WHEREAS, the Executive is presently employed by the Company
in the capacity of Senior Vice President - Operations,
International and Deepwater Division; and
WHEREAS, the Executive previously entered into an employment
agreement with the Company dated as of August 20, 1998 and it is
now in the best interest of the Company and the Executive to
enter into this new Agreement; and
WHEREAS, the Executive possesses considerable experience and
an intimate knowledge of the business and affairs of the Company,
its policies, methods, personnel, and operations; and
WHEREAS, the Company recognizes that the Executive's
contribution has been substantial and meritorious and, as such,
the Executive has demonstrated unique qualifications to act in an
executive capacity for the Company; and
WHEREAS, the Company is desirous of assuring the continued
employment of the Executive in the above stated capacity, and
Executive is desirous of having such assurance.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
Section 1. Term of Employment
The Company hereby agrees to employ the Executive and the
Executive hereby agrees to continue to serve the Company, in
accordance with the terms and conditions set forth herein, for an
initial period of three (3) years, commencing as of the Effective
Date of this Agreement, as indicated above; subject, however, to
earlier termination as expressly provided in Section 6 herein.
The initial three (3) year Employment Term (as defined below)
of this Agreement shall be extended automatically for one (1)
additional month beginning with the first day of the twenty-third
(23rd) month of the initial three (3) year term, and on the first
day of each month thereafter the Employment Term of this
Agreement automatically shall be extended one additional month;
provided, however, either party may give the other party written
notice that, beginning with the first of the month that is at
ninety (90) days after the date of the notice, the Employment
Term shall cease to be extended with respect to any termination
of the Executive's employment other than a termination occurring
during the Window Period (as defined in Section 6.7 herein).
In the event such notice of intent not to renew is properly
delivered by either party, then the Employment Term of this
Agreement, along with all corresponding rights, duties, and
covenants with respect thereto, shall automatically expire ninety
(90) days following the end of the later of the initial three-
year Employment Term or, if applicable, the extended Employment
Term then in effect; provided, however, that notwithstanding the
termination of the Employment Term (i) the provisions contained
in Section 8 herein shall survive such expiration and (ii) the
provisions and protections of this Agreement concerning a Change
in Control of the Company (as defined in Section 7 herein),
including, without limitation, a Change in Control that occurs
after the termination of the Employment Term, shall continue
without interruption or change.
This Agreement provides (x) for the employment of the
Executive for an initial fixed term, which may be extended, (such
term, as it may be extended, is referred to herein as the
"Employment Term"), and (y) separately, whether or not the
Employment Term has expired before a Change in Control of the
Company occurs, for Change in Control employment protection for
the Executive for as long as the Executive remains an employee of
the Company (or any parent or subsidiary), and also with respect
to certain terminations of the Executive's employment occurring
during the Window Period prior to a Change in Control.
Further, notwithstanding anything in this Agreement to the
contrary, termination of this Agreement shall not alter or impair
any rights or benefits of the Executive (or the Executive's
beneficiaries) that have arisen (contingently or otherwise) under
this Agreement on or prior to such termination.
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to
serve as the Senior Vice President - Operations, International
and Deepwater Division of the Company. In his capacity as the
Senior Vice President - Operations, International and Deepwater
Division of the Company, the Executive shall report directly to
the President and Chief Operating Officer, and shall maintain the
level of duties and responsibilities as in effect as of the
Effective Date, as set forth on Appendix A, or such higher level
of duties and responsibilities as he may be assigned during the
term of this Agreement. The Executive shall have the same status,
privileges, and responsibilities normally inherent in such
capacities in corporations of similar size and character.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to
devote substantially his full time, attention, and energies to
the Company's business and shall not be engaged in any other
business activity, whether or not such business activity is
pursued for gain, profit, or other pecuniary advantage; provided,
however, subject to the restrictions of Section 8, the Executive
may serve as a director of other companies so long as such
service is not injurious to the Company, may continue the conduct
of the business activities listed on Appendix B (to the extent
conducted before the Effective Date), and may engage in the
conduct of such other business activities that are substantially
similar in nature and scope to those listed on Appendix B,
provided that such other business activities do not materially
interfere with the Executive's duties and obligations under this
Agreement. The Executive covenants, warrants, and represents that
he shall:
(a) Devote his full and best efforts to the fulfillment of
his employment obligations; and
(b) Act in the same manner as a competent executive in a
comparable company.
This Section 3 shall not be construed as preventing the
Executive from investing assets in such form or manner as will
not require his services in the daily operations of the affairs
of the companies in which such investments are made.
Section 4. Compensation
As remuneration for all services to be rendered by the
Executive during the term of this Agreement, and as consideration
for complying with the covenants herein, the Company shall pay
and provide to the Executive the following:
4.1Base Salary. The Company shall pay the Executive a Base
Salary in an amount which shall be established from time to time
by the Board of Directors of the Company or the Board's designee;
provided, however, that the Executive's Base Salary may be
decreased by the Board (other than during a Window Period) as
part of a program that is applicable equally (as a percentage of
base salary) to all executives of the Company and is determined
by the Board to be necessary and appropriate in light of the
Company's then financial condition. Base Salary shall be paid to
the Executive in equal semi-monthly installments throughout the
year, consistent with the normal payroll practices of the
Company.
The annual Base Salary shall be reviewed at least annually
following the Effective Date of this Agreement, while this
Agreement is in force, to ascertain whether, in the judgment of
the Board or the Board's designee, such Base Salary should be
increased, based primarily on the performance of the Executive
during the year and on the then current rate of inflation. If so
increased, the Base Salary as stated above shall, likewise, be
increased for all purposes of this Agreement.
4.2Annual Bonus. The Company shall provide the Executive with
the opportunity to earn an annual bonus, at a level which is
commensurate with the opportunity typically offered to executives
having the same or similar duties and responsibilities as the
Executive at companies similar in size and character to the
Company. The Executive shall be notified in writing by the
Company prior to the beginning of each fiscal year as to what the
Executive's target bonus will be for such fiscal year.
Nothing in this section shall be construed as obligating the
Company to refrain from changing and/or amending any annual
incentive plan so long as such changes are similarly applicable
to all executives generally.
4.3Long-Term Incentives. The Company shall provide the
Executive the opportunity to earn long-term incentive awards, at
a level which is commensurate with the opportunity typically
offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size
and in character to the Company.
Nothing in this section shall be construed as obligating the
Company to refrain from changing, and/or amending any long-term
incentive plan, so long as such changes are similarly applicable
to all executives generally.
4.4Retirement Benefits. The Company shall provide to the
Executive participation in all Company qualified defined benefit
and defined contribution retirement plans, subject to the
eligibility and participation requirements of such plans. In
addition, the Company shall provide to the Executive
participation in all other nonqualified retirement and welfare
programs typically offered by companies similar in size and
character to the Company to executives having the same or similar
duties and responsibilities including any supplemental retirement
plans.
Nothing in this section shall be construed as obligating the
Company to refrain from changing, and/or amending the
nonqualified programs, so long as such changes are similarly
applicable to all executives generally.
4.5Supplemental Life Insurance. The Company, at its cost,
shall provide the Executive with supplemental life insurance in
the face amount of $100,000 per child for each child under age
21(twenty-one) years old.
4.6Employee Benefits. During the term of this Agreement, and
as otherwise provided within the provisions of each of the
respective plans, the Company shall provide to the Executive all
benefits to which other executives and employees of the Company
are entitled to receive, as commensurate with the Executive's
position. Such benefits shall include, but not be limited to,
group term life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and
long-term disability.
The Executive shall be entitled to paid vacation in
accordance with the standard written policy of the Company with
regard to vacations of employees.
The Executive shall likewise participate in any additional
benefit as may be established during the term of this Agreement,
by standard written policy of the Company.
4.7Perquisites. The Company shall provide to the Executive,
at the Company's cost, all perquisites to which other executives
of the Company are entitled to receive and such other perquisites
which are suitable to the character of Executive's position with
the Company and adequate for the performance of his duties
hereunder.
4.8Right to Change Plans. By reason of Sections 4.5 and 4.6
herein, the Company shall not be obligated to institute,
maintain, or refrain from changing, amending, or discontinuing
any benefit plan, program, or perquisite, so long as such changes
are similarly applicable to executive employees generally.
4.9Physical Exams. The Executive shall be entitled to an
annual physical exam paid for by the Company.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all
ordinary and necessary expenses, in a reasonable amount, which
the Executive incurs in performing his duties under this
Agreement including, but not limited to, travel, entertainment,
professional dues and subscriptions, and all dues, fees, and
expenses associated with membership in various professional,
business, social, and civic clubs, associations and societies of
which the Executive's participation is in the best interest of
the Company.
Section 6. Employment Terminations
6.1Termination Due to Retirement. In the event the
Executive's employment is terminated during the Employment Term
or Window Period by reason of retirement, the Executive's
benefits shall be determined in accordance with the Company's
qualified retirement, supplemental retirement, survivor's
benefits, insurance, and other applicable programs of the Company
then in effect.
Upon the effective date of such termination, the Company will pay
the Executive a pro rata portion of his Highest Annual Bonus (as
defined below in Section 7.1) and the Executive will be
immediately vested in all long-term incentive awards. Further,
upon the effective date of the termination, the Company's
obligation to pay and provide to the Executive any future Base
Salary, annual bonus, and long-term incentive awards (as provided
in Sections 4.1, 4.2, and 4.3 herein, respectively) shall
immediately expire. However, the Executive shall receive all
rights and benefits that he is vested in pursuant to other plans
and programs of the Company, including, but not limited to, the
retirement benefits as described in Section 4.4 herein.
6.2Termination Due to Death. In the event of the death of the
Executive during the Employment Term or Window Period, or during
any period of Disability during which he is receiving
compensation pursuant to Section 6.3 herein, the Company shall
(i) pay to the Executive's surviving spouse, or other beneficiary
as so designated by the Executive during his lifetime, or to the
Executive's estate, as appropriate, a lump sum amount equal to
the sum of the Executive's (x) Base Salary otherwise payable for
the remaining Employment Term and (y) an amount equal to the sum
of the Highest Annual Bonus for each fiscal year ending during
the remaining Employment Term, plus for the fiscal year in which
the remaining Employment Term would expire, a prorata portion of
the Highest Annual Bonus for such partial fiscal year, (ii) vest
all long-term incentive awards of the Executive, and (iii)
continue, at the Company's cost, all health and welfare benefits
for the Executive's spouse and dependents for the remaining term
of this Agreement.
Further, the Company shall pay and provide all other benefits
to which the Executive has a vested right at the time, according
to the provisions of the governing plan or program. The Company
thereafter shall have no further obligations under this
Agreement.
6.3Suspension Due to Disability. In the event that the
Executive becomes disabled during the Employment Term or Window
Period and is, therefore, unable to perform his duties herein for
a period of more than one hundred-eighty (180) calendar days in
the aggregate during any period of twelve (12) consecutive
months, or in the event of the Board's reasonable expectation
that the Executive's Disability will exist for more than a period
of one hundred-eighty (180) calendar days, the Company shall have
the right to suspend the Executive's active employment as
provided in this Agreement and place him on Disability. However,
the Board shall deliver written notice to the Executive of the
Company's intent to suspend for Disability at least thirty (30)
calendar days prior to the effective date of such suspension.
A suspension for Disability shall become effective upon the
end of the thirty (30) day notice period. Upon such effective
date, the Company will pay the Executive any Base Salary through
the effective date of the suspension for Disability, a pro rata
portion of the Highest Annual Bonus for the fiscal year in which
such suspension occurs, and the Executive will be immediately
vested in all long-term incentive awards, provided however, that
if the Executive's Disability is due to alcohol or drug
dependence, he will vest ratably in any long-term incentive
awards. Further, upon the effective date of the suspension, the
Company's obligation to pay and provide to the Executive any
future Base Salary, annual bonus, and long-term incentive awards
(as provided in Sections 4.1, 4.2, and 4.3, respectively) shall
immediately be suspended. However, the Executive shall receive
all rights and benefits that he is vested in, pursuant to other
plans and programs of the Company, including, but not limited to,
short- and long-term disability benefits, and retirement benefits
as described in Section 4.4.
Under no circumstance will the Executive, if suspended due to
Disability, receive less than 60% of his Base Salary in effect at
the time of his suspension for Disability through age 65. The
Company agrees to make such payments to the Executive in the
event that the benefit is not available for any reason.
The term "Disability" shall mean, for all purposes of this
Agreement, the incapacity of the Executive, due to injury,
illness, disease, alcohol or drug dependency, or bodily or mental
infirmity, to engage in the performance of substantially all of
the usual duties of employment with the Company as contemplated
by Section 2 herein, such Disability to be determined by the
Board of Directors of the Company upon receipt and in reliance on
competent medical advice from one or more individuals, selected
by the Board, who are qualified to give such professional medical
advice.
If the Executive and the Company shall not be in agreement as
to whether the Executive has suffered a Disability for the
purposes of this Agreement, the matter shall be referred to a
panel of three medical doctors, one of which shall be selected by
the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two doctors as so selected,
and the decision of a majority of the panel with respect to the
question of whether the Executive has suffered a Disability shall
be binding upon the Executive and the Company. The expenses of
any such referral shall be borne by the Company. The Executive
may be required by the Company to submit to medical examination
at any time during the period of his employment hereunder, but
not more often than quarter-annually, to determine whether a
Disability exists for the purposes of this Agreement.
It is expressly understood that the Disability of the
Executive for a period of one hundred-eighty (180) calendar days
or less in the aggregate during any period of twelve (12)
consecutive months, in the absence of any reasonable expectation
that his Disability will exist for more than such a period of
time, shall not constitute a failure by him to perform his duties
hereunder and shall not be deemed a breach or default and the
Executive shall receive full compensation and benefits for any
such period of Disability or for any other temporary illness or
incapacity during the term of this Agreement. If the Executive
recovers from any Disability, his suspension shall terminate and
the Executive shall resume his duties with full compensation and
benefits.
6.4Voluntary Termination by the Executive. The Executive may
terminate this Agreement at any time by giving the Board of
Directors of the Company written notice of intent to terminate,
delivered at least thirty (30) calendar days prior to the
effective date of such termination (such period not to include
vacation). The termination automatically shall become effective
upon the expiration of the thirty (30) day notice period.
Upon the effective date of such termination, the Company
shall pay to the Executive his full Base Salary, at the rate then
in effect as provided in Section 4.1 herein, through the
effective date of termination, plus all other benefits, including
long-term incentive awards, to which the Executive has a vested
right to at that time including, but not limited to, accrued
vacation pay. The Company also shall provide to the Executive the
vested retirement benefits described in Section 4.4 herein. With
the exception of the covenants contained in Section 8 herein
(which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this
Agreement.
6.5Involuntary Termination by the Company Without Cause. At
all times during the Employment Term and outside the Window
Period, the Board may terminate the Executive's employment, as
provided under this Agreement, at any time for reasons other than
a suspension for Disability or a termination for Cause, by
notifying the Executive in writing of the Company's intent to
terminate, at least thirty (30) calendar days prior the effective
date of such termination.
Upon the effective date of such termination, following the
expiration of the thirty (30) day notice period, the Company
shall (i) pay the Executive a lump sum amount equal to the sum of
(x) the Executive's Base Salary otherwise payable for the
remaining Employment Term and (y) an amount equal to the sum of
the Highest Annual Bonus for each fiscal year ending during the
remaining Employment Term plus for the fiscal year in which the
remaining Employment Term would expire, a prorata portion of the
Highest Annual Bonus for such partial fiscal year, (ii) vest all
long-term incentive awards of the Executive, and (iii) continue,
at the Company's cost, all health and welfare benefits for the
Executive's spouse and dependents for the remaining Employment
Term.
Further, the Company shall pay the Executive all other
benefits to which the Executive has a vested right at the time,
according to the provisions of the governing plan or program. The
Company will also provide outplacement services or will reimburse
the Executive for the cost of such services as described in
Section 10 herein. The Company and the Executive thereafter shall
have no further obligations under this Agreement.
If the Executive's employment is terminated during the Window
Period by the Board for reasons other than a suspension for
Disability or a termination for Cause, the Executive shall be
entitled to receive the benefits provided in Section 7.1 herein
in lieu of the benefits set forth in this Section 6.5.
6.6 Termination For Cause. Nothing in this Agreement shall be
construed to prevent the Board from terminating the Executive's
employment under this Agreement for "Cause."
"Cause" means the Executive's:
(a) deliberate act of proven fraud having a
material adverse impact on the business or
consolidated financial condition or results of
operations of the Company and its subsidiaries;
(b) deliberate and continuing failure to
comply with applicable laws and regulations having a
material adverse impact on the business or
consolidated financial condition or results of
operations of the Company and its subsidiaries; or
(c) conviction of a criminal offense
constituting a felony.
For purposes of this Section 6.6, no act or omission by
the Executive shall be considered "willful" unless it is done or
omitted in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the
Company. Any act or failure to act based upon (i) authority given
pursuant to a resolution duly adopted by the Board, or (ii)
advice of counsel for the Company, shall be conclusively presumed
to be done or omitted to be done by the Executive in good faith
and in the best interests of the Company. For purposes of
subsections (a) and (b) above, the Executive shall not be deemed
to be terminated for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than the entire membership to
the Board at a meeting called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard
before the Board) finding that in the good faith opinion of the
Board (x) the Executive is guilty of the conduct described in
subsection (a) or (b) above, (y) the Executive has been provided
a 30-day period in which to "cure" such specified violation
following a detailed written notice from the Board of the
Executive's violation of subsection (a) or (b) above and (z) the
Executive has failed to "cure" such violation, specifying the
particulars thereof in detail. The Executive, if a member of the
Board, will be not be counted for purposes of such a vote.
In the event this Agreement is terminated by the Board for
Cause, the Company shall pay the Executive his Base Salary
through the effective date of the employment termination and the
Executive shall immediately thereafter forfeit all rights and
benefits (other than vested benefits) he would otherwise have
been entitled to receive under this Agreement. The Executive will
lose any right to supplemental retirement benefits provided by
the Company. The Company and the Executive thereafter shall have
no further obligations under this Agreement.
During the Window Period, as described herein, if any
litigation arises out of a termination for Cause, to the extent
permitted by law, the Company shall pay all legal fees, costs of
litigation, prejudgment interest and other expenses incurred in
good faith by the Executive.
6.7Termination for Good Reason. At any time during the
Employment Term or Window Period, the Executive may terminate
this Agreement for Good Reason (as defined below) by giving the
Board of Directors of the Company thirty (30) calendar days
written notice of intent to terminate, which notice sets forth in
reasonable detail the facts and circumstances claimed to provide
a basis for such termination.
Upon the expiration of the thirty (30) day notice period, the
Good Reason termination shall become effective, and the Company
shall pay, in a lump sum, and provide to the Executive the
benefits set forth in this Section 6.7 (or, in the event of
termination for Good Reason during the Window Period, the
benefits set forth in Section 7.1 herein).
Good Reason shall mean, without the Executive's express
written consent, the occurrence of any one or more of the
following:
(a) The assignment of the Executive to duties materially
inconsistent with the Executive's authorities, duties,
responsibilities, and status (including offices, titles,
and reporting relationships) as an officer of the
Company, or a reduction or alteration in the nature or
status of the Executive's authorities, duties, or
responsibilities from those in effect during the
immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a
location which is at least fifty (50) miles further from
the Executive's current primary residence than is such
residence from the Company's current headquarters, except
for required travel on the Company's business to an
extent substantially consistent with the Executive's
business obligations as of the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary
except as permitted in Section 4.1;
(d) A material reduction in the Executive's level of
participation in any of the Company's short- and/or long-
term incentive compensation plans, or employee benefit or
retirement plans, policies, practices, or arrangements in
which the Executive participates as of the Effective
Date; provided, however, that reductions in the levels of
participation in any such plans shall not be deemed to be
"Good Reason" if the Executive's reduced level of
participation in each such program remains substantially
consistent with the average level of participation of
other executives who have positions commensurate with the
Executive's position; or
(e) The failure of the Company to obtain a satisfactory
agreement from any successor to the Company to assume and
agree to perform this Agreement, as contemplated in
Section 11.1 herein.
Upon a termination of the Executive's employment for Good
Reason at any time during the Employment Term, other than during
the Window Period, with the "Window Period" being (x) the twelve
(12) full calendar month period prior to the effective date of a
Change in Control that occurs during the initial three (3) year
term of the Employment Term, (y) the six (6) full calendar month
period prior to the effective date of a Change in Control that
occurs after the initial three (3) year Employment Term, and (z)
the twenty-four (24) month period beginning on the effective date
of a Change in Control, the Executive shall be entitled to
receive the same payments and benefits as he is entitled to
receive following an involuntary termination of his employment by
the Company during the Employment Term without Cause, as
specified in Section 6.5 herein. Upon a termination of the
Executive's employment for Good Reason within the Window Period,
regardless of whether the Change in Control occurs during the
Employment Term, the Executive shall be entitled to receive the
payments and benefits set forth in Section 7.1 herein in lieu of
those set forth in this Section 6.7.
The Executive's right to terminate employment for Good Reason
shall not be affected by the Executive's incapacity due to
physical or mental illness; provided, however, the Executive may
not terminate for Good Reason during any period that the
Executive's employment is suspended due to Disability.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason herein.
Section 7. Change in Control
7.1Employment Terminations in Connection with a Change in
Control. In the event of a Qualifying Termination (as defined
below) within the Window Period, then in lieu of all other
benefits provided to the Executive under the provisions of this
Agreement, the Company shall pay to the Executive in a lump sum
amount, and provide him with the following severance benefits
(hereinafter referred to as the "Severance Benefits"):
(a) An amount equal to three (3) times the highest rate of
the Executive's annualized Base Salary rate in effect at
any time up to and including the effective date of
termination;
(b) An amount equal to three (3) times the "Highest Annual
Bonus", which shall mean the greater of (i) Executive's
highest annual bonus earned over the fiscal years,
beginning with the 1998 fiscal year, prior to the Change
in Control (with respect to the 1998 fiscal year, the
Executive received a bonus of $58,000) and (ii) the
Executive's targeted annual bonus for such fiscal year of
termination;
(c) An amount equal to the Executive's unpaid Base Salary and
accrued vacation pay through the effective date of
termination;
(d) An amount equal to the Executive's Highest Annual Bonus
multiplied by a fraction, the numerator of which is the
number of completed days in the then-existing fiscal year
through the effective date of termination, and the
denominator of which is three hundred sixty-five (365);
(e) A continuation of the welfare benefits of medical
insurance, dental insurance, and group term life
insurance for three (3) full years after the effective
date of termination. These benefits shall be provided to
the Executive at the same premium cost, and at the same
coverage level, as in effect as of the Executive's
effective date of termination. However, in the event the
premium cost and/or level of coverage shall change for
all employees of the Company, the cost and/or coverage
level, likewise, shall change for the Executive in a
corresponding manner.
The continuation of these welfare benefits shall be
discontinued prior to the end of the three (3) year
period in the event the Executive has available
substantially similar benefits from a subsequent
employer, as determined by the Company's Board of
Directors or the Board's designee.
Upon the termination of these welfare benefits, the
Executive shall be provided a COBRA continuation election
under the Company's group health plans;
(f) A lump-sum cash payment of the actuarial present value
equivalent (as determined pursuant to Section 417 of the
Internal Revenue Code) of the aggregate benefits accrued
by the Executive as of the effective date of termination
under the terms of any and all supplemental retirement
plans in which the Executive participates. For this
purpose, such benefits shall be calculated under the
assumption that the Executive's employment continued
following the effective date of termination for three (3)
full years (i.e., three (3) additional years of service
credits shall be added); provided, however, that for
purposes of determining "final average pay" under such
programs, the Executive's actual pay history as of the
effective date of termination shall be used;
(g) Reimbursement for outplacement services costs (as
provided in Section 10 herein); and
(h) Immediate vesting of all outstanding long-term incentive
awards.
For purposes of this Section 7, a Qualifying Termination
shall mean any termination of the Executive's employment other
than: (1) by the Company for Cause (as provided in Section 6.6
herein); (2) by reason of death or suspension for Disability (as
provided in Section 6.2 herein); or (3) by the Executive without
Good Reason (as provided in Section 6.7 herein).
7.2Definition of "Change in Control." A Change in Control of
the Company shall be deemed to have occurred as of the first day
any one or more of the following conditions shall have been
satisfied:
(a) Any individual, corporation (other than the Company),
partnership, trust, association, pool, syndicate, or any
other entity or any group of persons acting in concert
becomes the beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, of
securities of the Company possessing twenty-five percent
(25%) or more of the voting power for the election of
directors of the Company;
(b) There shall be consummated any consolidation, merger, or
other business combination involving the Company or the
securities of the Company in which holders of voting
securities of the Company immediately prior to such
consummation own, as a group, immediately after such
consummation, voting securities of the Company (or, if
the Company does not survive such transaction, voting
securities of the corporation surviving such transaction)
having less than sixty percent (60%) of the total voting
power in an election of directors of the Company (or such
other surviving corporation);
(c) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the directors of the Company cease for any
reason to constitute at least a majority thereof unless
the election, or the nomination for election by the
Company's shareholders, of each new director of the
Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in
office who were directors of the Company at the beginning
of any such period; or
(d) There shall be consummated any sale, lease, exchange, or
other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets
of the Company (on a consolidated basis) to a party which
is not controlled by or under common control with the
Company.
7.3 Excise Tax Equalization Payment. In the event that the
Executive becomes entitled to Severance Benefits or any
other payment or benefit under this Agreement, or under
any other agreement with or plan of the Company (in the
aggregate, the "Total Payments"), if any of the Total
Payments will be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Code (or any similar tax
that may hereafter be imposed), the Company shall pay to
the Executive in cash an additional amount (the "Gross-Up
Payment") such that the net amount retained by the
Executive after deduction of any Excise Tax upon the
Total Payments and any federal, state and local income
tax and Excise Tax upon the Gross-Up Payment provided for
by this Section 7.3 (including FICA and FUTA), shall be
equal to the Total Payments. Such payment shall be made
by the Company to the Executive as soon as practical
following the effective date of termination, but in no
event beyond thirty (30) days from such date.
7.4Tax Computation. For purposes of determining whether any
of the Total Payments will be subject to the Excise Tax and
the amounts of such Excise Tax:
(a) Any other payments or benefits received or to be received
by the Executive in connection with a Change in Control
of the Company or the Executive's termination of
employment (whether pursuant to the terms of this Plan or
any other plan, arrangement, or agreement with the
Company, or with any person (which shall have the meaning
set forth in Section 3(a)(9) of the Securities Exchange
Act of 1934, including a "group" as defined in
Section 13(d) therein) whose actions result in a Change
in Control of the Company or any person affiliated with
the Company or such persons) shall be treated as
"parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall
be treated as subject to the Excise Tax, unless in the
opinion of tax counsel as supported by the Company's
independent auditors and acceptable to the Executive,
such other payments or benefits (in whole or in part) do
not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in
excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not
subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated
as subject to the Excise Tax shall be equal to the lesser
of: (i) the total amount of the Total Payments; or (ii)
the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (a)
above); and
(c) The value of any noncash benefits or any deferred payment
or benefit shall be determined by the Company's
independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of Federal income taxation in
the calendar year in which the Gross-Up Payment is to be made,
and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence
on the effective date of termination, net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
7.5Subsequent Recalculation. In the event the Internal
Revenue Service adjusts the computation of the Company under
Section 7.4 herein so that the Executive did not receive the
greatest net benefit, the Company shall reimburse the Executive
for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Committee.
7.6Payment of Legal Fees. To the extent permitted by law, the
Company shall pay all legal fees, costs of litigation,
prejudgment interest, and other expenses incurred in good faith
by the Executive as a result of the Company's refusal to provide
the severance benefits under this Section 7 to which the
Executive becomes entitled under this Agreement, or as a result
of the Company's contesting the validity, enforceability, or
interpretation of this Agreement, or as a result of any conflict
(including conflicts related to the calculation of parachute
payments) between the parties pertaining to this Agreement.
Section 8. Confidentiality and Noncompetition
8.1Confidentiality. During the term of this Agreement and
thereafter in perpetuity, the Executive will not directly or
indirectly disclose to any third party not a member of the
Company Group, its or their legal counsel or independent
accountants, Confidential Information and Trade Secrets of the
Company and its subsidiaries and affiliates (collectively, the
"Company Group"), except as to any of the Confidential
Information or Trade Secrets which shall be or become in the
public domain other than by breach by the Executive of his
obligations set out in this Section 8.1 or shall be required to
be disclosed by applicable laws or regulations, any judicial or
administrative authority or stock exchange rule or regulation.
For the purposes of this Section 8.1 "Confidential Information"
shall mean: (i) internal policies and procedures, (ii) financial
information, (iii) marketing strategies, (iv) secret discoveries,
inventions, formulae, designs and know-how not constituting Trade
Secrets, and (v) other non-public information relating to the
Company Group's business, the disclosure of which would
materially adversely affect the Company Group's business or
financial condition. For the purposes of this Section 8.1 "Trade
Secrets" shall mean all secret discoveries, inventions, formulae,
designs, methods, processes and know-how entitled to protection
as trade secrets under the laws of the state of Texas.
8.2Noncompetition. In the event the Executive breaches his
obligations under Section 8.1 of this Agreement during the one
(1) year period following the Executive's termination of
employment, during the remainder of such one (1) year period (the
"Restricted Period") the Executive shall not engage in
Competition with the Company. For purposes of this Section 8.2,
"Competition" shall mean the Executive engaging in or otherwise
being a director, officer, employee, principal, agent,
stockholder, member, owner or partner of, or permitting his name
to be used in connection with the activities of any business or
organization in the international offshore contract drilling
industry in direct competition with the Company Group, but shall
not preclude the Executive becoming the registered or beneficial
owner of up to two percent (2%) of any class of capital stock of
any such corporation which is registered under the Securities
Exchange Act of 1934, as amended, provided the Executive does not
actively participate in the business of such corporation until
the end of the Restricted Period.
Section 9. Indemnification
The Company hereby covenants and agrees to indemnify and hold
harmless the Executive fully, completely, and absolutely against
and in respect to any and all actions, suits, proceedings,
claims, demands, judgments, costs, expenses (including attorney's
fees), losses, and damages resulting from the Executive's good
faith performance of his duties and obligations under the terms
of this Agreement.
Section 10. Outplacement Assistance
Following a termination of the Executive's employment as
described in Sections 6.5, 6.7, or 7.1 herein, the Executive
shall be reimbursed by the Company for the costs of all
outplacement services obtained by the Executive within the two
(2) year period after the effective date of termination;
provided, however, that the total reimbursement shall be limited
to an amount equal to fifteen percent (15%) of the Executive's
Base Salary as of the effective date of termination.
Section 11. Assignment
11.1. Assignment by Company. This Agreement may and shall be
assigned or transferred to, and shall be binding upon and shall
inure to the benefit of, any successor of the Company, and any
such successor shall be deemed substituted for all purposes of
the "Company" under the terms of this Agreement. As used in this
Agreement, the term "successor" shall mean any person, firm,
corporation, or business entity that at any time, causes a Change
in Control as described in Section 7.2. Notwithstanding such
assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall immediately entitle the Executive to
compensation from the Company in the same amount and on the same
terms as the Executive would be entitled in the event of an
involuntary termination by the Company, as provided in
Section 7.1 herein. Notice of such agreement shall be provided to
the Executive within thirty (30) days after a Change in Control.
Except as herein provided, the Company may not otherwise
assign this Agreement.
11.2 Assignment by Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive
should die while any amounts payable to the Executive hereunder
remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee
or, in the absence of such designee, to the Executive's estate.
This Agreement is not otherwise assignable by the Executive.
Section 12. Dispute Resolution and Notice
12.1 Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled by
arbitration, conducted before a panel of three (3) arbitrators
sitting in a location selected by the Executive within fifty (50)
miles from the location of his employment with the Company, in
accordance with the rules of the American Arbitration Association
then in effect.
Judgment may be entered on the award of the arbitrator in any
court having proper jurisdiction. All expenses of such
arbitration, including the fees and expenses of the counsel for
the Executive, shall be borne by the Company, exclusive of
Section 7.6.
12.2. Notice. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient
if in writing and if sent by registered or certified mail to the
Executive at the last address he has filed in writing with the
Company or, in the case of the Company, at its principal offices.
Section 13. Miscellaneous
13.1. Gender and Number. Except where otherwise indicated by
the context, any masculine term used herein also shall include
the feminine; the plural shall include the singular and the
singular shall include the plural.
13.2. Entire Agreement. This Agreement supersedes any prior
agreements or understandings, oral or written, between the
parties hereto or between the Executive and the Company, with
respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect thereto.
13.3. Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended
except by mutual agreement of the parties in a written instrument
executed by the parties hereto or their legal representatives.
13.4. Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect.
13.5. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original, but all of which together will constitute one and the
same Agreement.
13.6. Tax Withholding. The Company may withhold from any
benefits payable under this Agreement all federal, state, city,
or other taxes as may be required pursuant to any law or govern-
mental regulation or ruling.
13.7. Beneficiaries. The Executive may designate one or more
persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing
acceptable to the Board or the Board's designee. The Executive
may make or change such designation at any time.
Section 14. Governing Law
To the extent not preempted by federal law, the provisions of
this Agreement shall be construed and enforced in accordance with
the laws of the state of Texas.
IN WITNESS WHEREOF, the Executive and the Company (pursuant
to a resolution adopted at a duly constituted meeting of its
Board of Directors) have executed this Agreement, as of the day
and year first above written.
Executive:
___________________________
ATTEST R&B Falcon Corporation:
___________________________
APPENDIX A
R&B Falcon Corporation
Job Description
Job Title: Senior Vice President - Operations, International
and Deepwater Division
Reports to: President/Chief Operating Officer
Department: Executive
Location: Houston
Basic Function
Responsible for controlling and directing the operating unit's
marketing program, drilling operations and related support
functions. Responsible for profit and loss for the operating
unit and for all capital building projects for the Company.
Control and evaluate all operations of the operating unit to
ensure efficient and profitable operations.
Responsibilities and Duties
Operational Performance & Management
1. Directs and coordinates division management in the areas of
rig operational performance and administration.
2. Ensures company and area policies are actively implemented
and goals achieved by area/region employees.
3. Establishes and maintains a working environment that will
motivate departmental personnel toward desired results and will
reward those individuals that attain significant goals.
4. Ensures each Division is properly staffed with qualified and
trained personnel. Manages by demonstrating leadership,
motivation, planning, feedback and delegation as appropriate.
5. Works closely with Vice Presidents and Regional Operations
Managers to resolve any operating problems to ensure the
fulfillment of the Company's contractual agreements.
6. Plan and control rig mobilization, demobilization, dry-
docking and other large-scale projects to minimize expense to
Company.
7. Monitors daily drilling reports, equipment purchases,
warehouse stock, accounts payable, accounts receivable, and the
preparation of monthly area general reports which summarizes all
action during period, both operational and financial.
Materials
1. Responsible for all materials management functions,
corporate-wide, including purchasing, contract services,
materials control and transportation.
2. Overseas the plans to effectively respond to supply/demand
conditions to meet material requirements. Directs plans to
optimize the management of equipment assets throughout the
Company.
Projects
1. Responsible for new project work including design
development with respect to schedule, budget, quality, safety,
and personnel issues.
2. Works closely with partners and vendors to resolve any
problems to ensure the fulfillment of the Company's contractual
agreements.
3. Ensures all company and area policies are maintained with
regards to personnel, safety, operations, and financial controls.
4. Monitors progress of all projects to ensure operational and
financial goals and budgets are met.
Health, Safety & Environmental
1. Provides support and direction for operating unit safety
programs to reduce accidents and incidents.
2. Investigates all incidents as per Company policy.
Personnel & Training
1. Select, organize and develop a staff capable of effectively
accomplishing objectives of the operating unit.
2. Coordinate with SHE & HR departments in setting standards
for employment, training, compensation and career planning of
regional employees.
3. Overall responsibility to budget for and ensure personnel
are trained in accordance with internal (including training
identified in performance appraisal) and external training
requirements.
Budgeting & Profitability
1. Responsible for development and administration of Operating
Budget and Project Budget.
2. Approves budgets for each regional and project unit prior to
submission to Houston for final approval.
3. Direct development and administration of operating budgets
for divisional and project operations. Supervises local
management in their preparation of Capital, Fixed and Contract
budgets.
4. Monitors results and dictates necessary corrective action to
rectify budget exceptions and variances to achieve planned
profitability.
Contracts & Further Business
1. Reviews market trends and makes market forecasts for
budgeting decisions.
2. Apprises President/COO of all marketing and operating
activities for the divisions and projects.
3. Coordinates with area rate petition preparation when indexes
or direct operating or project costs increase.
4. Assists with efforts in procuring future business by
visiting prospective and current clients, identifies client
drilling programs, assists in evaluating client needs, and
reports to marketing accordingly.
5. Liaisons with marketing personnel and clients when
negotiating new business.
Client Relations
1. Maintains frequent contact with customers in all Divisions
to ensure a positive relationship with R&B Falcon Drilling Co.
2. Fosters relationships with clients to keep abreast of
current developments and attitudes.
3. Acts on information to insure smooth operating conditions.
R&B Falcon Image
1. Maintains company's professional image by determining
operating policies in line with standard company ideals and
insuring their adherence.
Education
Four year degree required.
Experience
Ten or more years offshore drilling industry experience,
including experience as Area Manager, or other equivalent
qualifications as deemed appropriate by the President/COO.
Reporting
Reports to President and Chief Operating Officer
Supervision
The following Managers and Department heads are direct reports -
Regional Vice Presidents, Regional Operations Managers, all
Capital Project Managers, Vice President Materials, Manager Human
Resources Operations, and Director of Sales.
EXHIBIT 10.16
Employment and Change in Control
Agreement
R&B Falcon Corporation
August 25, 1999
Contents
Section 1. Term of Employment 1
Section 2. Position and Responsibilities 2
Section 3. Standard of Care 2
Section 4. Compensation 3
Section 5. Expenses 5
Section 6. Employment Terminations 5
Section 7. Change in Control 10
Section 8. Confidentiality and Noncompetition 13
Section 9. Indemnification 14
Section 10. Outplacement Assistance 14
Section 11. Assignment 14
Section 12. Dispute Resolution and Notice 15
Section 13. Miscellaneous 15
Section 14. Governing Law 16
R&B Falcon Corporation
Employment and Change in Control Agreement
This EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT ("Agreement")
is made, entered into, and is effective as of this 25th day of
August, 1999 (hereinafter referred to as the "Effective Date"),
by and between R&B Falcon Corporation (hereinafter referred to as
the "Company"), a Delaware corporation having its principal
offices at Houston, Texas, and Bernie W. Stewart (hereinafter
referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company
in the capacity of Senior Vice President, Operations -
Shallowater and Transition Zone Division; and
WHEREAS, the Executive previously entered into an employment
agreement with the Company dated as of March 25, 1998 and it is
now in the best interest of the Company and the Executive to
enter into this new Agreement; and
WHEREAS, the Executive possesses considerable experience and
an intimate knowledge of the business and affairs of the Company,
its policies, methods, personnel, and operations; and
WHEREAS, the Company recognizes that the Executive's
contribution has been substantial and meritorious and, as such,
the Executive has demonstrated unique qualifications to act in an
executive capacity for the Company; and
WHEREAS, the Company is desirous of assuring the continued
employment of the Executive in the above stated capacity, and
Executive is desirous of having such assurance.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
Section 1. Term of Employment
The Company hereby agrees to employ the Executive and the
Executive hereby agrees to continue to serve the Company, in
accordance with the terms and conditions set forth herein, for an
initial period of three (3) years, commencing as of the Effective
Date of this Agreement, as indicated above; subject, however, to
earlier termination as expressly provided in Section 6 herein.
The initial three (3) year Employment Term (as defined below)
of this Agreement shall be extended automatically for one (1)
additional month beginning with the first day of the twenty-third
(23rd) month of the initial three (3) year term, and on the first
day of each month thereafter the Employment Term of this
Agreement automatically shall be extended one additional month;
provided, however, either party may give the other party written
notice that, beginning with the first of the month that is at
ninety (90) days after the date of the notice, the Employment
Term shall cease to be extended with respect to any termination
of the Executive's employment other than a termination occurring
during the Window Period (as defined in Section 6.7 herein).
In the event such notice of intent not to renew is properly
delivered by either party, then the Employment Term of this
Agreement, along with all corresponding rights, duties, and
covenants with respect thereto, shall automatically expire ninety
(90) days following the end of the later of the initial three-
year Employment Term or, if applicable, the extended Employment
Term then in effect; provided, however, that notwithstanding the
termination of the Employment Term (i) the provisions contained
in Section 8 herein shall survive such expiration and (ii) the
provisions and protections of this Agreement concerning a Change
in Control of the Company (as defined in Section 7 herein),
including, without limitation, a Change in Control that occurs
after the termination of the Employment Term, shall continue
without interruption or change.
This Agreement provides (x) for the employment of the
Executive for an initial fixed term, which may be extended, (such
term, as it may be extended, is referred to herein as the
"Employment Term"), and (y) separately, whether or not the
Employment Term has expired before a Change in Control of the
Company occurs, for Change in Control employment protection for
the Executive for as long as the Executive remains an employee of
the Company (or any parent or subsidiary), and also with respect
to certain terminations of the Executive's employment occurring
during the Window Period prior to a Change in Control.
Further, notwithstanding anything in this Agreement to the
contrary, termination of this Agreement shall not alter or impair
any rights or benefits of the Executive (or the Executive's
beneficiaries) that have arisen (contingently or otherwise) under
this Agreement on or prior to such termination.
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to
serve as the Senior Vice President, Operations - Shallowater and
Transition Zone Division of the Company. In his capacity as the
Senior Vice President, Operations - Shallowater and Transition
Zone Division of the Company, the Executive shall report directly
to the President and Chief Operating Officer, and shall maintain
the level of duties and responsibilities as in effect as of the
Effective Date, as set forth on Appendix A, or such higher level
of duties and responsibilities as he may be assigned during the
term of this Agreement. The Executive shall have the same status,
privileges, and responsibilities normally inherent in such
capacities in corporations of similar size and character.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to
devote substantially his full time, attention, and energies to
the Company's business and shall not be engaged in any other
business activity, whether or not such business activity is
pursued for gain, profit, or other pecuniary advantage; provided,
however, subject to the restrictions of Section 8, the Executive
may serve as a director of other companies so long as such
service is not injurious to the Company, may continue the conduct
of the business activities listed on Appendix B (to the extent
conducted before the Effective Date), and may engage in the
conduct of such other business activities that are substantially
similar in nature and scope to those listed on Appendix B,
provided that such other business activities do not materially
interfere with the Executive's duties and obligations under this
Agreement. The Executive covenants, warrants, and represents that
he shall:
(a) Devote his full and best efforts to the fulfillment of
his employment obligations; and
(b) Act in the same manner as a competent executive in a
comparable company.
This Section 3 shall not be construed as preventing the
Executive from investing assets in such form or manner as will
not require his services in the daily operations of the affairs
of the companies in which such investments are made.
Section 4. Compensation
As remuneration for all services to be rendered by the
Executive during the term of this Agreement, and as consideration
for complying with the covenants herein, the Company shall pay
and provide to the Executive the following:
4.1Base Salary. The Company shall pay the Executive a Base
Salary in an amount which shall be established from time to time
by the Board of Directors of the Company or the Board's designee;
provided, however, that the Executive's Base Salary may be
decreased by the Board (other than during a Window Period) as
part of a program that is applicable equally (as a percentage of
base salary) to all executives of the Company and is determined
by the Board to be necessary and appropriate in light of the
Company's then financial condition. Base Salary shall be paid to
the Executive in equal semi-monthly installments throughout the
year, consistent with the normal payroll practices of the
Company.
The annual Base Salary shall be reviewed at least annually
following the Effective Date of this Agreement, while this
Agreement is in force, to ascertain whether, in the judgment of
the Board or the Board's designee, such Base Salary should be
increased, based primarily on the performance of the Executive
during the year and on the then current rate of inflation. If so
increased, the Base Salary as stated above shall, likewise, be
increased for all purposes of this Agreement.
4.2Annual Bonus. The Company shall provide the Executive with
the opportunity to earn an annual bonus, at a level which is
commensurate with the opportunity typically offered to executives
having the same or similar duties and responsibilities as the
Executive at companies similar in size and character to the
Company. The Executive shall be notified in writing by the
Company prior to the beginning of each fiscal year as to what the
Executive's target bonus will be for such fiscal year.
Nothing in this section shall be construed as obligating the
Company to refrain from changing and/or amending any annual
incentive plan so long as such changes are similarly applicable
to all executives generally.
4.3Long-Term Incentives. The Company shall provide the
Executive the opportunity to earn long-term incentive awards, at
a level which is commensurate with the opportunity typically
offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size
and in character to the Company.
Nothing in this section shall be construed as obligating the
Company to refrain from changing, and/or amending any long-term
incentive plan, so long as such changes are similarly applicable
to all executives generally.
4.4Retirement Benefits. The Company shall provide to the
Executive participation in all Company qualified defined benefit
and defined contribution retirement plans, subject to the
eligibility and participation requirements of such plans. In
addition, the Company shall provide to the Executive
participation in all other nonqualified retirement and welfare
programs typically offered by companies similar in size and
character to the Company to executives having the same or similar
duties and responsibilities including any supplemental retirement
plans.
Nothing in this section shall be construed as obligating the
Company to refrain from changing, and/or amending the
nonqualified programs, so long as such changes are similarly
applicable to all executives generally.
4.5Supplemental Life Insurance. The Company, at its cost,
shall provide the Executive with supplemental life insurance in
the face amount of $100,000 per child for each child under age
21(twenty-one) years old.
4.6Employee Benefits. During the term of this Agreement, and
as otherwise provided within the provisions of each of the
respective plans, the Company shall provide to the Executive all
benefits to which other executives and employees of the Company
are entitled to receive, as commensurate with the Executive's
position. Such benefits shall include, but not be limited to,
group term life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and
long-term disability.
The Executive shall be entitled to paid vacation in
accordance with the standard written policy of the Company with
regard to vacations of employees.
The Executive shall likewise participate in any additional
benefit as may be established during the term of this Agreement,
by standard written policy of the Company.
4.7Perquisites. The Company shall provide to the Executive,
at the Company's cost, all perquisites to which other executives
of the Company are entitled to receive and such other perquisites
which are suitable to the character of Executive's position with
the Company and adequate for the performance of his duties
hereunder.
4.8Right to Change Plans. By reason of Sections 4.5 and 4.6
herein, the Company shall not be obligated to institute,
maintain, or refrain from changing, amending, or discontinuing
any benefit plan, program, or perquisite, so long as such changes
are similarly applicable to executive employees generally.
4.9Physical Exams. The Executive shall be entitled to an
annual physical exam paid for by the Company.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all
ordinary and necessary expenses, in a reasonable amount, which
the Executive incurs in performing his duties under this
Agreement including, but not limited to, travel, entertainment,
professional dues and subscriptions, and all dues, fees, and
expenses associated with membership in various professional,
business, social, and civic clubs, associations and societies of
which the Executive's participation is in the best interest of
the Company.
Section 6. Employment Terminations
6.1Termination Due to Retirement. In the event the
Executive's employment is terminated during the Employment Term
or Window Period by reason of retirement, the Executive's
benefits shall be determined in accordance with the Company's
qualified retirement, supplemental retirement, survivor's
benefits, insurance, and other applicable programs of the Company
then in effect.
Upon the effective date of such termination, the Company will pay
the Executive a pro rata portion of his Highest Annual Bonus (as
defined below in Section 7.1) and the Executive will be
immediately vested in all long-term incentive awards. Further,
upon the effective date of the termination, the Company's
obligation to pay and provide to the Executive any future Base
Salary, annual bonus, and long-term incentive awards (as provided
in Sections 4.1, 4.2, and 4.3 herein, respectively) shall
immediately expire. However, the Executive shall receive all
rights and benefits that he is vested in pursuant to other plans
and programs of the Company, including, but not limited to, the
retirement benefits as described in Section 4.4 herein.
6.2Termination Due to Death. In the event of the death of the
Executive during the Employment Term or Window Period, or during
any period of Disability during which he is receiving
compensation pursuant to Section 6.3 herein, the Company shall
(i) pay to the Executive's surviving spouse, or other beneficiary
as so designated by the Executive during his lifetime, or to the
Executive's estate, as appropriate, a lump sum amount equal to
the sum of the Executive's (x) Base Salary otherwise payable for
the remaining Employment Term and (y) an amount equal to the sum
of the Highest Annual Bonus for each fiscal year ending during
the remaining Employment Term, plus for the fiscal year in which
the remaining Employment Term would expire, a prorata portion of
the Highest Annual Bonus for such partial fiscal year, (ii) vest
all long-term incentive awards of the Executive, and (iii)
continue, at the Company's cost, all health and welfare benefits
for the Executive's spouse and dependents for the remaining term
of this Agreement.
Further, the Company shall pay and provide all other benefits
to which the Executive has a vested right at the time, according
to the provisions of the governing plan or program. The Company
thereafter shall have no further obligations under this
Agreement.
6.3Suspension Due to Disability. In the event that the
Executive becomes disabled during the Employment Term or Window
Period and is, therefore, unable to perform his duties herein for
a period of more than one hundred-eighty (180) calendar days in
the aggregate during any period of twelve (12) consecutive
months, or in the event of the Board's reasonable expectation
that the Executive's Disability will exist for more than a period
of one hundred-eighty (180) calendar days, the Company shall have
the right to suspend the Executive's active employment as
provided in this Agreement and place him on Disability. However,
the Board shall deliver written notice to the Executive of the
Company's intent to suspend for Disability at least thirty (30)
calendar days prior to the effective date of such suspension.
A suspension for Disability shall become effective upon the
end of the thirty (30) day notice period. Upon such effective
date, the Company will pay the Executive any Base Salary through
the effective date of the suspension for Disability, a pro rata
portion of the Highest Annual Bonus for the fiscal year in which
such suspension occurs, and the Executive will be immediately
vested in all long-term incentive awards, provided however, that
if the Executive's Disability is due to alcohol or drug
dependence, he will vest ratably in any long-term incentive
awards. Further, upon the effective date of the suspension, the
Company's obligation to pay and provide to the Executive any
future Base Salary, annual bonus, and long-term incentive awards
(as provided in Sections 4.1, 4.2, and 4.3, respectively) shall
immediately be suspended. However, the Executive shall receive
all rights and benefits that he is vested in, pursuant to other
plans and programs of the Company, including, but not limited to,
short- and long-term disability benefits, and retirement benefits
as described in Section 4.4.
Under no circumstance will the Executive, if suspended due to
Disability, receive less than 60% of his Base Salary in effect at
the time of his suspension for Disability through age 65. The
Company agrees to make such payments to the Executive in the
event that the benefit is not available for any reason.
The term "Disability" shall mean, for all purposes of this
Agreement, the incapacity of the Executive, due to injury,
illness, disease, alcohol or drug dependency, or bodily or mental
infirmity, to engage in the performance of substantially all of
the usual duties of employment with the Company as contemplated
by Section 2 herein, such Disability to be determined by the
Board of Directors of the Company upon receipt and in reliance on
competent medical advice from one or more individuals, selected
by the Board, who are qualified to give such professional medical
advice.
If the Executive and the Company shall not be in agreement as
to whether the Executive has suffered a Disability for the
purposes of this Agreement, the matter shall be referred to a
panel of three medical doctors, one of which shall be selected by
the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two doctors as so selected,
and the decision of a majority of the panel with respect to the
question of whether the Executive has suffered a Disability shall
be binding upon the Executive and the Company. The expenses of
any such referral shall be borne by the Company. The Executive
may be required by the Company to submit to medical examination
at any time during the period of his employment hereunder, but
not more often than quarter-annually, to determine whether a
Disability exists for the purposes of this Agreement.
It is expressly understood that the Disability of the
Executive for a period of one hundred-eighty (180) calendar days
or less in the aggregate during any period of twelve (12)
consecutive months, in the absence of any reasonable expectation
that his Disability will exist for more than such a period of
time, shall not constitute a failure by him to perform his duties
hereunder and shall not be deemed a breach or default and the
Executive shall receive full compensation and benefits for any
such period of Disability or for any other temporary illness or
incapacity during the term of this Agreement. If the Executive
recovers from any Disability, his suspension shall terminate and
the Executive shall resume his duties with full compensation and
benefits.
6.4Voluntary Termination by the Executive. The Executive may
terminate this Agreement at any time by giving the Board of
Directors of the Company written notice of intent to terminate,
delivered at least thirty (30) calendar days prior to the
effective date of such termination (such period not to include
vacation). The termination automatically shall become effective
upon the expiration of the thirty (30) day notice period.
Upon the effective date of such termination, the Company
shall pay to the Executive his full Base Salary, at the rate then
in effect as provided in Section 4.1 herein, through the
effective date of termination, plus all other benefits, including
long-term incentive awards, to which the Executive has a vested
right to at that time including, but not limited to, accrued
vacation pay. The Company also shall provide to the Executive the
vested retirement benefits described in Section 4.4 herein. With
the exception of the covenants contained in Section 8 herein
(which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this
Agreement.
6.5Involuntary Termination by the Company Without Cause. At
all times during the Employment Term and outside the Window
Period, the Board may terminate the Executive's employment, as
provided under this Agreement, at any time for reasons other than
a suspension for Disability or a termination for Cause, by
notifying the Executive in writing of the Company's intent to
terminate, at least thirty (30) calendar days prior the effective
date of such termination.
Upon the effective date of such termination, following the
expiration of the thirty (30) day notice period, the Company
shall (i) pay the Executive a lump sum amount equal to the sum of
(x) the Executive's Base Salary otherwise payable for the
remaining Employment Term and (y) an amount equal to the sum of
the Highest Annual Bonus for each fiscal year ending during the
remaining Employment Term plus for the fiscal year in which the
remaining Employment Term would expire, a prorata portion of the
Highest Annual Bonus for such partial fiscal year, (ii) vest all
long-term incentive awards of the Executive, and (iii) continue,
at the Company's cost, all health and welfare benefits for the
Executive's spouse and dependents for the remaining Employment
Term.
Further, the Company shall pay the Executive all other
benefits to which the Executive has a vested right at the time,
according to the provisions of the governing plan or program. The
Company will also provide outplacement services or will reimburse
the Executive for the cost of such services as described in
Section 10 herein. The Company and the Executive thereafter shall
have no further obligations under this Agreement.
If the Executive's employment is terminated during the Window
Period by the Board for reasons other than a suspension for
Disability or a termination for Cause, the Executive shall be
entitled to receive the benefits provided in Section 7.1 herein
in lieu of the benefits set forth in this Section 6.5.
6.6 Termination For Cause. Nothing in this Agreement shall be
construed to prevent the Board from terminating the Executive's
employment under this Agreement for "Cause."
"Cause" means the Executive's:
(a) deliberate act of proven fraud having a
material adverse impact on the business or
consolidated financial condition or results of
operations of the Company and its subsidiaries;
(b) deliberate and continuing failure to
comply with applicable laws and regulations having a
material adverse impact on the business or
consolidated financial condition or results of
operations of the Company and its subsidiaries; or
(c) conviction of a criminal offense
constituting a felony.
For purposes of this Section 6.6, no act or omission by
the Executive shall be considered "willful" unless it is done or
omitted in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the
Company. Any act or failure to act based upon (i) authority given
pursuant to a resolution duly adopted by the Board, or (ii)
advice of counsel for the Company, shall be conclusively presumed
to be done or omitted to be done by the Executive in good faith
and in the best interests of the Company. For purposes of
subsections (a) and (b) above, the Executive shall not be deemed
to be terminated for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than the entire membership to
the Board at a meeting called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard
before the Board) finding that in the good faith opinion of the
Board (x) the Executive is guilty of the conduct described in
subsection (a) or (b) above, (y) the Executive has been provided
a 30-day period in which to "cure" such specified violation
following a detailed written notice from the Board of the
Executive's violation of subsection (a) or (b) above and (z) the
Executive has failed to "cure" such violation, specifying the
particulars thereof in detail. The Executive, if a member of the
Board, will be not be counted for purposes of such a vote.
In the event this Agreement is terminated by the Board for
Cause, the Company shall pay the Executive his Base Salary
through the effective date of the employment termination and the
Executive shall immediately thereafter forfeit all rights and
benefits (other than vested benefits) he would otherwise have
been entitled to receive under this Agreement. The Executive will
lose any right to supplemental retirement benefits provided by
the Company. The Company and the Executive thereafter shall have
no further obligations under this Agreement.
During the Window Period, as described herein, if any
litigation arises out of a termination for Cause, to the extent
permitted by law, the Company shall pay all legal fees, costs of
litigation, prejudgment interest and other expenses incurred in
good faith by the Executive.
6.7Termination for Good Reason. At any time during the
Employment Term or Window Period, the Executive may terminate
this Agreement for Good Reason (as defined below) by giving the
Board of Directors of the Company thirty (30) calendar days
written notice of intent to terminate, which notice sets forth in
reasonable detail the facts and circumstances claimed to provide
a basis for such termination.
Upon the expiration of the thirty (30) day notice period, the
Good Reason termination shall become effective, and the Company
shall pay, in a lump sum, and provide to the Executive the
benefits set forth in this Section 6.7 (or, in the event of
termination for Good Reason during the Window Period, the
benefits set forth in Section 7.1 herein).
Good Reason shall mean, without the Executive's express
written consent, the occurrence of any one or more of the
following:
(a) The assignment of the Executive to duties materially
inconsistent with the Executive's authorities, duties,
responsibilities, and status (including offices, titles,
and reporting relationships) as an officer of the
Company, or a reduction or alteration in the nature or
status of the Executive's authorities, duties, or
responsibilities from those in effect during the
immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a
location which is at least fifty (50) miles further from
the Executive's current primary residence than is such
residence from the Company's current headquarters, except
for required travel on the Company's business to an
extent substantially consistent with the Executive's
business obligations as of the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary
except as permitted in Section 4.1;
(d) A material reduction in the Executive's level of
participation in any of the Company's short- and/or long-
term incentive compensation plans, or employee benefit or
retirement plans, policies, practices, or arrangements in
which the Executive participates as of the Effective
Date; provided, however, that reductions in the levels of
participation in any such plans shall not be deemed to be
"Good Reason" if the Executive's reduced level of
participation in each such program remains substantially
consistent with the average level of participation of
other executives who have positions commensurate with the
Executive's position; or
(e) The failure of the Company to obtain a satisfactory
agreement from any successor to the Company to assume and
agree to perform this Agreement, as contemplated in
Section 11.1 herein.
Upon a termination of the Executive's employment for Good
Reason at any time during the Employment Term, other than during
the Window Period, with the "Window Period" being (x) the twelve
(12) full calendar month period prior to the effective date of a
Change in Control that occurs during the initial three (3) year
term of the Employment Term, (y) the six (6) full calendar month
period prior to the effective date of a Change in Control that
occurs after the initial three (3) year Employment Term, and (z)
the twenty-four (24) month period beginning on the effective date
of a Change in Control, the Executive shall be entitled to
receive the same payments and benefits as he is entitled to
receive following an involuntary termination of his employment by
the Company during the Employment Term without Cause, as
specified in Section 6.5 herein. Upon a termination of the
Executive's employment for Good Reason within the Window Period,
regardless of whether the Change in Control occurs during the
Employment Term, the Executive shall be entitled to receive the
payments and benefits set forth in Section 7.1 herein in lieu of
those set forth in this Section 6.7.
The Executive's right to terminate employment for Good Reason
shall not be affected by the Executive's incapacity due to
physical or mental illness; provided, however, the Executive may
not terminate for Good Reason during any period that the
Executive's employment is suspended due to Disability.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason herein.
Section 7. Change in Control
7.1Employment Terminations in Connection with a Change in
Control. In the event of a Qualifying Termination (as defined
below) within the Window Period, then in lieu of all other
benefits provided to the Executive under the provisions of this
Agreement, the Company shall pay to the Executive in a lump sum
amount, and provide him with the following severance benefits
(hereinafter referred to as the "Severance Benefits"):
(a) An amount equal to three (3) times the highest rate of
the Executive's annualized Base Salary rate in effect at
any time up to and including the effective date of
termination;
(b) An amount equal to three (3) times the "Highest Annual
Bonus", which shall mean the greater of (i) Executive's
highest annual bonus earned over the fiscal years,
beginning with the 1998 fiscal year, prior to the Change
in Control (with respect to the 1998 fiscal year, the
Executive received a bonus of $166,521) and (ii) the
Executive's targeted annual bonus for such fiscal year of
termination;
(c) An amount equal to the Executive's unpaid Base Salary and
accrued vacation pay through the effective date of
termination;
(d) An amount equal to the Executive's Highest Annual Bonus
multiplied by a fraction, the numerator of which is the
number of completed days in the then-existing fiscal year
through the effective date of termination, and the
denominator of which is three hundred sixty-five (365);
(e) A continuation of the welfare benefits of medical
insurance, dental insurance, and group term life
insurance for three (3) full years after the effective
date of termination. These benefits shall be provided to
the Executive at the same premium cost, and at the same
coverage level, as in effect as of the Executive's
effective date of termination. However, in the event the
premium cost and/or level of coverage shall change for
all employees of the Company, the cost and/or coverage
level, likewise, shall change for the Executive in a
corresponding manner.
The continuation of these welfare benefits shall be
discontinued prior to the end of the three (3) year
period in the event the Executive has available
substantially similar benefits from a subsequent
employer, as determined by the Company's Board of
Directors or the Board's designee.
Upon the termination of these welfare benefits, the
Executive shall be provided a COBRA continuation election
under the Company's group health plans;
(f) A lump-sum cash payment of the actuarial present value
equivalent (as determined pursuant to Section 417 of the
Internal Revenue Code) of the aggregate benefits accrued
by the Executive as of the effective date of termination
under the terms of any and all supplemental retirement
plans in which the Executive participates. For this
purpose, such benefits shall be calculated under the
assumption that the Executive's employment continued
following the effective date of termination for three (3)
full years (i.e., three (3) additional years of service
credits shall be added); provided, however, that for
purposes of determining "final average pay" under such
programs, the Executive's actual pay history as of the
effective date of termination shall be used;
(g) Reimbursement for outplacement services costs (as
provided in Section 10 herein); and
(h) Immediate vesting of all outstanding long-term incentive
awards.
For purposes of this Section 7, a Qualifying Termination
shall mean any termination of the Executive's employment other
than: (1) by the Company for Cause (as provided in Section 6.6
herein); (2) by reason of death or suspension for Disability (as
provided in Section 6.2 herein); or (3) by the Executive without
Good Reason (as provided in Section 6.7 herein).
7.2Definition of "Change in Control." A Change in Control of
the Company shall be deemed to have occurred as of the first day
any one or more of the following conditions shall have been
satisfied:
(a) Any individual, corporation (other than the Company),
partnership, trust, association, pool, syndicate, or any
other entity or any group of persons acting in concert
becomes the beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, of
securities of the Company possessing twenty-five percent
(25%) or more of the voting power for the election of
directors of the Company;
(b) There shall be consummated any consolidation, merger, or
other business combination involving the Company or the
securities of the Company in which holders of voting
securities of the Company immediately prior to such
consummation own, as a group, immediately after such
consummation, voting securities of the Company (or, if
the Company does not survive such transaction, voting
securities of the corporation surviving such transaction)
having less than sixty percent (60%) of the total voting
power in an election of directors of the Company (or such
other surviving corporation);
(c) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the directors of the Company cease for any
reason to constitute at least a majority thereof unless
the election, or the nomination for election by the
Company's shareholders, of each new director of the
Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in
office who were directors of the Company at the beginning
of any such period; or
(d) There shall be consummated any sale, lease, exchange, or
other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets
of the Company (on a consolidated basis) to a party which
is not controlled by or under common control with the
Company.
7.3 Excise Tax Equalization Payment. In the event that the
Executive becomes entitled to Severance Benefits or any
other payment or benefit under this Agreement, or under
any other agreement with or plan of the Company (in the
aggregate, the "Total Payments"), if any of the Total
Payments will be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Code (or any similar tax
that may hereafter be imposed), the Company shall pay to
the Executive in cash an additional amount (the "Gross-Up
Payment") such that the net amount retained by the
Executive after deduction of any Excise Tax upon the
Total Payments and any federal, state and local income
tax and Excise Tax upon the Gross-Up Payment provided for
by this Section 7.3 (including FICA and FUTA), shall be
equal to the Total Payments. Such payment shall be made
by the Company to the Executive as soon as practical
following the effective date of termination, but in no
event beyond thirty (30) days from such date.
7.4Tax Computation. For purposes of determining whether any
of the Total Payments will be subject to the Excise Tax and
the amounts of such Excise Tax:
(a) Any other payments or benefits received or to be received
by the Executive in connection with a Change in Control
of the Company or the Executive's termination of
employment (whether pursuant to the terms of this Plan or
any other plan, arrangement, or agreement with the
Company, or with any person (which shall have the meaning
set forth in Section 3(a)(9) of the Securities Exchange
Act of 1934, including a "group" as defined in
Section 13(d) therein) whose actions result in a Change
in Control of the Company or any person affiliated with
the Company or such persons) shall be treated as
"parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall
be treated as subject to the Excise Tax, unless in the
opinion of tax counsel as supported by the Company's
independent auditors and acceptable to the Executive,
such other payments or benefits (in whole or in part) do
not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in
excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not
subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated
as subject to the Excise Tax shall be equal to the lesser
of: (i) the total amount of the Total Payments; or (ii)
the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (a)
above); and
(c) The value of any noncash benefits or any deferred payment
or benefit shall be determined by the Company's
independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of Federal income taxation in
the calendar year in which the Gross-Up Payment is to be made,
and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence
on the effective date of termination, net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
7.5Subsequent Recalculation. In the event the Internal
Revenue Service adjusts the computation of the Company under
Section 7.4 herein so that the Executive did not receive the
greatest net benefit, the Company shall reimburse the Executive
for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Committee.
7.6Payment of Legal Fees. To the extent permitted by law, the
Company shall pay all legal fees, costs of litigation,
prejudgment interest, and other expenses incurred in good faith
by the Executive as a result of the Company's refusal to provide
the severance benefits under this Section 7 to which the
Executive becomes entitled under this Agreement, or as a result
of the Company's contesting the validity, enforceability, or
interpretation of this Agreement, or as a result of any conflict
(including conflicts related to the calculation of parachute
payments) between the parties pertaining to this Agreement.
Section 8. Confidentiality and Noncompetition
8.1Confidentiality. During the term of this Agreement and
thereafter in perpetuity, the Executive will not directly or
indirectly disclose to any third party not a member of the
Company Group, its or their legal counsel or independent
accountants, Confidential Information and Trade Secrets of the
Company and its subsidiaries and affiliates (collectively, the
"Company Group"), except as to any of the Confidential
Information or Trade Secrets which shall be or become in the
public domain other than by breach by the Executive of his
obligations set out in this Section 8.1 or shall be required to
be disclosed by applicable laws or regulations, any judicial or
administrative authority or stock exchange rule or regulation.
For the purposes of this Section 8.1 "Confidential Information"
shall mean: (i) internal policies and procedures, (ii) financial
information, (iii) marketing strategies, (iv) secret discoveries,
inventions, formulae, designs and know-how not constituting Trade
Secrets, and (v) other non-public information relating to the
Company Group's business, the disclosure of which would
materially adversely affect the Company Group's business or
financial condition. For the purposes of this Section 8.1 "Trade
Secrets" shall mean all secret discoveries, inventions, formulae,
designs, methods, processes and know-how entitled to protection
as trade secrets under the laws of the state of Texas.
8.2Noncompetition. In the event the Executive breaches his
obligations under Section 8.1 of this Agreement during the one
(1) year period following the Executive's termination of
employment, during the remainder of such one (1) year period (the
"Restricted Period") the Executive shall not engage in
Competition with the Company. For purposes of this Section 8.2,
"Competition" shall mean the Executive engaging in or otherwise
being a director, officer, employee, principal, agent,
stockholder, member, owner or partner of, or permitting his name
to be used in connection with the activities of any business or
organization in the international offshore contract drilling
industry in direct competition with the Company Group, but shall
not preclude the Executive becoming the registered or beneficial
owner of up to two percent (2%) of any class of capital stock of
any such corporation which is registered under the Securities
Exchange Act of 1934, as amended, provided the Executive does not
actively participate in the business of such corporation until
the end of the Restricted Period.
Section 9. Indemnification
The Company hereby covenants and agrees to indemnify and hold
harmless the Executive fully, completely, and absolutely against
and in respect to any and all actions, suits, proceedings,
claims, demands, judgments, costs, expenses (including attorney's
fees), losses, and damages resulting from the Executive's good
faith performance of his duties and obligations under the terms
of this Agreement.
Section 10. Outplacement Assistance
Following a termination of the Executive's employment as
described in Sections 6.5, 6.7, or 7.1 herein, the Executive
shall be reimbursed by the Company for the costs of all
outplacement services obtained by the Executive within the two
(2) year period after the effective date of termination;
provided, however, that the total reimbursement shall be limited
to an amount equal to fifteen percent (15%) of the Executive's
Base Salary as of the effective date of termination.
Section 11. Assignment
11.1. Assignment by Company. This Agreement may and shall be
assigned or transferred to, and shall be binding upon and shall
inure to the benefit of, any successor of the Company, and any
such successor shall be deemed substituted for all purposes of
the "Company" under the terms of this Agreement. As used in this
Agreement, the term "successor" shall mean any person, firm,
corporation, or business entity that at any time, causes a Change
in Control as described in Section 7.2. Notwithstanding such
assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall immediately entitle the Executive to
compensation from the Company in the same amount and on the same
terms as the Executive would be entitled in the event of an
involuntary termination by the Company, as provided in
Section 7.1 herein. Notice of such agreement shall be provided to
the Executive within thirty (30) days after a Change in Control.
Except as herein provided, the Company may not otherwise
assign this Agreement.
11.2 Assignment by Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive
should die while any amounts payable to the Executive hereunder
remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee
or, in the absence of such designee, to the Executive's estate.
This Agreement is not otherwise assignable by the Executive.
Section 12. Dispute Resolution and Notice
12.1 Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled by
arbitration, conducted before a panel of three (3) arbitrators
sitting in a location selected by the Executive within fifty (50)
miles from the location of his employment with the Company, in
accordance with the rules of the American Arbitration Association
then in effect.
Judgment may be entered on the award of the arbitrator in any
court having proper jurisdiction. All expenses of such
arbitration, including the fees and expenses of the counsel for
the Executive, shall be borne by the Company, exclusive of
Section 7.6.
12.2. Notice. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient
if in writing and if sent by registered or certified mail to the
Executive at the last address he has filed in writing with the
Company or, in the case of the Company, at its principal offices.
Section 13. Miscellaneous
13.1. Gender and Number. Except where otherwise indicated by
the context, any masculine term used herein also shall include
the feminine; the plural shall include the singular and the
singular shall include the plural.
13.2. Entire Agreement. This Agreement supersedes any prior
agreements or understandings, oral or written, between the
parties hereto or between the Executive and the Company, with
respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect thereto.
13.3. Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended
except by mutual agreement of the parties in a written instrument
executed by the parties hereto or their legal representatives.
13.4. Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect.
13.5. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original, but all of which together will constitute one and the
same Agreement.
13.6. Tax Withholding. The Company may withhold from any
benefits payable under this Agreement all federal, state, city,
or other taxes as may be required pursuant to any law or govern-
mental regulation or ruling.
13.7. Beneficiaries. The Executive may designate one or more
persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing
acceptable to the Board or the Board's designee. The Executive
may make or change such designation at any time.
Section 14. Governing Law
To the extent not preempted by federal law, the provisions of
this Agreement shall be construed and enforced in accordance with
the laws of the state of Texas.
IN WITNESS WHEREOF, the Executive and the Company (pursuant
to a resolution adopted at a duly constituted meeting of its
Board of Directors) have executed this Agreement, as of the day
and year first above written.
Executive:
___________________________
ATTEST R&B Falcon Corporation:
___________________________
APPENDIX A
R&B Falcon Corporation
Job Description
Job Title: Senior Vice President, Operations - Shallowater
and Transition Zone Division
Reports to: President/Chief Operating Officer
Department: Executive
Location: Houston
Basic Function
Responsible for controlling and directing the operating unit's
marketing program, drilling operations and related support
functions. Responsible for profit and loss for the operating
unit. Control and evaluate all operations of the operating unit
to ensure efficient and profitable operations.
Responsibilities and Duties
Operational Performance & Management
1. Directs and coordinates division management in the areas of
rig operational performance and administration.
2. Ensures company and area policies are actively implemented
and goals achieved by area/region employees.
3. Establishes and maintains a working environment that will
motivate departmental personnel toward desired results and will
reward those individuals that attain significant goals.
4. Ensures each Division is properly staffed with qualified and
trained personnel. Manages by demonstrating leadership,
motivation, planning, feedback and delegation as appropriate.
5. Works closely with Division Presidents, Vice Presidents and
Regional Operations Managers to resolve any operating problems to
ensure the fulfillment of the Company's contractual agreements.
6. Plan and control rig mobilization, demobilization, dry-
docking and other large-scale projects to minimize expense to
Company.
7. Monitors daily drilling reports, equipment purchases,
warehouse stock, accounts payable, accounts receivable, and the
preparation of monthly area general reports which summarizes all
action during period, both operational and financial.
Health, Safety & Environmental
1. Provides support and direction for operating unit safety
programs to reduce accidents and incidents.
2. Investigates all incidents as per Company policy.
Personnel & Training
1. Select, organize and develop a staff capable of effectively
accomplishing objectives of the operating unit.
2. Coordinate with HSE & HR departments in setting standards
for employment, training, compensation and career planning of
regional employees.
3. Overall responsibility to budget for and ensure personnel
are trained in accordance with internal (including training
identified in performance appraisal) and external training
requirements.
Budgeting & Profitability
1. Responsible for development and administration of Operating
Budget.
2. Approves budgets for each regional unit prior to submission
to Houston for final approval.
3. Direct development and administration of operating budgets
for divisional operations. Supervises local management in their
preparation of Capital, Fixed and Contract budgets.
4. Monitors results and dictates necessary corrective action to
rectify budget exceptions and variances to achieve planned
profitability.
Contracts & Further Business
1. Reviews market trends and makes market forecasts for
budgeting decisions.
2. Apprises President/COO of all marketing and operating
activities for the Division.
3. Coordinates with area rate petition preparation when indexes
or direct operating costs increase.
4. Assists with efforts in procuring future business by
visiting prospective and current clients, identifies client
drilling programs, assists in evaluating client needs, and
reports to marketing accordingly.
5. Liaisons with marketing personnel and clients when
negotiating new business.
Client Relations
1. Maintains frequent contact with customers in all Divisions
to ensure a positive relationship with R&B Falcon Drilling Co.
2. Fosters relationships with clients to keep abreast of
current developments and attitudes.
3. Acts on information to insure smooth operating conditions.
R&B Falcon Image
1. Maintains company's professional image by determining
operating policies in line with standard company ideals and
insuring their adherence.
Education
Four year degree required.
Experience
Ten or more years offshore drilling industry experience,
including experience as Area Manager, or other equivalent
qualifications as deemed appropriate by the President/COO.
Reporting
Reports to President and Chief Operating Officer
Supervision
The direct reports to this position are the managers responsible
for the asset performance in the Offshore Division, Inland Barge
Division, and the Marine Division in the domestic markets, as
well as the overall Administrative Manager. These currently
include Executive Vice President - Inland Drilling, Vice
President - Offshore Drilling, President - Double Eagle Marine,
and Vice President - Administration.
EXHIBIT 10.17
Employment and Change in Control
Agreement
R&B Falcon Corporation
August 25, 1999
Contents
Section 1. Term of Employment 1
Section 2. Position and Responsibilities 2
Section 3. Standard of Care 2
Section 4. Compensation 3
Section 5. Expenses 5
Section 6. Employment Terminations 5
Section 7. Change in Control 10
Section 8. Confidentiality and Noncompetition 13
Section 9. Indemnification 14
Section 10. Outplacement Assistance 14
Section 11. Assignment 14
Section 12. Dispute Resolution and Notice 15
Section 13. Miscellaneous 15
Section 14. Governing Law 16
R&B Falcon Corporation
Employment and Change in Control Agreement
This EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT ("Agreement")
is made, entered into, and is effective as of this 25th day of
August, 1999 (hereinafter referred to as the "Effective Date"),
by and between R&B Falcon Corporation (hereinafter referred to as
the "Company"), a Delaware corporation having its principal
offices at Houston, Texas, and Wayne K. Hillin (hereinafter
referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company
in the capacity of Senior Vice President, General Counsel and
Secretary; and
WHEREAS, the Executive previously entered into an employment
agreement with the Company dated as of March 25, 1998 and it is
now in the best interest of the Company and the Executive to
enter into this new Agreement; and
WHEREAS, the Executive possesses considerable experience and
an intimate knowledge of the business and affairs of the Company,
its policies, methods, personnel, and operations; and
WHEREAS, the Company recognizes that the Executive's
contribution has been substantial and meritorious and, as such,
the Executive has demonstrated unique qualifications to act in an
executive capacity for the Company; and
WHEREAS, the Company is desirous of assuring the continued
employment of the Executive in the above stated capacity, and
Executive is desirous of having such assurance.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
Section 1. Term of Employment
The Company hereby agrees to employ the Executive and the
Executive hereby agrees to continue to serve the Company, in
accordance with the terms and conditions set forth herein, for an
initial period of three (3) years, commencing as of the Effective
Date of this Agreement, as indicated above; subject, however, to
earlier termination as expressly provided in Section 6 herein.
The initial three (3) year Employment Term (as defined below)
of this Agreement shall be extended automatically for one (1)
additional month beginning with the first day of the twenty-third
(23rd) month of the initial three (3) year term, and on the first
day of each month thereafter the Employment Term of this
Agreement automatically shall be extended one additional month;
provided, however, either party may give the other party written
notice that, beginning with the first of the month that is at
ninety (90) days after the date of the notice, the Employment
Term shall cease to be extended with respect to any termination
of the Executive's employment other than a termination occurring
during the Window Period (as defined in Section 6.7 herein).
In the event such notice of intent not to renew is properly
delivered by either party, then the Employment Term of this
Agreement, along with all corresponding rights, duties, and
covenants with respect thereto, shall automatically expire ninety
(90) days following the end of the later of the initial three-
year Employment Term or, if applicable, the extended Employment
Term then in effect; provided, however, that notwithstanding the
termination of the Employment Term (i) the provisions contained
in Section 8 herein shall survive such expiration and (ii) the
provisions and protections of this Agreement concerning a Change
in Control of the Company (as defined in Section 7 herein),
including, without limitation, a Change in Control that occurs
after the termination of the Employment Term, shall continue
without interruption or change.
This Agreement provides (x) for the employment of the
Executive for an initial fixed term, which may be extended, (such
term, as it may be extended, is referred to herein as the
"Employment Term"), and (y) separately, whether or not the
Employment Term has expired before a Change in Control of the
Company occurs, for Change in Control employment protection for
the Executive for as long as the Executive remains an employee of
the Company (or any parent or subsidiary), and also with respect
to certain terminations of the Executive's employment occurring
during the Window Period prior to a Change in Control.
Further, notwithstanding anything in this Agreement to the
contrary, termination of this Agreement shall not alter or impair
any rights or benefits of the Executive (or the Executive's
beneficiaries) that have arisen (contingently or otherwise) under
this Agreement on or prior to such termination.
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to
serve as the Senior Vice President, General Counsel and Secretary
of the Company. In his capacity as the Senior Vice President,
General Counsel and Secretary of the Company, the Executive shall
report directly to the Chairman and Chief Executive Officer, and
shall maintain the level of duties and responsibilities as in
effect as of the Effective Date, as set forth on Appendix A, or
such higher level of duties and responsibilities as he may be
assigned during the term of this Agreement. The Executive shall
have the same status, privileges, and responsibilities normally
inherent in such capacities in corporations of similar size and
character.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to
devote substantially his full time, attention, and energies to
the Company's business and shall not be engaged in any other
business activity, whether or not such business activity is
pursued for gain, profit, or other pecuniary advantage; provided,
however, subject to the restrictions of Section 8, the Executive
may serve as a director of other companies so long as such
service is not injurious to the Company, may continue the conduct
of the business activities listed on Appendix B (to the extent
conducted before the Effective Date), and may engage in the
conduct of such other business activities that are substantially
similar in nature and scope to those listed on Appendix B,
provided that such other business activities do not materially
interfere with the Executive's duties and obligations under this
Agreement. The Executive covenants, warrants, and represents that
he shall:
(a) Devote his full and best efforts to the fulfillment of
his employment obligations; and
(b) Act in the same manner as a competent executive in a
comparable company.
This Section 3 shall not be construed as preventing the
Executive from investing assets in such form or manner as will
not require his services in the daily operations of the affairs
of the companies in which such investments are made.
Section 4. Compensation
As remuneration for all services to be rendered by the
Executive during the term of this Agreement, and as consideration
for complying with the covenants herein, the Company shall pay
and provide to the Executive the following:
4.1Base Salary. The Company shall pay the Executive a Base
Salary in an amount which shall be established from time to time
by the Board of Directors of the Company or the Board's designee;
provided, however, that the Executive's Base Salary may be
decreased by the Board (other than during a Window Period) as
part of a program that is applicable equally (as a percentage of
base salary) to all executives of the Company and is determined
by the Board to be necessary and appropriate in light of the
Company's then financial condition. Base Salary shall be paid to
the Executive in equal semi-monthly installments throughout the
year, consistent with the normal payroll practices of the
Company.
The annual Base Salary shall be reviewed at least annually
following the Effective Date of this Agreement, while this
Agreement is in force, to ascertain whether, in the judgment of
the Board or the Board's designee, such Base Salary should be
increased, based primarily on the performance of the Executive
during the year and on the then current rate of inflation. If so
increased, the Base Salary as stated above shall, likewise, be
increased for all purposes of this Agreement.
4.2Annual Bonus. The Company shall provide the Executive with
the opportunity to earn an annual bonus, at a level which is
commensurate with the opportunity typically offered to executives
having the same or similar duties and responsibilities as the
Executive at companies similar in size and character to the
Company. The Executive shall be notified in writing by the
Company prior to the beginning of each fiscal year as to what the
Executive's target bonus will be for such fiscal year.
Nothing in this section shall be construed as obligating the
Company to refrain from changing and/or amending any annual
incentive plan so long as such changes are similarly applicable
to all executives generally.
4.3Long-Term Incentives. The Company shall provide the
Executive the opportunity to earn long-term incentive awards, at
a level which is commensurate with the opportunity typically
offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size
and in character to the Company.
Nothing in this section shall be construed as obligating the
Company to refrain from changing, and/or amending any long-term
incentive plan, so long as such changes are similarly applicable
to all executives generally.
4.4Retirement Benefits. The Company shall provide to the
Executive participation in all Company qualified defined benefit
and defined contribution retirement plans, subject to the
eligibility and participation requirements of such plans. In
addition, the Company shall provide to the Executive
participation in all other nonqualified retirement and welfare
programs typically offered by companies similar in size and
character to the Company to executives having the same or similar
duties and responsibilities including any supplemental retirement
plans.
Nothing in this section shall be construed as obligating the
Company to refrain from changing, and/or amending the
nonqualified programs, so long as such changes are similarly
applicable to all executives generally.
4.5Supplemental Life Insurance. The Company, at its cost,
shall provide the Executive with supplemental life insurance in
the face amount of $100,000 per child for each child under age
21(twenty-one) years old.
4.6Employee Benefits. During the term of this Agreement, and
as otherwise provided within the provisions of each of the
respective plans, the Company shall provide to the Executive all
benefits to which other executives and employees of the Company
are entitled to receive, as commensurate with the Executive's
position. Such benefits shall include, but not be limited to,
group term life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and
long-term disability.
The Executive shall be entitled to paid vacation in
accordance with the standard written policy of the Company with
regard to vacations of employees.
The Executive shall likewise participate in any additional
benefit as may be established during the term of this Agreement,
by standard written policy of the Company.
4.7Perquisites. The Company shall provide to the Executive,
at the Company's cost, all perquisites to which other executives
of the Company are entitled to receive and such other perquisites
which are suitable to the character of Executive's position with
the Company and adequate for the performance of his duties
hereunder.
4.8Right to Change Plans. By reason of Sections 4.5 and 4.6
herein, the Company shall not be obligated to institute,
maintain, or refrain from changing, amending, or discontinuing
any benefit plan, program, or perquisite, so long as such changes
are similarly applicable to executive employees generally.
4.9Physical Exams. The Executive shall be entitled to an
annual physical exam paid for by the Company.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all
ordinary and necessary expenses, in a reasonable amount, which
the Executive incurs in performing his duties under this
Agreement including, but not limited to, travel, entertainment,
professional dues and subscriptions, and all dues, fees, and
expenses associated with membership in various professional,
business, social, and civic clubs, associations and societies of
which the Executive's participation is in the best interest of
the Company.
Section 6. Employment Terminations
6.1Termination Due to Retirement. In the event the
Executive's employment is terminated during the Employment Term
or Window Period by reason of retirement, the Executive's
benefits shall be determined in accordance with the Company's
qualified retirement, supplemental retirement, survivor's
benefits, insurance, and other applicable programs of the Company
then in effect.
Upon the effective date of such termination, the Company will pay
the Executive a pro rata portion of his Highest Annual Bonus (as
defined below in Section 7.1) and the Executive will be
immediately vested in all long-term incentive awards. Further,
upon the effective date of the termination, the Company's
obligation to pay and provide to the Executive any future Base
Salary, annual bonus, and long-term incentive awards (as provided
in Sections 4.1, 4.2, and 4.3 herein, respectively) shall
immediately expire. However, the Executive shall receive all
rights and benefits that he is vested in pursuant to other plans
and programs of the Company, including, but not limited to, the
retirement benefits as described in Section 4.4 herein.
6.2Termination Due to Death. In the event of the death of the
Executive during the Employment Term or Window Period, or during
any period of Disability during which he is receiving
compensation pursuant to Section 6.3 herein, the Company shall
(i) pay to the Executive's surviving spouse, or other beneficiary
as so designated by the Executive during his lifetime, or to the
Executive's estate, as appropriate, a lump sum amount equal to
the sum of the Executive's (x) Base Salary otherwise payable for
the remaining Employment Term and (y) an amount equal to the sum
of the Highest Annual Bonus for each fiscal year ending during
the remaining Employment Term, plus for the fiscal year in which
the remaining Employment Term would expire, a prorata portion of
the Highest Annual Bonus for such partial fiscal year, (ii) vest
all long-term incentive awards of the Executive, and (iii)
continue, at the Company's cost, all health and welfare benefits
for the Executive's spouse and dependents for the remaining term
of this Agreement.
Further, the Company shall pay and provide all other benefits
to which the Executive has a vested right at the time, according
to the provisions of the governing plan or program. The Company
thereafter shall have no further obligations under this
Agreement.
6.3Suspension Due to Disability. In the event that the
Executive becomes disabled during the Employment Term or Window
Period and is, therefore, unable to perform his duties herein for
a period of more than one hundred-eighty (180) calendar days in
the aggregate during any period of twelve (12) consecutive
months, or in the event of the Board's reasonable expectation
that the Executive's Disability will exist for more than a period
of one hundred-eighty (180) calendar days, the Company shall have
the right to suspend the Executive's active employment as
provided in this Agreement and place him on Disability. However,
the Board shall deliver written notice to the Executive of the
Company's intent to suspend for Disability at least thirty (30)
calendar days prior to the effective date of such suspension.
A suspension for Disability shall become effective upon the
end of the thirty (30) day notice period. Upon such effective
date, the Company will pay the Executive any Base Salary through
the effective date of the suspension for Disability, a pro rata
portion of the Highest Annual Bonus for the fiscal year in which
such suspension occurs, and the Executive will be immediately
vested in all long-term incentive awards, provided however, that
if the Executive's Disability is due to alcohol or drug
dependence, he will vest ratably in any long-term incentive
awards. Further, upon the effective date of the suspension, the
Company's obligation to pay and provide to the Executive any
future Base Salary, annual bonus, and long-term incentive awards
(as provided in Sections 4.1, 4.2, and 4.3, respectively) shall
immediately be suspended. However, the Executive shall receive
all rights and benefits that he is vested in, pursuant to other
plans and programs of the Company, including, but not limited to,
short- and long-term disability benefits, and retirement benefits
as described in Section 4.4.
Under no circumstance will the Executive, if suspended due to
Disability, receive less than 60% of his Base Salary in effect at
the time of his suspension for Disability through age 65. The
Company agrees to make such payments to the Executive in the
event that the benefit is not available for any reason.
The term "Disability" shall mean, for all purposes of this
Agreement, the incapacity of the Executive, due to injury,
illness, disease, alcohol or drug dependency, or bodily or mental
infirmity, to engage in the performance of substantially all of
the usual duties of employment with the Company as contemplated
by Section 2 herein, such Disability to be determined by the
Board of Directors of the Company upon receipt and in reliance on
competent medical advice from one or more individuals, selected
by the Board, who are qualified to give such professional medical
advice.
If the Executive and the Company shall not be in agreement as
to whether the Executive has suffered a Disability for the
purposes of this Agreement, the matter shall be referred to a
panel of three medical doctors, one of which shall be selected by
the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two doctors as so selected,
and the decision of a majority of the panel with respect to the
question of whether the Executive has suffered a Disability shall
be binding upon the Executive and the Company. The expenses of
any such referral shall be borne by the Company. The Executive
may be required by the Company to submit to medical examination
at any time during the period of his employment hereunder, but
not more often than quarter-annually, to determine whether a
Disability exists for the purposes of this Agreement.
It is expressly understood that the Disability of the
Executive for a period of one hundred-eighty (180) calendar days
or less in the aggregate during any period of twelve (12)
consecutive months, in the absence of any reasonable expectation
that his Disability will exist for more than such a period of
time, shall not constitute a failure by him to perform his duties
hereunder and shall not be deemed a breach or default and the
Executive shall receive full compensation and benefits for any
such period of Disability or for any other temporary illness or
incapacity during the term of this Agreement. If the Executive
recovers from any Disability, his suspension shall terminate and
the Executive shall resume his duties with full compensation and
benefits.
6.4Voluntary Termination by the Executive. The Executive may
terminate this Agreement at any time by giving the Board of
Directors of the Company written notice of intent to terminate,
delivered at least thirty (30) calendar days prior to the
effective date of such termination (such period not to include
vacation). The termination automatically shall become effective
upon the expiration of the thirty (30) day notice period.
Upon the effective date of such termination, the Company
shall pay to the Executive his full Base Salary, at the rate then
in effect as provided in Section 4.1 herein, through the
effective date of termination, plus all other benefits, including
long-term incentive awards, to which the Executive has a vested
right to at that time including, but not limited to, accrued
vacation pay. The Company also shall provide to the Executive the
vested retirement benefits described in Section 4.4 herein. With
the exception of the covenants contained in Section 8 herein
(which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this
Agreement.
6.5Involuntary Termination by the Company Without Cause. At
all times during the Employment Term and outside the Window
Period, the Board may terminate the Executive's employment, as
provided under this Agreement, at any time for reasons other than
a suspension for Disability or a termination for Cause, by
notifying the Executive in writing of the Company's intent to
terminate, at least thirty (30) calendar days prior the effective
date of such termination.
Upon the effective date of such termination, following the
expiration of the thirty (30) day notice period, the Company
shall (i) pay the Executive a lump sum amount equal to the sum of
(x) the Executive's Base Salary otherwise payable for the
remaining Employment Term and (y) an amount equal to the sum of
the Highest Annual Bonus for each fiscal year ending during the
remaining Employment Term plus for the fiscal year in which the
remaining Employment Term would expire, a prorata portion of the
Highest Annual Bonus for such partial fiscal year, (ii) vest all
long-term incentive awards of the Executive, and (iii) continue,
at the Company's cost, all health and welfare benefits for the
Executive's spouse and dependents for the remaining Employment
Term.
Further, the Company shall pay the Executive all other
benefits to which the Executive has a vested right at the time,
according to the provisions of the governing plan or program. The
Company will also provide outplacement services or will reimburse
the Executive for the cost of such services as described in
Section 10 herein. The Company and the Executive thereafter shall
have no further obligations under this Agreement.
If the Executive's employment is terminated during the Window
Period by the Board for reasons other than a suspension for
Disability or a termination for Cause, the Executive shall be
entitled to receive the benefits provided in Section 7.1 herein
in lieu of the benefits set forth in this Section 6.5.
6.6 Termination For Cause. Nothing in this Agreement shall be
construed to prevent the Board from terminating the Executive's
employment under this Agreement for "Cause."
"Cause" means the Executive's:
(a) deliberate act of proven fraud having a
material adverse impact on the business or
consolidated financial condition or results of
operations of the Company and its subsidiaries;
(b) deliberate and continuing failure to
comply with applicable laws and regulations having a
material adverse impact on the business or
consolidated financial condition or results of
operations of the Company and its subsidiaries; or
(c) conviction of a criminal offense
constituting a felony.
For purposes of this Section 6.6, no act or omission by
the Executive shall be considered "willful" unless it is done or
omitted in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the
Company. Any act or failure to act based upon (i) authority given
pursuant to a resolution duly adopted by the Board, or (ii)
advice of counsel for the Company, shall be conclusively presumed
to be done or omitted to be done by the Executive in good faith
and in the best interests of the Company. For purposes of
subsections (a) and (b) above, the Executive shall not be deemed
to be terminated for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than the entire membership to
the Board at a meeting called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard
before the Board) finding that in the good faith opinion of the
Board (x) the Executive is guilty of the conduct described in
subsection (a) or (b) above, (y) the Executive has been provided
a 30-day period in which to "cure" such specified violation
following a detailed written notice from the Board of the
Executive's violation of subsection (a) or (b) above and (z) the
Executive has failed to "cure" such violation, specifying the
particulars thereof in detail. The Executive, if a member of the
Board, will be not be counted for purposes of such a vote.
In the event this Agreement is terminated by the Board for
Cause, the Company shall pay the Executive his Base Salary
through the effective date of the employment termination and the
Executive shall immediately thereafter forfeit all rights and
benefits (other than vested benefits) he would otherwise have
been entitled to receive under this Agreement. The Executive will
lose any right to supplemental retirement benefits provided by
the Company. The Company and the Executive thereafter shall have
no further obligations under this Agreement.
During the Window Period, as described herein, if any
litigation arises out of a termination for Cause, to the extent
permitted by law, the Company shall pay all legal fees, costs of
litigation, prejudgment interest and other expenses incurred in
good faith by the Executive.
6.7Termination for Good Reason. At any time during the
Employment Term or Window Period, the Executive may terminate
this Agreement for Good Reason (as defined below) by giving the
Board of Directors of the Company thirty (30) calendar days
written notice of intent to terminate, which notice sets forth in
reasonable detail the facts and circumstances claimed to provide
a basis for such termination.
Upon the expiration of the thirty (30) day notice period, the
Good Reason termination shall become effective, and the Company
shall pay, in a lump sum, and provide to the Executive the
benefits set forth in this Section 6.7 (or, in the event of
termination for Good Reason during the Window Period, the
benefits set forth in Section 7.1 herein).
Good Reason shall mean, without the Executive's express
written consent, the occurrence of any one or more of the
following:
(a) The assignment of the Executive to duties materially
inconsistent with the Executive's authorities, duties,
responsibilities, and status (including offices, titles,
and reporting relationships) as an officer of the
Company, or a reduction or alteration in the nature or
status of the Executive's authorities, duties, or
responsibilities from those in effect during the
immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a
location which is at least fifty (50) miles further from
the Executive's current primary residence than is such
residence from the Company's current headquarters, except
for required travel on the Company's business to an
extent substantially consistent with the Executive's
business obligations as of the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary
except as permitted in Section 4.1;
(d) A material reduction in the Executive's level of
participation in any of the Company's short- and/or long-
term incentive compensation plans, or employee benefit or
retirement plans, policies, practices, or arrangements in
which the Executive participates as of the Effective
Date; provided, however, that reductions in the levels of
participation in any such plans shall not be deemed to be
"Good Reason" if the Executive's reduced level of
participation in each such program remains substantially
consistent with the average level of participation of
other executives who have positions commensurate with the
Executive's position; or
(e) The failure of the Company to obtain a satisfactory
agreement from any successor to the Company to assume and
agree to perform this Agreement, as contemplated in
Section 11.1 herein.
Upon a termination of the Executive's employment for Good
Reason at any time during the Employment Term, other than during
the Window Period, with the "Window Period" being (x) the twelve
(12) full calendar month period prior to the effective date of a
Change in Control that occurs during the initial three (3) year
term of the Employment Term, (y) the six (6) full calendar month
period prior to the effective date of a Change in Control that
occurs after the initial three (3) year Employment Term, and (z)
the twenty-four (24) month period beginning on the effective date
of a Change in Control, the Executive shall be entitled to
receive the same payments and benefits as he is entitled to
receive following an involuntary termination of his employment by
the Company during the Employment Term without Cause, as
specified in Section 6.5 herein. Upon a termination of the
Executive's employment for Good Reason within the Window Period,
regardless of whether the Change in Control occurs during the
Employment Term, the Executive shall be entitled to receive the
payments and benefits set forth in Section 7.1 herein in lieu of
those set forth in this Section 6.7.
The Executive's right to terminate employment for Good Reason
shall not be affected by the Executive's incapacity due to
physical or mental illness; provided, however, the Executive may
not terminate for Good Reason during any period that the
Executive's employment is suspended due to Disability.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason herein.
Section 7. Change in Control
7.1Employment Terminations in Connection with a Change in
Control. In the event of a Qualifying Termination (as defined
below) within the Window Period, then in lieu of all other
benefits provided to the Executive under the provisions of this
Agreement, the Company shall pay to the Executive in a lump sum
amount, and provide him with the following severance benefits
(hereinafter referred to as the "Severance Benefits"):
(a) An amount equal to three (3) times the highest rate of
the Executive's annualized Base Salary rate in effect at
any time up to and including the effective date of
termination;
(b) An amount equal to three (3) times the "Highest Annual
Bonus", which shall mean the greater of (i) Executive's
highest annual bonus earned over the fiscal years,
beginning with the 1998 fiscal year, prior to the Change
in Control (with respect to the 1998 fiscal year, the
Executive received a bonus of $121,704) and (ii) the
Executive's targeted annual bonus for such fiscal year of
termination;
(c) An amount equal to the Executive's unpaid Base Salary and
accrued vacation pay through the effective date of
termination;
(d) An amount equal to the Executive's Highest Annual Bonus
multiplied by a fraction, the numerator of which is the
number of completed days in the then-existing fiscal year
through the effective date of termination, and the
denominator of which is three hundred sixty-five (365);
(e) A continuation of the welfare benefits of medical
insurance, dental insurance, and group term life
insurance for three (3) full years after the effective
date of termination. These benefits shall be provided to
the Executive at the same premium cost, and at the same
coverage level, as in effect as of the Executive's
effective date of termination. However, in the event the
premium cost and/or level of coverage shall change for
all employees of the Company, the cost and/or coverage
level, likewise, shall change for the Executive in a
corresponding manner.
The continuation of these welfare benefits shall be
discontinued prior to the end of the three (3) year
period in the event the Executive has available
substantially similar benefits from a subsequent
employer, as determined by the Company's Board of
Directors or the Board's designee.
Upon the termination of these welfare benefits, the
Executive shall be provided a COBRA continuation election
under the Company's group health plans;
(f) A lump-sum cash payment of the actuarial present value
equivalent (as determined pursuant to Section 417 of the
Internal Revenue Code) of the aggregate benefits accrued
by the Executive as of the effective date of termination
under the terms of any and all supplemental retirement
plans in which the Executive participates. For this
purpose, such benefits shall be calculated under the
assumption that the Executive's employment continued
following the effective date of termination for three (3)
full years (i.e., three (3) additional years of service
credits shall be added); provided, however, that for
purposes of determining "final average pay" under such
programs, the Executive's actual pay history as of the
effective date of termination shall be used;
(g) Reimbursement for outplacement services costs (as
provided in Section 10 herein); and
(h) Immediate vesting of all outstanding long-term incentive
awards.
For purposes of this Section 7, a Qualifying Termination
shall mean any termination of the Executive's employment other
than: (1) by the Company for Cause (as provided in Section 6.6
herein); (2) by reason of death or suspension for Disability (as
provided in Section 6.2 herein); or (3) by the Executive without
Good Reason (as provided in Section 6.7 herein).
7.2Definition of "Change in Control." A Change in Control of
the Company shall be deemed to have occurred as of the first day
any one or more of the following conditions shall have been
satisfied:
(a) Any individual, corporation (other than the Company),
partnership, trust, association, pool, syndicate, or any
other entity or any group of persons acting in concert
becomes the beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, of
securities of the Company possessing twenty-five percent
(25%) or more of the voting power for the election of
directors of the Company;
(b) There shall be consummated any consolidation, merger, or
other business combination involving the Company or the
securities of the Company in which holders of voting
securities of the Company immediately prior to such
consummation own, as a group, immediately after such
consummation, voting securities of the Company (or, if
the Company does not survive such transaction, voting
securities of the corporation surviving such transaction)
having less than sixty percent (60%) of the total voting
power in an election of directors of the Company (or such
other surviving corporation);
(c) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the directors of the Company cease for any
reason to constitute at least a majority thereof unless
the election, or the nomination for election by the
Company's shareholders, of each new director of the
Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in
office who were directors of the Company at the beginning
of any such period; or
(d) There shall be consummated any sale, lease, exchange, or
other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets
of the Company (on a consolidated basis) to a party which
is not controlled by or under common control with the
Company.
7.3 Excise Tax Equalization Payment. In the event that the
Executive becomes entitled to Severance Benefits or any
other payment or benefit under this Agreement, or under
any other agreement with or plan of the Company (in the
aggregate, the "Total Payments"), if any of the Total
Payments will be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Code (or any similar tax
that may hereafter be imposed), the Company shall pay to
the Executive in cash an additional amount (the "Gross-Up
Payment") such that the net amount retained by the
Executive after deduction of any Excise Tax upon the
Total Payments and any federal, state and local income
tax and Excise Tax upon the Gross-Up Payment provided for
by this Section 7.3 (including FICA and FUTA), shall be
equal to the Total Payments. Such payment shall be made
by the Company to the Executive as soon as practical
following the effective date of termination, but in no
event beyond thirty (30) days from such date.
7.4Tax Computation. For purposes of determining whether any
of the Total Payments will be subject to the Excise Tax and
the amounts of such Excise Tax:
(a) Any other payments or benefits received or to be received
by the Executive in connection with a Change in Control
of the Company or the Executive's termination of
employment (whether pursuant to the terms of this Plan or
any other plan, arrangement, or agreement with the
Company, or with any person (which shall have the meaning
set forth in Section 3(a)(9) of the Securities Exchange
Act of 1934, including a "group" as defined in
Section 13(d) therein) whose actions result in a Change
in Control of the Company or any person affiliated with
the Company or such persons) shall be treated as
"parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall
be treated as subject to the Excise Tax, unless in the
opinion of tax counsel as supported by the Company's
independent auditors and acceptable to the Executive,
such other payments or benefits (in whole or in part) do
not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in
excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not
subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated
as subject to the Excise Tax shall be equal to the lesser
of: (i) the total amount of the Total Payments; or (ii)
the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (a)
above); and
(c) The value of any noncash benefits or any deferred payment
or benefit shall be determined by the Company's
independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of Federal income taxation in
the calendar year in which the Gross-Up Payment is to be made,
and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence
on the effective date of termination, net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
7.5Subsequent Recalculation. In the event the Internal
Revenue Service adjusts the computation of the Company under
Section 7.4 herein so that the Executive did not receive the
greatest net benefit, the Company shall reimburse the Executive
for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Committee.
7.6Payment of Legal Fees. To the extent permitted by law, the
Company shall pay all legal fees, costs of litigation,
prejudgment interest, and other expenses incurred in good faith
by the Executive as a result of the Company's refusal to provide
the severance benefits under this Section 7 to which the
Executive becomes entitled under this Agreement, or as a result
of the Company's contesting the validity, enforceability, or
interpretation of this Agreement, or as a result of any conflict
(including conflicts related to the calculation of parachute
payments) between the parties pertaining to this Agreement.
Section 8. Confidentiality and Noncompetition
8.1Confidentiality. During the term of this Agreement and
thereafter in perpetuity, the Executive will not directly or
indirectly disclose to any third party not a member of the
Company Group, its or their legal counsel or independent
accountants, Confidential Information and Trade Secrets of the
Company and its subsidiaries and affiliates (collectively, the
"Company Group"), except as to any of the Confidential
Information or Trade Secrets which shall be or become in the
public domain other than by breach by the Executive of his
obligations set out in this Section 8.1 or shall be required to
be disclosed by applicable laws or regulations, any judicial or
administrative authority or stock exchange rule or regulation.
For the purposes of this Section 8.1 "Confidential Information"
shall mean: (i) internal policies and procedures, (ii) financial
information, (iii) marketing strategies, (iv) secret discoveries,
inventions, formulae, designs and know-how not constituting Trade
Secrets, and (v) other non-public information relating to the
Company Group's business, the disclosure of which would
materially adversely affect the Company Group's business or
financial condition. For the purposes of this Section 8.1 "Trade
Secrets" shall mean all secret discoveries, inventions, formulae,
designs, methods, processes and know-how entitled to protection
as trade secrets under the laws of the state of Texas.
8.2Noncompetition. In the event the Executive breaches his
obligations under Section 8.1 of this Agreement during the one
(1) year period following the Executive's termination of
employment, during the remainder of such one (1) year period (the
"Restricted Period") the Executive shall not engage in
Competition with the Company. For purposes of this Section 8.2,
"Competition" shall mean the Executive engaging in or otherwise
being a director, officer, employee, principal, agent,
stockholder, member, owner or partner of, or permitting his name
to be used in connection with the activities of any business or
organization in the international offshore contract drilling
industry in direct competition with the Company Group, but shall
not preclude the Executive becoming the registered or beneficial
owner of up to two percent (2%) of any class of capital stock of
any such corporation which is registered under the Securities
Exchange Act of 1934, as amended, provided the Executive does not
actively participate in the business of such corporation until
the end of the Restricted Period.
Section 9. Indemnification
The Company hereby covenants and agrees to indemnify and hold
harmless the Executive fully, completely, and absolutely against
and in respect to any and all actions, suits, proceedings,
claims, demands, judgments, costs, expenses (including attorney's
fees), losses, and damages resulting from the Executive's good
faith performance of his duties and obligations under the terms
of this Agreement.
Section 10. Outplacement Assistance
Following a termination of the Executive's employment as
described in Sections 6.5, 6.7, or 7.1 herein, the Executive
shall be reimbursed by the Company for the costs of all
outplacement services obtained by the Executive within the two
(2) year period after the effective date of termination;
provided, however, that the total reimbursement shall be limited
to an amount equal to fifteen percent (15%) of the Executive's
Base Salary as of the effective date of termination.
Section 11. Assignment
11.1. Assignment by Company. This Agreement may and shall be
assigned or transferred to, and shall be binding upon and shall
inure to the benefit of, any successor of the Company, and any
such successor shall be deemed substituted for all purposes of
the "Company" under the terms of this Agreement. As used in this
Agreement, the term "successor" shall mean any person, firm,
corporation, or business entity that at any time, causes a Change
in Control as described in Section 7.2. Notwithstanding such
assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall immediately entitle the Executive to
compensation from the Company in the same amount and on the same
terms as the Executive would be entitled in the event of an
involuntary termination by the Company, as provided in
Section 7.1 herein. Notice of such agreement shall be provided to
the Executive within thirty (30) days after a Change in Control.
Except as herein provided, the Company may not otherwise
assign this Agreement.
11.2 Assignment by Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive
should die while any amounts payable to the Executive hereunder
remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee
or, in the absence of such designee, to the Executive's estate.
This Agreement is not otherwise assignable by the Executive.
Section 12. Dispute Resolution and Notice
12.1 Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled by
arbitration, conducted before a panel of three (3) arbitrators
sitting in a location selected by the Executive within fifty (50)
miles from the location of his employment with the Company, in
accordance with the rules of the American Arbitration Association
then in effect.
Judgment may be entered on the award of the arbitrator in any
court having proper jurisdiction. All expenses of such
arbitration, including the fees and expenses of the counsel for
the Executive, shall be borne by the Company, exclusive of
Section 7.6.
12.2. Notice. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient
if in writing and if sent by registered or certified mail to the
Executive at the last address he has filed in writing with the
Company or, in the case of the Company, at its principal offices.
Section 13. Miscellaneous
13.1. Gender and Number. Except where otherwise indicated by
the context, any masculine term used herein also shall include
the feminine; the plural shall include the singular and the
singular shall include the plural.
13.2. Entire Agreement. This Agreement supersedes any prior
agreements or understandings, oral or written, between the
parties hereto or between the Executive and the Company, with
respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect thereto.
13.3. Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended
except by mutual agreement of the parties in a written instrument
executed by the parties hereto or their legal representatives.
13.4. Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect.
13.5. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original, but all of which together will constitute one and the
same Agreement.
13.6. Tax Withholding. The Company may withhold from any
benefits payable under this Agreement all federal, state, city,
or other taxes as may be required pursuant to any law or govern-
mental regulation or ruling.
13.7. Beneficiaries. The Executive may designate one or more
persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing
acceptable to the Board or the Board's designee. The Executive
may make or change such designation at any time.
Section 14. Governing Law
To the extent not preempted by federal law, the provisions of
this Agreement shall be construed and enforced in accordance with
the laws of the state of Texas.
IN WITNESS WHEREOF, the Executive and the Company (pursuant
to a resolution adopted at a duly constituted meeting of its
Board of Directors) have executed this Agreement, as of the day
and year first above written.
Executive:
___________________________
ATTEST R&B Falcon Corporation:
___________________________
APPENDIX A
R&B Falcon Corporation
Job Description
Job Title: Senior Vice President, General Counsel and
Secretary
Reports to: Chairman & Chief Executive Officer
Department: Executive
Location: Houston
Basic Function
Responsible for the legal, corporate security and risk management
and corporate secretarial functions for the Company, its
subsidiaries and affiliated companies.
Responsibilities and Duties
I. Legal: Responsible for providing, or causing to be
provided, legal advice and counsel to Company, its board of
directors, officers, managers and employees with respect to
matters affecting the Company's business and operations. Duties
include retention and supervision of corporate staff attorneys
and retention and supervision of outside counsel (domestic and
foreign), where appropriate.
II. Corporate Security: Responsible for the development,
implementation and administration of the security programs to
provide adequate protection of the employees and assets of the
Company, its subsidiaries and affiliated companies. Duties
include the retention and supervision of the Company's corporate
staff and retention and supervision of third party services,
where appropriate, to facilitate administration of such programs.
III. Risk Management: Responsible for the risk management
program for the Company, its subsidiaries and affiliated
companies including the identification of risks and exposures,
negotiation and placement of insurance programs and coverages,
management of uninsured risks and claims administration. Duties
include retention and supervision of corporate department staff,
brokers and other third parties to facilitate the implementation
of such programs.
IV. Corporate Secretary: Responsible for the corporate
secretarial function of the Company and its subsidiary and
affiliated companies. Duties include preparation or supervision
of the preparation of minutes, consents, notices of annual
meetings and proxy statements and stockholder records. Also
retention and supervision of the Company's registrar and transfer
agents.
Education and Professional Qualification
Bachelor of Laws degree (J.D. or LL.B.) from an accredited law
school; licensed to practice law in Texas.
Experience
Ten to fifteen years legal experience in the oil and gas or oil
service industry.
Supervision
Direct 3
Indirect 8
Total 11
EXHIBIT 10.18
Employment and Change in Control
Agreement
R&B Falcon Corporation
August 25, 1999
Contents
Section 1. Term of Employment 1
Section 2. Position and Responsibilities 2
Section 3. Standard of Care 2
Section 4. Compensation 3
Section 5. Expenses 5
Section 6. Employment Terminations 5
Section 7. Change in Control 10
Section 8. Confidentiality and Noncompetition 13
Section 9. Indemnification 14
Section 10. Outplacement Assistance 14
Section 11. Assignment 14
Section 12. Dispute Resolution and Notice 15
Section 13. Miscellaneous 15
Section 14. Governing Law 16
R&B Falcon Corporation
Employment and Change in Control Agreement
This EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT ("Agreement")
is made, entered into, and is effective as of this 25th day of
August, 1999 (hereinafter referred to as the "Effective Date"),
by and between R&B Falcon Corporation (hereinafter referred to as
the "Company"), a Delaware corporation having its principal
offices at Houston, Texas, and Andrew Bakonyi (hereinafter
referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company
in the capacity of President and Chief Operating Officer; and
WHEREAS, the Executive previously entered into an employment
agreement with the Company dated as of March 25, 1998 and it is
now in the best interest of the Company and the Executive to
enter into this new Agreement; and
WHEREAS, the Executive possesses considerable experience and
an intimate knowledge of the business and affairs of the Company,
its policies, methods, personnel, and operations; and
WHEREAS, the Company recognizes that the Executive's
contribution has been substantial and meritorious and, as such,
the Executive has demonstrated unique qualifications to act in an
executive capacity for the Company; and
WHEREAS, the Company is desirous of assuring the continued
employment of the Executive in the above stated capacity, and
Executive is desirous of having such assurance.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
Section 1. Term of Employment
The Company hereby agrees to employ the Executive and the
Executive hereby agrees to continue to serve the Company, in
accordance with the terms and conditions set forth herein, for an
initial period of three (3) years, commencing as of the Effective
Date of this Agreement, as indicated above; subject, however, to
earlier termination as expressly provided in Section 6 herein.
The initial three (3) year Employment Term (as defined below)
of this Agreement shall be extended automatically for one (1)
additional month beginning with the first day of the twenty-third
(23rd) month of the initial three (3) year term, and on the first
day of each month thereafter the Employment Term of this
Agreement automatically shall be extended one additional month;
provided, however, either party may give the other party written
notice that, beginning with the first of the month that is at
ninety (90) days after the date of the notice, the Employment
Term shall cease to be extended with respect to any termination
of the Executive's employment other than a termination occurring
during the Window Period (as defined in Section 6.7 herein).
In the event such notice of intent not to renew is properly
delivered by either party, then the Employment Term of this
Agreement, along with all corresponding rights, duties, and
covenants with respect thereto, shall automatically expire ninety
(90) days following the end of the later of the initial three-
year Employment Term or, if applicable, the extended Employment
Term then in effect; provided, however, that notwithstanding the
termination of the Employment Term (i) the provisions contained
in Section 8 herein shall survive such expiration and (ii) the
provisions and protections of this Agreement concerning a Change
in Control of the Company (as defined in Section 7 herein),
including, without limitation, a Change in Control that occurs
after the termination of the Employment Term, shall continue
without interruption or change.
This Agreement provides (x) for the employment of the
Executive for an initial fixed term, which may be extended, (such
term, as it may be extended, is referred to herein as the
"Employment Term"), and (y) separately, whether or not the
Employment Term has expired before a Change in Control of the
Company occurs, for Change in Control employment protection for
the Executive for as long as the Executive remains an employee of
the Company (or any parent or subsidiary), and also with respect
to certain terminations of the Executive's employment occurring
during the Window Period prior to a Change in Control.
Further, notwithstanding anything in this Agreement to the
contrary, termination of this Agreement shall not alter or impair
any rights or benefits of the Executive (or the Executive's
beneficiaries) that have arisen (contingently or otherwise) under
this Agreement on or prior to such termination.
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to
serve as the President and Chief Operating Officer of the
Company. In his capacity as the President and Chief Operating
Officer of the Company, the Executive shall report directly to
the Chairman and Chief Executive Officer, and shall maintain the
level of duties and responsibilities as in effect as of the
Effective Date, as set forth on Appendix A, or such higher level
of duties and responsibilities as he may be assigned during the
term of this Agreement. The Executive shall have the same status,
privileges, and responsibilities normally inherent in such
capacities in corporations of similar size and character.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to
devote substantially his full time, attention, and energies to
the Company's business and shall not be engaged in any other
business activity, whether or not such business activity is
pursued for gain, profit, or other pecuniary advantage; provided,
however, subject to the restrictions of Section 8, the Executive
may serve as a director of other companies so long as such
service is not injurious to the Company, may continue the conduct
of the business activities listed on Appendix B (to the extent
conducted before the Effective Date), and may engage in the
conduct of such other business activities that are substantially
similar in nature and scope to those listed on Appendix B,
provided that such other business activities do not materially
interfere with the Executive's duties and obligations under this
Agreement. The Executive covenants, warrants, and represents that
he shall:
(a) Devote his full and best efforts to the fulfillment of
his employment obligations; and
(b) Act in the same manner as a competent executive in a
comparable company.
This Section 3 shall not be construed as preventing the
Executive from investing assets in such form or manner as will
not require his services in the daily operations of the affairs
of the companies in which such investments are made.
Section 4. Compensation
As remuneration for all services to be rendered by the
Executive during the term of this Agreement, and as consideration
for complying with the covenants herein, the Company shall pay
and provide to the Executive the following:
4.1Base Salary. The Company shall pay the Executive a Base
Salary in an amount which shall be established from time to time
by the Board of Directors of the Company or the Board's designee;
provided, however, that the Executive's Base Salary may be
decreased by the Board (other than during a Window Period) as
part of a program that is applicable equally (as a percentage of
base salary) to all executives of the Company and is determined
by the Board to be necessary and appropriate in light of the
Company's then financial condition. Base Salary shall be paid to
the Executive in equal semi-monthly installments throughout the
year, consistent with the normal payroll practices of the
Company.
The annual Base Salary shall be reviewed at least annually
following the Effective Date of this Agreement, while this
Agreement is in force, to ascertain whether, in the judgment of
the Board or the Board's designee, such Base Salary should be
increased, based primarily on the performance of the Executive
during the year and on the then current rate of inflation. If so
increased, the Base Salary as stated above shall, likewise, be
increased for all purposes of this Agreement.
4.2Annual Bonus. The Company shall provide the Executive with
the opportunity to earn an annual bonus, at a level which is
commensurate with the opportunity typically offered to executives
having the same or similar duties and responsibilities as the
Executive at companies similar in size and character to the
Company. The Executive shall be notified in writing by the
Company prior to the beginning of each fiscal year as to what the
Executive's target bonus will be for such fiscal year.
Nothing in this section shall be construed as obligating the
Company to refrain from changing and/or amending any annual
incentive plan so long as such changes are similarly applicable
to all executives generally.
4.3Long-Term Incentives. The Company shall provide the
Executive the opportunity to earn long-term incentive awards, at
a level which is commensurate with the opportunity typically
offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size
and in character to the Company.
Nothing in this section shall be construed as obligating the
Company to refrain from changing, and/or amending any long-term
incentive plan, so long as such changes are similarly applicable
to all executives generally.
4.4Retirement Benefits. The Company shall provide to the
Executive participation in all Company qualified defined benefit
and defined contribution retirement plans, subject to the
eligibility and participation requirements of such plans. In
addition, the Company shall provide to the Executive
participation in all other nonqualified retirement and welfare
programs typically offered by companies similar in size and
character to the Company to executives having the same or similar
duties and responsibilities including any supplemental retirement
plans.
Nothing in this section shall be construed as obligating the
Company to refrain from changing, and/or amending the
nonqualified programs, so long as such changes are similarly
applicable to all executives generally.
4.5Supplemental Life Insurance. The Company, at its cost,
shall provide the Executive with supplemental life insurance in
the face amount of $100,000 per child for each child under age
21(twenty-one) years old.
4.6Employee Benefits. During the term of this Agreement, and
as otherwise provided within the provisions of each of the
respective plans, the Company shall provide to the Executive all
benefits to which other executives and employees of the Company
are entitled to receive, as commensurate with the Executive's
position. Such benefits shall include, but not be limited to,
group term life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and
long-term disability.
The Executive shall be entitled to paid vacation in
accordance with the standard written policy of the Company with
regard to vacations of employees.
The Executive shall likewise participate in any additional
benefit as may be established during the term of this Agreement,
by standard written policy of the Company.
4.7Perquisites. The Company shall provide to the Executive,
at the Company's cost, all perquisites to which other executives
of the Company are entitled to receive and such other perquisites
which are suitable to the character of Executive's position with
the Company and adequate for the performance of his duties
hereunder.
4.8Right to Change Plans. By reason of Sections 4.5 and 4.6
herein, the Company shall not be obligated to institute,
maintain, or refrain from changing, amending, or discontinuing
any benefit plan, program, or perquisite, so long as such changes
are similarly applicable to executive employees generally.
4.9Physical Exams. The Executive shall be entitled to an
annual physical exam paid for by the Company.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all
ordinary and necessary expenses, in a reasonable amount, which
the Executive incurs in performing his duties under this
Agreement including, but not limited to, travel, entertainment,
professional dues and subscriptions, and all dues, fees, and
expenses associated with membership in various professional,
business, social, and civic clubs, associations and societies of
which the Executive's participation is in the best interest of
the Company.
Section 6. Employment Terminations
6.1Termination Due to Retirement. In the event the
Executive's employment is terminated during the Employment Term
or Window Period by reason of retirement, the Executive's
benefits shall be determined in accordance with the Company's
qualified retirement, supplemental retirement, survivor's
benefits, insurance, and other applicable programs of the Company
then in effect.
Upon the effective date of such termination, the Company will pay
the Executive a pro rata portion of his Highest Annual Bonus (as
defined below in Section 7.1) and the Executive will be
immediately vested in all long-term incentive awards. Further,
upon the effective date of the termination, the Company's
obligation to pay and provide to the Executive any future Base
Salary, annual bonus, and long-term incentive awards (as provided
in Sections 4.1, 4.2, and 4.3 herein, respectively) shall
immediately expire. However, the Executive shall receive all
rights and benefits that he is vested in pursuant to other plans
and programs of the Company, including, but not limited to, the
retirement benefits as described in Section 4.4 herein.
6.2Termination Due to Death. In the event of the death of the
Executive during the Employment Term or Window Period, or during
any period of Disability during which he is receiving
compensation pursuant to Section 6.3 herein, the Company shall
(i) pay to the Executive's surviving spouse, or other beneficiary
as so designated by the Executive during his lifetime, or to the
Executive's estate, as appropriate, a lump sum amount equal to
the sum of the Executive's (x) Base Salary otherwise payable for
the remaining Employment Term and (y) an amount equal to the sum
of the Highest Annual Bonus for each fiscal year ending during
the remaining Employment Term, plus for the fiscal year in which
the remaining Employment Term would expire, a prorata portion of
the Highest Annual Bonus for such partial fiscal year, (ii) vest
all long-term incentive awards of the Executive, and (iii)
continue, at the Company's cost, all health and welfare benefits
for the Executive's spouse and dependents for the remaining term
of this Agreement.
Further, the Company shall pay and provide all other benefits
to which the Executive has a vested right at the time, according
to the provisions of the governing plan or program. The Company
thereafter shall have no further obligations under this
Agreement.
6.3Suspension Due to Disability. In the event that the
Executive becomes disabled during the Employment Term or Window
Period and is, therefore, unable to perform his duties herein for
a period of more than one hundred-eighty (180) calendar days in
the aggregate during any period of twelve (12) consecutive
months, or in the event of the Board's reasonable expectation
that the Executive's Disability will exist for more than a period
of one hundred-eighty (180) calendar days, the Company shall have
the right to suspend the Executive's active employment as
provided in this Agreement and place him on Disability. However,
the Board shall deliver written notice to the Executive of the
Company's intent to suspend for Disability at least thirty (30)
calendar days prior to the effective date of such suspension.
A suspension for Disability shall become effective upon the
end of the thirty (30) day notice period. Upon such effective
date, the Company will pay the Executive any Base Salary through
the effective date of the suspension for Disability, a pro rata
portion of the Highest Annual Bonus for the fiscal year in which
such suspension occurs, and the Executive will be immediately
vested in all long-term incentive awards, provided however, that
if the Executive's Disability is due to alcohol or drug
dependence, he will vest ratably in any long-term incentive
awards. Further, upon the effective date of the suspension, the
Company's obligation to pay and provide to the Executive any
future Base Salary, annual bonus, and long-term incentive awards
(as provided in Sections 4.1, 4.2, and 4.3, respectively) shall
immediately be suspended. However, the Executive shall receive
all rights and benefits that he is vested in, pursuant to other
plans and programs of the Company, including, but not limited to,
short- and long-term disability benefits, and retirement benefits
as described in Section 4.4.
Under no circumstance will the Executive, if suspended due to
Disability, receive less than 60% of his Base Salary in effect at
the time of his suspension for Disability through age 65. The
Company agrees to make such payments to the Executive in the
event that the benefit is not available for any reason.
The term "Disability" shall mean, for all purposes of this
Agreement, the incapacity of the Executive, due to injury,
illness, disease, alcohol or drug dependency, or bodily or mental
infirmity, to engage in the performance of substantially all of
the usual duties of employment with the Company as contemplated
by Section 2 herein, such Disability to be determined by the
Board of Directors of the Company upon receipt and in reliance on
competent medical advice from one or more individuals, selected
by the Board, who are qualified to give such professional medical
advice.
If the Executive and the Company shall not be in agreement as
to whether the Executive has suffered a Disability for the
purposes of this Agreement, the matter shall be referred to a
panel of three medical doctors, one of which shall be selected by
the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two doctors as so selected,
and the decision of a majority of the panel with respect to the
question of whether the Executive has suffered a Disability shall
be binding upon the Executive and the Company. The expenses of
any such referral shall be borne by the Company. The Executive
may be required by the Company to submit to medical examination
at any time during the period of his employment hereunder, but
not more often than quarter-annually, to determine whether a
Disability exists for the purposes of this Agreement.
It is expressly understood that the Disability of the
Executive for a period of one hundred-eighty (180) calendar days
or less in the aggregate during any period of twelve (12)
consecutive months, in the absence of any reasonable expectation
that his Disability will exist for more than such a period of
time, shall not constitute a failure by him to perform his duties
hereunder and shall not be deemed a breach or default and the
Executive shall receive full compensation and benefits for any
such period of Disability or for any other temporary illness or
incapacity during the term of this Agreement. If the Executive
recovers from any Disability, his suspension shall terminate and
the Executive shall resume his duties with full compensation and
benefits.
6.4Voluntary Termination by the Executive. The Executive may
terminate this Agreement at any time by giving the Board of
Directors of the Company written notice of intent to terminate,
delivered at least thirty (30) calendar days prior to the
effective date of such termination (such period not to include
vacation). The termination automatically shall become effective
upon the expiration of the thirty (30) day notice period.
Upon the effective date of such termination, the Company
shall pay to the Executive his full Base Salary, at the rate then
in effect as provided in Section 4.1 herein, through the
effective date of termination, plus all other benefits, including
long-term incentive awards, to which the Executive has a vested
right to at that time including, but not limited to, accrued
vacation pay. The Company also shall provide to the Executive the
vested retirement benefits described in Section 4.4 herein. With
the exception of the covenants contained in Section 8 herein
(which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this
Agreement.
6.5Involuntary Termination by the Company Without Cause. At
all times during the Employment Term and outside the Window
Period, the Board may terminate the Executive's employment, as
provided under this Agreement, at any time for reasons other than
a suspension for Disability or a termination for Cause, by
notifying the Executive in writing of the Company's intent to
terminate, at least thirty (30) calendar days prior the effective
date of such termination.
Upon the effective date of such termination, following the
expiration of the thirty (30) day notice period, the Company
shall (i) pay the Executive a lump sum amount equal to the sum of
(x) the Executive's Base Salary otherwise payable for the
remaining Employment Term and (y) an amount equal to the sum of
the Highest Annual Bonus for each fiscal year ending during the
remaining Employment Term plus for the fiscal year in which the
remaining Employment Term would expire, a prorata portion of the
Highest Annual Bonus for such partial fiscal year, (ii) vest all
long-term incentive awards of the Executive, and (iii) continue,
at the Company's cost, all health and welfare benefits for the
Executive's spouse and dependents for the remaining Employment
Term.
Further, the Company shall pay the Executive all other
benefits to which the Executive has a vested right at the time,
according to the provisions of the governing plan or program. The
Company will also provide outplacement services or will reimburse
the Executive for the cost of such services as described in
Section 10 herein. The Company and the Executive thereafter shall
have no further obligations under this Agreement.
If the Executive's employment is terminated during the Window
Period by the Board for reasons other than a suspension for
Disability or a termination for Cause, the Executive shall be
entitled to receive the benefits provided in Section 7.1 herein
in lieu of the benefits set forth in this Section 6.5.
6.6 Termination For Cause. Nothing in this Agreement shall be
construed to prevent the Board from terminating the Executive's
employment under this Agreement for "Cause."
"Cause" means the Executive's:
(a) deliberate act of proven fraud having a
material adverse impact on the business or
consolidated financial condition or results of
operations of the Company and its subsidiaries;
(b) deliberate and continuing failure to
comply with applicable laws and regulations having a
material adverse impact on the business or
consolidated financial condition or results of
operations of the Company and its subsidiaries; or
(c) conviction of a criminal offense
constituting a felony.
For purposes of this Section 6.6, no act or omission by
the Executive shall be considered "willful" unless it is done or
omitted in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the
Company. Any act or failure to act based upon (i) authority given
pursuant to a resolution duly adopted by the Board, or (ii)
advice of counsel for the Company, shall be conclusively presumed
to be done or omitted to be done by the Executive in good faith
and in the best interests of the Company. For purposes of
subsections (a) and (b) above, the Executive shall not be deemed
to be terminated for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than the entire membership to
the Board at a meeting called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard
before the Board) finding that in the good faith opinion of the
Board (x) the Executive is guilty of the conduct described in
subsection (a) or (b) above, (y) the Executive has been provided
a 30-day period in which to "cure" such specified violation
following a detailed written notice from the Board of the
Executive's violation of subsection (a) or (b) above and (z) the
Executive has failed to "cure" such violation, specifying the
particulars thereof in detail. The Executive, if a member of the
Board, will be not be counted for purposes of such a vote.
In the event this Agreement is terminated by the Board for
Cause, the Company shall pay the Executive his Base Salary
through the effective date of the employment termination and the
Executive shall immediately thereafter forfeit all rights and
benefits (other than vested benefits) he would otherwise have
been entitled to receive under this Agreement. The Executive will
lose any right to supplemental retirement benefits provided by
the Company. The Company and the Executive thereafter shall have
no further obligations under this Agreement.
During the Window Period, as described herein, if any
litigation arises out of a termination for Cause, to the extent
permitted by law, the Company shall pay all legal fees, costs of
litigation, prejudgment interest and other expenses incurred in
good faith by the Executive.
6.7Termination for Good Reason. At any time during the
Employment Term or Window Period, the Executive may terminate
this Agreement for Good Reason (as defined below) by giving the
Board of Directors of the Company thirty (30) calendar days
written notice of intent to terminate, which notice sets forth in
reasonable detail the facts and circumstances claimed to provide
a basis for such termination.
Upon the expiration of the thirty (30) day notice period, the
Good Reason termination shall become effective, and the Company
shall pay, in a lump sum, and provide to the Executive the
benefits set forth in this Section 6.7 (or, in the event of
termination for Good Reason during the Window Period, the
benefits set forth in Section 7.1 herein).
Good Reason shall mean, without the Executive's express
written consent, the occurrence of any one or more of the
following:
(a) The assignment of the Executive to duties materially
inconsistent with the Executive's authorities, duties,
responsibilities, and status (including offices, titles,
and reporting relationships) as an officer of the
Company, or a reduction or alteration in the nature or
status of the Executive's authorities, duties, or
responsibilities from those in effect during the
immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a
location which is at least fifty (50) miles further from
the Executive's current primary residence than is such
residence from the Company's current headquarters, except
for required travel on the Company's business to an
extent substantially consistent with the Executive's
business obligations as of the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary
except as permitted in Section 4.1;
(d) A material reduction in the Executive's level of
participation in any of the Company's short- and/or long-
term incentive compensation plans, or employee benefit or
retirement plans, policies, practices, or arrangements in
which the Executive participates as of the Effective
Date; provided, however, that reductions in the levels of
participation in any such plans shall not be deemed to be
"Good Reason" if the Executive's reduced level of
participation in each such program remains substantially
consistent with the average level of participation of
other executives who have positions commensurate with the
Executive's position; or
(e) The failure of the Company to obtain a satisfactory
agreement from any successor to the Company to assume and
agree to perform this Agreement, as contemplated in
Section 11.1 herein.
Upon a termination of the Executive's employment for Good
Reason at any time during the Employment Term, other than during
the Window Period, with the "Window Period" being (x) the twelve
(12) full calendar month period prior to the effective date of a
Change in Control that occurs during the initial three (3) year
term of the Employment Term, (y) the six (6) full calendar month
period prior to the effective date of a Change in Control that
occurs after the initial three (3) year Employment Term, and (z)
the twenty-four (24) month period beginning on the effective date
of a Change in Control, the Executive shall be entitled to
receive the same payments and benefits as he is entitled to
receive following an involuntary termination of his employment by
the Company during the Employment Term without Cause, as
specified in Section 6.5 herein. Upon a termination of the
Executive's employment for Good Reason within the Window Period,
regardless of whether the Change in Control occurs during the
Employment Term, the Executive shall be entitled to receive the
payments and benefits set forth in Section 7.1 herein in lieu of
those set forth in this Section 6.7.
The Executive's right to terminate employment for Good Reason
shall not be affected by the Executive's incapacity due to
physical or mental illness; provided, however, the Executive may
not terminate for Good Reason during any period that the
Executive's employment is suspended due to Disability.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason herein.
Section 7. Change in Control
7.1Employment Terminations in Connection with a Change in
Control. In the event of a Qualifying Termination (as defined
below) within the Window Period, then in lieu of all other
benefits provided to the Executive under the provisions of this
Agreement, the Company shall pay to the Executive in a lump sum
amount, and provide him with the following severance benefits
(hereinafter referred to as the "Severance Benefits"):
(a) An amount equal to three (3) times the highest rate of
the Executive's annualized Base Salary rate in effect at
any time up to and including the effective date of
termination;
(b) An amount equal to three (3) times the "Highest Annual
Bonus", which shall mean the greater of (i) Executive's
highest annual bonus earned over the fiscal years,
beginning with the 1998 fiscal year, prior to the Change
in Control (with respect to the 1998 fiscal year, the
Executive received a bonus of $242,941) and (ii) the
Executive's targeted annual bonus for such fiscal year of
termination;
(c) An amount equal to the Executive's unpaid Base Salary and
accrued vacation pay through the effective date of
termination;
(d) An amount equal to the Executive's Highest Annual Bonus
multiplied by a fraction, the numerator of which is the
number of completed days in the then-existing fiscal year
through the effective date of termination, and the
denominator of which is three hundred sixty-five (365);
(e) A continuation of the welfare benefits of medical
insurance, dental insurance, and group term life
insurance for three (3) full years after the effective
date of termination. These benefits shall be provided to
the Executive at the same premium cost, and at the same
coverage level, as in effect as of the Executive's
effective date of termination. However, in the event the
premium cost and/or level of coverage shall change for
all employees of the Company, the cost and/or coverage
level, likewise, shall change for the Executive in a
corresponding manner.
The continuation of these welfare benefits shall be
discontinued prior to the end of the three (3) year
period in the event the Executive has available
substantially similar benefits from a subsequent
employer, as determined by the Company's Board of
Directors or the Board's designee.
Upon the termination of these welfare benefits, the
Executive shall be provided a COBRA continuation election
under the Company's group health plans;
(f) A lump-sum cash payment of the actuarial present value
equivalent (as determined pursuant to Section 417 of the
Internal Revenue Code) of the aggregate benefits accrued
by the Executive as of the effective date of termination
under the terms of any and all supplemental retirement
plans in which the Executive participates. For this
purpose, such benefits shall be calculated under the
assumption that the Executive's employment continued
following the effective date of termination for three (3)
full years (i.e., three (3) additional years of service
credits shall be added); provided, however, that for
purposes of determining "final average pay" under such
programs, the Executive's actual pay history as of the
effective date of termination shall be used;
(g) Reimbursement for outplacement services costs (as
provided in Section 10 herein); and
(h) Immediate vesting of all outstanding long-term incentive
awards.
For purposes of this Section 7, a Qualifying Termination
shall mean any termination of the Executive's employment other
than: (1) by the Company for Cause (as provided in Section 6.6
herein); (2) by reason of death or suspension for Disability (as
provided in Section 6.2 herein); or (3) by the Executive without
Good Reason (as provided in Section 6.7 herein).
7.2Definition of "Change in Control." A Change in Control of
the Company shall be deemed to have occurred as of the first day
any one or more of the following conditions shall have been
satisfied:
(a) Any individual, corporation (other than the Company),
partnership, trust, association, pool, syndicate, or any
other entity or any group of persons acting in concert
becomes the beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, of
securities of the Company possessing twenty-five percent
(25%) or more of the voting power for the election of
directors of the Company;
(b) There shall be consummated any consolidation, merger, or
other business combination involving the Company or the
securities of the Company in which holders of voting
securities of the Company immediately prior to such
consummation own, as a group, immediately after such
consummation, voting securities of the Company (or, if
the Company does not survive such transaction, voting
securities of the corporation surviving such transaction)
having less than sixty percent (60%) of the total voting
power in an election of directors of the Company (or such
other surviving corporation);
(c) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the directors of the Company cease for any
reason to constitute at least a majority thereof unless
the election, or the nomination for election by the
Company's shareholders, of each new director of the
Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in
office who were directors of the Company at the beginning
of any such period; or
(d) There shall be consummated any sale, lease, exchange, or
other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets
of the Company (on a consolidated basis) to a party which
is not controlled by or under common control with the
Company.
7.3 Excise Tax Equalization Payment. In the event that the
Executive becomes entitled to Severance Benefits or any
other payment or benefit under this Agreement, or under
any other agreement with or plan of the Company (in the
aggregate, the "Total Payments"), if any of the Total
Payments will be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Code (or any similar tax
that may hereafter be imposed), the Company shall pay to
the Executive in cash an additional amount (the "Gross-Up
Payment") such that the net amount retained by the
Executive after deduction of any Excise Tax upon the
Total Payments and any federal, state and local income
tax and Excise Tax upon the Gross-Up Payment provided for
by this Section 7.3 (including FICA and FUTA), shall be
equal to the Total Payments. Such payment shall be made
by the Company to the Executive as soon as practical
following the effective date of termination, but in no
event beyond thirty (30) days from such date.
7.4Tax Computation. For purposes of determining whether any
of the Total Payments will be subject to the Excise Tax and
the amounts of such Excise Tax:
(a) Any other payments or benefits received or to be received
by the Executive in connection with a Change in Control
of the Company or the Executive's termination of
employment (whether pursuant to the terms of this Plan or
any other plan, arrangement, or agreement with the
Company, or with any person (which shall have the meaning
set forth in Section 3(a)(9) of the Securities Exchange
Act of 1934, including a "group" as defined in
Section 13(d) therein) whose actions result in a Change
in Control of the Company or any person affiliated with
the Company or such persons) shall be treated as
"parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall
be treated as subject to the Excise Tax, unless in the
opinion of tax counsel as supported by the Company's
independent auditors and acceptable to the Executive,
such other payments or benefits (in whole or in part) do
not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in
excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not
subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated
as subject to the Excise Tax shall be equal to the lesser
of: (i) the total amount of the Total Payments; or (ii)
the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (a)
above); and
(c) The value of any noncash benefits or any deferred payment
or benefit shall be determined by the Company's
independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of Federal income taxation in
the calendar year in which the Gross-Up Payment is to be made,
and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence
on the effective date of termination, net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
7.5Subsequent Recalculation. In the event the Internal
Revenue Service adjusts the computation of the Company under
Section 7.4 herein so that the Executive did not receive the
greatest net benefit, the Company shall reimburse the Executive
for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Committee.
7.6Payment of Legal Fees. To the extent permitted by law, the
Company shall pay all legal fees, costs of litigation,
prejudgment interest, and other expenses incurred in good faith
by the Executive as a result of the Company's refusal to provide
the severance benefits under this Section 7 to which the
Executive becomes entitled under this Agreement, or as a result
of the Company's contesting the validity, enforceability, or
interpretation of this Agreement, or as a result of any conflict
(including conflicts related to the calculation of parachute
payments) between the parties pertaining to this Agreement.
Section 8. Confidentiality and Noncompetition
8.1Confidentiality. During the term of this Agreement and
thereafter in perpetuity, the Executive will not directly or
indirectly disclose to any third party not a member of the
Company Group, its or their legal counsel or independent
accountants, Confidential Information and Trade Secrets of the
Company and its subsidiaries and affiliates (collectively, the
"Company Group"), except as to any of the Confidential
Information or Trade Secrets which shall be or become in the
public domain other than by breach by the Executive of his
obligations set out in this Section 8.1 or shall be required to
be disclosed by applicable laws or regulations, any judicial or
administrative authority or stock exchange rule or regulation.
For the purposes of this Section 8.1 "Confidential Information"
shall mean: (i) internal policies and procedures, (ii) financial
information, (iii) marketing strategies, (iv) secret discoveries,
inventions, formulae, designs and know-how not constituting Trade
Secrets, and (v) other non-public information relating to the
Company Group's business, the disclosure of which would
materially adversely affect the Company Group's business or
financial condition. For the purposes of this Section 8.1 "Trade
Secrets" shall mean all secret discoveries, inventions, formulae,
designs, methods, processes and know-how entitled to protection
as trade secrets under the laws of the state of Texas.
8.2Noncompetition. In the event the Executive breaches his
obligations under Section 8.1 of this Agreement during the one
(1) year period following the Executive's termination of
employment, during the remainder of such one (1) year period (the
"Restricted Period") the Executive shall not engage in
Competition with the Company. For purposes of this Section 8.2,
"Competition" shall mean the Executive engaging in or otherwise
being a director, officer, employee, principal, agent,
stockholder, member, owner or partner of, or permitting his name
to be used in connection with the activities of any business or
organization in the international offshore contract drilling
industry in direct competition with the Company Group, but shall
not preclude the Executive becoming the registered or beneficial
owner of up to two percent (2%) of any class of capital stock of
any such corporation which is registered under the Securities
Exchange Act of 1934, as amended, provided the Executive does not
actively participate in the business of such corporation until
the end of the Restricted Period.
Section 9. Indemnification
The Company hereby covenants and agrees to indemnify and hold
harmless the Executive fully, completely, and absolutely against
and in respect to any and all actions, suits, proceedings,
claims, demands, judgments, costs, expenses (including attorney's
fees), losses, and damages resulting from the Executive's good
faith performance of his duties and obligations under the terms
of this Agreement.
Section 10. Outplacement Assistance
Following a termination of the Executive's employment as
described in Sections 6.5, 6.7, or 7.1 herein, the Executive
shall be reimbursed by the Company for the costs of all
outplacement services obtained by the Executive within the two
(2) year period after the effective date of termination;
provided, however, that the total reimbursement shall be limited
to an amount equal to fifteen percent (15%) of the Executive's
Base Salary as of the effective date of termination.
Section 11. Assignment
11.1. Assignment by Company. This Agreement may and shall be
assigned or transferred to, and shall be binding upon and shall
inure to the benefit of, any successor of the Company, and any
such successor shall be deemed substituted for all purposes of
the "Company" under the terms of this Agreement. As used in this
Agreement, the term "successor" shall mean any person, firm,
corporation, or business entity that at any time, causes a Change
in Control as described in Section 7.2. Notwithstanding such
assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall immediately entitle the Executive to
compensation from the Company in the same amount and on the same
terms as the Executive would be entitled in the event of an
involuntary termination by the Company, as provided in
Section 7.1 herein. Notice of such agreement shall be provided to
the Executive within thirty (30) days after a Change in Control.
Except as herein provided, the Company may not otherwise
assign this Agreement.
11.2 Assignment by Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive
should die while any amounts payable to the Executive hereunder
remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee
or, in the absence of such designee, to the Executive's estate.
This Agreement is not otherwise assignable by the Executive.
Section 12. Dispute Resolution and Notice
12.1 Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled by
arbitration, conducted before a panel of three (3) arbitrators
sitting in a location selected by the Executive within fifty (50)
miles from the location of his employment with the Company, in
accordance with the rules of the American Arbitration Association
then in effect.
Judgment may be entered on the award of the arbitrator in any
court having proper jurisdiction. All expenses of such
arbitration, including the fees and expenses of the counsel for
the Executive, shall be borne by the Company, exclusive of
Section 7.6.
12.2. Notice. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient
if in writing and if sent by registered or certified mail to the
Executive at the last address he has filed in writing with the
Company or, in the case of the Company, at its principal offices.
Section 13. Miscellaneous
13.1. Gender and Number. Except where otherwise indicated by
the context, any masculine term used herein also shall include
the feminine; the plural shall include the singular and the
singular shall include the plural.
13.2. Entire Agreement. This Agreement supersedes any prior
agreements or understandings, oral or written, between the
parties hereto or between the Executive and the Company, with
respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect thereto.
13.3. Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended
except by mutual agreement of the parties in a written instrument
executed by the parties hereto or their legal representatives.
13.4. Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect.
13.5. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original, but all of which together will constitute one and the
same Agreement.
13.6. Tax Withholding. The Company may withhold from any
benefits payable under this Agreement all federal, state, city,
or other taxes as may be required pursuant to any law or govern-
mental regulation or ruling.
13.7. Beneficiaries. The Executive may designate one or more
persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing
acceptable to the Board or the Board's designee. The Executive
may make or change such designation at any time.
Section 14. Governing Law
To the extent not preempted by federal law, the provisions of
this Agreement shall be construed and enforced in accordance with
the laws of the state of Texas.
IN WITNESS WHEREOF, the Executive and the Company (pursuant
to a resolution adopted at a duly constituted meeting of its
Board of Directors) have executed this Agreement, as of the day
and year first above written.
Executive:
___________________________
ATTEST R&B Falcon Corporation:
___________________________
APPENDIX A
R&B Falcon Corporation
Job Description
Job Title: President and Chief Operating Officer
Reports to: Chairman & Chief Executive Officer
Department: Executive
Location: Houston
Basic Function
Plans, develops, and establishes policies and objectives of R&B
Falcon Corporation in accordance with Board directives and
corporation charter. Responsible for achieving organizational
performance and profit objectives.
Responsibilities and Duties
1. Has overall responsibility for all of the corporations
operating divisions including International & Deepwater Division,
Shallow Water and Transition Zone Division, International
Engineering Services (Turnkey), Domestic Engineering Services
(Turnkey), Engineering & Technical Support, Marketing Services
and Quality, Safety & Training.
2. Confers with managers of International & Deepwater, Shallow
Water & Transition Zone and Turnkey Divisions to plan business
objectives, to develop organizational policies, to coordinate
functions and operations between divisions and departments, and
to establish responsibilities and procedures for attaining
objectives.
3. Reviews activity reports and financial statements to
determine progress and status in attaining objectives and revises
objectives and plans in accordance with current conditions.
4. Ensures Manager's understanding of Safety Management System
functions and how they contribute to company goals. Encourages
continuous improvement to further these goals and increase
operational efficiency in each Division.
5. Manages by demonstrating leadership, motivation, planning,
feedback and delegation as appropriate.
6. Approves Division manager's annual operating budgets and
monitors actual expenditures throughout the year. Monitors
results and dictates necessary corrective action to rectify
budget exceptions and variances to achieve planned profitability.
7. Assumes overall command of the crisis management team,
during actual emergencies and drills.
8. Develops and maintains contact with customers in all
Divisions to ensure good relationships with R&B Falcon Drilling
Co.
9. Creates the structure and processes necessary to manage R&B
Falcon's current activities and its projected growth.
10. Maintains a sound plan of corporate organization,
establishing policies to ensure adequate management development
and to provide for capable management succession.
11. Evaluates the results of overall operations regularly and
systematically and reports these results to Chief Executive
Officer.
12. Ensures that the responsibilities, authorities, and
accountability of all direct subordinates are defined and
understood.
13. Ensures that all organization activities and operations are
carried out in compliance with local, state, federal and
international regulations and laws governing business operations.
Reporting
Reports to the Chairman and Chief Executive Officer
Supervision
The following division and department heads are direct reports -
Senior Vice President Operations, International & Deepwater
Division; Senior Vice President Operations, Shallow Water &
Transition Zone Division; Vice President, International
Engineering Services (Turnkey); Vice President, Domestic
Engineering Services (Turnkey); Vice President, Engineering &
Technical Support; Director, Marketing Services and Director,
Quality, Safety & Training.
Exhibit 15
R&B Falcon Corporation
We are aware that R&B Falcon Corporation has incorporated by
reference in its Registration Statements No. 333-43475, 333-
67755, 333-67757, 333-68101, 333-81179, 333-81181, 333-
81381, 333-88839, 333-88841 and 333-88843 its Form 10-Q for the
quarter ended September 30, 1999, which includes our report dated
October 29, 1999 covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of the
Securities Act of 1933, that report is not considered a part of
the registration statement prepared or certified by our firm or a
report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
/s/Arthur Andersen LLP
Houston, Texas
November 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of R&B Falcon Corporation for the nine months ended
September 30, 1999 and 1998 as restated to reflect the recontinuance of the oil
and gas operations for the nine months ended September 30, 1998 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> SEP-30-1999 SEP-30-1998
<CASH> 646 67
<SECURITIES> 32 82
<RECEIVABLES> 265 255
<ALLOWANCES> 21 11
<INVENTORY> 45 28
<CURRENT-ASSETS> 1,000 441
<PP&E> 4,115 2,801
<DEPRECIATION> 625 487
<TOTAL-ASSETS> 4,913 2,793
<CURRENT-LIABILITIES> 276 354
<BONDS> 2,943 1,375
256 0
0 0
<COMMON> 2 2
<OTHER-SE> 1,248 841
<TOTAL-LIABILITY-AND-EQUITY> 4,913 2,793
<SALES> 0 0
<TOTAL-REVENUES> 685 804
<CGS> 0 0
<TOTAL-COSTS> 639 599
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 117 43
<INCOME-PRETAX> (38) 169
<INCOME-TAX> (14) 68
<INCOME-CONTINUING> (33) 93
<DISCONTINUED> 0 17
<EXTRAORDINARY> (2) (22)
<CHANGES> 0 0
<NET-INCOME> (56) 88
<EPS-BASIC> (.29) .53
<EPS-DILUTED> (.29) .53
</TABLE>
