<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 26, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
RBF FINANCE CO.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1381 76-0599699
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
901 THREADNEEDLE
HOUSTON, TEXAS 77079
(281) 496-5000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
LEIGHTON E. MOSS
RBF FINANCE CO.
901 THREADNEEDLE
HOUSTON, TEXAS 77079
(281) 496-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
Copies to:
W. MARK YOUNG
GARDERE WYNNE SEWELL & RIGGS, L.L.P.
1000 LOUISIANA, SUITE 3400
HOUSTON, TEXAS 77002-5007
(713) 276-5864
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this registration
statement and upon consummation of the exchange offer described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the offering. [ ] __________
---------------------
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
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- ----------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
11% Senior Secured Notes due 2006....... $400,000,000 100% $400,000,000 $111,200
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11 3/8% Senior Secured Notes due 2009... $400,000,000 100% $400,000,000 $111,200
- ----------------------------------------------------------------------------------------------------------------
Guarantees of 11% Senior Secured Notes
due 2006(2)........................... -- -- -- --
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Guarantees of 11 3/8% Senior Secured
Notes due 2009(2)..................... -- -- -- --
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Total........................... $800,000,000 $800,000,000 $222,400
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
(2) Pursuant to Rule 457(n), no separate filing fee is required to be paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
TABLE OF OTHER REGISTRANTS
<TABLE>
<CAPTION>
PRIMARY
STATE OR OTHER STANDARD
JURISDICTION OF INDUSTRIAL
EXACT NAME OF REGISTRANT INCORPORATION OR CLASSIFICATION I.R.S. EMPLOYER
AS SPECIFIED IN ITS CHARTER ORGANIZATION CODE NUMBER IDENTIFICATION NO.
--------------------------- ---------------- -------------- ------------------
<S> <C> <C> <C>
R&B Falcon Corporation........................... Delaware 1381 76-0544217
</TABLE>
<PAGE> 3
SUBJECT TO COMPLETION, DATED MAY 26, 1999
PROSPECTUS
RBF FINANCE CO.
OFFER TO EXCHANGE
ALL OUTSTANDING
11% SENIOR SECURED NOTES DUE 2006
FOR
11% SENIOR SECURED NOTES DUE 2006
AND
ALL OUTSTANDING
11 3/8% SENIOR SECURED NOTES DUE 2009
FOR
11 3/8% SENIOR SECURED NOTES DUE 2009
-------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1999, UNLESS EXTENDED
-------------------------
TERMS OF EXCHANGE OFFER
- - We are offering to exchange up to $400 million of our outstanding 11% Senior
Secured Notes due 2006 for an equal amount of our 11% Senior Secured Notes due
2006, and up to $400 million of our outstanding 11 3/8% Senior Secured Notes
due 2009 for an equal amount of our 11 3/8% Senior Secured Notes due 2009
- - The exchange offer expires 5:00 p.m., New York City time, ,
1999, unless extended
- - The exchange offer is not subject to any condition other than that it not
violate applicable law or any applicable interpretation of the staff of the
Securities and Exchange Commission
- - We will exchange all outstanding notes of each series that are validly
tendered and not validly withdrawn
- - Tenders of outstanding notes may be withdrawn any time prior to the expiration
of the exchange offer
- - The exchange of notes will not be a taxable exchange for the U.S. federal
income tax purposes
- - We will not receive any proceeds from the exchange offer
- - The terms of each series of the notes to be issued are substantially identical
to the same series of outstanding notes, except they do not contain the
transfer restrictions and registration rights relating to the outstanding
notes
-------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF MATTERS THAT YOU
SHOULD CONSIDER PRIOR TO DECIDING WHETHER TO EXCHANGE YOUR NOTES IN THE EXCHANGE
OFFER.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES TO BE DISTRIBUTED IN THE
EXCHANGE OFFER, NOR HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
THE INFORMATION IN THE PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
-------------------------
The date of this Prospectus is , 1999
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY..................................................... 1
RISK FACTORS................................................ 13
FORWARD-LOOKING STATEMENTS.................................. 20
THE EXCHANGE OFFER.......................................... 21
USE OF PROCEEDS............................................. 27
CAPITALIZATION OF RBF FINANCE CO............................ 28
CAPITALIZATION OF R&B FALCON CORPORATION.................... 29
SELECTED FINANCIAL DATA..................................... 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 31
THE COMPANY................................................. 34
MANAGEMENT.................................................. 35
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 36
SECURITY OWNERSHIP OF OFFICERS AND DIRECTORS................ 36
DESCRIPTION OF THE NOTES.................................... 37
DESCRIPTION OF SECURITY FOR THE NOTES....................... 81
DESCRIPTION OF R&B FALCON'S SIGNIFICANT INDEBTEDNESS........ 85
TRANSFER RESTRICTIONS....................................... 86
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS FOR
NON-UNITED STATES HOLDERS................................. 86
PLAN OF DISTRIBUTION........................................ 88
WHERE YOU CAN FIND MORE INFORMATION......................... 89
INCORPORATION BY REFERENCE.................................. 90
LEGAL MATTERS............................................... 90
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 90
</TABLE>
------------------------------------
<PAGE> 5
SUMMARY
This summary highlights selected information from this prospectus to help
you understand the exchange offer and the exchange notes. You should carefully
read the entire prospectus to understand fully the terms of the exchange offer
and the exchange notes, as well as the tax and other considerations that are
important to you in making your investment decision. You should pay special
attention to the "Risk Factors" section beginning on page 13 of this prospectus.
THE COMPANY
We are a limited purpose corporation that has been recently organized
solely for the purpose of issuing $400 million of our 11% Senior Secured Notes
due 2006 and $400 million of our 11 3/8% Senior Secured Notes due 2009. The
notes are our full recourse obligations. We loaned the proceeds of the sale of
the notes to R&B Falcon Corporation to finance costs of acquiring, constructing,
repairing and improving drilling rigs and, to the extent that R&B Falcon had
already paid those costs, for general corporate purposes, including the
repayment of debt. R&B Falcon has unconditionally and irrevocably guaranteed our
obligations under the notes. The mailing address of our principal executive
offices is 901 Threadneedle, Houston, Texas 77079, and our telephone number is
(281) 496-5000.
R&B FALCON CORPORATION
R&B Falcon owns and operates the world's largest fleet of marine drilling
rigs. R&B Falcon's fleet is one of the most diverse in the industry, capable of
drilling in shallow to ultra-deepwater depths. R&B Falcon currently operates in
most of the world's major offshore hydrocarbon producing regions. R&B Falcon
believes that its fleet diversity and worldwide operations allow it to mitigate
revenue and cash flow impacts associated with a major downturn in any single
segment of the drilling industry or geographic region. The mailing address of
R&B Falcon's principal executive offices is 901 Threadneedle, Houston, Texas
77079, and its telephone number is (281) 496-5000.
RECENT DEVELOPMENTS
On March 26, 1999, R&B Falcon issued $200 million of its 12 1/4% Senior
Secured Notes due 2006. Also on that date, we issued $400 million of our 11%
Senior Secured Notes due 2006 and $400 million of our 11 3/8% Senior Secured
Notes due 2009. We loaned the proceeds from these notes to R&B Falcon in ten
separate loans, each of which is secured by one of R&B Falcon's drilling rigs or
the construction contract to build a drilling rig. R&B Falcon also guaranteed
the 11% Senior Secured Notes due 2006 and the 11 3/8% Senior Secured Notes due
2009. R&B Falcon is using the proceeds from these loans to finance the costs of
acquiring, constructing, repairing and improving the drilling rigs that are
security for the loans. To the extent R&B Falcon had already paid these costs,
it is using the proceeds for general corporate purposes, including the repayment
of debt. R&B Falcon is using the net proceeds from its offering of the $200
million senior notes for general corporate purposes, including the repayment of
debt. For accounting purposes, R&B Falcon will record our $800 million of notes
because it guarantees these notes.
On April 7, 1999, R&B Falcon announced that Steven Webster, R&B Falcon's
president and chief executive officer, would resign from these officer positions
at the end of May 1999. On May 19, 1999, R&B Falcon elected Mr. Paul Loyd, R&B
Falcon's chairman of the board, as R&B Falcon's chief executive officer. R&B
Falcon also elected Mr. Andrew Bakonyi as President and Chief Operating Officer.
Mr. Webster remains a director of R&B Falcon.
On April 15, 1999, BP Amoco cancelled its drilling contract with R&B Falcon
for the drillship Peregrine VII in accordance with the terms of the contract
because R&B Falcon had not delivered this rig on time. R&B Falcon is currently
marketing this rig.
On April 22, 1999, R&B Falcon issued 300,000 units, each consisting of one
share of preferred stock and a warrant to purchase 35 shares of R&B Falcon
common stock, in a private placement for net
1
<PAGE> 6
proceeds of approximately $289 million. The preferred stock provides for a
liquidation preference of $1,000 per share and cumulative dividends, payable
quarterly, at a rate of 13 7/8% per year. R&B Falcon may pay these dividends in
additional shares of preferred stock for up to five years. R&B Falcon will have
the right to exchange the preferred stock for subordinated debentures when it
could do so without violating the covenants in its existing debt documents. R&B
Falcon must redeem the preferred stock at a price equal to its liquidation
preference on May 1, 2009. Each warrant entitles the holder to purchase 35
shares of R&B Falcon's common stock, for an aggregate of 10,500,000 shares, at a
purchase price of $9.50 per share. The warrants are exercisable at any time
after they separate from the preferred stock, which will occur no later than
October 22, 1999. The warrants expire on May 1, 2009. R&B Falcon is using the
net proceeds from this offering for general corporate purposes, including
funding its deepwater rig construction program.
On May 19, 1999, R&B Falcon announced that it had received notice from
Petrobras of cancellation of the drilling contract on the semisubmersible Falcon
100, based upon alleged late delivery of the rig. R&B Falcon does not believe
that Petrobras has the right to cancel the contract. R&B Falcon has engaged
Brazilian counsel to pursue its rights under the contract and intends to take
legal action to enforce its rights under the contract. Petrobras has also
advised R&B Falcon that the contract for which R&B Falcon had been the low
bidder with its Peregrine VII drillship had been awarded by Petrobras to another
drilling contractor, for the reason that Petrobras desired to commence this
contract before the expected delivery date of the Peregrine VII.
SUMMARY OF TERMS OF EXCHANGE OFFER
In March 1999, we completed the private offering of $400 million of our 11%
Senior Secured Notes due 2006 and $400 million of our 11 3/8% Senior Secured
Notes due 2009. In connection with that offering, we agreed to deliver to you
this prospectus and to use our best efforts to complete the exchange offer by
, 1999.
THE EXCHANGE OFFER......... We are offering to exchange up to $400 million of
our outstanding 11% Senior Secured Notes due 2006
for an equal amount of our registered 11% Senior
Secured Notes due 2006 and up to $400 million of
our outstanding 11 3/8% Senior Secured Notes due
2009 for an equal amount of our registered 11 3/8%
Senior Secured Notes due 2009.
The form and terms of each series of the exchange
notes are identical in all material respects to the
form and terms of the outstanding notes of that
series, except that the exchange notes have been
registered under the Securities Act. In order to be
exchanged, an outstanding note must be properly
tendered and accepted. You may tender outstanding
notes only in integral multiples of $1,000.
As of the date of this prospectus, there are $400
million principal amount of our 11% Senior Secured
Notes due 2006 outstanding and $400 million
principal amount of our 11 3/8% Senior Secured
Notes due 2009 outstanding. The exchange offer is
not conditioned on any minimum aggregate principal
amount of outstanding notes being tendered for
exchange.
RESALE OF THE EXCHANGE
NOTES...................... Based on an interpretation by the staff of the SEC
set forth in no-action letters issued to third
parties, we believe that the notes issued in the
exchange offer may be offered for resale, resold
and otherwise transferred by you without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided that:
- you are acquiring the notes issued in the
exchange offer in the ordinary course of
business;
2
<PAGE> 7
- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to
participate, in the distribution of the
notes issued to you in the exchange offer;
- you are not a broker-dealer who purchased
those outstanding notes directly from us for
resale under to Rule 144A or any other
available exemption under the Securities
Act; and
- you are not an "affiliate" of our company.
Each broker-dealer that acquires notes in the
exchange offer for its own account in exchange for
outstanding notes that it acquired as a result of
market-making or other trading activities must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resale of the notes issued in
the exchange offer. The letter of transmittal
states that by making this acknowledgment and by
delivering a prospectus, a broker-dealer will not
admit that it is an "underwriter" within the
meaning of the Securities Act. A broker-dealer may
use this prospectus for an offer to resell, resale
or other retransfer of the notes issued to it in
the exchange offer. We have agreed that, for a
period of 180 days after the date of this
prospectus, we will make this prospectus and any
amendment or supplement to this prospectus
available to any such broker-dealer for use in
connection with any such resales. We believe that
no registered holder of the outstanding notes is an
affiliate (as this term is defined in Rule 405 of
the Securities Act) of our company.
EXPIRATION DATE............ The exchange offer will expire at 5:00 p.m., New
York City time, , 1999, unless we extend
the expiration date.
ACCRUED INTEREST ON THE
EXCHANGE NOTES AND THE
OUTSTANDING NOTES........ The exchange notes will bear interest from March
26, 1999. Holders of outstanding notes that are
accepted for exchange will not have the right to
receive any payment of interest on those notes
accrued from March 26, 1999 to the date of the
issuance of the exchange notes. Consequently,
holders who exchange their outstanding notes for
exchange notes will receive the same interest
payment on September 15, 1999 (the first interest
payment date) that they would have received had
they not accepted the exchange offer.
TERMINATION OF THE EXCHANGE
OFFER.................... We may terminate the exchange offer if we determine
that our ability to proceed with the exchange offer
could be materially impaired due to any legal or
governmental action, new law, statute, rule or
regulation or any interpretation of the staff of
the SEC of any existing law, statute, rule or
regulation. We do not expect any of the foregoing
conditions to occur, although there can be no
assurance that such conditions will not occur. We
must pay increased interest on the notes if we do
not complete the exchange offer.
PROCEDURES FOR TENDERING
OUTSTANDING NOTES........ If you are a holder of a note and you wish to
tender your note for exchange in the exchange
offer, you must send to United States Trust
3
<PAGE> 8
Company of New York, as exchange agent, on or
before the expiration date:
either
- a properly completed and duly executed
letter of transmittal, which accompanies
this prospectus, or a facsimile of the
letter of transmittal, including all other
documents required by the letter of
transmittal, to the exchange agent at the
address set forth on the cover page of the
letter of transmittal; or
- an agent's message transmitted by means of
The Depository Trust Company's Automated
Tender Offer Program system and received by
the exchange agent and forming a part of a
confirmation of book entry transfer in which
you acknowledge and agree to be bound by the
terms of the letter of transmittal;
and, the exchange agent must receive on or
before the expiration date either
- a timely confirmation of book-entry transfer
of your outstanding notes into the exchange
agent's account at The Depository Trust
Company under the procedure for book-entry
transfers described in this prospectus under
the heading "The Exchange
Offer -- Procedures for Tendering
Outstanding Notes;" or
- the documents necessary for compliance with
the guaranteed delivery procedures described
below.
By executing the letter of transmittal, each holder
will represent to us that:
- the person receiving the exchange notes is
obtaining the exchange notes in the ordinary
course of business of the person receiving
such exchange notes, whether or not such
person is the holder;
- neither the holder nor any other person
acting for the holder has an arrangement or
understanding with any person to participate
in the distribution of the exchange notes;
and
- neither the holder nor any such other person
is an "affiliate," as defined in Rule 405
under the Securities Act, of our company.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS.......... If you are the beneficial owner of notes and your
name does not appear on a security position listing
of The Depository Trust Company as the holder of
your notes, or if you are a beneficial owner of
registered notes that are registered in the name of
a broker, dealer, commercial bank, trust company or
other nominee, and you wish to tender your notes in
the exchange offer, you should contact the person
in whose name your notes are registered promptly
and instruct that person to tender on your behalf.
If you wish to tender on your own behalf you must,
prior to completing and executing the letter of
transmittal and delivering your outstanding notes,
either make appropriate arrangements to register
ownership of the outstanding notes in your name or
obtain a properly completed bond power from the
4
<PAGE> 9
registered holder. The transfer of record ownership
may take considerable time.
GUARANTEED DELIVERY
PROCEDURES............. If you wish to tender your notes and time will not
permit your required documents to reach the
exchange agent by the expiration date of the
exchange offer, or you cannot complete the
procedure for book-entry transfer or deliver
certificates for registered notes on time, you may
tender your notes under the procedures described in
this prospectus under the heading "The Exchange
Offer -- Guaranteed Delivery Procedure."
WITHDRAWAL RIGHTS.......... You may withdraw the tender of your notes at any
time prior to 5:00 p.m. on the expiration date.
FEDERAL TAX CONSEQUENCES... The exchange of the notes will generally not be a
taxable event for United States federal income tax
purposes.
USE OF PROCEEDS............ We will not receive any proceeds from the issuance
of notes in the exchange offer. We and R&B Falcon
will pay all expenses of the exchange offer.
EXCHANGE AGENT............. United States Trust Company of New York, the
trustee under the indenture governing the notes, is
serving as the exchange agent in connection with
the exchange offer. The exchange agent can be
reached at:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Attention: Corporate Trust Services
The telephone number for the exchange agent is
(800) 548-6565, and the facsimile number for the
exchange agent is (212) 780-0592.
CONSEQUENCES OF NOT
EXCHANGING OUTSTANDING
NOTES.................... If you do not exchange your outstanding notes for
exchange notes, you will no longer be able to
require us to register the outstanding notes under
the Securities Act. In addition, you will not be
able to offer or sell the outstanding notes unless:
- they are registered under the Securities
Act; or
- you offer or sell them under an exemption
from the registration requirements of the
Securities Act.
See "The Exchange Offer" for more detailed information concerning the terms
of the exchange offer.
5
<PAGE> 10
SUMMARY OF TERMS OF EXCHANGE NOTES
SECURITIES OFFERED......... - $400 million aggregate principal amount of 11%
Senior Secured Notes due 2006; and
- $400 million aggregate principal amount of 11 3/8%
Senior Secured Notes due 2009.
MATURITY DATES............. - March 15, 2006 for the 11% Senior Secured Notes
due 2006; and
- March 15, 2009 for the 11 3/8% Senior Secured
Notes due 2009.
INTEREST PAYMENT DATES..... March 15 and September 15 of each year, beginning
September 15, 1999.
MANDATORY REDEMPTION
Loss of a Mortgaged
Rig........................ Upon an event of loss with respect to a mortgaged
rig, R&B Falcon must repay the loan applicable to
the mortgaged rig in an amount sufficient to provide
funds to us for us to redeem notes. We must redeem
notes, in whole or in part, in an aggregate
principal amount equal to the principal amount of
the repaid loan. If a default has occurred and is
continuing under the indenture governing the notes,
we must redeem notes in an amount equal to the
amount received as a result of the event of loss. We
will redeem notes at a redemption price equal to
100% of the principal amount of the notes plus
accrued interest to the redemption date.
Sale of a Mortgaged
Rig........................ Upon the permitted sale of a mortgaged rig (or the
capital stock of the subsidiary guarantor owning
such rig), R&B Falcon must repay the loan applicable
to the mortgaged rig in an amount sufficient to
provide funds to us for us to redeem notes. We must
redeem notes, in whole or in part, in an aggregate
principal amount equal to the principal amount of
the loan related to the mortgaged rig. If a default
has occurred and is continuing under the indenture
governing the notes, we must redeem notes in an
amount equal to the net amount received as a result
of such sale.
We will redeem the 11% Senior Secured Notes due 2006
at a redemption price equal to the sum of the then
remaining payments of principal and interest on such
notes discounted at their present values using the
treasury rate plus 50 basis points, plus accrued
interest, if any, to such redemption date.
We will redeem the 11 3/8% Senior Secured Notes due
2009 at a redemption price equal to:
- if such redemption occurs before March 15, 2004,
the sum of the then remaining payments of
principal, including premiums payable, and
interest up to and including March 15, 2004
discounted at their present values using the
treasury rate plus 50 basis points, plus accrued
interest, if any, to such redemption date; or
- if such redemption occurs after March 15, 2004, at
a price equal to 105.6875% of the principal amount
(declining ratably to 100% of the principal amount
on March 15, 2007) plus accrued and unpaid
interest to the date of redemption.
6
<PAGE> 11
OPTIONAL REDEMPTION........ We may redeem the 11% Senior Secured Notes due 2006
at any time prior to their stated maturity at a
make-whole premium. We may redeem the 11 3/8% Senior
Secured Notes due 2009 at any time after March 15,
2004, at a price equal to 105.6875% of the principal
amount (declining ratably to 100% of the principal
amount on March 15, 2007) plus accrued and unpaid
interest to the date of redemption.
GUARANTEE BY THE COMPANY... R&B Falcon has unconditionally and irrevocably
guaranteed our obligations under the notes. Any
payment by R&B Falcon on its obligations under the
guarantee will reduce its obligations on its loans
from us.
SUBSIDIARY GUARANTEES...... Any subsidiary that guarantees any of R&B Falcon's
indebtedness after March 26, 1999 (including
indebtedness under a bank facility) or that owns a
mortgaged rig will be required to guarantee the
notes.
RANKINGS................... The notes are our senior secured obligations. We are
not permitted to incur additional indebtedness,
other than subordinated indebtedness owed to R&B
Falcon.
The loans we have made to R&B Falcon are each a
senior secured obligation of R&B Falcon and will
rank equally in right of payment with claims of
creditors of R&B Falcon holding indebtedness or
other liabilities that are not expressly
subordinated to such loans, but will rank ahead of
claims to the extent of the value, priority and
validity of R&B Falcon's mortgages of its marine
drilling rigs that secure the loans. To the extent
that any such rig has value in excess of the loan
that it secures, such additional value is not
collateral for our claims against R&B Falcon. R&B
Falcon's obligations under the loans from us will be
effectively subordinated to indebtedness and other
liabilities of its subsidiaries. As of March 31,
1999, R&B Falcon's subsidiaries had approximately
$225.8 million of indebtedness, in addition to other
substantial liabilities (primarily trade payables
and accrued expenses).
R&B Falcon's guarantee of the notes is its senior
unsecured obligation. The guarantee will rank
equally in right of payment with any of R&B Falcon's
existing or future senior unsecured indebtedness and
senior in right of payment to any of its existing or
future indebtedness that is, by its terms, expressly
subordinated to the guarantee. R&B Falcon's
obligations under the guarantee will be effectively
subordinated to indebtedness and other liabilities
of its subsidiaries and to R&B Falcon's secured
indebtedness.
SECURITY................... The notes are secured by a collateral assignment of
the loans we have made to R&B Falcon and the liens
securing those loans. Each of these loans is secured
by a lien on one drilling rig or one construction
contract for a drilling rig. These liens are:
- security interests in the construction contract
for the Deepwater IV and the equipment the
Company has purchased for the Deepwater IV.
Following delivery of the Deepwater IV, the
security interests will be replaced by a first
priority ship mortgage on the Deepwater IV; and
- first priority ship mortgages on the vessels
Deepwater Millennium, Peregrine IV, Peregrine
VII, Falcon 100, Peregrine I, Peregrine II,
Harvey Ward, W. D. Kent, and Falrig 82.
7
<PAGE> 12
The collateral agent holds, as collateral for the
notes, R&B Falcon's promissory notes payable to us
and the related liens. The collateral agent will
exercise remedies with respect to the collateral,
including the sale or other disposition of the
collateral, upon receipt of notice of the
occurrence of an event of default under the
indenture governing the notes.
CHANGE OF CONTROL.......... So long as the notes are rated by Standard & Poors
and Moody's, we will not have to make an offer to
purchase the notes upon the occurrence of a change
of control unless the notes are downgraded or R&B
Falcon is put on a negative credit watch or there
is a default which has occurred and is continuing.
In such a case, we will be required to offer to
repurchase all the notes at a purchase price equal
to 101% of the principal amount plus accrued and
unpaid interest to the date of repurchase.
COVENANTS.................. The indenture restricts R&B Falcon's ability, and
the ability of its subsidiaries, to:
- borrow money;
- pay dividends on stock or purchase stock or make
payments on subordinated indebtedness;
- make investments;
- use assets as security in other transactions;
- engage in sale/leaseback transactions;
- sell substantially all of its assets or merge or
consolidate with other companies;
- sell assets; and
- enter into transactions with affiliates.
If R&B Falcon sells a sufficient amount of its
assets and does not reinvest the proceeds or repay
indebtedness as provided in the indenture, R&B
Falcon will be required to prepay its loans from us
to provide funds to enable us to offer to purchase
notes. We will be required to offer to purchase
notes at a purchase price equal to 100% of the
principal amount thereof, plus accrued and unpaid
interest, from the proceeds of these asset sales.
The Indenture also restricts our ability to conduct
any activities not connected with the issuance of
the notes and the enforcement of our rights in the
collateral for the notes.
These limitations are subject to important
qualifications and exceptions.
TRANSFER RESTRICTIONS...... The notes may only be transferred to Qualified
Institutional Buyers, institutional Accredited
Investors and our affiliates. See "Transfer
Restrictions."
RISK FACTORS
See "Risk Factors" for a discussion of factors you should carefully
consider before deciding whether to exchange your notes in the exchange offer.
8
<PAGE> 13
SUMMARY CONSOLIDATED FINANCIAL DATA OF R&B FALCON CORPORATION
The summary consolidated financial data of R&B Falcon set forth below gives
effect to the merger of Falcon Drilling Company, Inc. and Reading & Bates
Corporation, which occurred on December 31, 1997, under the
"pooling-of-interests" method of accounting. This means that these companies are
treated as if they have always been combined for accounting and financial
reporting purposes. The summary consolidated financial data as of and for the
three months ended March 31, 1998 and 1999 have been derived from R&B Falcon's
unaudited condensed consolidated financial statements and include all
adjustments (consisting of only normal recurring adjustments) that its
management considers necessary for a fair presentation of the interim periods.
Results of interim periods are not necessarily indicative of results for the
full year. The summary financial data for the years ended December 31, 1995,
1996, 1997 and 1998 were derived from R&B Falcon's audited consolidated
financial statements, and for the year ended December 31, 1994 from the separate
audited consolidated financial statements of Reading & Bates and Falcon. You
should read this data together with R&B Falcon's historical consolidated
financial statements, which are incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------------
1998 1999
------- ---------
(IN MILLIONS, EXCEPT
PER SHARE AND RATIO
AMOUNTS)
(UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues.......................................... $279.3 $ 243.8
Operating income............................................ 116.8 32.7
Income from continuing operations before income tax expenses
and minority interest..................................... 105.2 9.3
Net income(1)............................................... 69.8 1.6
Income from continuing operations per common share:
Basic..................................................... .42 .01
Diluted................................................... .42 .01
OTHER DATA:
Ratio of earnings to fixed charges(2)....................... 5.3x --
Depreciation and amortization............................... $ 21.4 $ 36.5
Capital expenditures and acquisitions....................... $237.4 $ 236.3
BALANCE SHEET DATA AS OF MARCH 31, 1999:
Working capital............................................. $ 639.1
Total assets................................................ 4,442.2
Total debt.................................................. 2,720.5
Stockholders' equity........................................ 1,253.0
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998(3)
----------- ------ -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues.......................................... $307.6 $390.3 $ 609.6 $ 933.0 $1,032.6
Operating income............................................ 22.4 64.9 178.8 160.4 215.8
Income (loss) from continuing operations before
extraordinary item........................................ (12.7) 23.5 106.7 29.8 91.0
Net income (loss)(1)........................................ (12.7) 26.9 106.7 (6.2) 102.8
Net income (loss) from continuing operations per common
share:
Basic..................................................... (.18) .16 .70 .18 .54
Diluted................................................... (.18) .15 .67 .18 .54
OTHER DATA:
Ratio of earnings to fixed charges(2)....................... -- 1.8x 3.4x 2.6x 2.0x
Depreciation and amortization............................... $ 38.4 $ 46.9 $ 62.3 $ 84.7 $ 97.6
Capital expenditures and acquisitions....................... 124.7 186.9 383.2 600.2 1,166.5
</TABLE>
9
<PAGE> 14
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998(3)
----------- ------ -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (END OF PERIOD):
Working capital............................................. $ 9.2 $ 57.7 $ 195.3 $ (15.2) $ 175.3
Total assets................................................ 810.9 946.8 1,455.8 1,933.0 3,709.3
Total debt.................................................. 288.6 308.7 514.2 827.4 1,995.9
Stockholders' equity........................................ 356.3 472.6 716.7 728.0 1,250.2
</TABLE>
- ---------------
(1) After extraordinary gain of $3.4 million in 1995, loss from discontinued
operations of $36.0 million in 1997, extraordinary loss of $24.2 million and
income from discontinued operations of $36.0 million in 1998, income from
discontinued operations of $8.3 million for the three months ended March 31,
1998, and extraordinary loss of $1.7 million for the three months ended
March 31, 1999.
(2) For the purpose of this calculation "earnings" represents income (loss) from
continuing operations before income tax expense, minority interest, and
extraordinary gain, plus fixed charges exclusive of interest capitalized.
"Fixed charges" consist of interest, whether expensed or capitalized,
amortization of debt expense and an estimated portion of rentals
representing interest expense. For the year ended December 31, 1994 and the
three months ended March 31, 1999, earnings were insufficient to cover fixed
charges by $3.4 million and $5.3 million, respectively. Fixed charges for
the year ended December 31, 1997 and 1998 and the three months ended March
31, 1998 and 1999 exclude interest cost of $7.3 million, $22.5 million, $4.5
million and $3.7 million, respectively, related to the debt of joint venture
companies guaranteed by R&B Falcon or its subsidiaries. Approximately $273.4
million of outstanding indebtedness at December 31, 1998 was retired with a
portion of R&B Falcon's borrowings from RBF Finance Co. and the proceeds
from the sale of its $200 million senior notes. Giving effect to this
retirement and assuming an average effective interest rate of approximately
11.7% on this debt and giving effect to the amortization of debt issuance
costs, the pro forma ratio of earnings to fixed charges for the year ended
December 31, 1998 was 1.8x and, for the three months ended March 31, 1999,
earnings were insufficient to cover fixed charges by $12.3 million.
(3) Includes results of Cliffs Drilling Company, which R&B Falcon acquired on
December 1, 1998, only for the month of December 1998 because it accounted
for this acquisition under the purchase method.
10
<PAGE> 15
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The summary unaudited pro forma combined financial data set forth below for
the year ended December 31, 1998 was derived from R&B Falcon's historical
financial statements and from the historical financial statements of Cliffs
Drilling Company, which R&B Falcon acquired on December 1, 1998. The summary
unaudited pro forma combined financial data is presented as if the acquisition
of Cliffs Drilling and certain other acquisition and financing transactions were
consummated at the beginning of the period. The summary unaudited pro forma
combined financial data does not purport to represent what R&B Falcon's and
Cliffs Drilling's combined results of operations actually would have been if the
acquisition of Cliffs Drilling had occurred as of the date indicated or will be
for any future periods. The summary unaudited pro forma combined financial data
should be read in conjunction with the unaudited pro forma condensed statement
of operations and R&B Falcon's historical financial statements, which are
incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998(4)
-------------
(IN MILLIONS,
EXCEPT RATIO
AMOUNTS)
(UNAUDITED)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues.......................................... $1,349.0
Operating income............................................ 305.1
Income from continuing operations........................... 138.9
OTHER DATA:
EBITDA(1)................................................... $ 544.6
Ratio of EBITDA to interest expense(2)...................... 6.7x
Ratio of earnings to fixed charges(3)....................... 2.4x
Depreciation and amortization............................... $ 130.0
</TABLE>
- ---------------
(1) "EBITDA" means income from continuing operations before extraordinary loss,
interest expense, taxes, depreciation, amortization, cancellation of
conversion projects and merger expenses. EBITDA should not be considered as
an alternative to net income as an indicator of R&B Falcon's operating
performance, or as an alternative to cash flow as a better measure of
liquidity. EBITDA measures presented may not be comparable to other
similarly titled measures of other companies. We believe EBITDA is a widely
accepted financial indicator of a company's ability to service debt.
(2) R&B Falcon believes that the ratio of EBITDA to interest expense provides an
investor with information as to its current ability to meet its interest
costs.
(3) For the purpose of this calculation "earnings" represent income from
continuing operations before income tax expense, minority interest, and
extraordinary loss, plus fixed charges exclusive of interest capitalized.
"Fixed charges" consist of interest, whether expensed or capitalized,
amortization of debt expense, and an estimated portion of rentals
representing interest expense. Fixed charges for the year ended December 31,
1998 exclude interest cost of $22.5 million related to the debt of joint
venture companies guaranteed by R&B Falcon or its subsidiaries.
(4) The pro forma data does not reflect any of the proceeds from R&B Falcon's
offering of the outstanding notes completed in December 1998, or the
application of the net proceeds from that offering, as it used the net
proceeds for general corporate purposes, including funding its deepwater
construction program. Additionally, the pro forma data does not reflect the
proceeds from the senior note offering completed in March 1999 or the
application of the loans from RBF Finance Co. funded with the proceeds from
the secured note offerings of RBF Finance Co., since R&B Falcon used these
proceeds to repay its revolving credit facility and its short-term
obligations and for general corporate purposes, including funding its
deepwater construction program, and the impact of repaying the revolving
credit facility and short-term obligations did not have a material effect.
Likewise, the pro forma data does not reflect any proceeds from R&B Falcon's
offering in April 1999 of preferred stock and warrants since it is using
these proceeds for general corporate purposes, including funding its
deepwater rig construction program.
11
<PAGE> 16
SUMMARY FINANCIAL DATA OF RBF FINANCE CO.
The summary financial data set forth below is derived from our audited
financial statements as of March 31, 1999, and for the period from inception
(March 19, 1999) to March 31, 1999. The summary financial data below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements (including the
Notes thereto) included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(MARCH 19, 1999)
TO MARCH 31, 1999
-----------------
(IN THOUSANDS,
EXCEPT RATIO
AMOUNTS)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues............................................ $ 1,316
Interest expense.......................................... 1,226
Operating income.......................................... 90
Net income................................................ 58
OTHER DATA:
Ratio of earnings to fixed charges(1)..................... 1.1x
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1999
-----------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Working capital........................................... $303,159
Total assets.............................................. 801,317
Total debt................................................ 800,000
Stockholders' equity...................................... 59
</TABLE>
- ---------------
(1) For the purpose of this calculation "earnings" represents income before
income tax expense, plus fixed charges exclusive of interest capitalized.
"Fixed charges" consist of interest, whether expensed or capitalized,
amortization of debt expense and an estimated portion of rentals
representing interest expense.
12
<PAGE> 17
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks described below are not the only ones facing our
company. Additional risks not presently known to us or that we currently deem
immaterial may also impair our business operations. The risk factors set forth
below are generally applicable to the outstanding notes as well as the exchange
notes.
We are a limited purpose corporation formed solely to issue the notes and
loan the proceeds from the sale of the notes to R&B Falcon. Our only material
assets are the loans to R&B Falcon, and our only material source of revenue is
R&B Falcon's payments under those loans. As a result, our ability to make
payments under the notes is entirely dependent on R&B Falcon's ability to make
payments under the loans or, to the extent R&B Falcon does not make its
payments, on our ability to realize on the collateral that secures those loans.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our and R&B Falcon's actual results could differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including the risks faced by us described below and elsewhere in this
prospectus.
RISKS RELATED TO R&B FALCON'S BUSINESS
DEPRESSED INDUSTRY CONDITIONS, COMBINED WITH ITS SUBSTANTIAL CAPITAL
REQUIREMENTS, HAVE ADVERSELY AFFECTED R&B FALCON'S LIQUIDITY.
R&B Falcon is currently constructing or significantly upgrading six
wholly-owned deepwater drilling rigs and has recently completed the construction
of one deepwater drilling rig. R&B Falcon estimates the gross capital
expenditures on these projects will be approximately $1.9 billion, of which
approximately $0.9 billion remains to be expended. Since May 1998, however,
there has been a downturn in demand for marine drilling rigs resulting in a
decline in rig utilization and dayrates. The decline has been particularly
dramatic in the domestic barge and jack-up rig markets where R&B Falcon is one
of the largest contractors. Although R&B Falcon's operating revenues increased
by $99.6 million from 1997 to 1998, on a quarterly basis during 1998, it
experienced a decline in operating revenues from $279.3 million for the first
quarter of 1998 to $243.8 million for the first quarter of 1999. Similarly,
although R&B Falcon's EBITDA increased by $114.5 million from 1997 to 1998, it
experienced a decline in EBITDA from $136.7 million in the first quarter of 1998
to $71.5 million in the first quarter of 1999. As a result of R&B Falcon's
declining operating results, its cash flow from operations and cash on hand,
including the net proceeds from its debt offering in March 1999, its borrowings
from us and its preferred stock and warrant offering in April 1999 may not be
sufficient to satisfy its short-term and long-term working capital needs,
planned investments, capital expenditures, debt, lease and other payment
obligations. Accordingly, R&B Falcon may be required to obtain additional
capital through debt and/or equity financings to meet its currently projected
obligations. R&B Falcon is currently evaluating two project financings to meet a
portion of its additional capital requirements. There can be no assurance,
however, that R&B Falcon can obtain these or any other additional financings or,
if obtained, that they will be on favorable terms or for the amount it needs. As
a result of its debt offering in March 1999 and its borrowings from us, R&B
Falcon has a limited ability under its indenture covenants to incur additional
recourse indebtedness and to secure that debt. In the event that R&B Falcon is
unable to obtain the requisite financing, it would have to sell assets or
terminate or suspend one or more construction projects. Termination or
suspension of a project may subject R&B Falcon to claims for penalties or
damages under the construction contracts or drilling contracts for rigs that are
being constructed. Accordingly, R&B Falcon's inability to complete such
financings would have a material adverse effect on its financial condition and
its ability to repay the notes.
R&B FALCON IS DEPENDENT ON THE OIL AND GAS INDUSTRY AND MARKET PRICES. DECLINES
IN OIL AND GAS PRICES HAVE ADVERSELY AFFECTED ITS DAYRATES AND RIG UTILIZATION.
R&B Falcon must generate substantial cash flow in order to repay the notes.
The amount of cash flow it generates depends on the level of activity in
offshore oil and gas exploration and development. Oil and
13
<PAGE> 18
gas prices significantly affect the level of activity in oil and gas exploration
and development. These prices are volatile, and have only recently begun to show
signs of recovery from declines that started in 1997. These declines have
adversely affected R&B Falcon's rig utilization and dayrates. Utilization of R&B
Falcon's domestic jack-up fleet has declined from approximately 100% in January
1998 to approximately 32% in March 1999, and dayrates on new contracts have
declined from a range of $35,000 to $40,000 in January 1998 to a range of
$10,000 to $13,000 at present. Dayrates for R&B Falcon's domestic barge drilling
rig fleet have not declined materially, but utilization of the fleet declined
from approximately 96% in January 1998 to approximately 24% in March 1999. R&B
Falcon's international jack-up fleet has experienced declines in utilization and
dayrates since January 1998, but such declines have not been as dramatic as
those experienced in the domestic jack-up fleet. If conditions in the oil and
gas industry do not improve in the future, R&B Falcon may be unable to repay the
notes.
R&B FALCON HAS A SIGNIFICANT AMOUNT OF DEBT.
R&B Falcon has a significant amount of debt. At March 31, 1999, R&B
Falcon's total indebtedness was approximately $2.7 billion, which would have
been 63% of its total book value capitalization, as adjusted to give effect to
its preferred stock and warrant offering in April 1999. This substantial
indebtedness will have important consequences to us and, therefore, to you. For
example, it will:
- make it more difficult for R&B Falcon to make payments on the loans from
us, thus making it more difficult for us to make the required payments on
the notes;
- increase R&B Falcon's vulnerability to general adverse economic and
industry conditions;
- limit R&B Falcon's ability to fund future capital expenditures and
working capital and other general corporate requirements;
- potentially require R&B Falcon to sell assets or to terminate or suspend
some of its deepwater drilling construction projects;
- limit R&B Falcon's flexibility in planning for, or reacting to, changes
in its business and its industry;
- place R&B Falcon at a competitive disadvantage compared to its
competitors that have less debt; and
- limit R&B Falcon's ability to borrow additional funds because of
financial and other restrictive covenants governing its debt.
RESTRICTIONS ON R&B FALCON'S ABILITY TO PREPAY THE LOANS, AND THUS OUR ABILITY
TO REDEEM THE NOTES, MAY LIMIT R&B FALCON'S FINANCIAL FLEXIBILITY.
R&B Falcon is subject to restrictions with respect to the loans from us
that may limit its flexibility in structuring or refinancing existing or future
debt. We may redeem the notes, and R&B Falcon may prepay the loans, but only
upon payment of a make-whole premium.
As of March 31, 1999, R&B Falcon had $900 million of indebtedness with
maturity dates on or prior to the maturity of the 11% Senior Secured Notes due
2006, and $2.1 billion of indebtedness with maturity dates on or prior to the
maturity of the 11 3/8% Senior Secured Notes due 2009. These substantial
repayment obligations may adversely affect its ability to refinance the loans at
maturity.
R&B FALCON HAS COMMITTED SIGNIFICANT RESOURCES TO THE DEEPWATER DRILLING MARKET.
R&B Falcon has committed significant financial resources to the deepwater
drilling market through its deepwater rig construction projects. The cost of
these projects will exceed the cash flow from the contractual commitments that
R&B Falcon has for these projects. If the deepwater market continues to weaken,
R&B Falcon may not be able to obtain contracts for the use of the contracted
rigs once the initial contracts expire, and any renewals may be at lower
dayrates and for shorter terms than those in the initial contracts. For the
periods during which R&B Falcon is obligated to use the Deepwater Frontier, it
will be
14
<PAGE> 19
obligated to pay the full dayrate of $165,000 to the limited liability company
that owns this rig, without regard to whether R&B Falcon has a customer for this
rig. These developments would result in reduced cash flows and profitability,
and adversely affect R&B Falcon's ability to repay the notes.
MOST OF THE FUNDS TO PAY R&B FALCON'S DEBT OBLIGATIONS WILL COME FROM ITS
SUBSIDIARIES, AND OUR RIGHT TO RECEIVE PAYMENTS ON THE LOANS, AND THEREFORE,
YOUR RIGHT TO RECEIVE PAYMENT ON THE NOTES, IS JUNIOR TO THE INDEBTEDNESS OF R&B
FALCON'S NON-GUARANTOR SUBSIDIARIES.
Most of R&B Falcon's operating income and cash flow from operations is
generated by its subsidiaries. R&B Falcon expects that funds necessary to meet
its debt service obligations will be provided primarily by distributions or
advances from R&B Falcon's subsidiaries. R&B Falcon's ability to obtain cash
from its subsidiaries to meet its debt service obligations, including the
payment of principal and interest on the loans, may be limited by contractual
and legal restrictions on its subsidiaries and by their financial condition and
requirements for cash to conduct their operations.
None of R&B Falcon's subsidiaries currently guarantee the notes. R&B
Falcon's subsidiaries will not be obligated with respect to the notes unless any
subsidiary guarantees any of its funded indebtedness on or after the date the
notes were issued. If this occurs, the subsidiary will be obligated to equally
and ratably guarantee the notes. Because R&B Falcon's subsidiaries do not
guarantee the notes, the claims of creditors of its subsidiaries effectively
have priority on the assets and earnings of the subsidiaries over the claims of
the holders of the notes. If any subsidiary of R&B Falcon is required to
guarantee the notes in the future, its guarantee will be subordinate to any
secured indebtedness of the subsidiary to the extent of the value of the
collateral securing the indebtedness.
In the event of an insolvency, liquidation or reorganization of any of R&B
Falcon's subsidiaries, any creditors of the subsidiary, including trade
creditors, would be entitled to payment in full from the assets of the
subsidiary before R&B Falcon, as a stockholder, would be entitled to receive any
distribution from the subsidiary. As of March 31, 1999, R&B Falcon's
subsidiaries had approximately $225.8 million of indebtedness, in addition to
other substantial liabilities (primarily trade payables and accrued expenses).
All of this indebtedness and these other liabilities effectively ranks senior to
our loans to R&B Falcon, and therefore to the notes.
R&B FALCON'S CUSTOMERS MAY SEEK TO CANCEL OR RENEGOTIATE CONTRACTS DURING
DEPRESSED MARKET CONDITIONS.
During depressed market conditions like those R&B Falcon is currently
experiencing, a customer may no longer need a rig, or may be able to obtain a
comparable rig at a lower dayrate. As a result, customers may pressure R&B
Falcon to renegotiate the terms of existing contracts. In addition, customers
may seek to avoid their obligations under existing drilling contracts. Since
December 1998, customers have cancelled a number of contracts within the
drilling industry, including the contract for the Jack Bates semisubmersible
rig, primarily based on alleged performance breaches by the drilling
contractors. R&B Falcon's customers for its drillship Peregrine VII and its
semisubmersible Falcon 100 recently cancelled their contracts with R&B Falcon
because of late delivery of these rigs. If R&B Falcon's customers cancel some of
its significant contracts, it could have a material adverse effect on its
financial condition and its ability to meet its obligations under the loans.
R&B FALCON'S CUSTOMERS MAY CANCEL THEIR DEEPWATER CONTRACTS IF IT EXPERIENCES
OPERATIONAL PROBLEMS.
The deepwater market requires the use of floating rigs utilizing more
sophisticated technologies than those of the bottom-supported rigs that
previously constituted the majority of R&B Falcon's fleet. R&B Falcon and other
drilling contractors have experienced problems with the new generation of subsea
and related systems designed for drilling in deeper waters. If this equipment
fails to function properly, the rig cannot engage in drilling operations. If R&B
Falcon encounters these or other operational problems on its deepwater rigs, it
will lose revenues, and its customers may have the right to terminate the
drilling contracts. The likelihood that a customer may seek to terminate a
contract for operational problems is increased during market downturns like the
one currently being experienced. If R&B Falcon's customers
15
<PAGE> 20
cancel some of its significant contracts, it could have a material adverse
effect on its financial condition and its ability to meet its obligations under
the loans.
R&B FALCON'S CONSTRUCTION AND UPGRADE PROJECTS ARE SUBJECT TO DELAYS AND COST
OVERRUNS.
R&B Falcon's deepwater rig construction and upgrade projects are subject to
delays and cost overruns from (1) delays in equipment deliveries, (2) unforeseen
engineering problems, (3) work stoppages, (4) weather interference, (5)
unanticipated cost increases and (6) shortages of materials or skilled labor.
R&B Falcon's conversion projects are particularly susceptible to cost overruns
and delays due to the engineering and construction uncertainties inherent in
conversion projects. The customers for R&B Falcon's drillship Peregrine VII and
semisubmersible Falcon 100 have cancelled their drilling contracts due to late
delivery of these rigs. R&B Falcon will be subject to late delivery penalties to
its customer for its drillship Peregrine IV, and its drilling contract for this
rig gives the customer cancellation rights if delivery is delayed significantly.
R&B Falcon may also be subject to late delivery penalties under the recently
cancelled contract for its semisubmersible Falcon 100. R&B Falcon has recently
extended the delivery dates for, and increased its estimated costs of, several
of its deepwater rig projects. Any additional cost overruns or delays will
adversely affect R&B Falcon's financial condition and results of operations and
make it more difficult for R&B Falcon to make the required payments on the
loans.
REDUCED DAYRATES RESULTING FROM COMPETITION ADVERSELY EFFECT R&B FALCON'S
RESULTS OF OPERATIONS BECAUSE IT CANNOT SIGNIFICANTLY REDUCE ITS OPERATING
COSTS.
The marine drilling market is highly competitive and no one competitor is
dominant. During periods when the supply of rigs exceeds demand, as it currently
does, this competition results in significant downward pressure on the dayrates
at which R&B Falcon can contract our rigs. Because R&B Falcon's rig operating
costs cannot be materially reduced, any reduction in dayrates adversely affects
its results of operations.
R&B FALCON IS SUBJECT TO OPERATIONAL RISKS.
R&B Falcon's operations are subject to the hazards inherent in the marine
drilling business. These include (1) blowouts, (2) craterings, (3) fires, (4)
collisions, (5) capsizings and (6) adverse weather. These hazards could result
in substantial damage to the environment, personal injury and loss of life,
suspension of drilling operations or damage to property and producing
formations. R&B Falcon may incur substantial liabilities or losses as a result
of these hazards. While R&B Falcon maintains insurance protection against some
of these risks, and seeks to obtain indemnity agreements from its customers
requiring the customers to hold us harmless in the event of loss of production,
reservoir damage or liability for pollution that originates below the water
surface, its insurance or contractual indemnity protection may not be sufficient
to protect it under all circumstances or against all hazards.
R&B FALCON CONDUCTS TURNKEY DRILLING OPERATIONS.
R&B Falcon conducts most of its drilling services under daywork drilling
contracts where the customer pays for the period of time required to drill or
workover a well. R&B Falcon expects to provide an increasing portion of its
services under turnkey drilling contracts. Under turnkey drilling contracts, R&B
Falcon contracts to drill a well to a contract depth under specified conditions
for a fixed price. R&B Falcon's risks under a turnkey drilling contract are
substantially greater than on a well drilled on a daywork basis because it
assumes most of the risks associated with drilling operations generally assumed
by the operator in a daywork contract, including (1) risk of blowout, (2) loss
of hole, (3) stuck drill stem, (4) lost production or damage to the reservoir,
(5) machinery breakdowns, (6) abnormal drilling conditions and (7) risks
associated with subcontractors' services, supplies and personnel.
16
<PAGE> 21
R&B FALCON CONDUCTS FOREIGN OPERATIONS.
R&B Falcon currently operates its rigs worldwide. Operations outside the
United States involve additional risks, including (1) war and civil
disturbances, (2) general strikes, (3) regional economic downturns and (4)
foreign governmental activities that may limit or disrupt markets, restrict
payments or the movement of funds, impose exchange controls or cause currency
devaluations, or result in the loss of contract rights or expropriation of
property.
OFFSHORE DRILLING OPERATIONS ARE SUBJECT TO GOVERNMENT REGULATION.
A number of federal, state, local and foreign laws and regulations govern
R&B Falcon's operations. These include laws and regulations that restrict the
discharge of materials into the environment or otherwise relate to the
protection of the environment, the safety of our personnel and vessels and other
matters. Environmental laws and regulations could impose significant liability
on us for damages, clean-up costs and penalties if we spill oil or other
pollutants in the course of our operations. Some of these laws impose liability
without regard to negligence or fault. Environmental and other laws and
regulations may increase our costs of doing business, discourage our customers
from exploring for oil and gas and reduce demand for our services.
RISKS RELATED TO THE NATURE OF THE NOTES
THERE IS NO ESTABLISHED MARKET FOR THE NOTES.
The notes that are currently outstanding have not been registered under the
Securities Act or any state securities law. Therefore, these notes may not be
offered or sold except under an effective registration statement on an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act and any applicable state securities laws.
Although the exchange notes may be resold or otherwise transferred by the
holders (who are not affiliates of our company) without compliance with the
registration requirements under the Securities Act, they will be new securities
for which there is currently no established trading market. We do not intend to
apply for listing of the exchange notes on a national securities exchange or for
quotation of the exchange notes on an automated dealer quotation system. The
liquidity of any market for the exchange notes will depend upon the number of
holders of the exchange notes, the interest of securities dealers in making a
market in the exchange notes and other factors. Accordingly, there can be no
assurance as to the development or liquidity of any market for the exchange
notes. If an active trading market for the exchange notes does not develop, the
market price and liquidity of the exchange notes may be adversely affected. If
the exchange notes are traded, they may trade at a discount from their face
value, depending upon prevailing interest rates, the market for similar
securities, R&B Falcon's performance and other factors. The exchange notes will
be eligible for trading in The PORTAL Market.
Even though we are registering our offer of the exchange notes in the
exchange offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of our company may publicly offer for sale or resell the
exchange notes only in compliance with provisions of Rule 144 under the
Securities Act. In addition, holders of the exchange notes will only be
permitted to resell or otherwise transfer the notes to Qualified Institutional
Buyers, institutional Accredited Investors or certain of our affiliates.
YOUR NOTES WILL CONTINUE TO BE SUBJECT TO TRANSFER RESTRICTIONS IF YOU DO NOT
EXCHANGE THEM IN THE EXCHANGE OFFER.
If you do not exchange your notes for the exchange notes in the exchange
offer, you will continue to be subject to the restrictions on transfer of your
notes described in the legend on your notes. The restrictions on transfer of
your outstanding notes arise because we issued the notes under exemptions from,
or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, you may only
offer or sell the currently outstanding notes if they are registered under the
Securities Act and applicable state securities laws, or offered and sold under
an exemption from
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these registration requirements. We do not intend to register the currently
outstanding notes under the Securities Act. In addition, if you exchange your
notes in the exchange offer for the purpose of participating in a distribution
of the exchange notes, you may be deemed to have received restricted securities
and, if so, will be required to comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. To the extent the amount of the currently outstanding notes
decreases because noteholders tendered their notes in the exchange offer, the
trading market, if any, for the currently outstanding notes after the closing of
the exchange offer would be adversely affected.
THERE WILL ALSO BE RESTRICTIONS ON TRANSFERS OF THE EXCHANGE NOTES AFTER THE
EXCHANGE OFFER.
Holders of notes will only be permitted to resell or otherwise transfer
their notes to Qualified Institutional Buyers, institutional Accredited
Investors or certain of our affiliates.
RIG VALUES FLUCTUATE AND A RIG'S VALUE MAY BE LESS THAN THE AMOUNT OF THE LOAN
THAT THE RIG IS PLEDGED TO SECURE.
The notes are secured by a collateral assignment of promissory notes
payable to us by R&B Falcon and liens securing those promissory notes. It is
contemplated that such liens will ultimately consist primarily of first priority
ship mortgages on drilling rigs. The market value of the mortgaged rigs may
fluctuate significantly. There can be no assurance that the proceeds from the
sale of any rig upon the collateral agent's exercise of remedies following an
event of default under the loans will be sufficient to redeem the required
principal amount of the notes. R&B Falcon is not required under the loans or the
ship mortgages to maintain any minimum value of any rig, and the future value of
a rig could be considerably less than its acquisition cost or the applicable
mandatory redemption amount for the related loan secured thereby. If the
proceeds from the sale of a rig is not sufficient to make all payments due under
the related loan, the holders of the notes will have only senior unsecured
claims against us and R&B Falcon to the extent of the deficiency.
THE LOANS TO R&B FALCON FROM US WILL NOT BE CROSS-COLLATERALIZED, SO IF THE
FORECLOSURE PROCEEDS OF ONE RIG EXCEED THE LOAN AMOUNT FOR THAT RIG, THE EXCESS
WILL NOT BE APPLIED TO ANY DEFICIENCIES IN THE FORECLOSURE PROCEEDS FOR OTHER
RIGS.
Each loan is secured by the ship mortgage or the construction contract and
equipment relating to one rig. If the net proceeds from a foreclosure on one of
the mortgaged rigs is greater than the amount of the loan for that rig, the
collateral agent will pay the excess proceeds to R&B Falcon. If the net proceeds
from a foreclosure on one of the other mortgaged rigs is less than amount of the
loan for that rig, the deficiency will be R&B Falcon's unsecured, senior
obligation, and will share pro rata with R&B Falcon's other unsecured senior
obligations in R&B Falcon's remaining, unencumbered assets.
PRIOR TO COMPLETION OF THE DEEPWATER IV, R&B FALCON CANNOT GRANT A SHIP MORTGAGE
TO SECURE THE LOAN RELATED TO THIS VESSEL, BUT CAN ONLY ASSIGN ITS RIGHTS UNDER
THE CONSTRUCTION CONTRACT.
Because the Deepwater IV is a newbuild drillship that has not yet been
documented and that R&B Falcon does not yet own, R&B Falcon cannot grant a ship
mortgage on this drilling rig to secure our loans to R&B Falcon. Instead, R&B
Falcon initially can only collaterally assign its rights under the construction
contract for this drilling rig to secure the loan with respect to this rig. This
type of security interest does not afford us the same level of protection as a
ship mortgage, and therefore provides a lesser degree of security for the loan.
If an event of default occurs under the notes prior to the time when R&B Falcon
grants a first priority ship mortgage on this vessel, holders of the notes may
not be able to recover as much under the loans with respect to this vessel as
they would have been able to recover if the vessel was subject to a valid ship
mortgage.
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THERE IS NO ASSURANCE THAT A RIG UNDER CONSTRUCTION WILL BE COMPLETED. IF R&B
FALCON FAILS TO COMPLETE CONSTRUCTION OF THE DEEPWATER IV, WHICH IS TO BE
MORTGAGED AS SECURITY FOR ONE OF OUR LOAN TO R&B FALCON, THERE IS A GREATER RISK
THAT SUCH LOAN MAY BE UNDERCOLLATERALIZED.
Our loan to R&B Falcon related to the Deepwater IV is secured by security
interests in the construction contract and equipment R&B Falcon has purchased
for the vessel. The loans on the Peregrine IV and Peregrine VII are secured by
ship mortgages on these vessels, both of which are still not completed. If a rig
is not completed, its value as collateral will be impaired, with the possible
result that the loan secured by such vessel would be undercollateralized.
OUR LOANS TO R&B FALCON RELATING TO THE DEEPWATER IV IS CURRENTLY SECURED IN
PART BY UNPERFECTED LIENS.
The liens initially granted by R&B Falcon on certain of the equipment to be
installed on the Deepwater IV are not perfected. When this drillship is
completed, a perfected first priority ship mortgage on the entirety of the
vessel will secure the loan related to this vessel. If R&B Falcon were to file
bankruptcy within one year after completion of this vessel, the mortgage on this
vessel may be invalid as to other creditors of R&B Falcon insofar as it pertains
to equipment that was not subject to a perfected lien at the time the related
loan was made.
YOUR RIGHTS IN THE COLLATERAL MAY BE ADVERSELY AFFECTED BY BANKRUPTCY
PROCEEDINGS.
The right of the indenture trustee and/or the collateral agent to repossess
and dispose of the collateral upon acceleration of our loans to R&B Falcon and
the notes is likely to be significantly impaired by bankruptcy law if a
bankruptcy proceeding were to be commenced by or against R&B Falcon prior to or
possibly even after the trustee has repossessed and disposed of the collateral.
Under the bankruptcy code, a secured creditor such as the trustee is prohibited
from repossessing its security from a debtor in a bankruptcy case, or from
disposing of security repossessed from such debtor, without bankruptcy court
approval. Moreover, bankruptcy law generally permits the debtor to continue to
return and to use collateral (and the proceeds, products, offspring, rents or
profits of such collateral) even though the debtor is in default under the
applicable debt instruments, provided generally that the secured creditor is
given "adequate protection." There is not a definition of the term "adequate
protection" and because of the broad discretionary powers of a bankruptcy court,
it is impossible to predict how long payments under the loans and the notes
could be delayed following commencement of a bankruptcy case, whether or when
the trustee would repossess or dispose of the collateral or whether or to what
extent holders of the notes would be compensated for any delay in payment or
loss of value of the collateral through the requirements of "adequate
protection." In addition, further delays and impairments could result if we and
R&B Falcon were substantively consolidated. Furthermore, in the event the
bankruptcy court determines that the value of the collateral is not sufficient
to repay all amounts due on the notes, the holders of the notes would have
"undersecured claims." Federal bankruptcy laws do not permit the payment and/or
accrual of interest, costs and attorneys' fees for "undersecured claims" during
the debtor's bankruptcy case.
THE SHIP MORTGAGES ON THE RIGS ARE SUBORDINATED TO OTHER TYPES OF MARITIME
LIENS.
R&B Falcon has registered first priority mortgages on nine rigs in favor of
the collateral agent for the benefit of the holders of the notes. Upon flagging,
R&B Falcon will register first priority ship mortgages on the one remaining rig
currently under construction. Ship mortgages are generally subordinate to some
kinds of maritime liens that arise by operation of law. The priority that these
mortgages would have against the claims of the other lien creditors in an
enforcement proceeding is generally determined by, and will vary in accordance
with, the laws of the country where the proceeding is brought. The following
liens and claims frequently take priority over rig mortgages: (1) costs arising
out of the arrest of a rig or the subsequent sale of the rig; (2) wages and
other sums due to the master, officers and other members of the rig's complement
in respect of their employment on the rig; (3) port, canal and other waterway
dues and pilotage dues; (4) claims against the rig owner in respect of loss of
life or personal injury occurring in connection with the operation of the rig;
(5) claims against the rig owner, based on tort and not capable of being based
on contract, in respect of loss of or damage to property occurring in connection
with the
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operation of the rig; (6) claims for salvage, wreck removal and contribution in
general average; and (7) liens exercisable by a rigbuilder or repairer over a
rig when the rigbuilder or repairer has possession of the rig prior to the date
the mortgage is filed with the flagging jurisdiction.
FORECLOSING ON SHIP MORTGAGES CAN BE DIFFICULT IN SOME JURISDICTIONS.
Upon an event of default under the notes, the holders of a majority of the
aggregate principal amount of the notes then outstanding may direct the
collateral agent to commence enforcement proceedings under the ship mortgages
that will secure our loans to R&B Falcon. R&B Falcon will operate the rigs
securing these loans in international waters and various foreign jurisdictions,
and there can be no assurance that, if enforcement proceedings must be commenced
against a particular rig, that rig will be located in a jurisdiction having
effective or favorable procedures and lien priorities. Each of the mortgaged
rigs is, or is expected to be upon completion of the rig, registered under the
Panamanian, Bahamian or U.S. flag. The mortgages on these rigs will be first
preferred ship mortgage liens under Panamanian, Bahamian or U.S. maritime laws.
Panamanian, Bahamian and U.S. ship mortgages are generally recognized by U.S.
and foreign courts in accordance with their terms, to the extent that they do
not offend national sovereignty, public order or good morals of the
jurisdiction. Any enforcement proceedings could be subject to lengthy delays
that could result in increased custodial costs, deterioration in the condition
of the rig and substantial reduction in the value of the rig. Some jurisdictions
may provide no legal remedy for the enforcement of the ship mortgages, or a
remedy dependent on court proceedings so expensive and time consuming as to be
impracticable. Furthermore, some jurisdictions may not permit a rig to be sold
prior to entry of a judgment, resulting in a lengthy delay that could result in
increased custodial costs, deterioration in the condition of the rig and
substantial reduction in the value of the rig.
FORWARD-LOOKING STATEMENTS
This prospectus includes and incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements relate to analyses and other information which are based
on forecasts of future results and estimates of amounts not yet determinable.
These statements also relate to our and R&B Falcon's future prospects,
developments and business strategies.
These forward-looking statements are identified by their use of terms and
phrases such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will," and similar terms and
phrases, including references to assumptions. These statements are contained in
sections entitled "Summary" and "Risk Factors," and other sections of this
prospectus and in the documents incorporated by reference in this prospectus.
These forward-looking statements involve risks and uncertainties that may
cause our or R&B Falcon's actual future activities and results of operations to
be materially different from those suggested or described in this prospectus.
These risks include: R&B Falcon's dependence on the oil and gas industry; the
effects of recent declines in oil and gas prices; R&B Falcon's commitment to the
deepwater drilling market; R&B Falcon's ability to secure adequate financing,
including financing to fund its deepwater drilling program; the risks involved
in R&B Falcon's construction and upgrade projects; competition; operational
risks; risks involved in turnkey operations and foreign operations; the age of
R&B Falcon's rigs; government regulation and environmental matters; R&B Falcon's
ability to integrate and realize anticipated synergies relating to the merger
with Cliffs Drilling Company; R&B Falcon's ability to achieve and execute
internal business plans; and the impact of any economic downturns and inflation.
If one or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, our or R&B Falcon's actual results may
vary materially from those expected, estimated or projected.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OUTSTANDING NOTES
Subject to the terms and conditions set forth in this prospectus and in the
letter of transmittal, we are offering to exchange up to $400 million of our
outstanding 11% Senior Secured Notes due 2006 for an equal amount of our 11%
Senior Secured Notes due 2006, and up to $400 million of our outstanding 11 3/8%
Senior Secured Notes due 2009 for an equal amount of our 11 3/8% Senior Secured
Notes due 2009. We will accept for exchange outstanding 11% Senior Secured Notes
due 2006 and 11 3/8% Senior Secured Notes due 2009 which are properly tendered
on or prior to the expiration date and not withdrawn as permitted below. As used
in this prospectus, the term "expiration date" means 5:00 p.m., New York City
time, on , 1999; provided, however, that if we, in our sole
discretion, have extended the period of time during which the exchange offer is
open, the term "expiration date" means the latest time and date to which we
extend the exchange offer.
The currently outstanding notes were issued on March 26, 1999 in a private
offering. As of the date of this prospectus, $400 million aggregate principal
amount of 11% Senior Secured Notes due 2006 and $400 million aggregate principal
amount of 11 3/8% Senior Secured Notes due 2009 are outstanding. This prospectus
and the letter of transmittal are first being sent on or about, 1999,
to all holders of outstanding notes known to us.
We expressly reserve the right, at any time or from time to time, to extend
the period of time during which the exchange offer is open, and thereby delay
acceptance for exchange of any outstanding notes, by giving oral or written
notice of such extension to the holders of outstanding notes as described below.
During any extension, all outstanding notes previously tendered will remain
subject to the exchange offer and may be accepted for exchange by us. We will
return at no expense to the holder any outstanding notes not accepted for
exchange as promptly as practicable after the expiration or termination of the
exchange offer.
Outstanding notes tendered in the exchange offer must be in denominations
of principal amount of $1,000 and any integral multiple thereof.
If any of the events specified in "-- Conditions to the Exchange Offer"
should occur, we expressly reserve the right to amend or terminate the exchange
offer, and not to accept for exchange any outstanding notes not already accepted
for exchange. We will give oral or written notice of any extension, amendment,
non-acceptance or termination to holders of outstanding notes as promptly as
practicable. In the case of an extension, we will issue a press release or other
public announcement no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
Following consummation of the exchange offer, we may, in our sole
discretion, commence one or more additional exchange offers to those holders of
currently outstanding notes who do not exchange their notes in this exchange
offer on terms which may differ from those contained in this prospectus. We may
use this prospectus, as amended or supplemented from time to time, in connection
with additional exchange offers. These additional exchange offers may take place
from time to time until all of the currently outstanding notes have been
exchanged for exchange notes.
PROCEDURES FOR TENDERING OUTSTANDING NOTES
The tender by a holder of the outstanding notes and our acceptance of that
holder's notes will constitute a binding agreement between us and that holder
subject to the terms and conditions set forth in this prospectus and the
accompanying letter of transmittal. Except as set forth below in the section
entitled "Guaranteed Delivery Procedures," to tender any series of the
outstanding notes in the exchange offer, a holder must transmit to United States
Trust Company of New York, the exchange agent, at the address set forth under
"-- Exchange Agent" on or prior to the expiration date either:
- a properly completed and duly executed letter of transmittal, including
all other documents required by the letter of transmittal, or
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- if the notes are tendered under to the book-entry procedures set forth
below, the tendering note holder may transmit an agent's message
(described below) instead of the letter of transmittal.
In addition, on or prior to the expiration date, either:
- the exchange agent must receive the certificates for the notes along with
the letter of transmittal; or
- the exchange agent must receive a timely confirmation of a book-entry
transfer of the tendered notes into the exchange agent's account at The
Depository Trust Company according to the procedure for book-entry
transfer described below, along with a letter of transmittal or an
agent's message in lieu of the letter of transmittal; or
- the holder must comply with the guaranteed delivery procedures described
below.
An "agent's message" is a message, transmitted by The Depository Trust
Company and received by the Exchange Agent and forming a part of the book-entry
confirmation, which states that The Depository Trust Company has received an
express acknowledgment from the tendering holder that the holder has received
and agrees to be bound by the letter of transmittal and that we may enforce the
letter of transmittal against the holder.
The method of delivery of outstanding notes, letters of transmittal or
agent's messages and all other required documents is at the election and risk of
the holders. If such delivery is by mail, we recommend registered mail, properly
insured, with return receipt requested. In all cases, you should allow
sufficient time to assure timely delivery. Do not send letters of transmittal,
agent's messages or outstanding notes to us.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the outstanding notes surrendered for
exchange are tendered either by a registered holder of the notes who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal or for the account of an eligible
institution. An "eligible institution" is a firm which is a member of a
registered national securities exchange or a member of the National Association
of Securities Dealers, Inc. or a commercial bank or trust company having an
office or correspondent in the United States. If signatures on a letter of
transmittal or a notice of withdrawal are required to be guaranteed, the
guarantor must be an eligible institution. If outstanding notes are registered
in the name of a person other than a signer of the letter of transmittal, the
outstanding notes surrendered for exchange must be endorsed by, or be
accompanied by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by us in our sole discretion, duly executed by,
the registered holder with the signature guaranteed by an eligible institution.
We will determine all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of outstanding notes tendered for
exchange in our sole discretion. Our determination will be final and binding. We
reserve the absolute right to reject any and all tenders of outstanding notes
improperly tendered or to not accept any outstanding notes which acceptance
might, in our judgment or that of our counsel, be unlawful. We also reserve the
absolute right to waive any defects or irregularities or conditions of the
exchange offer as to any outstanding notes either before or after the expiration
date (including the right to waive the ineligibility of any holder who seeks to
tender outstanding notes in the exchange offer). Our interpretation of the terms
and conditions of the exchange offer as to any particular outstanding notes
either before or after the expiration date (including the letter of transmittal
and its instructions) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of outstanding notes
for exchange must be cured within such reasonable period of time as we shall
determine. Neither us, the exchange agent nor any other person shall be under
any duty to give notification of any defect or irregularity with respect to any
tender of outstanding notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
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If a person other than the registered holder of outstanding notes signs the
letter of transmittal, the outstanding notes must be endorsed or accompanied by
appropriate powers of attorney, in either case signed exactly as the name of the
registered holder that appears on the outstanding notes.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any outstanding notes or powers of
attorney, such persons should so indicate when signing, and you must submit
proper evidence satisfactory to us of such persons' authority to so act unless
we waive this requirement.
By tendering, each holder represents to us that, among other things, the
exchange notes acquired in the exchange offer are being obtained in the ordinary
course of business of the person receiving the exchange notes, whether or not
the person is the holder, and that neither the holder nor any person for whom
the holder is acting has any arrangement or understanding with any person to
participate in the distribution of the exchange notes. In the case of a holder
that is not a broker-dealer, the holder, by tendering, also represents to us
that the holder is not engaged in, nor intends to engage in, a distribution of
the exchange notes. If any holder or any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act, of our company, or is engaged in
or intends to engage in or has an arrangement or understanding with any person
to participate in a distribution of the exchange notes to be acquired in the
exchange offer, the holder or any such other person could not rely on the
applicable interpretations of the staff of the SEC and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
exchange notes for its own account in exchange for outstanding notes, where the
outstanding notes were acquired by that broker dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of the exchange notes.
See "Plan of Distribution." The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not admit
that it is an "underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all outstanding notes of
each series properly tendered and will issue the exchange notes of such series
promptly after acceptance of the outstanding notes. See "-- Certain Conditions
to the Exchange Offer." For purposes of the exchange offer, we shall be deemed
to have accepted properly tendered outstanding notes for exchange when, as and
if we have given oral or written notice to the exchange agent, with written
confirmation of any oral notice to be given promptly thereafter.
For each outstanding note accepted for exchange, the outstanding note
holder will receive an exchange note having a principal amount and maturity
equal to that of the surrendered outstanding note. Interest on the exchange
notes will accrue from March 26, 1999, the original issue date of the
outstanding notes. If we do not complete the exchange offer by September 22,
1999, then we are obligated to pay special interest on the outstanding notes.
The special interest amount shall be, with respect to the first 90-day period,
an amount equal to $0.05 per week per $1,000 principal amount of notes. The
special interest amount will increase by an additional $0.05 per week per $1,000
principal amount of notes for each subsequent 90-day period until we complete
the exchange offer, up to a maximum amount of $0.50 per week per $1,000
principal amount of notes. Payments of this special interest, if any, on
outstanding notes in exchange for which exchange notes were issued will be made
to the persons who, at the close of business on March 1 or September 1
immediately preceding the interest payment date, are registered holders of the
outstanding notes if such record date occurs prior to the exchange, or are
registered holders of the exchange notes if the record date occurs on or after
the date of the exchange, even if notes are cancelled after the record date and
on or before the interest payment date.
In all cases, issuance of exchange notes in the exchange offer will be made
only after the exchange agent timely receives either certificates for the
outstanding notes or a book-entry confirmation of the outstanding notes into the
exchange agent's account at The Depository Trust Company, a properly completed
and duly executed letter of transmittal and all other required documents or, in
the case of a
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book-entry confirmation, an agent's message. If for any reason set forth in the
terms and conditions of the exchange offer we do not accept any tendered notes
or if outstanding notes are submitted for a greater principal amount than the
holder desired to exchange, we will return such unaccepted or non-exchanged
outstanding notes without expense to the tendering holder (or, in the case of
outstanding notes tendered by book-entry transfer into the exchange agent's
account at The Depository Trust Company under the book-entry procedures
described below, such unaccepted or non-exchanged outstanding notes will be
credited to an account maintained with The Depository Trust Company) as promptly
as practicable after the expiration or termination of the exchange offer.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the outstanding notes at The Depository Trust Company for the exchange offer
within two business days after the date of this prospectus, and any financial
institution that is a participant in The Depository Trust Company's systems may
make book-entry delivery of outstanding notes by causing The Depository Trust
Company to transfer such outstanding notes into the exchange agent's account at
The Depository Trust Company in accordance with The Depository Trust Company's
procedures for transfer. However, although delivery of outstanding notes may be
effected through book-entry transfer at The Depository Trust Company, the letter
of transmittal or facsimile thereof, with any required signature guarantees, or
an agent's message in lieu of a letter of transmittal, and any other required
documents, must, in any case, be transmitted to and received by the exchange
agent at one of the addresses set forth below under "-- Exchange Agent" on or
prior to the expiration date or the guaranteed delivery procedures described
below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of any series of the outstanding notes desires to
tender such outstanding notes and the outstanding notes are not immediately
available, or time will not permit such holder's outstanding notes or other
required documents to reach the exchange agent before the expiration date, or
the procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if:
- the tender is made through an eligible institution;
- prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed letter of
transmittal (or a facsimile thereof) and notice of guaranteed delivery,
substantially in the form provided by us (by telegram, telex, facsimile
transmission, mail or hand delivery), setting forth the name and address
of the holder of outstanding notes and the amount of outstanding notes
tendered, stating that the tender is being made thereby and guaranteeing
that within three New York Stock Exchange trading days after the date of
execution of the notice of guaranteed delivery, the certificates for all
physically tendered outstanding notes, in proper form for transfer, or a
book-entry confirmation, as the case may be, and any other documents
required by the letter of transmittal will be deposited by the eligible
institution with the exchange agent; and
- the exchange agent receives the certificates for all physically tendered
outstanding notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, and all other documents required by the
letter of transmittal, within three New York Stock Exchange trading days
after the date of execution of the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
You may withdraw tenders of any series of the outstanding notes at any time
prior to the expiration date.
For a withdrawal to be effective, you must send a written notice of
withdrawal to the exchange agent at one of the addresses set forth below under
"-- Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the outstanding notes to be withdrawn, identify the
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outstanding notes to be withdrawn (including the principal amount of such
outstanding notes), and (where certificates for outstanding notes have been
transmitted) specify the name in which such outstanding notes are registered, if
different from that of the withdrawing holder. If certificates for outstanding
notes have been delivered or otherwise identified to the exchange agent, then,
prior to the release of such certificates the withdrawing holder must also
submit the serial numbers of the particular certificates to be withdrawn and a
signed notice of withdrawal with signatures guaranteed by an eligible
institution unless such holder is an eligible institution. If outstanding notes
have been tendered under the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at The
Depository Trust Company to be credited with the withdrawn outstanding notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the us. Our determination will be final and binding on all
parties. Any outstanding notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the exchange offer. Any
outstanding notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost to
such holder (or, in the case of outstanding notes tendered by book-entry
transfer into the exchange Agent's account at The Depository Trust Company under
the book-entry transfer procedures described above, such outstanding notes will
be credited to an account maintained with The Depository Trust Company for the
outstanding notes) as soon as practicable after withdrawal, rejection of tender
or termination of the exchange offer. Properly withdrawn outstanding notes may
be retendered by following one of the procedures described under "-- Procedures
for Tendering Outstanding Notes" above at any time on or prior to the expiration
date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offer, we shall not be
required to accept for exchange, or to issue exchange notes in exchange for, any
outstanding notes. We may terminate or amend the exchange offer, if at any time
before the acceptance of such outstanding notes for exchange or the exchange of
the exchange notes for such outstanding notes, the exchange offer is determined
by us, in our sole and absolute discretion, to violate applicable law or any
applicable interpretation of the staff of the SEC.
EXCHANGE AGENT
We have appointed United States Trust Company of New York as the exchange
agent for the exchange offer. All executed letters of transmittal should be
directed to the exchange agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of this
prospectus or of the letter of transmittal and requests for notices of
guaranteed delivery should be directed to the exchange agent addressed as
follows:
<TABLE>
<S> <C>
By Overnight Delivery:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Attention: Corporate Trust Services
By Registered or Certified Mail: by Facsimile:
(212) 780-0592
United States Trust Company of New York Confirm by Telephone:
P.O. Box 843 (800) 548-6565
Cooper Station
New York, New York 10276
Attention: Corporate Trust Services
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE IS NOT VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
25
<PAGE> 30
FEES AND EXPENSES
We will not make any payment to brokers, dealers, or others soliciting
acceptances of the exchange offer.
We will pay the estimated cash expenses to be incurred in connection with
the exchange offer, which are estimated in the aggregate to be $325,000.
TRANSFER TAXES
Holders who tender their outstanding notes for exchange will not be
obligated to pay any transfer taxes in connection with the tender, except that
holders who instruct us to register exchange notes in the name of, or request
that outstanding notes not tendered or not accepted in the exchange offer be
returned to, a person other than the registered tendering holder will be
responsible for the payment of any applicable transfer tax thereon.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE OUTSTANDING NOTES
Holders of outstanding notes who do not exchange their outstanding notes
for exchange notes in the exchange offer will continue to be subject to the
provisions in the indenture regarding transfer and exchange of the outstanding
notes and the restrictions on transfer of such outstanding notes as set forth in
the legend thereon as a consequence of the issuance of the outstanding notes
under exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the outstanding notes may not be offered or sold, unless registered
under the Securities Act, except under an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. We do
not currently anticipate that we will register outstanding notes under the
Securities Act. See "Description of the Notes -- Registered Exchange Offer;
Registration Rights."
Based on interpretations by the staff of the SEC, as set forth in no-action
letters issued to third parties, we believe that exchange notes issued in the
exchange offer in exchange for outstanding notes may be offered for resale,
resold or otherwise transferred by holders thereof (other than any such holder
which is an "affiliate" of our company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such exchange notes are acquired
in the ordinary course of such holders' business and such holders have no
arrangement or understanding with any person to participate in the distribution
of such exchange notes. However, we do not intend to request the SEC to
consider, and the SEC has not considered, the exchange offer in the context of a
no-action letter and we cannot guarantee that the staff of the SEC would make a
similar determination with respect to the exchange offer as in such other
circumstances.
Each holder, other than a broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage in, a distribution of exchange notes
and has no arrangement or understanding to participate in a distribution of
exchange notes. If any holder is an affiliate of our company, is engaged in or
intends to engage in or has any arrangement or understanding with respect to the
distribution of the exchange notes to be acquired in the exchange offer, such
holder:
- could not rely on the applicable interpretations of the staff of the SEC,
and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction.
Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes, where such outstanding notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such exchange notes. See "Plan of Distribution."
26
<PAGE> 31
In addition, to comply with state securities laws, the exchange notes may
not be offered or sold in any state unless they have been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and is complied with. The offer and sale of the
exchange notes to "qualified institutional buyers" (as such term is defined
under Rule 144A of the Securities Act) is generally exempt from registration or
qualification under the state securities laws. We currently do not intend to
register or qualify the sale of the exchange notes in any state where an
exemption from registration or qualification is required and not available.
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes. In consideration for issuing the exchange notes of a series as
contemplated in this prospectus, we will receive in exchange outstanding notes
of the corresponding series in like principal amount. The form and terms of each
series of the exchange notes are identical in all material respects to the form
and terms of such series of outstanding notes of the corresponding series,
except that:
- the offering of the exchange notes has been registered under the
Securities Act;
- the exchange notes will not be subject to transfer restrictions except as
set forth in "Transfer Restrictions"; and
- the holders of the exchange notes will not be entitled to registration or
other rights under the registration rights agreement, including the
payment of liquidated damages upon our failure to complete the exchange
offer or the occurrence of certain other events.
The outstanding notes surrendered in exchange for exchange notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the
exchange notes will not result in a change in our indebtedness.
Our net proceeds from the private offering of the outstanding notes were
$800 million because R&B Falcon paid all of the expenses of the offering. The
net proceeds to R&B Falcon from our loans to them, after deducting discounts,
commissions and estimated fees and expenses in connection with the private
offering, were approximately $777.2 million. R&B Falcon used $350 million of
these net proceeds to reduce borrowings under its bank facility, $125 million to
repay indebtedness incurred in the construction of the Deepwater Millennium, and
$81 million to repay its portion of the indebtedness incurred by its 60% owned
subsidiary in the construction of the Deepwater Frontier. R&B Falcon has used or
will use the remaining proceeds from the private offering for planned capital
expenditures, working capital and other general corporate purposes.
27
<PAGE> 32
CAPITALIZATION OF RBF FINANCE CO.
The following table sets forth our unaudited consolidated capitalization as
of March 31, 1999. You should read this table along with our financial
statements and the related notes that are included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1999
-------------------
AS
ACTUAL ADJUSTED
-------- --------
(IN THOUSANDS,
UNAUDITED)
<S> <C> <C>
Cash and cash equivalents................................... $303,101 $303,101(1)
======== ========
Long-term debt:
11% Senior Secured Notes due 2006......................... 400,000 400,000
11 3/8% Senior Secured Notes due 2009..................... 400,000 400,000
-------- --------
Total long-term debt.............................. 800,000 800,000
-------- --------
Stockholders' equity:
Common stock, par value $.01 per share.................... -- --
Capital in excess of par.................................. 1 1
Retained earnings......................................... 58 58
-------- --------
Total stockholders' equity.................................. 59 59
-------- --------
Total capitalization........................................ $800,059 $800,059
======== ========
</TABLE>
- ---------------
(1) Subsequent to March 31, 1999, we loaned this $303.1 million to R&B Falcon
Corporation.
28
<PAGE> 33
CAPITALIZATION OF R&B FALCON CORPORATION
The following table sets forth R&B Falcon's unaudited consolidated
capitalization as of March 31, 1999 and its unaudited consolidated
capitalization as adjusted to reflect its offering of preferred stock and
warrants in April 1999, and the application of the net proceeds from that
offering. You should read this table along with R&B Falcon's consolidated
financial statements and the related notes that are incorporated by reference in
this prospectus.
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1999
-------------------------
AS
ACTUAL ADJUSTED
----------- -----------
(IN MILLIONS, UNAUDITED)
<S> <C> <C>
Cash and cash equivalents................................... $ 545.1 $ 834.1
======== ========
Current portion of long-term debt........................... 6.2 6.2
Long-term debt, excluding current portion:
Loans from RBF Finance Co. due 2006(1).................... 400.0 400.0
Loans from RBF Finance Co. due 2009(2).................... 400.0 400.0
12 1/4% Senior Notes due 2006............................. 200.0 200.0
6 1/2% Senior Notes due 2003.............................. 249.2 249.2
6 3/4% Senior Notes due 2005.............................. 348.2 348.2
6.95% Senior Notes due 2008............................... 249.2 249.2
7 3/8% Senior Notes due 2018.............................. 248.0 248.0
9 1/8% Senior Notes due 2003.............................. 100.0 100.0
9 1/2% Senior Notes due 2008.............................. 300.0 300.0
10 1/4% Senior Notes due 2003............................. 202.4 202.4
Other debt................................................ 17.3 17.3
-------- --------
Total long-term debt, including current portion... 2,720.5 2,720.5
-------- --------
Minority interest........................................... 44.6 44.6
-------- --------
Mandatorily redeemable preferred stock(3)................... -- 242.8
-------- --------
Stockholders' equity:
Common stock, par value $.01 per share.................... 1.9 1.9
Capital in excess of par.................................. 1,061.1 1,061.1
Warrants(4)............................................... -- 46.2
Retained earnings......................................... 200.7 200.7
Other..................................................... (10.7) (10.7)
-------- --------
Total stockholders' equity.................................. 1,253.0 1,299.2
-------- --------
Total capitalization, including current portion of long-term
debt...................................................... $4,018.1 $4,307.1
======== ========
</TABLE>
- ---------------
(1) Comprised of ten tranches with interest rates of 11.02%.
(2) Comprised of ten tranches with interest rates of 11.395%.
(3) We have discounted the $300 million liquidation preference of the preferred
stock by the preliminary estimated fair value of the warrants and a portion
of the estimated offering costs.
(4) We have based the fair value of the warrants on our preliminary estimate,
and we will finalize the fair value based on a third party appraisal.
29
<PAGE> 34
SELECTED FINANCIAL DATA
The selected financial data set forth below are derived from our audited
financial statements as of March 31, 1999 and for the period from inception
(March 19, 1999) to March 31, 1999. The selected financial data should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements (including Notes
thereto) included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
(MARCH 19, 1999
TO
MARCH 31, 1999)
---------------------
(IN THOUSANDS,
EXCEPT FOR
RATIO AMOUNTS
<S> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues............................................ $ 1,316
Interest expense.......................................... 1,226
Operating income.......................................... 90
Net income................................................ 58
OTHER DATA:
Cash used in operating activities......................... --
Cash used in investing activities......................... (496,900)
Cash provided by financing activities..................... 800,001
Ratio of earnings to fixed charges(1)..................... 1.1x
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1999
--------------
<S> <C>
BALANCE SHEET DATA:
Working capital........................................... $ 303,159
Total assets.............................................. 801,317
Total debt................................................ 800,000
Stockholders' equity...................................... 59
</TABLE>
- ---------------
(1) For the purpose of this calculation "Earnings" represents income before
income tax expense, plus fixed charges, exclusive of interest capitalized.
"Fixed charges" consist of interest, whether expensed or capitalized,
amortization of debt expense, and an estimated portion of rentals
representing interest expense.
30
<PAGE> 35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a limited purpose corporation that has been recently organized
solely for the purpose of issuing the notes as our full recourse obligations and
loaning the proceeds of the sale of the notes to R&B Falcon. Our ability to make
payments on the notes is dependent on R&B Falcon making its payments to us under
these loans and, to the extent R&B Falcon is unable to make these payments, on
our ability to realize on the collateral that secures these loans. Also, R&B
Falcon has fully and unconditionally guaranteed our obligations under the notes.
Because of our dependence on R&B Falcon, you should read R&B Falcon's
Management's Discussion of Financial Condition and Results of Operations in its
Annual Report on Form 10-K for the year ended December 31, 1998 and its
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1999,
which are incorporated by reference in this prospectus. See "Where You Can Find
More Information" and "Incorporation by Reference."
RESULTS OF OPERATIONS
We were formed on March 19, 1999 and do not conduct any business operations
other than with respect to the administration of our loans to R&B Falcon and the
notes. Our only sources of revenue are the payments R&B Falcon makes to us on
the loans and interest earned on our cash deposits. Other than an immaterial
amount of general and administrative expenses, our only expense is the interest
expense recognized on the payments of interest under the notes. The interest
payable to us by R&B Falcon on the loans is 0.02% per year greater than the
interest we pay on the notes. Because the interest rates on the notes and the
loans are fixed, we are not subject to market risk with respect to changes in
interest rates.
LIQUIDITY AND CAPITAL RESOURCES
All of our future cash flows and long-term obligations are guaranteed by
R&B Falcon. The following is a description of R&B Falcon's industry conditions
and liquidity. R&B Falcon is currently constructing or significantly upgrading
six wholly-owned deepwater drilling rigs and has recently completed the
construction of one deepwater drilling rig. R&B Falcon estimates the gross
capital expenditures on these projects will be approximately $1.9 billion, of
which approximately $.9 billion remains to be funded by R&B Falcon. Since May
1998, there has been a downturn in demand for marine drilling rigs resulting in
a decline in rig utilization and dayrates. The decline has been particularly
dramatic in the domestic barge and jack-up rig markets where R&B Falcon is one
of the largest contractors. As a result, R&B Falcon experienced a decline in
operating revenues from the first quarter of 1998 to the first quarter of 1999.
Depending on the level of future cash flows from operations, R&B Falcon's cash
on hand, and funds available under its existing credit facilities may not be
sufficient to satisfy R&B Falcon's short-term and long-term working capital
needs, planned investments, capital expenditures, debt, lease and other payment
obligations, without selling assets or terminating construction contracts.
On March 26, 1999, R&B Falcon issued a series of 12 1/4% Senior Notes with
an aggregate principal amount of $200.0 million due 2006. As a result, R&B
Falcon received net proceeds of approximately $194.3 million after deducting
estimated offering related expenses. R&B Falcon used the proceeds from such
notes and from loans from us to repay existing indebtedness of approximately
$556.0 million and will use the remainder to acquire, construct, repair and
improve drilling rigs and for general corporate purposes.
On April 22, 1999, R&B Falcon issued 300,000 shares of 13.875% Senior
Cumulative Redeemable Preferred Stock and warrants to purchase 10,500,000 shares
of R&B Falcon's common stock at an exercise price of $9.50 per share. R&B Falcon
received net proceeds from the issuance of the preferred stock and warrants of
approximately $289.0 million. Each share of preferred stock has a liquidation
preference of $1,000 per share and one warrant entitles the holder to purchase
35 shares of R&B Falcon's common stock. The preferred stock is mandatorily
redeemable on, and the warrants expire on, May 1, 2009. Dividends on the
preferred stock are to be paid quarterly commencing on August 1, 1999 and at R&B
31
<PAGE> 36
Falcon's option may be paid in cash or, on or before May 1, 2004, in additional
shares of preferred stock. R&B Falcon may redeem any of 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, R&B Falcon 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. The warrants' estimated fair value of $48.0 million was recorded as a
discount to the preferred stock and will be amortized on a straight line basis
over ten years. Preferred stock dividends and the amortization of the warrants'
initial value will be deducted from net income to arrive at net income
applicable to common stockholders.
Proceeds from the $200.0 million senior notes, loans from us and the
preferred stock met a portion of R&B Falcon's capital requirements. However, it
may also be necessary for R&B Falcon to obtain additional capital through debt
and/or equity financings to meet its currently projected obligations. R&B Falcon
is currently evaluating two project financings to meet a portion of its
additional capital requirements. The first is an approximately $270.0 million
financing in the form of a synthetic lease that would be collateralized by the
drillship Deepwater Frontier, drilling contract revenues from such drillship and
a letter of credit. Proceeds of such financing, if obtained, would be used in
part to repay advances made to a limited liability R&B Falcon which will operate
the Deepwater Frontier and which is owned 60% by R&B Falcon and 40% by Conoco.
The second financing being contemplated is an approximately $250.0 million
project financing that would be collateralized by the semisubmersible RBS8M, as
well as the drilling contract revenues from such rig.
R&B Falcon currently believes it will be able to consummate the proposed
project financings. However, there can be no assurance that these or any other
additional financings can be obtained, or if obtained, that they will be on
terms favorable to R&B Falcon or for the amounts needed. Further, R&B Falcon has
limited ability under its indenture covenants to incur additional recourse
indebtedness and to secure that debt. If R&B Falcon is unable to obtain its
requisite financing, R&B Falcon may have to sell assets or terminate or suspend
one or more construction projects. Termination or suspension of a project may
subject R&B Falcon to claims for penalties or damages under the construction
contracts or drilling contracts for rigs that are being constructed. In
addition, asset sales made under duress in today's drilling market may not yield
attractive sales prices. Accordingly, the inability of R&B Falcon to complete
required financings would have a material adverse effect on R&B Falcon's
financial condition and its ability to repay its outstanding indebtedness.
Three of R&B Falcon's outstanding credit facilities were repaid and
terminated in March 1999 from proceeds from its senior notes and its loans from
us. To assist R&B Falcon's liquidity position, R&B Falcon may seek to establish
a new revolving bank credit facility of up to $180.0 million, and may sell
certain assets. There can be no assurance, however, that such facility will be
obtained or sales completed.
The liquidity of R&B Falcon should also be considered in light of the
significant fluctuations in demand that may be experienced by drilling
contractors as changes in oil and gas producers' expectations and budgets occur,
primarily in response to declines in prices for oil and gas. These fluctuations
can rapidly impact R&B Falcon's liquidity as supply and demand factors directly
affect utilization and dayrates, which are the primary determinants of cash flow
from R&B Falcon's operations. The decline in oil and gas prices since 1997 has
negatively impacted R&B Falcon's performance, particularly in the shallow water
U.S. Gulf market, by adversely affecting R&B Falcon's rig utilization and
dayrates. Utilization of R&B Falcon's domestic jack-up fleet has declined from
approximately 97% in the first quarter of 1998 to approximately 49% in the first
quarter of 1999, and dayrates have declined from an average of $35,000 during
the first quarter of 1998 to an average of $21,000 during the first quarter of
1999. Dayrates for R&B Falcon's domestic barge drilling rig fleet have not
declined materially, but utilization of the fleet declined from approximately
93% in the first quarter of 1998 to approximately 27% in the first quarter of
1999. R&B Falcon believes a continued depression in oil and gas prices would
have a material adverse effect on R&B Falcon's financial position and results
from operations.
32
<PAGE> 37
In December 1998, Mobil U.K. Ltd. terminated its contract to use R&B
Falcon's Jack Bates semisubmersible rig on the grounds that two of the rig's
anchor cables broke. The contract provided for Mobil's use of the rig at a
dayrate of approximately $115,000 for the primary term through January 1999 and
approximately $200,000 for the extension term from February 1999 through
December 2000. R&B Falcon does not believe that Mobil had the right to terminate
this contract. R&B Falcon has recontracted the Jack Bates to Mobil for one well
at a dayrate of $156,000. This contract is without prejudice to either party's
rights in the dispute over the termination of the original contract. If R&B
Falcon is not successful in settling its dispute over the termination of the
original contract, R&B Falcon intends to commence legal proceedings to enforce
its rights under the contract.
In April 1999, BP Amoco cancelled its contract with R&B Falcon for the
drillship Peregrine VII in accordance with the contract's terms because the
drillship had not been delivered on time. R&B Falcon is currently marketing this
rig for work.
In May 1999, R&B Falcon received notice from Petrobras of cancellation of
the drilling contract on the semisubmersible Falcon 100, based upon alleged late
delivery of the rig. R&B Falcon does not believe that Petrobras has the right to
cancel the contract. R&B Falcon has engaged Brazilian counsel to pursue its
rights under the contract and intends to take legal action to enforce its rights
under the contract.
We consider all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Included in cash and
cash equivalents at March 31, 1999 was $303.1 million that was subsequently
loaned to R&B Falcon during April and May 1999 under the Senior Secured Loan
Agreements dated as of March 26, 1999.
We maintain cash balances and short-term investments with commercial banks
in the United States. Our cash equivalents and short-term investments generally
consist of commercial paper, money-market mutual funds and interest-bearing
deposits with strong credit rated financial institutions, therefore, bearing
minimal risk. No losses were incurred from inception through March 31, 1999.
Our revenues were generated primarily from interest income on notes from
R&B Falcon.
At March 31, 1999, our only material assets were cash of $303.1 million,
interest receivable of $1.3 million and loans to R&B Falcon of $496.9 million.
Since that date, we have loaned an additional $303.1 million to R&B Falcon, for
total outstanding loans as of May 24, 1999 of $800 million. We have an
immaterial working capital requirement, and management believes that the
difference between the interest payable to us by R&B Falcon on the loans and the
interest we pay on the notes will be sufficient to satisfy our working capital
needs.
NEWLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards (SFAS) No 131, Disclosures
about Segments of an Enterprise and Related Information Disclosures about
Segments of an Enterprise and Related Information, requires that companies
report financial and descriptive information about their reportable operating
segments. Segment information to be reported is to be based upon the way
management organizes the segments for making operating decisions and assessing
performance. We have made the appropriate disclosures. Our revenues are
generated primarily from its interest income on the loans made to R&B Falcon and
all of our activities occur in the United States. Therefore no segment
information has been disclosed.
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities
was issued. SFAS 133 establishes accounting and reporting standards requiring
that every derivative instrument be measured at its fair value, recorded in the
balance sheet as either an asset or liability and that changes in the
derivative's fair value be recognized currently in earnings. SFAS 133 is
effective for fiscal years beginning after June 15, 1999. We have not yet
quantified the impacts of adopting SFAS 133 on its financial statements nor has
it determined the timing of its adoption.
33
<PAGE> 38
THE COMPANY
We are a limited purpose corporation that was organized in March 1999
solely for the purpose of issuing the notes and loaning the proceeds of the sale
of the notes to R&B Falcon. Our certificate of incorporation limits our purposes
to the following:
- to issue and sell up to $400 million of our Senior Secured Notes due
2006, and up to $400 million of our Senior Secured Notes due 2009;
- to loan the proceeds from the issuance and sale of the notes to R&B
Falcon, which loans shall be secured by:
- first priority ship mortgages on eight drilling rigs owned by R&B
Falcon;
- by the collateral assignment of rights of R&B Falcon in construction
contracts for two additional drilling rigs, to be replaced by first
priority ship mortgages on such rigs upon their completion and delivery;
- by security interests in equipment purchased by R&B Falcon for use in
the construction of the two additional drilling rigs; and
- by any other collateral;
- to collaterally assign to a collateral agent for the benefit of the
holders of the notes our rights under the loans we have made to R&B
Falcon and the liens securing those loans; and
- to do all other things we deem necessary, incidental or convenient to
achieve these purposes.
Our certificate of incorporation requires us to:
- maintain our own bank accounts separate from any other person;
- maintain our own corporate books and records separate from any other
person;
- produce annual financial statements which disclose the effects of our
operations in accordance with generally accepted accounting principles in
the United States;
- fund our own operating expenses and other obligations; and
- identify ourselves in all dealings with other persons and the public
under our own name and as a separate and distinct entity and not identify
ourselves as being a division or part of any other person;
and prohibits us from:
- engaging in any business or activity other than in connection with,
relating to or facilitating the activities set forth in our corporate
purpose;
- incurring any indebtedness, or assuming or guarantying any indebtedness
of any other entity other than subordinated obligations owing to R&B
Falcon;
- commingling our assets with those of other persons;
- dissolving or liquidating, in whole or in part;
- without the affirmative vote of 100% of the members of our Board of
Directors, consolidating or merging with or into any other entity or
conveying or transferring our properties and assets substantially as an
entirety to any other entity; or
- without the affirmative vote of 100% of the members of our Board of
Directors, taking any actions with respect to bankruptcy.
34
<PAGE> 39
Our ability to make payments on the notes is dependent on R&B Falcon making
its payments to us under our loans to it and, to the extent R&B Falcon is unable
to make these payments, on our ability to realize on the collateral that secures
these loans. Also, R&B Falcon has fully and unconditionally guaranteed our
obligations under the notes. Because of our dependence on R&B Falcon, you should
read R&B Falcon's description of its business contained in its Annual Report on
Form 10-K, which is incorporated by reference in this prospectus. See "Where You
Can Find More Information" and "Incorporation by Reference."
Under the indenture governing the notes, recourse against our
incorporators, directors, officers and stockholders has been expressly waived.
Accordingly, our incorporators, directors, officers and stockholders will not be
liable for any payments on the notes.
Our capitalization is nominal. We do not conduct any business operations
other than with respect to the administration of our loans to R&B Falcon and the
notes. We have no employees and do not intend to hire any employees. We have no
properties.
R&B Falcon does not own any of our capital stock. However, all of our
stockholders are employees, officers or directors of R&B Falcon.
LEGAL PROCEEDINGS
We are not a party to any litigation.
MANAGEMENT
DIRECTORS AND OFFICERS
The following table sets forth certain information regarding our officers
and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Paul B. Loyd, Jr. .................... 52 Director
Steven A. Webster..................... 47 Director and President
Tim W. Nagle.......................... 48 Vice President
Robert F. Fulton...................... 48 Vice President
Wayne K. Hillin....................... 57 Secretary
Leighton E. Moss...................... 48 Vice President and Assistant Secretary
Roger L. Abel......................... 55 Director
</TABLE>
Paul B. Loyd, Jr. has been a director of the R&B Falcon since July 1997,
Chairman of the Board of R&B Falcon since January 6, 1998, and Chief Executive
Officer of R&B Falcon since May 19, 1999. Mr. Loyd was Chief Executive Officer
and Chairman of the Board of Reading & Bates from 1991 until December 31, 1997,
when Reading & Bates merged with Falcon Drilling Company to form R&B Falcon. Mr.
Loyd has been President of Loyd & Associates, Inc., a financial consulting firm,
since 1989. Mr. Loyd is a director of Wainoco Oil Corporation and Carrizo Oil &
Gas, Inc. Mr. Loyd has been a director of our company since March 1999.
Steven A. Webster was Chief Executive Officer of R&B Falcon from its
organization in July 1997 until May 19, 1999. Mr. Webster has been a director of
R&B Falcon since its organization in July 1997. Mr. Webster served as Chief
Executive Officer and Chairman of the Board of Falcon Drilling Company from its
formation in 1991 until May 19, 1999. He serves as a director of Grey Wolf,
Inc., Carrizo Oil & Gas, Inc., Ponder Industries, Inc., Geokinetics, Inc. and
Crown Resources Corporation. Mr. Webster also serves as a trust manager of
Camden Property Trust. Mr. Webster has been President and a director of our
company since March 1999.
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<PAGE> 40
Tim W. Nagle has been Executive Vice President of R&B Falcon since January
1998. Mr. Nagle was Chief Financial Officer of Reading & Bates for more than
five years prior to that. Mr. Nagle has been a Vice President of our company
since March 1999.
Robert F. Fulton has been Executive Vice President of R&B Falcon since
January 1998. Mr. Fulton has been Executive Vice President of Falcon since
January 1, 1995. From 1991 until joining Falcon in 1995, Mr. Fulton served as an
executive officer of Chiles Offshore Corporation, most recently as Senior Vice
President and Chief Financial Officer. Mr. Fulton has been Vice President of our
company since March 1999.
Wayne K. Hillin has been Senior Vice President of R&B Falcon since January
1998. Mr. Hillin was Senior Vice President and General Counsel of Reading &
Bates for more than five years prior to that. Mr. Hillin has been Secretary of
our company since March 1999.
Leighton E. Moss has been Senior Vice President of R&B Falcon since January
1998. Mr. Moss has been Vice President and General Counsel of Falcon Drilling
Company since January 1, 1996. From October 1995 until joining R&B Falcon, Mr.
Moss was a member of the law firm of Gardere Wynne Sewell & Riggs, L.L.P. For
five years prior to October 1995, Mr. Moss was a member of the law firm of
Sewell & Riggs, P.C. Mr. Moss has been a Vice President of our company since
March 1999.
Roger L. Abel was Executive Vice President of Occidental Petroleum
Corporation and President and Chief Operating Officer of Occidental Oil and Gas
Corporation from 1997 until his retirement in early 1999. For more than five
years prior to that, Mr. Abel served in various management positions with
Conoco, Inc., including Manager of Engineering and Research from 1988 to 1990,
Vice President and General Manager of Engineering and Research from 1990 to
1991, Vice President of Conoco Russia from 1991 to 1993, and Chairman of Conoco
Exploration Production Europe from 1993 to 1997. Mr. Abel has been a director of
our company since March 1999.
OFFICER AND DIRECTOR COMPENSATION
We pay our independent director, Mr. Abel, a directors fee of $25,000 per
year. We do not compensate any of our other directors or officers, although all
of our other directors and officers are employees of R&B Falcon and are
compensated by R&B Falcon.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
All of our officers and all of our directors other than Mr. Abel are also
officers and directors of R&B Falcon. We have loaned $800 million to R&B Falcon
pursuant to ten separate loans, each of which is secured by a mortgage on a
drilling rig or an assignment of the construction contract for a drilling rig.
SECURITY OWNERSHIP OF OFFICERS AND DIRECTORS
The following table sets forth, as of May 19, 1999, the number of shares of
our common stock beneficially owned by (1) each person or group known by us to
own beneficially more than 5% of the outstanding shares of common stock, (2)
each of our directors, (3) each of our executive officers, and (4) all or our
directors and executive officers as a group. Except as otherwise indicated, each
of the persons or groups named below has sole voting power and investment power
with respect to our common stock.
<TABLE>
<CAPTION>
COMMON STOCK
-----------------
NAME OF BENEFICIAL OWNER OR GROUP SHARES PERCENT
--------------------------------- ------ -------
<S> <C> <C>
Paul B. Loyd, Jr. .......................................... 25 10.0%
Steven A. Webster........................................... 25 10.0%
Tim W. Nagle................................................ 25 10.0%
Robert F. Fulton............................................ 25 10.0%
Leighton E. Moss............................................ 150 60.0%
All directors and executive officers as a group (7
persons).................................................. 250 100.0%
</TABLE>
36
<PAGE> 41
DESCRIPTION OF THE NOTES
We issued each series of the outstanding notes under an indenture dated as
of March 26, 1999 (the "Indenture") among our company, as issuer, R&B Falcon, as
guarantor, and United States Trust Company of New York, as trustee (the
"Trustee"). Upon the issuance of the exchange notes the Indenture will be
subject to and governed by the Trust Indenture Act of 1939.
The following is a summary of the material provisions of the Indenture, the
notes and the Security Agreements. It does not state these provisions in their
entirety. You should read the Indenture and the Security Agreements because
these documents, and not this description, define your rights as holders of the
exchange notes. Capitalized terms used herein and not otherwise defined have the
meanings set forth in the section "-- Definitions." These definitions apply only
to this section of this prospectus As used in this section only, references to
the "R&B Falcon" exclude R&B Falcon's Subsidiaries.
TERMS OF THE NOTES
The exchange notes will be issued in two series that are limited to the
following respective aggregate principal amounts:
- $400,000,000 aggregate principal amount of 11% Senior Secured Notes due
2006 (the "7-year Notes"); and
- $400,000,000 aggregate principal amount of 11 3/8% Senior Secured Notes
due 2009 (the "10-year Notes").
The 7-year Notes will mature on March 15, 2006 and the 10-year Notes will
mature on March 15, 2009. The outstanding 7-year Notes and the outstanding
10-year Notes are, and the exchange 7-year Notes and the exchange 10-year Notes
will be, our senior secured obligations.
The 7-year Notes bear interest at the rate per annum of 11% and the 10-year
Notes bear interest at the rate per annum of 11 3/8% from the date of original
issuance of the notes, or from the most recent date to which interest has been
paid or provided for. Interest will be payable semiannually to Holders of record
at the close of business on the March 1 or September 1 immediately preceding the
interest payment date on March 15 and September 15 of each year, commencing
September 15, 1999. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
The interest rate on the outstanding notes will increase if we do not
complete the exchange offer by September 22, 1999. See "-- Registered Exchange
Offer; Registration Rights."
The exchange notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000. No
service charge shall be made for any registration of transfer or exchange of the
notes, but we may require payment of a sum sufficient to cover any transfer tax
or other similar governmental charge payable in connection therewith.
The principal of, premium, if any, and interest on, and all other amounts
(including any Additional Amounts (as hereinafter defined)) payable under the
notes is unconditionally guaranteed by R&B Falcon (the "Guarantee") to the
extent described under "-- Guarantee" below. R&B Falcon's Subsidiaries currently
have no direct obligation to pay amounts due on the notes. However, if a
Restricted Subsidiary guarantees any Indebtedness of R&B Falcon after March 26,
1999 or if a Restricted Subsidiary acquires a Mortgaged Rig, that Restricted
Subsidiary will be obligated to guarantee (a "Subsidiary Guarantee") the notes.
ESCROW OF PROCEEDS
We initially deposited all proceeds of the notes in an escrow account (the
"Escrow Account") pursuant to an escrow agreement (the "Escrow Agreement") with
United States Trust Company of New York, as Escrow Agent, and the Trustee. The
Escrow Agent invests all funds contained in the Escrow Account, at our direction
except during the existence of a Default or an Event of Default, in Temporary
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<PAGE> 42
Cash Equivalents (such cash and Temporary Cash Equivalents, together with the
interest, dividends and distributions thereof, are hereinafter collectively
called the "Escrowed Property"). We have pledged the Escrow Account and the
Escrowed Property to the Trustee acting for its benefit and the benefit of the
Holders of the notes.
Pursuant to the Escrow Agreement and the Indenture, we entered into ten
separate loan agreements with R&B Falcon (each an "Loan Agreement"). Each Loan
Agreement is secured by Liens pursuant to a mortgage (each a "Mortgage") on a
separate drilling rig (each a "Mortgaged Rig") or, if such Mortgaged Rig was
under construction but not yet flagged on the Issue Date, Liens on the
construction contract and equipment purchased by R&B Falcon for such Mortgaged
Rig. Eight of the Mortgaged Rigs were flagged at the time we and R&B Falcon
executed the Loan Agreements and were subject to a first priority ship mortgage
prior to any advance under the loan with respect to such drilling rig. The other
two Mortgaged Rigs were under construction on the Issue Date. The Escrow
Agreement and the Indenture provide that the purpose of each loan made under a
Loan Agreement (a "Loan") will be only as follows:
- Financing all or a portion of the cost of acquiring, constructing,
altering, improving or repairing the Mortgaged Rig or improvements used
or to be used in connection with such Mortgaged Rig; or
- Financing all or any part of the purchase price of the Mortgaged Rig or
improvements used or to be used in connection with such Mortgaged Rig,
which Loan is incurred prior to or within one year after the later of the
completion of construction, alteration, improvement or repair or the
commencement of commercial operations thereof.
Since two of the Mortgaged Rig were under construction and were not yet
flagged on the Issue Date, R&B Falcon secured the Loans relating to these two
Mortgaged Rigs with Liens on the construction contract and equipment purchased
by R&B Falcon for each such Mortgaged Rig. However, R&B Falcon is not required
to perfect our Liens on equipment that R&B Falcon has purchased for a rig that
has not yet been mortgaged until required by the Trustee. The Trustee may not
require this perfection until after the later of March 26, 2000 or the
completion date for such Mortgaged Rig as scheduled on the Issue Date.
We made each Loan to R&B Falcon in two tranches. One tranche of each Loan
(the "7-year Tranche") bears interest at the rate equal to the interest rate for
the 7-year Notes plus 2 basis points per annum and the other tranche (the
"10-year Tranche") bears interest at the rate equal to the interest rate for the
10-year Notes plus 2 basis points per annum. Each Loan Agreement also provides
for a commitment fee on the undrawn portion of the Loan. R&B Falcon is required
to repay the Loans in whole or in part if we redeem or are required to redeem or
purchase notes (see "-- Redemptions"). We have now released all of proceeds from
the sale of the notes from the Escrow Account to fund the Loans. We released
these amounts when R&B Falcon recorded a Mortgage or provided other applicable
security documents against a Mortgaged Rig or the construction contracts and
equipment purchased by R&B Falcon for an uncompleted Mortgaged Rig. We are not
entitled to withdraw the Escrowed Property (other than certain minimal amounts)
for any purposes other than the making of Loans or the repayment of principal,
premium, if any, and interest on the notes. One hundred million dollars ($100.0
million) of the proceeds of the Loan for the Deepwater Millennium was deposited
by R&B Falcon in an Escrow Account (the "R & B Falcon Escrow Account")
established by R&B Falcon pursuant to an express agreement (the "R & B Falcon
Escrow Agreement") with United States Trust Company of New York, as Escrow
Agent, and us. R&B Falcon withdrew these funds when the Deepwater Millennium was
completed and they had provided a perfected Mortgage on that rig in our favor.
REDEMPTIONS
Redemption upon Loss of a Rig. If an Event of Loss occurs at any time with
respect to a Mortgaged Rig (the Mortgaged Rig suffering such Event of Loss being
the "Lost Mortgaged Rig"), R&B Falcon shall apply funds in an amount (the "Loss
Redemption Amount") equal to the principal amount of the applicable Loan secured
by the Lost Mortgaged Rig outstanding on the date (the "Loss Date") on which
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<PAGE> 43
such Event of Loss was deemed to have occurred, together with all accrued and
unpaid interest (including Special Interest, if any, and Additional Amounts, if
any) thereon, to the prepayment of such Loan. If a Default shall have occurred
and be continuing at the time of receipt of the Event of Loss Proceeds with
respect to such Event of Loss, R&B Falcon will also be required to prepay other
Loans on a pro rata basis in an aggregate amount equal to the excess of the Net
Event of Loss Proceeds over the Loss Redemption Amount, if any, together with
all accrued and unpaid interest (including Special Interest, if any, and
Additional Amounts, if any) thereon. These payments on the Loan or Loans will be
made directly to the Trustee for deposit into the Escrow Account. These funds
will constitute part of the Collateral pending application in accordance with
the next paragraph. See "-- Collateral."
Upon the earlier to occur of (A) 30 days after the receipt of such Event of
Loss Proceeds by R&B Falcon (the "Loss Proceeds Receipt Date") and (B) 180 days
after the Loss Date, we shall redeem notes, of both series, in whole or in part
on a pro rata basis, at a redemption price equal to 100% of their principal
amount, plus accrued and unpaid interest (including Additional Amounts and
Special Interest, if any) to the redemption date, in an aggregate principal
amount equal to the Loss Redemption Amount or the Net Event of Loss Proceeds, as
the case may be. We and R&B Falcon will treat as Loss Excess Proceed the amount
equal to (i) the excess of the Net Event of Loss Proceeds from such Event of
Loss over the funds applied pursuant to the preceding sentence, less (ii) the
amount of such excess Net Event of Loss Proceeds (A) used to repay Senior
Indebtedness of R&B Falcon or secured Senior Indebtedness of a Subsidiary
Guarantor then owning a Mortgaged Rig, in each case, with a permanent reduction
of availability in the case of revolving credit borrowings and owing to a Person
other than R&B Falcon or any of its Subsidiaries, or (B) invested in Additional
Assets (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board resolution).
Redemption upon Sale of a Mortgaged Rig. If a Mortgaged Rig or the Capital
Stock of a Subsidiary Guarantor then owning a Mortgaged Rig is sold in
compliance with the terms of the Indenture (the Mortgaged Rig so sold or owned
by the Subsidiary Guarantor whose Capital Stock is so sold being the "Sold
Mortgaged Rig"), R&B Falcon will apply funds in an amount (the "Sale Redemption
Amount") equal to the principal amount of the Loan secured by the Sold Mortgaged
Rig on the date of such sale (the "Sale Date"), together with all accrued and
unpaid interest (including Special Interest, if any, and Additional Amounts, if
any) thereon, plus any additional amounts required by us to redeem the notes to
the extent required by the next paragraph, to the repayment of such Loan. If a
Default shall have occurred and be continuing at the time of receipt of the cash
consideration with respect to such Sold Mortgaged Rig, R&B Falcon will also be
required to prepay other Loans on a pro rata basis in an aggregate amount equal
to the excess of such Net Available Cash attributable to such Sold Mortgaged Rig
over such Sale Redemption Amount. These payments on the Loan or Loans shall be
allocated between the 7-year Tranche and the 10-year Tranche of each such Loan
on a pro rata basis and shall be made directly to the Trustee for deposit into
the Escrow Account. These funds will constitute part of the Collateral pending
application in accordance with the next paragraph. See "-- Collateral."
Upon the earlier to occur of (A) 30 days after the receipt of such Net
Available Cash (the "Sale Proceeds Receipt Date") and (B) 60 days after the Sale
Date, we shall redeem notes of both series, in whole or in part on a pro rata
basis, in an aggregate principal amount equal to the Sale Redemption Amount or
the Net Available Cash, as the case may be, at a redemption price equal to:
- In respect to the 10-year Notes (i) if such redemption is before March
15, 2004, the sum of the remaining scheduled payments of interest,
through March 15, 2004 (including Additional Amounts and Special
Interest) and the redemption price as of March 15, 2004 as set forth in
"-- Other Redemptions" as discounted to their present values to the
redemption date on a semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Treasury Rate plus 50 basis points, plus
accrued and unpaid interest on the notes to the date of redemption or
(ii) if such redemption is on or after March 15, 2004, the redemption
price then applicable as described under "-- Other Redemptions;" or
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<PAGE> 44
- In respect of the 7-year Notes, the sum of the remaining scheduled
payments of principal and interest (including Additional Amounts and
Special Interest, if any) thereon, as discounted to their present values
to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 50 basis
points;
in each case plus accrued and unpaid interest (including Special Interest, if
any, and Additional Amounts, if any) on the notes to the date of redemption. The
excess of the Net Available Cash from the sale of a Mortgaged Rig over the funds
applied as payment of Loans shall be treated in the manner provided in the last
sentence of paragraph (b) under "-- Covenants -- Limitation on Asset Sales."
For purposes of the preceding paragraph, the following definitions apply:
"Treasury Rate" means, with respect to any redemption date, the rate
per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity
comparable to the weighted average maturity of the remaining term of the
notes outstanding that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to such weighted average
maturity of such notes. "Independent Investment Banker" means the Reference
Treasury Dealer appointed by the Trustee after consultation with us and R&B
Falcon.
"Comparable Treasury Price" means, with respect to any redemption
date, the average of the Reference Treasury Dealer Quotations for such
redemption date. The "Reference Treasury Dealer Quotations" means, with
respect to the Reference Treasury Dealer and any redemption date, the
average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by the Reference
Treasury Dealer at 5:00 p.m. (New York City time) on the third business day
preceding such redemption date.
"Reference Treasury Dealer" means Donaldson, Lufkin & Jenrette
Securities Corporation and its successors. If Donaldson, Lufkin & Jenrette
Securities Corporation ceases to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer"), we will substitute
another Primary Treasury Dealer.
Other Redemptions. On or after March 15, 2004, the 10-year Notes will be
redeemable, at our option, in whole or in part, at any time or from time to
time, upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each Holder's registered address, at the following
redemption prices (expressed in percentages of principal amount), plus accrued
and unpaid interest (including Special Interest, if any, and Additional Amounts,
if any) to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the 12-month period commencing on March 15 of the
years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- ------ ----------
<S> <C>
2004..................................................... 105.6875%
2005..................................................... 103.7917
2006..................................................... 101.8958
2007 and thereafter...................................... 100.0000
</TABLE>
Any prepayments by R&B Falcon on the Loans required to be made to provide
funds for us to make this redemption will be made on the 10-year Tranche of each
Loan on a pro rata basis.
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<PAGE> 45
The 7-year Notes are redeemable, at our option, at any time in whole or
from time to time in part upon not less than 30 and not more than 60 days' prior
notice mailed by first class mail to each Holder's registered address appearing
in the register for the notes, on any date prior to maturity at a price equal to
100% of the principal amount thereof plus accrued and unpaid interest (including
Special Interest, if any, and Additional Amounts, if any) to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on an interest payment date that is on or prior to the
redemption date) plus the Make-Whole Premium applicable to the 7-year Notes. In
no event will the redemption price ever be less than 100% of the principal
amount of the 7-year Notes plus accrued and unpaid interest (including Special
Interest, if any, and Additional Amounts, if any) to the redemption date.
The amount of the Make-Whole Premium with respect to any 7-year Notes (or
portion thereof) to be redeemed will be equal to the excess, if any, of:
(a) the sum of the present values, calculated as of the redemption
date, of:
(1) each interest payment that, but for such redemption, would have
been payable on the 7-year Notes (or portion thereof) of such series
being redeemed on each interest payment date occurring after the
redemption date (excluding any accrued and unpaid interest for the
period prior to the redemption date); and
(2) the principal amount that, but for such redemption, would have
been payable at the final maturity of the 7-year Notes (or portion
thereof) of such series being redeemed,
(b) the principal amount of the 7-year Notes (or portion thereof) of
such series being redeemed.
The present values of interest and principal payments referred to in clause
(a) above will be determined in accordance with generally accepted principles of
financial analysis. Such present values will be calculated by discounting the
amount of each payment of interest or principal from the date that each such
payment would have been payable, but for the redemption, to the redemption date
at a discount rate equal to the Treasury Rate (as defined below) plus 50 basis
points.
The Make-Whole Premium will be calculated by the Independent Investment
Banker. For purposes of determining the Make-Whole Premium, "Treasury Yield"
means a rate of interest per annum equal to the weekly average yield to maturity
of United States Treasury Notes that have a constant maturity that corresponds
to the remaining term to maturity of the 7-year Notes, calculated to the nearest
1/12th of a year (the "Remaining Term"). The Treasury Yield will be determined
as of the third business day immediately preceding the applicable redemption
date.
The weekly average yields of United States Treasury Notes will be
determined by reference to the most recent statistical release published by the
Federal Reserve Bank of New York and designated "H.15(519) Selected Interest
Rates" or any successor release (the "H.15 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States Treasury
Notes having a constant maturity that is the same as the Remaining Term, then
the Treasury Yield will be equal to such weekly average yield. In all other
cases, the Treasury Yield will be calculated by interpolation, on a
straight-line basis, between the weekly average yields on the United States
Treasury Notes that have a constant maturity closest to and greater than the
Remaining Term and the United States Treasury Notes that have a constant
maturity closest to and less than the Remaining Term (in each case as set forth
in H.15 Statistical Release). Any weekly average yields so calculated by
interpolation will be rounded to the nearest 1/100th of 1%, with any figure of
1/200 of 1% or above being rounded upward. If weekly average yields for United
States Treasury Notes are not available in comparable the H.15 Statistical
Release or otherwise, then the Treasury Yield will be calculated by
interpolation of comparable rates selected by the Independent Investment Banker.
Any prepayments by R&B Falcon on the Loans required to be made to provide
funds for us to make the redemption shall be made on the 7-year Tranche of each
Loan on a pro rata basis.
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<PAGE> 46
Selection of Notes for Redemption. In the case of any partial redemption
provided for in "Other Redemptions," selection of the notes for redemption will
be made by the Trustee on a pro rata basis, by lot or by such other method as
the Trustee in its sole discretion shall deem to be fair and appropriate,
although no Note of $1,000 in then outstanding principal amount or less shall be
redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Partial Redemptions provided for in
"-- Redemption Upon Loss of a Rig" and "-- Redemption Upon Sale of a Rig" will
be applied to all notes on a pro rata basis, although no Note of $1,000 in then
outstanding principal amount shall be redeemed in part.
Excess Proceeds Offers. If, as of the first day of any calendar month, the
aggregate amount of Sale Excess Proceeds and Loss Excess Proceeds exceeds 10% of
R&B Falcon's consolidated total assets, and if the aggregate amount of Sale
Excess Proceeds and Loss Excess Proceeds in excess of 10% of consolidated total
assets that has not already been subject to an Excess Proceeds Offer (the
"Excess Proceeds Offer Amount"), totals at least $10.0 million, we must, not
later than the fifteenth Business Day of such month, make an offer (an "Excess
Proceeds Offer") to purchase notes pursuant to and subject to the conditions
contained in the Indenture at a purchase price equal to 100% of their principal
amount, plus any accrued interest (including Additional Amounts and Special
Interest, if any) to the date of purchase. The indenture governing R&B Falcon's
12 1/4% Senior Notes due 2006 requires that R&B Falcon offer to purchase those
notes in these circumstances at a purchase price equal to 100% of their
principal amount, plus any accrued interest (including Special Interest, if any)
to the date of purchase. The total principal amount of our notes that we are
required to purchase and of R&B Falcon's notes that it is required to purchase
pursuant to the Excess Proceeds Offer will equal the Excess Proceeds Offer
Amount (an "Excess Proceeds Payment"). R&B Falcon will prepay the appropriate
tranches of the Loans on a pro rata basis, or make loans constituting
Subordinated Obligations to us, to permit us to purchase any notes validly
tendered pursuant to an Excess Proceeds Offer. Any amounts remaining after all
of our notes and all of R&B Falcon's notes that are validly tendered are
purchased shall no longer constitute Sale Excess Proceeds or Loss Excess
Proceeds.
We and R&B Falcon will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the purchase of notes pursuant to an Excess
Proceeds Offer. To the extent that the provisions of any securities laws or
regulations conflict with provisions in the Indenture governing Excess Proceeds
Offers, we will comply with the applicable securities laws and regulations and
will not be deemed to have breached our obligations under the covenant described
hereunder by virtue thereof.
Payment of Additional Amounts
Except to the extent required by any applicable law, regulation or
governmental policy, we will make any and all payments of, or in respect of, any
Note free and clear of and without deduction for or on account of any and all
present or future taxes, levies, imposts, deduction, charges or withholdings and
all liabilities with respect thereto imposed by Panama, The Bahamas or any other
jurisdiction with which we, R&B Falcon or any Subsidiary Guarantor has some
connection (including any jurisdiction (other than the United States of America)
from or through which payments under the Loans, the notes, the Guarantee or the
Subsidiary Guarantees (if any) are made) or any political subdivision of or any
taxing authority in any such jurisdiction ("Panamanian Taxes," "Bahamian Taxes,"
or "Other Taxes," respectively). If we, R&B Falcon or any Subsidiary Guarantor
are required by law to withhold or deduct any Panamanian Taxes, Bahamian Taxes,
or Other Taxes from or in respect of any sum payable under an Loan Agreement,
the notes, the Guarantee or a Subsidiary Guarantee, the sum payable by us, R&B
Falcon or such Subsidiary Guarantor, as the case may be, will be increased by
the amount ("Additional Amounts") necessary so that after making all required
withholdings and deductions, the Holder or beneficial owner of a Note will
receive an amount equal to the sum that it would have received had not such
withholdings and deductions been made. However, neither we, R&B Falcon nor any
Subsidiary Guarantor will be obligated to pay any
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<PAGE> 47
such sum in respect of any Panamanian Taxes, Bahamian Taxes or Other Taxes to a
Holder (an "Excluded Holder") (i) resulting from the beneficial owner of such
note carrying on business or being deemed to carry on business in or through a
permanent establishment or fixed base in the relevant taxing jurisdiction or
having any other connection with the relevant taxing jurisdiction or any
political subdivision thereof or any taxing authority therein other than the
mere holding or owning of such note, being a beneficiary of the Guarantee or any
applicable Subsidiary Guarantee, the receipt of any income or payments in
respect of such note, any Loan, the Guarantee or any applicable Subsidiary
Guarantee or the enforcement of such note, such Loan, the Guarantee or any
applicable Subsidiary Guarantee, or (ii) that would not have been imposed but
for the presentation (where presentation is required) of such note for payment
more than 180 days after the date such payment became due and payable or was
duly provided for, whichever occurs later. We, R&B Falcon or the Subsidiary
Guarantors, as applicable, will also (i) make such withholding or deduction and
(ii) remit the full amount deducted or withheld to the relevant authority in
accordance with applicable law, and, in any such case, we will furnish to each
Holder on whose behalf an amount was so remitted, within 30 calendar days after
the date the payment of any Panamanian Taxes, Bahamian Taxes or Other Taxes is
due pursuant to applicable law, certified copies of tax receipts evidencing such
payment by the us, R&B Falcon or the Subsidiary Guarantors, as applicable. We
will, upon written request of each Holder (other than an Excluded Holder),
reimburse each such Holder for the amount of (i) any Panamanian Taxes, Bahamian
Taxes or Other Taxes so levied or imposed and paid by such Holder as a result of
payments made under or with respect to any notes, and (ii) any Panamanian Taxes,
Bahamian Taxes, or Other Taxes so levied or imposed with respect to any
reimbursement under the foregoing clause (i) so that the net amount received by
such Holder (net of payments made under or with respect to such notes, such
Loans, the Guarantee or the applicable Subsidiary Guarantees) after such
reimbursement will not be less than the net amount the Holder would have
received if Panamanian Taxes, Bahamian Taxes or Other Taxes on such
reimbursement had not been imposed.
At least 30 calendar days prior to each date on which any payment under or
with respect to the notes is due and payable, if we, R&B Falcon or the
Subsidiary Guarantors, as applicable, will be obligated to pay Additional
Amounts with respect to such payment, we, R&B Falcon or the Subsidiary
Guarantors, as applicable, will deliver to the Trustee an officer's certificate
stating the fact that such Additional Amounts will be payable and the amounts so
payable and will set forth such other information necessary to enable the
Trustee to pay such Additional Amounts to Holders on the payment date.
If any Holder or beneficial owner of any Note receives a refund of the
Panamanian Taxes, Bahamian Taxes or Other Taxes after we, R&B Falcon or any
Subsidiary Guarantor, as applicable, has paid any Additional Amounts, such
Holder or beneficial owner shall reimburse us, R&B Falcon or any Subsidiary
Guarantor, as applicable, for any amount of such refund.
At the date of this prospectus, no Panamanian Taxes, Bahamian Taxes or
Other Taxes are imposed, and therefore no Additional Amounts would be payable in
respect of such taxes, in respect of any sum payable by us as principal of,
premium or interest on the notes or the exchange notes, or in respect of any sum
payable by R&B Falcon on the Guarantee or Loans.
In addition, we, R&B Falcon or the Subsidiary Guarantors will pay any
stamp, issue, registration, documentary or other similar taxes and duties,
including interest and penalties, in respect of the creation, issue and offering
of the notes payable in the United States, Panama, The Bahamas or any political
subdivision thereof or taxing authority of or in the foregoing. We, R&B Falcon
and the Subsidiary Guarantors, as applicable, will also pay and indemnify the
Trustee and the Holders of the notes from and against all court fees and taxes
or other taxes and duties, including interest and penalties, paid by any of them
in any jurisdiction in connection with any action permitted to be taken by the
Holders or the Trustee to create Liens on the Collateral or to enforce the
Obligations of R&B Falcon or the Subsidiary Guarantors under the notes, the
Indenture, the Guarantee, the Subsidiary Guarantees, the Loans or the Security
Agreements.
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Whenever there is mentioned, in any context, the payment of principal,
premium or interest in respect of any note or the net proceeds received on the
sale or exchange of any note, such mention shall be deemed to include the
payment of Additional Amounts or Special Interest provided for in the Indenture
to the extent that, in such context, Additional Amounts are, were or would be
payable in respect thereof pursuant to the Indenture.
THE GUARANTEE; THE SUBSIDIARY GUARANTEES
Pursuant to the Indenture, R&B Falcon will guarantee the due and punctual
payment of the principal of, premium, if any, and interest on, and all other
amounts payable under, the notes (including any Additional Amounts payable upon
redemption, in respect thereof) when and as the same become due and payable,
whether at Stated Maturity, by declaration of acceleration or otherwise. The
Guarantee will not be discharged with respect to any note except by payment in
full of the principal thereof, premium, if any, and interest thereon and all
other amounts payable thereunder, provided that to the extent that R&B Falcon
makes a payment on the Guarantee, it will be deemed to have made a payment on
the Loans then outstanding, and will otherwise be subrogated to our rights on
the Loans to the extent that such Loans remain unpaid. If at any time any amount
paid under a note is rescinded or must otherwise be restored, the rights of the
Holders of the notes under the Guarantee will be reinstated with respect to such
payments as though such payment had no been made.
If a Restricted Subsidiary is required to become a Subsidiary Guarantor, it
will irrevocably and unconditionally guarantee on a joint and several, senior
unsecured basis our obligations for payment of the principal of, and premium, if
any and interest (including Additional Amounts and Special Interest, if any) on
the notes, R&B Falcon's obligations for payment of sums of money payable under
the Guarantee, the other Subsidiary Guarantors' obligations for payment of all
sums of money payable under the Subsidiary Guarantees and/or our, R&B Falcon's
and Subsidiary Guarantor's respective obligations under the Security Agreements
and performance of all other provisions contained in the Indenture and the
Security Agreements (collectively, the "Obligations"). See
"-- Covenants -- Future Subsidiary Guarantors." Each Subsidiary Guarantee will
be limited in amount to an amount not to exceed the maximum amount that can be
guaranteed by the applicable Subsidiary Guarantor without rendering the
applicable Subsidiary Guarantee voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally or otherwise being void, voidable or unenforceable
under any bankruptcy, reorganization, insolvency, liquidation or other similar
legislation or legal principles under any applicable foreign law. Each
Subsidiary Guarantor that makes a payment or a distribution under its Subsidiary
Guarantee shall be entitled to a contribution from each other Subsidiary
Guarantor in a pro rata amount based upon the Adjusted Net Assets of each other
Subsidiary Guarantor. If a Subsidiary Guarantee were to be rendered voidable, it
could be subordinated by a court to all other indebtedness (including guarantees
and other contingent liabilities) of the applicable Subsidiary Guarantor, and,
depending on the amount of such indebtedness, a Subsidiary Guarantor's liability
on its Subsidiary Guarantee could be reduced to zero.
Upon the sale or other disposition (by merger or otherwise) of all the
Capital Stock of a Subsidiary Guarantor or the sale or disposition of all or
substantially all the assets of a Subsidiary Guarantor (in each case other than
to R&B Falcon or an Affiliate of R&B Falcon) permitted by the Indenture and the
application of the Net Available Cash from such sale as described under
"-- Redemptions."
COLLATERAL
We have pledged in favor of the Trustee all the Loans (together with
collateral assignment of all Liens securing such Loans) to secure our
obligations under the Indenture, the notes and applicable Security Agreements.
We have also pledged in favor of the Trustee our interest in the Escrow Account
and the Escrowed Property and any other cash that is required by the terms of
the Indenture to be deposited with the Trustee or the Escrow Agent to secure
these obligations.
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As security for each Loan, R&B Falcon has granted a Lien on a Mortgaged
Rig, or the construction contract and equipment purchased by R&B Falcon (with
respect to the Deepwater Millennium and Deepwater IV). R&B Falcon has also
granted a Lien on the R&B Falcon Escrow Account and R&B Falcon Escrowed Property
as security for the Loan relating to the Deepwater Millennium. R&B Falcon has
also granted a Lien on all proceeds of these items, including all its policies
and contracts of insurance taken out from time to time in respect of its
Mortgaged Rigs. All of these Liens are evidenced by a Mortgage or other
appropriate Security Agreement issued by R&B Falcon in our favor. These
Mortgages and Security Agreements contain covenants pursuant to which R&B Falcon
is prohibited from selling, further mortgaging or transferring any of its
interest in such Mortgaged Rig (other than as permitted under the Indenture).
Upon completion and flagging of the Deepwater Millennium and the Deepwater IV,
R&B Falcon is required to grant a Lien pursuant to a Mortgage on the respective
Mortgaged Rig. R&B Falcon has already granted a Mortgage in our favor on the
Deepwater Millennium. Contemporaneous with the granting of the Mortgage on the
Deepwater IV, the Loan secured by the Deepwater IV will be increased in exchange
for a reduction in the outstanding amounts of the Loans secured by certain other
Mortgaged Rigs. See "Description of Security for the Notes."
The Indenture and the Security Agreements provide that the Collateral may
be released from the Liens created by the Security Agreements (a) upon payment
in full of the notes in accordance with the terms of the notes and the Indenture
and the other obligations then due and owing under the notes, the Indenture and
the Security Agreements; (b) upon the sale or other disposition of Collateral
constituting an Asset Sale if such sale or other disposition is not prohibited
under the Indenture and if the Net Available Cash of such sale or other
disposition is applied as provided in the Indenture (see "-- Limitation on Asset
Sales"); (c) with respect to the net proceeds of the notes deposited in the
Escrow Account if the procedures described in "-- Escrow of Proceeds" are
complied with; and (d) with respect to proceeds of the Loan relating to the
Deepwater Millennium deposited in R&B Falcon Escrow Account if the procedures
described in "-- Escrow of Proceeds" are complied with. Any cash on deposit from
time to time with the Trustee or the R&B Falcon Escrow Agent and forming part of
the Collateral which is not required to be deposited with the Trustee or the
Escrow Agent may be released, subject to the terms and conditions of the
Indenture.
The release of any Collateral from the terms of the Security Agreements, or
the release, in whole or in part, of the Liens created by the Security
Agreements, will not be deemed to impair the security under the Indenture in
contravention of the provisions of the Indenture and of the Security Agreements
if and to the extent that the Collateral is released pursuant to the Indenture
and the Security Agreements. In connection with the release of Collateral, the
Trustee shall determine whether it has received all documentation required by
Section 314(d) of the Trust Indenture Act to permit such release.
RANKING
The indebtedness evidenced by the notes are our senior secured obligations.
The notes rank pari passu in right of payment with all our existing and future
indebtedness and other liabilities that are not expressly subordinated by their
express terms to the notes and are senior in right of payment to all our
Indebtedness that is so subordinated. We are not permitted to incur any
Indebtedness other than the notes or Subordinated Obligations owing to R&B
Falcon. See "-- Covenants -- Limitation on Our Activities." The notes are
secured by Liens on the Loans (and the Liens securing such Loans) and on the
Escrow Account and the Escrowed Property; thus, claims of the Holders of the
notes rank ahead of claims of our creditors to the extent of the value, priority
and validity of the Liens securing the notes in such Collateral.
The Guarantee and any Subsidiary Guarantee will be senior unsecured
obligations of R&B Falcon and of the Subsidiary Guarantors, as applicable, and
will rank (i) equally in priority of payment with all other Indebtedness and
other liabilities of R&B Falcon or such Subsidiary Guarantor that are not
subordinated by their express terms to the Guarantee or such Subsidiary
Guarantee, as the case may be, and (ii) senior in priority of payment to all
other Indebtedness of R&B Falcon or such Subsidiary Guarantor that by its terms
is subordinated or junior in right of payment to the Guarantee or such
Subsidiary Guarantee, as the case may be. As of March 31, 1999, the total
outstanding Indebtedness of R&B Falcon that would rank
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pari passu with the Guarantee would have been approximately $2.5 billion. The
Guarantee, however, will be effectively subordinated in right of payment to all
secured indebtedness of R&B Falcon other than the Loans. The Guarantee is also
effectively subordinated in right of payment to all existing and future third-
party liabilities (including trade payables and other non-debt obligations) of
the Subsidiaries of R&B Falcon. As of March 31, 1999, the Subsidiaries of R&B
Falcon had approximately $225.8 million of indebtedness outstanding on a
combined consolidated basis, excluding indebtedness owed to R&B Falcon. In
addition, the Indenture permits under limited circumstances the creation of, or
the designation of existing Restricted Subsidiaries as, Unrestricted
Subsidiaries. Such Unrestricted Subsidiaries will not generally be subject to
the covenants applicable to R&B Falcon and the Restricted Subsidiaries under the
Indenture. The operations of R&B Falcon are to a significant extent conducted
through its Subsidiaries and, therefore, R&B Falcon is dependent upon those
entities to meet its obligations.
With respect to R&B Falcon, our claims under the Loans rank equally with
claims of the creditors of R&B Falcon holding indebtedness or other liabilities
that are not expressly subordinated by their express terms to such Loans, but
rank ahead of such claims to the extent of the value, priority and validity of
R&B Falcon's Liens on its Mortgaged Rigs securing the Loans. Although we should
be entitled to payment of the applicable Loan out of the proceeds of the
Mortgaged Rig prior to the holders of any general unsecured obligations of R&B
Falcon, any claim attributable to such an Loan which is not paid out of the
proceeds of the Mortgaged Rig will be an unsecured senior Obligation of R&B
Falcon. To the extent that any Mortgaged Rig has a value in excess of the Loan
secured thereby, such additional value is not security for any Obligations of
our company, R&B Falcon or a Subsidiary Guarantor. If the assets and cash flow
of R&B Falcon are insufficient to meet the obligations under the Loans, our
claims will be effectively subordinated to the claims of creditors (including
trade creditors, tort claimants, taxing authorities and other creditors) of
Subsidiaries. Although the Indenture limits the incurrence of Indebtedness by
us, R&B Falcon or any Restricted Subsidiary, such limitation is subject to a
number of significant qualifications. Moreover, the Indenture does not impose
any limitation on the incurrence by R&B Falcon or its Restricted Subsidiaries of
liabilities that are not considered Indebtedness under the Indenture. Under
certain circumstances, R&B Falcon will be able to designate additional
Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be
subject to many of the restrictive covenants set forth in the Indenture.
BOOK-ENTRY, DELIVERY, FORM AND TRANSFER
The exchange notes initially will be in the form of one or more registered
global notes without interest coupons (collectively, the "U.S. Global Notes").
Upon issuance, the U.S. Global Notes will be deposited with the Trustee, as
custodian for The Depository Trust Company, in New York, New York, and
registered in the name of The Depository Trust Company or its nominee, in each
case for credit to the accounts of The Depository Trust Company's Direct and
Indirect Participants (as defined below). All registered global notes are
referred to in this section collectively as "Global Notes."
Beneficial interests in all Global Notes and all Certificated Notes (as
defined below), if any, will be subject to certain restrictions on transfer and
will bear a restrictive legend as described under "Notice to Investors in the
Notes." In addition, transfer of beneficial interests in any Global Notes will
be subject to the applicable rules and procedures of The Depository Trust
Company and its Direct or Indirect Participants (including, if applicable, those
of Euroclear and Cedel), which may change from time to time.
The Global Notes may be transferred, in whole and not in part, only to
another nominee of The Depository Trust Company or to a successor of The
Depository Trust Company or its nominee in limited circumstances. Beneficial
interests in the Global Notes may be exchanged for notes in certificated form in
limited circumstances. See "-- Transfers of Interests in Global Notes for
Certificated Notes."
Initially, the Trustee will act as Paying Agent and Registrar. The notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.
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Depositary Procedures
The Depository Trust Company has advised us that The Depository Trust
Company is a limited-purpose trust company created to hold securities for its
participating organizations (collectively, the "Direct Participants") and to
facilitate the clearance and settlement of transactions in those securities
between Direct Participants through electronic book-entry changes in accounts of
Participants. The Direct Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations,
including Euroclear and Cedel. Access to The Depository Trust Company's system
is also available to other entities that clear through or maintain a direct or
indirect, custodial relationship with a Direct Participant (collectively, the
"Indirect Participants").
Under The Depository Trust Company's procedures, (i) upon deposit of the
Global Notes representing the exchange notes, The Depository Trust Company will
credit the accounts of the Direct Participants designated by the Exchange Agent
with the appropriate portions of the principal amount of the Global Notes, and
(ii) The Depository Trust Company will maintain records of the ownership
interests of such Direct Participants in the Global Notes and the transfer of
ownership interests by and between Direct Participants. The Depository Trust
Company will not maintain records of the ownership interests of, or the transfer
of ownership interests by and between, Indirect Participants or other owners of
beneficial interests in the Global Notes. Direct Participants and Indirect
Participants must maintain their own records of the ownership interests of, and
the transfer of ownership interests by and between, Indirect Participants and
other owners of beneficial interests in the Global Notes.
Investors in the Global Notes may hold their interests in the Global Notes
directly through The Depository Trust Company if they are Direct Participants in
The Depository Trust Company or indirectly through organizations that are Direct
Participants in The Depository Trust Company, or directly through Euroclear or
Cedel or indirectly through organizations that are participants in Euroclear or
Cedel. Morgan Guaranty Trust Company of New York, Brussels office, is the
operator and depositary of Euroclear and Citibank, N.A. is the operator and
depositary of Cedel (each, a "Nominee" of Euroclear and Cedel, respectively).
Therefore, they will each be recorded on The Depository Trust Company's records
as the holders of all ownership interests held by them on behalf of Euroclear
and Cedel, respectively. Euroclear and Cedel will maintain on their records the
ownership interests and transfer of ownership interests by and between, their
own customer's securities accounts. The Depository Trust Company will not
maintain records of the ownership interests of, or the transfer of ownership
interests by and between, customers of Euroclear or Cedel. All ownership
interests in any Global Notes, including those of customers' securities accounts
held through Euroclear or Cedel, may be subject to the procedures and
requirements of The Depository Trust Company.
The laws of some states in the United States require that some types of
security holders take physical delivery in definitive, certificated form, of
securities that they own. This may limit or curtail the ability to transfer
beneficial interests in a Global Note to these persons. Because The Depository
Trust Company can act only on behalf of Direct Participants, which in turn act
on behalf of Indirect Participants and others, the ability of a person having a
beneficial interest in a Global Note to pledge such interest to persons or
entities that are not Direct Participants in The Depository Trust Company, or to
otherwise take actions in respect of such interests, may be affected by the lack
of physical certificates evidencing such interests. For certain other
restrictions on the transferability of the notes see "-- Transfers of Interests
in Global Notes for Certificated Notes" and "Notice to Investors in the Notes."
Except as described in "-- Transfers of Interests in Global Notes for
Certificated Notes," owners of beneficial interests in the Global Notes will not
have the exchange notes registered in their names, will not receive physical
delivery of the exchange notes in certificated form and will not be considered
the registered owners or Holders thereof under the Indenture for any purpose.
Under the terms of the Indenture, we, R&B Falcon and the Trustee will treat
the persons in whose names the exchange notes are registered (including exchange
notes represented by Global Notes) as the owners thereof for the purpose of
receiving payments and for any and all other purposes whatsoever. Payments in
respect of the principal, premium, Special Interest, if any, Additional Amounts,
if any, and
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interest on Global Notes registered in the name of The Depository Trust Company
or its nominee will be payable by the Trustee to The Depository Trust Company or
its nominee as the registered Holder under the Indenture. Consequently, neither
we, R&B Falcon, the Trustee nor any of agents or any agent of R&B Falcon or the
Trustee has or will have any responsibility or liability for (i) any aspect of
The Depository Trust Company's records or any Direct Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any of The Depository Trust Company's records or any Direct
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in any Global Note or (ii) any other matter relating to the
actions and practices of The Depository Trust Company or any of its Direct
Participants or Indirect Participants.
The Depository Trust Company has advised us that its current payment
practice (for payments of principal, interest and the like) with respect to
securities such as the exchange notes is to credit the accounts of the relevant
Direct Participants with such payment on the payment date in amounts
proportionate to such Participant's respective ownership interests in the Global
Notes as shown on The Depository Trust Company's records. Payments by Direct
Participants and Indirect Participants to the beneficial owners of the exchange
notes will be governed by standing instructions and customary practices between
them and will not be the responsibility of The Depository Trust Company, the
Trustee, us or R&B Falcon. Neither we, R&B Falcon nor the Trustee will be liable
for any delay by The Depository Trust Company or its Direct Participants or
Indirect Participants in identifying the beneficial owners of the exchange notes
and we and the Trustee may conclusively rely on and will be protected in relying
on instructions from The Depository Trust Company or its nominee as the
registered owner of the exchange notes for all purposes.
The Global Notes will trade in The Depository Trust Company's Same-day
Funds Settlement System and, therefore, transfers between Direct Participants in
The Depository Trust Company will be effected in accordance with The Depository
Trust Company's procedures, and will be settled in immediately available funds.
Transfers between Indirect Participants (other than Indirect Participants who
hold an interest in the exchange notes through Euroclear or Cedel) who hold an
interest through a Direct Participant will be effected in accordance with the
procedures of such Direct Participant but generally will settle in immediately
available funds. Transfers between and among Indirect Participants who hold
interest in the exchange notes through Euroclear and Cedel will be effected in
the ordinary way in accordance with their respective rules and operating
procedures.
Subject to compliance with the transfer restrictions applicable to the
exchange notes described herein, crossmarket transfers between Direct
Participants in The Depository Trust Company, on the one hand, and Indirect
Participants who hold interests in the exchange notes through Euroclear or
Cedel, on the other hand, will be effected by Euroclear or Cedel's respective
nominee through The Depository Trust Company in accordance with The Depository
Trust Company's rules on behalf of Euroclear or Cedel; however, delivery of
instructions relating to cross-market transactions must be made directly to
Euroclear or Cedel, as the case may be, by the counterparty in accordance with
the rules and procedures of Euroclear or Cedel and within their established
deadlines (Brussels time for Euroclear and UK time for Cedel). Indirect
Participants who hold interest in the exchange notes through Euroclear and Cedel
may not deliver instructions directly to Euroclear's or Cedel's Nominee.
Euroclear or Cedel will, if the transaction meets its settlement requirements,
deliver instructions to its respective Nominee to deliver or receive interests
on Euroclear's or Cedel's behalf in the relevant Global Note in The Depository
Trust Company, and make or receive payment in accordance with normal procedures
for same-day fund settlement applicable to The Depository Trust Company.
Because of time zone differences, the securities accounts of an Indirect
Participant who holds an interest in the notes through Euroclear or Cedel
purchasing an interest in a Global Note from a Direct Participant in The
Depository Trust Company will be credited, and any such crediting will be
reported to Euroclear or Cedel during the European business day immediately
following the settlement date of The Depository Trust Company in New York.
Although recorded in The Depository Trust Company's accounting records as of The
Depository Trust Company's settlement date in New York, Euroclear and
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Cedel customers will not have access to the cash amount credited to their
accounts as a result of a sale of an interest in a Permanent Global Note to a
Depository Trust Company Participant until the European business day of
Euroclear or Cedel immediately following The Depository Trust Company's
settlement date.
The Depository Trust Company has advised us that it will take any action
permitted to be taken by a Holder of exchange notes only at the direction of one
or more Direct Participants to whose accounts interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of the exchange notes as to which such Direct Participant or Direct Participants
has or have given direction. However, if there is an Event of Default under the
exchange notes, The Depository Trust Company reserves the right to exchange
Global Notes (without the direction of one or more of its Direct Participants)
for exchange notes in certificated form, and to distribute such certificated
forms of notes to its Direct Participants. See "-- Transfers of Interests in
Global Notes for Certificated Notes."
Although The Depository Trust Company, Euroclear and Cedel have agreed to
these procedures to facilitate transfers of interests in the Global Notes among
Direct Participants, Euroclear and Cedel, they are under no obligation to
perform or to continue to perform these procedures, and these procedures may be
discontinued at any time. None of our company, R&B Falcon, or the Trustee will
have any responsibility for the performance by The Depository Trust Company,
Euroclear and Cedel or their respective Direct and Indirect Participants of
their obligations under the rules and procedures governing any of their
operations.
The information in this section concerning The Depository Trust Company,
Euroclear and Cedel and their book-entry systems has been obtained from sources
we believe to be reliable, but we take no responsibility for the accuracy
thereof.
Transfers of Interests in Global Notes for Certificated Notes
An entire Global Note may be exchanged for definitive notes in registered
certificated form without interest coupons ("Certificated Notes") if (1) The
Depository Trust Company (A) notifies us that it is unwilling or unable to
continue as depositary for the Global Notes and we thereupon fail to appoint a
successor depositary within 90 days or (B) has ceased to be a clearing agency
registered under the Exchange Act, (2) we, at our option, notify the Trustee in
writing that it elects to cause the issuance of Certificated Notes or (3) there
shall have occurred and be continuing a Default or an Event of Default with
respect to the notes. In any such case, we will notify the Trustee in writing
that, upon surrender by the Direct and Indirect Participants of their interest
in such Global Note, Certificated Notes will be issued to each person that such
Direct and Indirect Participants and The Depository Trust Company identify as
being the beneficial owner of the related notes.
Beneficial interests in Global Notes held by any Direct or Indirect
Participant may be exchanged for Certificated Notes upon request to The
Depository Trust Company, by such Direct Participant (for itself or on behalf of
an Indirect Participant), to the Trustee in accordance with customary The
Depository Trust Company procedures. Certificated Notes delivered in exchange
for any beneficial interest in any Global Note will be registered in the names,
and issued in any approved denominations, requested by The Depository Trust
Company on behalf of such Direct and Indirect Participants (in accordance with
The Depository Trust Company's customary procedures).
In all cases described herein, such Certificated Notes will bear the
restrictive legend referred to in "Notice to Investors in the Notes," unless we
determine otherwise in compliance with applicable law.
Neither we, R&B Falcon nor the Trustee will be liable for any delay by the
Holder of the notes or The Depository Trust Company in identifying the
beneficial owner of notes, and we, R&B Falcon and the Trustee may conclusively
rely on, and will be protected in relying on, instructions from the Holder of
the Global Note or The Depository Trust Company for all purposes.
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Continuous Restrictions on Transfers of Notes
The notes may not at any time, including after consummation of the exchange
offer, be transferred to, or held by persons other than "Qualified Institutional
Buyers" as defined in Rule 144A under the Securities Act, institutional
"Accredited Investors" as defined in Rule 501(a)(1), (2), (3) or (7) under
Regulation D under the Securities Act or a person involved in the organization
or operation of our company or an affiliate, as defined in Rule 465 under the
Securities Act, of our company. Any Holder or beneficial owner of a note shall,
by acceptance of such note, agree that such Holder or owner will deliver to each
person to whom a note or an interest in a note is transferred a notice provided
for in the legend described under "Notice to Investors in the Notes." The
Trustee and the Registrar may not transfer any note in violation of these
restrictions.
Same Day Settlement and Payment
The Indenture requires that payments in respect of the notes represented by
the Global Notes (including principal, premium, if any, interest and Special
Interest, if any) be made by wire transfer of immediately available same day
funds to the accounts specified by the Holder of interests in such Global Note.
With respect to Certificated Notes, we will make all payments of principal,
premium, if any, interest and Special Interest, if any, by wire transfer of
immediately available same day funds to the accounts specified by the Holders
thereof or, if no such account is specified, by mailing a check to each such
Holder's registered address. We expect that secondary trading in the
Certificated Notes will also be settled in immediately available funds.
CERTIFICATED NOTES
The notes represented by the Global Notes are exchangeable for Certificated
Notes in definitive form of like tenor as such notes in denominations of $1,000
and integral multiples thereof if (i) the Depositary notifies us that it is
unwilling or unable to continue as Depositary for the Global Notes or if at any
time the Depositary ceases to be a clearing agency registered under the Exchange
Act, and we fail to appoint a successor Depository within 90 days of such
notice, (ii) we in our discretion at any time determine not to have all the
notes represented by the Global Notes or (iii) an Event of Default entitling the
Holders of the notes to accelerate the maturity thereof has occurred and is
continuing. Any Global Note that is exchangeable under the preceding sentence is
exchangeable for Certificated Notes issuable in authorized denominations and
registered in such names as the Depositary shall direct. Otherwise, a Global
Note is not exchangeable for Certificated Notes, except for a Global Note of the
same aggregate denomination to be registered in the name of the Depositary or
its nominee. In addition, such certificates will bear the legend referred to
under "Notice to Investors in the Notes" (unless we determine otherwise in
accordance with applicable law) subject, with respect to such notes, to the
provisions of such legend. Upon the transfer of a note in definitive form, such
note will, unless the Global Note has previously been exchanged for notes in
definitive form, be exchanged for an interest in the Global Note representing
the principal amount of notes being transferred.
SAME-DAY PAYMENT
The Indenture requires that payments in respect of notes (including
principal, premium, if any, and interest, Additional Amounts and Special
Interest, if any) be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each such Holder's registered address.
REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS
We and R&B Falcon have agreed under a registration rights agreement with
the initial purchaser of the notes, for the benefit of the Holders of the notes,
that we and R&B Falcon will use our best efforts to cause the registration
statement of which this prospectus is a part to be declared effective by August
23, 1999. Upon the effectiveness of the registration statement, we will offer
the exchange notes in exchange for
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surrender of the outstanding notes. We and R&B Falcon will keep the exchange
offer open for not less than 30 days (or longer if required by applicable law)
after the date notice of the exchange offer is mailed to the Holders of the
notes. For each outstanding note surrendered to us in the exchange offer, the
Holder of such outstanding note will receive an exchange note having a principal
amount equal to that of the surrendered outstanding note. Interest on each
exchange note will accrue from the last interest payment date on which interest
was paid on the outstanding note surrendered in exchange thereof or, if no
interest has been paid on such outstanding note, from the date of its original
issue. Under existing SEC interpretations, the exchange notes would be freely
transferable by Holders other than affiliates of our company after the exchange
offer without further registration under the Securities Act if the Holder of the
exchange notes represents that it is acquiring the exchange notes in the
ordinary course of its business, that it has no arrangement or understanding
with any person to participate in the distribution of the exchange notes and
that it is not an affiliate of our company, as such terms are interpreted by the
SEC; provided, however, that broker-dealers ("Participating Broker-Dealers")
receiving exchange notes in the exchange offer will have a prospectus delivery
requirement with respect to resales of such exchange notes. The SEC has taken
the position that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to exchange notes (other than a resale of an
unsold allotment from the original sale of the notes) with this prospectus.
Under the registration rights agreement, we are required to allow Participating
Broker-Dealers and other persons, if any, with similar prospectus delivery
requirements to use this prospectus in connection with the resale of such
exchange notes.
A Holder of outstanding notes who wishes to exchange such notes for
exchange notes in the exchange offer must represent that it will acquire the
exchange notes in the ordinary course of its business and that at the time of
the commencement of the exchange offer it has no arrangement or understanding
with any person to participate in the distribution, within the meaning of the
Securities Act, of the exchange notes. The Holder must also represent that it is
not an "affiliate" of our company, as defined in Rule 405 of the Securities Act,
or if it is an affiliate, that it will comply with the registration and
prospectus delivery requirements of the Securities Act.
If interpretations of the staff of the SEC do not permit us to effect the
exchange offer, or if for any other reason we do not complete the exchange offer
by September 22, 1999, or if the initial purchaser of the outstanding notes so
requests with respect to outstanding notes not eligible to be exchanged for
exchange notes in the exchange offer, or if any Holder of notes is not eligible
to participate in the exchange offer or does not receive freely tradable
exchange notes in the exchange offer, we and R&B Falcon will, at our cost, (1)
as promptly as practicable, file a shelf registration statement covering resales
of the outstanding notes or the exchange notes, as the case may be, (2) use our
best efforts to cause the shelf registration statement to be declared effective
under the Securities Act and (3) keep the shelf registration statement effective
until the earlier of (A) the time when the notes covered by the shelf
registration statement can be sold under Rule 144 without any limitations under
clauses (c), (e), (f) and (h) of Rule 144 and (B) March 26, 2001. If we file a
shelf registration statement, we will provide to each Holder for whom we filed
the shelf registration statement copies of the prospectus which is a part of the
shelf registration statement, notify these Holders when the shelf registration
statement has become effective and take other actions to permit unrestricted
resales of the outstanding notes or the exchange notes. A Holder selling such
outstanding notes or exchange notes under the shelf registration statement
generally would be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
the civil liability provisions under the Securities Act in connection with these
sales and will be bound by the provisions of the registration rights agreement,
including certain indemnification obligations. Holders of notes must deliver
information to us to be used in connection with the shelf registration statement
and provide comments on the shelf registration statement within specific time
periods in order to have their outstanding notes included in the shelf
registration statement.
If (a) we and R&B Falcon fail to file any of the registration statements
required by the registration rights agreement by the required date, (b) any of
the registration statements we are required to file under the registration
rights agreement are not declared effective by the SEC by the required date (the
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"Effectiveness Target Date"), (c) we fail to consummate the exchange offer
within 30 days of the Effectiveness Target Date with respect to the registration
statement, or (d) the shelf registration statement or the registration statement
of which this prospectus is a part is declared effective but then ceases to be
effective or usable in connection with resales of outstanding notes or exchange
notes during the period specified in the registration rights agreement (each
such event referred to in clauses (a) through (d) above, a "Registration
Default"), then we will pay Special Interest to each Holder of notes to which
the Registration Default applies. For the first 90-day period following a
Registration Default, the Special Interest will equal to $.05 per week per
$1,000 principal amount of notes. The amount of the Special Interest will
increase by an additional $.05 per week per $1,000 principal amount of notes
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of Special Interest of $.50 per week per
$1,000 principal amount of notes. We will pay all accrued Special Interest on
each interest payment date to the Holders of the Global Notes by wire transfer
of immediately available funds or by federal funds check and to Holders of
Certificated Notes by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
Special Interest will cease.
If we effect the exchange offer, we will be entitled to close the exchange
offer 30 days after we start the exchange offer if we have accepted all
outstanding notes validly tendered under the exchange offer.
This summary of the material provisions of the registration rights
agreement is not a complete description of all the provisions of the
registration rights agreement. We have filed a copy of the registration rights
agreement as an exhibit to the registration statement of which this prospectus
is a part.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), we shall make an offer to repurchase all then outstanding notes at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, Additional Amounts and Special Interest, if any, to
the date of purchase (subject to the right of Holders of record on the relevant
record date to receive interest (including Special Interest, if any, and
Additional Amounts, if any) due on the relevant interest payment date):
- any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), is or becomes the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that for purposes of this
clause (i) such person shall be deemed to have "beneficial ownership" of
all shares that any such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total voting power of the
Voting Stock of R&B Falcon;
- during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of R&B Falcon
(together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of R&B
Falcon was approved by a vote of 66 2/3% of the directors of R&B Falcon
then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office; and
- the merger or consolidation of R&B Falcon with or into another Person or
the merger of another Person with or into R&B Falcon, or the sale of all
or substantially all the assets of R&B Falcon or R&B Falcon and its
Restricted Subsidiaries taken as a whole to another Person, and, in the
case of any such merger or consolidation, the securities of R&B Falcon
that are outstanding immediately prior to such transaction and which
represent 100% of the aggregate voting power of the Voting Stock of R&B
Falcon are changed into or exchanged for cash, securities or property,
unless in the transaction such securities are changed into or exchanged
for, in addition to any other consideration, securities of the surviving
corporation that represent immediately after such transaction, at least a
majority of the aggregate voting power of the Voting Stock of the
surviving corporation.
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Notwithstanding the foregoing, a Change of Control shall not be deemed to
have occurred if (1) the ratings assigned to the notes by Moody's and S&P prior
to the announcement are not downgraded or placed on a negative credit watch by
either such rating agency as a result thereof and (2) no Default has occurred
and is continuing.
Within 30 days following any Change of Control, we shall mail a notice to
each Holder with a copy to the Trustee stating among other things: (1) that a
Change of Control has occurred and that such Holder has the right to require us
to purchase such Holder's notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, Additional Amounts
and Special Interest, if any, to the date of purchase (subject to the right of
Holders of record on the relevant record date to receive interest, Additional
Amounts and Special Interest, if any, on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change of Control
(including information with respect to pro forma historical income, cash flow
and capitalization after giving effect to such Change of Control); (3) the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (4) the instructions determined by us,
consistent with the covenant described hereunder, that a Holder must follow in
order to have its notes purchased. R&B Falcon will also be required to prepay
appropriate tranches of the Loans on a pro rata basis at a redemption price
equal to 101% of the principal amount thereof being repaid, plus accrued and
unpaid interest (including Special Interest, if any, and Additional Amounts, if
any) thereon, in order to provide funds sufficient to permit us to purchase any
notes validly tendered pursuant to the foregoing offer to purchase notes upon a
Change of Control.
We shall comply, to the extent applicable, with the requirements of Section
14(e) of the Exchange Act and any other securities laws or regulations in
connection with the repurchase of notes under this covenant described hereunder.
To the extent that the provisions of any securities laws or regulations conflict
with the provisions of the covenant described hereunder, we shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached our obligations under the covenant described hereunder by virtue
thereof.
The Change of Control purchase feature is solely a result of negotiations
between us, R&B Falcon and the initial purchaser of the notes. R&B Falcon does
not have any present intention to engage in a transaction involving a Change of
Control, although it is possible that R&B Falcon could decide to do so in the
future. Subject to the limitations discussed below, R&B Falcon could, in the
future, enter into transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect R&B Falcon's capital structure or credit ratings.
Restrictions on the ability of R&B Falcon and its Restricted Subsidiaries to
incur additional Indebtedness are contained in the covenants described under
"-- Covenants -- Limitation on Indebtedness," "-- Limitation on Liens" and
"-- Limitation on Sale/Leaseback Transactions." Such restrictions can only be
waived with the consent of the Holders of a majority in aggregate principal
amount of the notes then outstanding. Such provisions may not necessarily afford
the Holders of the notes protection in the event of a highly leveraged
transaction, including a reorganization, restructuring, merger or other similar
transactions involving R&B Falcon, that may adversely affect the Holders because
such transactions may not involve a shift in voting power or beneficial
ownership or, even if they do, may not involve a shift of the magnitude required
under the definition of Change of Control to require us to make a Change of
Control offer. In addition, the existence of the Holder's right to require us to
repurchase such Holder's notes upon the occurrence of a Change of Control may or
may not deter a third party from seeking to acquire R&B Falcon in a transaction
that would constitute a Change of Control.
Our ability to repurchase notes in a Change of Control offer may be limited
by a number of factors. The indenture governing R&B Falcon's 12 1/4% Senior
Notes due 2006 contains a substantially identical provision for a change of
control offer of those notes at a redemption price equal to 100% of the
aggregate principal amount, plus accrued and unpaid interest. Future
Indebtedness of R&B Falcon or its Restricted Subsidiaries may contain
prohibitions on the occurrence of events that would constitute a Change of
Control or require such Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise
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by the Holders of their right to require us to repurchase the notes, or to
require R&B Falcon to repay the Loans, could cause a default under such
Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on R&B Falcon and its Subsidiaries. Finally,
R&B Falcon's ability to pay cash to us (which funds would be then used by us to
purchase notes) following the occurrence of a Change of Control may also be
limited by R&B Falcon's then existing financial resources. There can be no
assurance that sufficient funds will be available when necessary to make any
required repurchases. If a Change of Control offer occurs at a time when we and
R&B Falcon do not have sufficient available funds to pay the purchase price for
all notes validly tendered in the offer and all of R&B Falcon's 12 1/4% Senior
Notes due 2006 under the change of control provisions applicable to those notes,
or at a time when R&B Falcon is prohibited from repaying the Loans (and R&B
Falcon is unable either to obtain the consent of the holders of the relevant
Indebtedness or to repay such Indebtedness), an Event of Default would occur
under the Indenture. Our failure to purchase tendered notes or R&B Falcon's
failure to repay the Loans would constitute a breach of the Indenture which
could, in turn, constitute a default under other Indebtedness and could lead to
the acceleration of such other Indebtedness.
One of the events that constitutes a Change of Control under the Indenture
is a sale, conveyance, lease or transfer of all or substantially all of the
assets of R&B Falcon or of R&B Falcon and its Restricted Subsidiaries taken as a
whole. The Indenture will be governed by New York law, and there is no
established quantitative definition under New York law of "substantially all" of
the assets of a corporation. Accordingly, if R&B Falcon and/or its Restricted
Subsidiaries were to engage in a transaction in which it or they disposed of
less than all of the assets of R&B Falcon or of R&B Falcon and its Restricted
Subsidiaries taken as a whole, a question of interpretation could arise as to
whether such disposition was of "substantially all" of its or their assets, as
the case may be, and whether we were required to make a Change of Control offer.
COVENANTS
Covenant Suspension
If at any time (1) the ratings assigned to the notes by both of the Rating
Agencies are Investment Grade Ratings and (2) no Default has occurred and is
continuing under the Indenture, R&B Falcon and its Restricted Subsidiaries will
no longer be subject to the provisions of the Indenture described below under
"-- Limitation on Indebtedness" and "-- Limitation on Restricted Payments"
(together, the "Suspended Covenants"). If R&B Falcon is not subject to the
Suspended Covenants for any period of time as a result of the preceding sentence
and, subsequently, one or both Rating Agencies withdraws its ratings or
downgrades the ratings assigned to the notes below the required Investment Grade
Ratings, then R&B Falcon and its Restricted Subsidiaries will again be subject
to the Suspended Covenants and compliance with the Suspended Covenants with
respect to Restricted Payments made after the time of such withdrawal or
downgrade will be calculated in accordance with the terms of the "-- Limitation
on Restricted Payments" covenant as if such covenant had been in effect during
the entire period of time from the date of the Indenture.
Limitation on Indebtedness. (a) R&B Falcon will not, and will not permit
any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness;
provided, however, that R&B Falcon may Incur Indebtedness if the Consolidated
EBITDA Coverage Ratio at the date of such Incurrence and after giving effect
thereto exceeds 2.25 to 1.0.
(b) Notwithstanding paragraph (a), the following Indebtedness may be
Incurred:
(1) Indebtedness of R&B Falcon under one or more Credit Facilities
(and the guarantee of such Indebtedness by Restricted Subsidiaries);
provided, however, that the aggregate amount of such Indebtedness
outstanding at such time shall not exceed $350 million, less any amounts
derived from Asset Sales and applied to the required permanent reduction
of Senior Indebtedness (and a permanent reduction of the related
commitment to lend or amount available to be
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reborrowed in the case of a revolving credit facility) under such Credit
Facilities as contemplated by the "Limitation on Asset Sales" covenant;
(2) Indebtedness of R&B Falcon or a Restricted Subsidiary owed to
and held by a Restricted Subsidiary or Indebtedness of a Restricted
Subsidiary owed to and held by R&B Falcon; provided, however, that any
subsequent issuance or transfer of any Capital Stock that results in
such Restricted Subsidiary to whom Indebtedness is owed ceasing to be a
Restricted Subsidiary or any transfer of such Indebtedness (other than
to R&B Falcon or another Restricted Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Indebtedness;
(3) The Loans, the Guarantee, the Subsidiary Guarantees, if any,
and Indebtedness incurred in exchange for, or the proceeds of which are
used to Refinance any Indebtedness permitted by this clause (3);
provided, however, that (i) the principal amount of the Indebtedness so
Incurred shall not exceed the principal amount of the Indebtedness so
Refinanced (plus the amount of reasonable fees and expenses incurred in
connection therewith, including any premium or defeasance costs) and
(ii) the Indebtedness so Incurred (A) shall not mature prior to the
Stated Maturity of the Indebtedness so Refinanced and (B) shall have an
Average Life equal to or greater than the remaining Average Life of the
Indebtedness so Refinanced;
(4) Indebtedness of R&B Falcon or any Restricted Subsidiary (other
than Indebtedness described in clause (1), (2) or (3) above) (x)
outstanding on the Issue Date (including without limitation, R&B
Falcon's 12 1/4% Senior Notes due 2006 and any subsidiary guarantee
issued under the indenture governing those notes, R&B Falcon's 6 1/2%
Senior Notes due 2003, R&B Falcon's 6 3/4% Senior Notes due 2005, R&B
Falcon's 6.95% Senior Notes due 2008, the Company's 7 3/8% Senior Notes
due 2018, the Company's 9 1/8% Senior Notes due 2003, the Company's
9 1/2% Senior Notes due 2008 and the 10 1/4% Senior Notes due 2003 of
Cliffs Drilling Company) or Incurred pursuant to agreements as in effect
on the Issue Date and (y) Indebtedness Incurred in exchange for, or the
proceeds of which are used to Refinance, any Indebtedness permitted by
this clause (4) or permitted by clause (a) above; provided, however,
that (i) the principal amount of the Indebtedness so Incurred shall not
exceed the principal amount of the Indebtedness Refinanced (plus the
amount of reasonable fees and expenses incurred in connection therewith,
including any premium or defeasance costs); and (ii) the Indebtedness so
Incurred (A) shall not mature prior to the Stated Maturity of the
Indebtedness so Refinanced and (B) shall have an Average Life equal to
or greater than the remaining Average Life of the Indebtedness so
Refinanced;
(5) Indebtedness of R&B Falcon or any Restricted Subsidiary
consisting of guarantees in connection with any synthetic lease
obligations of Persons Incurred to finance the construction or upgrade
of the drillship Deepwater Frontier and the drillship Deepwater
Pathfinder pursuant to agreements governing such obligations;
(6) Acquired Indebtedness of any Restricted Subsidiary in an
aggregate amount not to exceed $300 million, provided that R&B Falcon on
a pro forma basis could Incur $1.00 of additional Indebtedness under
paragraph (a) of this covenant;
(7) Indebtedness of R&B Falcon or any Restricted Subsidiary
consisting of guarantees, indemnities or obligations in respect of
purchase price adjustments in connection with the acquisition or
disposition of assets, including, without limitation, shares of Capital
Stock;
(8) The Incurrence by R&B Falcon's Unrestricted Subsidiaries of
Non-Recourse Indebtedness; provided, however, that if any such
Indebtedness ceases to be Non-Recourse Indebtedness of any Unrestricted
Subsidiary, subject to the definition of "Unrestricted Subsidiary," such
event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of R&B Falcon that was not permitted by this
clause (8);
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(9) Obligations of R&B Falcon or a Restricted Subsidiary under
performance or surety bonds relating to building contracts for the
construction of drilling rigs, drillships or similar vessels or
contracts for the installation of related equipment;
(10) Hedging Obligations; and
(11) Indebtedness of R&B Falcon or any Restricted Subsidiary in an
aggregate principal amount which, together with all other Indebtedness
of R&B Falcon then outstanding (other than Indebtedness permitted by
clauses (1) through (10) of this paragraph (b) or paragraph (a)) does
not exceed $50.0 million.
(c) Notwithstanding paragraphs (a) and (b), R&B Falcon shall not issue
any Indebtedness if the proceeds thereof are used, directly or indirectly,
to repay, prepay, redeem, defease, retire, refund or refinance any
Subordinated Obligations unless such Indebtedness shall be subordinated to
the Guarantee and Loans to at least the same extent as such Subordinated
Obligations.
(d) For purposes of determining compliance with this covenant, (i) if
an item of Indebtedness meets the criteria of more than one of the types of
Indebtedness described above, we, in our sole discretion, will classify the
item of Indebtedness and only be required to include the amount and type of
the Indebtedness in one of the above clauses and (ii) an item of
Indebtedness may be divided and classified in more than one of the types of
Indebtedness described above.
Limitation on Liens. R&B Falcon will not, and will not permit any
Restricted Subsidiary of R&B Falcon to, issue, assume or guarantee any
Indebtedness for borrowed money secured by any Lien on any property or asset now
owned or hereafter acquired by R&B Falcon or such Restricted Subsidiary without
making effective provision whereby any and all notes then or thereafter
outstanding and/or the Guarantee will be secured by a Lien equally and ratably
with any and all other obligations thereby secured for so long as any such
obligations shall be so secured.
This restriction does not, however, apply to:
(1) Liens securing the notes, the Guarantee and the Loans;
(2) Liens existing on the date on which the notes are originally
issued or provided for under the terms of agreements existing on such
date;
(3) Liens on property securing (a) all or any portion of the cost
of acquiring, constructing, altering, improving or repairing any
property or assets, real or personal, or improvements used or to be used
in connection with such property or (b) Indebtedness incurred by R&B
Falcon or any Restricted Subsidiary of R&B Falcon prior to or within one
year after the later of the acquisition, the completion of construction,
alteration, improvement or repair or the commencement of commercial
operation thereof, which Indebtedness is incurred for the purpose of
financing all or any part of the purchase price thereof or construction
or improvements thereon;
(4) Liens securing Indebtedness owed by a Restricted Subsidiary of
R&B Falcon or to any other Restricted Subsidiary of R&B Falcon;
(5) Liens on property existing at the time of acquisition of such
property by R&B Falcon or any of its Restricted Subsidiary or Liens on
the property of any Person existing at the time such Person becomes a
Restricted Subsidiary of R&B Falcon and, in any case, not incurred as a
result of (or in connection with or in anticipation of) the acquisition
of such property or such Person becoming a Restricted Subsidiary of R&B
Falcon, provided that such Liens do not extend to or cover any property
or assets of R&B Falcon or any of its Restricted Subsidiaries other than
the property encumbered at the time such property is acquired by R&B
Falcon or any of its Restricted Subsidiaries or such Person becomes a
Restricted Subsidiary of R&B Falcon and, in any case, do not secure
Indebtedness with a principal amount in excess of the principal amount
outstanding at such time;
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(6) Liens on any property securing (a) Indebtedness incurred in
connection with the construction, installation or financing of pollution
control or abatement facilities or other forms of industrial revenue
bond financing or (b) Indebtedness issued or guaranteed by the United
States or any State thereof or any department, agency or instrumentality
of either;
(7) any Lien extending, renewing or replacing (or successive
extensions, renewals or replacements of) any Lien of any type permitted
under clause (1), (2), (3), (5) or (6) above, provided that such lien
extends to or covers only the property that is subject to the Lien being
extended, renewed or replaced and that the principal amount of the
Indebtedness secured thereby shall not exceed the principal amount of
Indebtedness so secured at the time of such extension, renewal or
replacement; or
(8) Liens (exclusive of any Lien of any type otherwise permitted
under clauses (1) through (7) above) securing Indebtedness for borrowed
money of R&B Falcon or any Restricted Subsidiary of R&B Falcon in an
aggregate principal amount which, together with the aggregate amount of
Attributable Indebtedness deemed to be outstanding in respect of all
Sale/Leaseback Transactions entered into pursuant to clause (1) of the
covenant described under "Limitation on Sale/Leaseback Transactions"
below (exclusive of any such Sale/Leaseback Transactions otherwise
permitted under clauses (1) through (7) above), does not at the time
such Indebtedness is incurred exceed 15% of the Consolidated Net Worth
of R&B Falcon (as shown in the most recent audited consolidated balance
sheet of R&B Falcon and its Restricted Subsidiaries).
Limitation on Restricted Payments. (a) R&B Falcon will not, and will not
permit any Restricted Subsidiary, directly or indirectly, to:
(1) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving R&B Falcon) or to the direct or indirect
holders of its Capital Stock, except:
(A) dividends or distributions payable solely in its
Non-Convertible Capital Stock or in options, warrants or other rights to
purchase its Non-Convertible Capital Stock;
(B) dividends or distributions payable to R&B Falcon or a
Restricted Subsidiary; and
(C) pro rata dividends or distributions on the Capital Stock of a
Restricted Subsidiary held by minority stockholders (including, without
limitation, minority stockholders of Arcade Drilling AS, a Norwegian
corporation);
(2) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of R&B Falcon or of any direct or indirect parent of R&B
Falcon, or any Restricted Subsidiary (except Capital Stock held by R&B
Falcon or a Restricted Subsidiary);
(3) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment, any Subordinated Obligation (other than
the purchase, repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition); or
(4) make any Investment other than a Permitted Investment (any such
dividend, distribution, purchase, redemption, repurchase, defeasance,
other acquisition, retirement or Investment being herein referred to as
a "Restricted Payment"),
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if at the time R&B Falcon or such Restricted Subsidiary makes such Restricted
Payment:
(i) a Default shall have occurred and be continuing (or would result
therefrom); or
(ii) R&B Falcon would not be permitted to Incur an additional $1.00 of
Indebtedness under paragraph (a) under "-- Limitation on Indebtedness"
after giving pro forma effect to such Restricted Payment; or
(iii) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter during which the notes were originally issued to the end of the
most recent fiscal quarter ending at least 45 days prior to the date of
such Restricted Payment (or, in case such Consolidated Net Income shall
be a deficit, minus 100% of such deficit);
(B) 100% of the aggregate net proceeds (including the fair market
value of non-cash proceeds, which shall be determined in good faith by
the Board of Directors of R&B Falcon) received by R&B Falcon from the
issue or sale of its Capital Stock (other than Redeemable Stock or
Exchangeable Stock) subsequent to the Issue Date (other than an issuance
or sale to a Restricted Subsidiary or an employee stock ownership plan
or similar trust);
(C) the amount by which R&B Falcons's Indebtedness is reduced on
R&B Falcon's balance sheet upon the conversion or exchange (other than
by a Restricted Subsidiary) subsequent to the Incurrence of any
Indebtedness of R&B Falcon convertible or exchangeable for Capital Stock
(other than Redeemable Stock or Exchangeable Stock) of R&B Falcon (less
the amount of any cash, or other property, distributed by R&B Falcon
upon such conversion or exchange);
(D) to the extent not otherwise included in Consolidated Net
Income, the net reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans or advances, or other
transfers of assets, in each case to R&B Falcon or any Restricted
Subsidiary after the Issue Date from any Unrestricted Subsidiary or from
the redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary (valued in each case as provided in the definition of
Investment), not to exceed in the case of any Restricted Subsidiary the
total amount of Investments (other than Permitted Investments) in such
Restricted Subsidiary made by R&B Falcon and its Restricted Subsidiaries
in such Unrestricted Subsidiary after the Issue Date; and
(E) $20.0 million.
(b) The provisions of Section (a) shall not prohibit:
(1) Any purchase or redemption of Capital Stock or Subordinated
Obligations of R&B Falcon made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Capital Stock of R&B Falcon (other
than Redeemable Stock or Exchangeable Stock and other Capital Stock issued
or sold to a Restricted Subsidiary or an employee stock ownership plan);
provided, however, that (i) such purchase or redemption shall be excluded
in the calculation of the amount of Restricted Payments and (ii) the Net
Cash Proceeds from such sale shall be excluded from clauses (iii)(B) and
(iii)(C) of Section (a);
(2) Any purchase or redemption of R&B Falcon's Subordinated
Obligations made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Indebtedness of R&B Falcon which is
permitted to be issued under the provision of "-- Limitation on
Indebtedness" above; provided, however, that such purchase or redemption
shall be excluded in the calculation of the amount of Restricted Payments;
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(3) Dividends paid within 60 days after the date of declaration if at
such date of declaration such dividend would have complied with this
provision; provided, however, that at the time of payment of such dividend,
no other Default shall have occurred and be continuing (or would result
therefrom); provided further, however, that such dividend shall be included
in the calculation of the amount of Restricted Payments (unless already
included in determining the amount of Restricted Payments previously made
upon the declaration of such dividend); and
(4) If R&B Falcon issues Preferred Stock which is Non-Convertible
Capital Stock and receives at least $100.0 million of net proceeds
therefrom, dividends on such Preferred Stock in an aggregate amount not to
exceed $30.0 million, provided that such dividends constitute Restricted
Payments for purposes of calculating the amount of Restricted Payments made
under clause (iii) of Section (a) above.
Limitation on Sale/Leaseback Transactions. R&B Falcon will not, and will
not permit any Restricted Subsidiary to, enter into any Sale/Leaseback
Transaction with any Person (other than R&B Falcon or a Restricted Subsidiary)
unless:
(1) R&B Falcon or such Restricted Subsidiary would be entitled to
incur Indebtedness, in a principal amount equal to the Attributable
Indebtedness with respect to such Sale/Leaseback Transaction, secured by a
Lien on the property subject to such Sale/Leaseback Transaction under the
covenant described under "Limitation on Liens" above without equally and
ratably securing the notes and/or the Guarantee pursuant to such covenant;
(2) after the Issue Date and within a period commencing six months
prior to the consummation of such Sale/Leaseback Transaction and ending six
months after the consummation thereof, R&B Falcon or such Restricted
Subsidiary shall have expended for property used or to be used in the
ordinary course of business of R&B Falcon and its Restricted Subsidiaries
an amount equal to all or a portion of the net proceeds of such
Sale/Leaseback Transaction and R&B Falcon shall have elected to designate
such amount as a credit against such Sale/Leaseback Transaction (with any
such amount not being so designated to be applied as set forth in clause
(3) below); or
(3) during the 12-month period after the effective date of such
Sale/Leaseback Transaction, R&B Falcon shall have applied to the voluntary
defeasance or retirement of Loans and notes or any Pari Passu Indebtedness
an amount equal to the greater of the net proceeds of the sale or transfer
of the property leased in such Sale/Leaseback Transaction and the fair
value, as determined by the Board of Directors of R&B Falcon, of such
property at the time of entering into such Sale/Leaseback Transaction (in
either case adjusted to reflect the remaining term of the lease and any
amount expended by R&B Falcon as set forth in clause (2) above), less an
amount equal to the principal amount of Loans and notes and Pari Passu
Indebtedness voluntarily defeased or retired by us and R&B Falcon within
such 12-month period and not designated as a credit against any other Sale/
Leaseback Transaction entered into by R&B Falcon or any Restricted
Subsidiary during such period.
Limitations on Mergers and Consolidations. Neither R&B Falcon nor any
Subsidiary Guarantor (other than any Subsidiary Guarantor that shall have been
released from its Subsidiary Guarantee under the provisions of the Indenture)
will consolidate with or merge into any Person, continue in another
jurisdiction, or sell, lease, convey, transfer or otherwise dispose of all or
substantially all of its assets to any Person, unless:
(1) the Person formed by or surviving such consolidation or merger (if
other than R&B Falcon or such Subsidiary Guarantor, as the case may be), or
to which such sale, lease, conveyance, transfer or other disposition shall
be made (collectively, the "Successor"), is a corporation organized and
existing under the laws of the United States or any State thereof or the
District of Columbia (or, alternatively, in the case of a Subsidiary
Guarantor organized under the laws of a jurisdiction outside the United
States, a corporation organized and existing under the laws of such foreign
jurisdiction), and the Successor assumes by supplemental indenture in a
form satisfactory to the Trustee all of the
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applicable Obligations of R&B Falcon or such Subsidiary Guarantor, as the
case may be, under the Indenture, the Guarantee, the Subsidiary Guarantees
and the notes;
(2) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; and
(3) in the case of R&B Falcon, immediately after giving effect to such
transactions, the resulting, surviving or transferee Person would be able
to incur at least $1.00 of Indebtedness under paragraph (a) of the
"Limitation on Indebtedness" covenant.
We shall not consolidate or merge with or into any other Person, continue
in another jurisdiction, or convey, transfer or lease any assets to any other
Person (other than as permitted under "Collateral"). We shall not become a
Subsidiary of R&B Falcon so long as any of R&B Falcon's 6 1/2% Senior Notes due
2003, 6 3/4% Senior Notes due 2005, 6.95% Senior Notes due 2008, 7 3/8% Senior
Notes due 2018, 9 1/8% Senior Notes due 2003, 9 1/2% Senior Notes due 2008 or
12 1/4% Senior Notes due 2006 remain outstanding.
SEC Reports. Notwithstanding that R&B Falcon may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, R&B Falcon shall file with the SEC and provide the Trustee and Holders with
such annual reports and such information, documents and other reports specified
in Sections 13 and 15(d) of the Exchange Act.
In addition, whether or not required by the rules and regulations of the
SEC, R&B Falcon will file a copy of all such information and reports with the
SEC for public availability (unless the SEC will not accept such filing). In
addition, we and R&B Falcon shall furnish to the Holders and to prospective
investors, upon the requests of such Holders, any information required to be
delivered under Rule 144A(d)(4) under the Securities Act so long as the notes
are not freely transferable under the Securities Act.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. R&B Falcon shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (a) pay dividends or make any other distributions, in cash or
otherwise, on its Capital Stock to R&B Falcon or any Restricted Subsidiary or
pay any Indebtedness owed to R&B Falcon or any Restricted Subsidiary, (b) make
any loans or advances to R&B Falcon or any Restricted Subsidiary or (c) transfer
any of its property or assets to R&B Falcon or any Restricted Subsidiary,
except:
(i) any encumbrance or restriction pursuant to an agreement in effect
or entered into on the Issue Date;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Acquired Indebtedness
or Preferred Stock Incurred by such Restricted Subsidiary on or prior to
the date on which such Restricted Subsidiary became a Restricted Subsidiary
or was acquired by R&B Falcon (other than Indebtedness or Preferred Stock
Incurred as consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of
related transactions in which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by R&B Falcon or otherwise Incurred
in anticipation of such acquisition) and outstanding on such date;
(iii) any encumbrance or restriction relating to any assets acquired
after the Issue Date, so long as such encumbrance or restriction relates
only to the assets so acquired and is not or was not created in
anticipation of such acquisition;
(iv) any encumbrance or restriction pursuant to an agreement effecting
a Refinancing of Indebtedness or Preferred Stock Incurred pursuant to an
agreement referred to in clause (i), (ii) or (iii) of this covenant or this
clause (iv) or contained in any amendment to an agreement referred to in
clause (i), (ii) or (iii) of this covenant or this clause (iv); provided,
however, that the
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encumbrances and restrictions with respect to such Restricted Subsidiary
contained in any such refinancing agreement or amendment are in the
aggregate no less favorable to the Holders of the notes than the
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in such predecessor agreements;
(v) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests or in
license agreements to the extent such provisions restrict the assignment of
such agreement and any rights granted or property leased thereunder;
(vi) in the case of clause (iii) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages; and
(vii) any temporary encumbrance or restriction with respect to a
Restricted Subsidiary imposed pursuant to an agreement entered into for the
sale or disposition of all or substantially all the Capital Stock or assets
of such Restricted Subsidiary pending the closing of such sale or
disposition.
Nothing contained in this covenant shall prevent R&B Falcon or any
Restricted Subsidiary from entering into any agreement permitting the incurrence
of Liens otherwise permitted by "-- Covenants -- Limitation on Liens."
Limitation on Asset Sales. (a) R&B Falcon shall not, and shall not permit
any Subsidiary Guarantor to, sell, assign, convey, transfer or otherwise dispose
of a Mortgaged Rig or any other portion of the Collateral (other than an
Incidental Asset or Temporary Cash Investments in the Escrow Account and other
than a transfer of a Mortgaged Rig to a Wholly-Owned Restricted Subsidiary that
becomes a Subsidiary Guarantor); provided, however, that R&B Falcon or a
Subsidiary Guarantor may sell a Mortgaged Rig or R&B Falcon may sell all the
Capital Stock of a Subsidiary Guarantor owning a Mortgaged Rig (any such asset
proposed to be sold is referred to herein as a "Mortgaged Rig Asset") if such
sale of a Mortgaged Rig Asset is made in compliance with each of the following
conditions:
(i) no Default shall have occurred and be continuing;
(ii) the sale shall be effected in a commercially reasonable manner as
determined by the Board of Directors and evidenced by a board resolution;
(iii) the entire consideration for such sale shall be at least equal
to the fair market value of the Mortgaged Rig (as determined in good faith
by R&B Falcon's Board of Directors);
(iv) at least 75% of the consideration received shall be in the form
of cash or Temporary Cash Equivalents, provided that Net Available Cash
shall not be less than an amount equal to the Sale Redemption Amount for
the Loan secured by a Lien on such Mortgaged Rig;
(v) funds in an amount equal to the Sale Redemption Amount (or if
required by the provisions of "-- Redemptions -- Redemption Upon Sale of a
Mortgaged Rig," the Net Available Cash of such sale) shall be applied as
repayments on the appropriate Loan or Loans and paid in full directly to
the Trustee for deposit in the Escrow Account and shall be received by the
Trustee free of any Lien (other than the Lien of the Indenture and the
Security Agreements); and
(vi) R&B Falcon shall have complied with the other provisions of the
Indenture applicable to such sale.
We and R&B Falcon must apply the Net Available Cash from such sale as
described above under "-- Redemptions -- Redemption Upon Sale of a Mortgaged
Rig."
(b) R&B Falcon shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in any Asset Sales (other than Asset Sales permitted by
the paragraph (a) above) unless (i) R&B Falcon or the applicable Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the fair market value of the assets sold or otherwise
disposed of (as determined in good faith by R&B Falcon's Board of Directors),
and (ii) at least 75% of the consideration received by R&B
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Falcon or the Restricted Subsidiary, as the case may be, from such Asset Sale at
the time of such disposition shall be in the form of cash or Temporary Cash
Equivalents (or the assumption of indebtedness and liabilities of R&B Falcon or
such Restricted Subsidiary and the release of R&B Falcon or such Restricted
Subsidiary from all liability thereon) or notes or marketable securities that
are converted into cash or Temporary Cash Equivalents within 180 days after the
date of such Asset Sale; provided that any Asset Sale of shares of Capital Stock
of Reading & Bates Development Co. or of assets owned by Reading & Bates
Development Co. not constituting a Mortgaged Rig shall not have to comply with
the provisions of this clause (ii). If R&B Falcon or a Restricted Subsidiary
engages in an Asset Sale in compliance with the previous sentence, then R&B
Falcon shall or shall cause a Restricted Subsidiary to apply an amount equal to
such excess Net Available Cash within 360 days of the Asset Sale either (i) to
repay Senior Indebtedness of R&B Falcon or of a Restricted Subsidiary (other
than in each case Indebtedness owed to an Affiliate of R&B Falcon), (ii) to
invest in Additional Assets or (iii) treat (no later than the end of such
360-day period) such excess Net Available Cash (to the extent not applied
pursuant to clauses (i) or (ii) above) as Sale Excess Proceeds.
Limitation on Asset Swaps. R&B Falcon will not, and will not permit any
Restricted Subsidiary to, engage in any Asset Swaps, unless:
(i) at the time of entering into the agreement with respect thereto
and immediately after giving effect to the proposed Asset Swap, no Default
shall have occurred and be continuing;
(ii) the aggregate fair market values of the Additional Assets and
other consideration to be received by R&B Falcon or the applicable
Restricted Subsidiary is, at the time the Asset Swap is agreed to,
substantially equal to the aggregate fair market of the property being
disposed of by R&B Falcon or the applicable Restricted Subsidiary (to be
determined in good faith by the Board of Directors of R&B Falcon and to be
evidenced by a resolution of such Board set forth in an Officer's
Certificate delivered to the Trustee); and
(iii) the cash payments, if any, received by R&B Falcon or such
Restricted Subsidiary in connection with such Asset Swap are treated as Net
Available Cash received from an Asset Sale.
Limitation on Affiliate Transactions. (a) R&B Falcon shall not, and shall
not permit any Restricted Subsidiary to, enter into any transaction (including
the purchase, sale, lease or exchange of any property, employee compensation
arrangements or the rendering of any service) with any Affiliate of R&B Falcon
(an "Affiliate Transaction") unless the terms thereof (1) are no less favorable
to R&B Falcon or such Restricted Subsidiary than those that could be obtained at
the time of such transaction in arm's-length dealings with a Person who is not
such an Affiliate, (2) if such Affiliate Transaction involves an amount in
excess of $500,000, (i) are set forth in writing and (ii) have been approved by
a majority of the members of the Board of Directors of R&B Falcon having no
personal stake in such Affiliate Transaction and (3) if such Affiliate
Transaction involves an amount in excess of $10.0 million, have been determined
by an investment banking firm of national reputation or, in the case of the sale
or transfer of assets subject to valuation, an appropriate independent qualified
appraiser of national reputation, given the size and nature of the transaction,
to be fair, from a financial standpoint, to R&B Falcon and its Restricted
Subsidiaries.
(b) The provisions of paragraph (a) shall not prohibit (i) any Restricted
Payment permitted to be paid under the covenant described under "-- Limitation
on Restricted Payments," (ii) any issuance of securities, or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the funding
of, employment arrangements of R&B Falcon, stock options, stock ownership and
other employee benefit plans approved by the Board of Directors of R&B Falcon,
(iii) the grant of stock options or similar rights to employees, officers and
directors of R&B Falcon pursuant to plans approved by its Board of Directors,
(iv) loans or advances to employees in the ordinary course of business in
accordance with the past practices of R&B Falcon or its Subsidiaries, but in any
event not to exceed $1.0 million in aggregate principal amount outstanding at
any one time, (v) the payment of reasonable fees to directors of R&B Falcon and
its Restricted Subsidiaries who are not employees of R&B Falcon or its
Restricted Subsidiaries and (vi) any Affiliate Transaction among any of us, R&B
Falcon, the Restricted Subsidiaries, Arcade
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Drilling AS, any entity owning or operating any of the Deepwater Pathfinder, the
Deepwater Frontier or the Seillean (but only for transactions relating to such
vessels) and Navis AS.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. R&B Falcon shall not sell or otherwise dispose of any Capital
Stock of a Restricted Subsidiary, and shall not permit any such Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
of its Capital Stock except (i) to R&B Falcon or a Wholly Owned Restricted
Subsidiary, (ii) if, immediately after giving effect to such issuance, sale or
other disposition, neither R&B Falcon nor any of its Subsidiaries own any
Capital Stock of such Restricted Subsidiary, (iii) other than with respect to
shares of Capital Stock of a Subsidiary Guarantor owning a Mortgaged Rig, to
Persons who are entering into joint ventures or other similar business
relationships with R&B Falcon or any Subsidiary other than a Subsidiary
Guarantor; provided, however, that transactions under this clause (iii) are
approved in the manner set forth in paragraph (a) under "-- Limitation on
Affiliate Transactions," (iv) directors' qualifying shares, (v) other than with
respect to shares of Capital Stock of a Subsidiary Guarantor which owns a
Mortgaged Rig, if, immediately after giving effect to such issuance, sale or
other disposition, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary and any Investment in such Person remaining after giving
effect thereto would have been permitted to be made under the covenant described
under "-- Limitation on Restricted Payments" if made on the date of such
issuance, sale or other disposition or (vi) pursuant to the loan arrangement
with Nisho-Iwai. R&B Falcon shall apply the proceeds from any applicable sale of
Capital Stock of a Subsidiary Guarantor which owns a Mortgaged Rig in accordance
with the provisions described above under "-- Redemptions -- Redemption upon
Sale of a Mortgaged Rig."
Future Subsidiary Guarantors. The Indenture provides that R&B Falcon may
not permit any Restricted Subsidiary, directly or indirectly, to guarantee any
Indebtedness of R&B Falcon ("Guaranteed Indebtedness") or any other Obligor or
to acquire a Mortgaged Rig unless (i) such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture to the Indenture providing for a
Subsidiary Guarantee of payment of the notes by such Restricted Subsidiary and
(ii) such Restricted Subsidiary waives and will not in any manner whatsoever
claim or take the benefit or advantage of, any rights of reimbursement,
indemnity or subrogation or any other rights against us, R&B Falcon or any other
Restricted Subsidiary as a result of any payment by such Restricted Subsidiary
under its Subsidiary Guarantee. If the Guaranteed Indebtedness ranks equally in
right of payment with the Guarantee, then the guarantee of such Guaranteed
Indebtedness shall rank equally in right of payment with or be subordinated to
the Subsidiary Guarantee; and if the Guaranteed Indebtedness is subordinated to
the Guarantee, then the guarantee of such Guaranteed Indebtedness shall be
subordinated to the Subsidiary Guarantee at least to the extent that all
Guaranteed Indebtedness is subordinated to the Guarantee. Any Subsidiary
Guarantee by a Restricted Subsidiary which does not own a Mortgaged Rig that was
incurred pursuant to the terms of this paragraph (but not otherwise) shall
provide by its terms that it shall be automatically and unconditionally released
and discharged upon the release or discharge of the guarantee which resulted in
the creation of such Restricted Subsidiary's Subsidiary Guarantee, except a
discharge or release by, or as a result of, payment under such guarantee.
Impairment of Liens. We and R&B Falcon shall not, and we and R&B Falcon
shall not permit any Restricted Subsidiary to, take or knowingly or negligently
omit to take, any action which action or omission might or would have the result
of materially impairing the Liens granted by us with respect to the Collateral
for the benefit of the Trustee and the Holders of the notes and the Liens
granted by R&B Falcon with respect to Collateral for the benefit of us. Except
as permitted by the Indenture and the Security Agreements, we and R&B Falcon
shall not, and shall not permit any Restricted Subsidiary to, grant to any
Person other than the Trustee, for the benefit of the Trustee and the Holders of
the notes, any interest whatsoever in any of the Collateral.
Limitation on Activities. We will not engage in any business activity or
undertake any activity, except any activity (i) relating to the offering, sale
or issuance of the notes or the lending of the proceeds of the sale of notes to
R&B Falcon pursuant to the Loans, or (ii) undertaken with the purpose of, and
directly related to, exercising our rights under, and fulfilling our obligations
or the obligations of R&B Falcon or the Restricted Subsidiaries under, the
notes, the Indenture, the Loans and the Security Agreements. The
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Indenture provides that we are a limited purpose entity with corporate
organizational documents containing limitations on our business activities, the
requirement of an independent director on our Board of Directors, and a
restriction on our ability to commence a voluntary case or proceeding under any
applicable bankruptcy or insolvency laws without the prior unanimous affirmative
vote of all of our directors. The Indenture also provides that we will not (i)
incur any Indebtedness other than the notes or Subordinated Obligations owing to
R&B Falcon or (ii) enter into any derivative product transactions.
DEFAULTS
An Event of Default is defined in the Indenture as
(i) a default in the payment of interest (including Special Interest
and Additional Amounts, if any) on the notes or an Loan when due, continued
for 30 days,
(ii) (a) a default in the payment of principal of, or premium, if any,
on any note or Loan when due at its Stated Maturity, upon redemption,
required repurchase, declaration of acceleration or otherwise or
(b) the failure to redeem or purchase notes or the Loans when required
pursuant to the Indenture or the Loan Agreements,
(iii) the failure by R&B Falcon to comply with its obligations under
"-- Covenants -- Limitation on Mergers and Consolidations,"
"-- Redemptions -- Redemption upon Loss of a Mortgaged Rig," and
"-- Redemptions -- Redemption upon Sale of a Mortgaged Rig" or in the
covenants described above under "-- Change of Control" or
"-- Covenants -- Limitation on Asset Sales."
(iv) the failure by us, R&B Falcon and the Subsidiary Guarantors to
comply with its other agreements contained in the Indenture or in the
Security Agreements, or the occurrence of an event of default under a
Mortgage, and such failure or event of default continues for 60 days after
notice,
(v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness by R&B Falcon or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by R&B Falcon or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default unless being contested in good
faith by appropriate proceedings (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been
a Payment Default or the maturity of which has been so accelerated,
aggregates $20.0 million or more;
(vi) failure by R&B Falcon or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $20.0 million, which judgments
are not paid, discharged or stayed for a period of 30 days;
(vii) certain events of bankruptcy or insolvency with respect to us,
R&B Falcon or any of R&B Falcon's Significant Subsidiaries or group of
Restricted Subsidiaries that, taken together (as of the latest audited
consolidated financial statements for R&B Falcon and its Subsidiaries),
would constitute a Significant Subsidiary;
(viii) the Guarantee or any Subsidiary Guarantee ceases to be in full
force and effect (other than in accordance with the terms of the Indenture
and such Subsidiary Guarantee) or R&B Falcon or a Subsidiary Guarantor
denies or disaffirms its obligations under the Guarantee or its Subsidiary
Guarantee, as applicable, or
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(ix) the Liens under the Security Agreements shall, at any time, cease
to be in full force and effect for any reason (other than by operation of
the provisions of the Indenture and the Security Agreements) other than the
satisfaction in full of all obligations under the Indenture and discharge
of the Indenture, or any Lien created under the Security Agreements shall
be declared invalid or unenforceable or we, R&B Falcon or any Subsidiary
Guarantor shall assert, in any pleading in any court of competent
jurisdiction, that any such Lien is invalid or unenforceable.
However, a default under clause (v) will not constitute an Event of Default
until the Trustee provides a written notice to us, or the Holders of 25% in
aggregate principal amount of the outstanding notes provide a written notice to
us and the Trustee, of the default and we do not cure such default within the
time specified after receipt of such notice.
If an Event of Default occurs and is continuing with respect to the
Indenture (other than certain events of bankruptcy, insolvency or
reorganization), the Trustee or the Holders of not less than 25% in principal
amount of the notes outstanding may declare the principal of and premium, if
any, and accrued but unpaid interest (including Additional Amounts and Special
Interest, if any) on all the notes to be due and payable. Upon such a
declaration, such principal, premium, if any, and interest (including Additional
Amounts and Special Interest, if any) will be due and payable immediately.
If an Event of Default relating to certain events of bankruptcy, insolvency
or reorganization occurs and is continuing, the principal of and premium, if
any, and interest (including Additional Amounts and Special Interest, if any) on
the notes will become and be immediately due and payable without any declaration
or other act on the part of the Trustee or any Holders of the notes.
The amount due and payable on the acceleration of any note will be equal to
100% of the principal amount of such note, plus accrued and unpaid interest
(including Additional Amounts and Special interest, if any) to the date of
payment.
Under limited circumstances, the Holders of a majority in principal amount
of the outstanding notes may rescind any such acceleration with respect to the
notes and its consequences.
No Holder of a note of any series may pursue any remedy under the Indenture
unless
- the Trustee shall have received written notice of a continuing Event of
Default,
- the Trustee shall have received a request from Holders of at least 25% in
principal amount of such series of notes to pursue such remedy,
- the Trustee shall have been offered indemnity reasonably satisfactory to
it and
- the Trustee shall have failed to act for a period of 60 days after
receipt of such notice and offer of indemnity; however, such provision
does not affect the right of a Holder of a note to sue for enforcement of
any overdue payment.
The Holders of a majority in aggregate principal amount of the outstanding
notes are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. These rights are subject to restrictions. The
Trustee, however, may refuse to follow any direction that conflicts with law or
the Indenture or that the Trustee determines is unduly prejudicial to the rights
of any other Holder of a note or that would involve the Trustee in personal
liability. Subject to the provisions of the Indenture relating to the duties of
the Trustee in case an Event of Default occurs and is continuing, the Trustee
will be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders of the notes unless
such Holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder of the notes notice
of the Default within 90 days after it occurs. Except in the case of a Default
in the payment of principal of or interest on any note, the Trustee may withhold
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notice if and so long as a committee of its trust officers determines that
withholding notice is not opposed to the interest of the Holders of the notes.
In addition, we and R&B Falcon are each required to deliver to the Trustee,
within 120 days after the end of each fiscal year, a certificate indicating
whether the officers signing the certificate know of any Default that occurred
during the previous year. We and R&B Falcon are each also required to deliver to
the Trustee, within 5 Business Days after the occurrence thereof, written notice
of any event which would constitute a Default or an Event of Default, its status
and what action we and R&B Falcon are taking or proposes to take in respect of
the Default of Event of Default.
AMENDMENTS AND WAIVERS
We and R&B Falcon and the Trustee may amend the Indenture and the Security
Agreements with the consent of the Holders of a majority in aggregate principal
amount of the notes then outstanding (including consents obtained in connection
with a tender offer or exchange for the notes) and any past Default or Event of
Default or compliance with any provisions may also be waived with the consent of
the Holders of a majority in aggregate principal amount of the notes then
outstanding. However, without the consent of each Holder of a then outstanding
note that would be affected by the amendment, no amendment may (1) reduce the
amount of notes whose Holders must consent to an amendment, (2) reduce the rate
of or extend the time for payment of interest on any note or any Loan, (3)
reduce the principal of or extend the Stated Maturity of any note or any Loan,
(4) modify our obligations to make mandatory redemptions or otherwise reduce the
premium payable upon the redemption of any note or change the time at which any
note may be or is required to be redeemed as described under "-- Redemptions"
above, (5) modify the obligations of R&B Falcon to make mandatory repayments or
change the time at which an Loan may be or is required to be repaid under
"-- Redemptions" above, (6) make any note payable in money other than that
stated in the note, (7) impair the right of any Holder of the notes to receive
payment of principal of and interest on such Holder's notes on or after the due
dates or to institute suit for the enforcement of any payment on or with respect
to such Holder's notes, (8) make any change in the amendment provisions which
require each Holder's consent or in the waiver provisions, (9) make any change
in the Guarantee or any Security Agreement or Loan Agreement that would
adversely affect the Holders or terminate the Lien of the Indenture or any
Security Agreement on any property at any time subject to that Lien or deprive
the Holders of the security afforded by the Lien of the Indenture or the
Security Agreements or us of the Liens securing the Loans.
Without the consent of any Holder of the notes, we, R&B Falcon and the
Trustee may amend the Indenture and the Security Agreements to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption by a
successor corporation of the obligations of R&B Falcon under the Indenture, the
Loan Agreements, and the Security Agreements, to provide for uncertificated
notes in addition to or in place of certificated notes (provided that the
uncertificated notes are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated notes are
described in Section 163(f)(2)(B) of the Code), to add additional guarantees
with respect to the notes, to provide additional security for the notes, to add
to our covenants and the covenants of R&B Falcon for the benefit of the Holders
of the notes or to surrender any right or power conferred upon us or R&B Falcon,
to make any change that does not adversely affect the rights of any Holder of
the notes or to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the Trust Indenture Act.
The consent of the Holders of the notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture or the Security Agreements becomes
effective, we are required to mail to Holders of the notes a notice briefly
describing such amendment. However, the failure to give such notice to all
Holders of the notes, or any defect therein, will not impair or affect the
validity of the amendment.
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ABILITY TO REALIZE ON COLLATERAL
The proceeds of any sale of the Collateral in whole pursuant to the
Indenture, the Loan Agreements and the Security Agreements following an Event of
Default under the Indenture may not provide sufficient funds to permit us to
make payments due on the notes. In addition, the ability of the Holders of the
notes to realize upon the Collateral may be limited in the event of a bankruptcy
or insolvency or pursuant to applicable laws, including securities laws.
If an Event of Default occurs and is continuing and the Loans and the notes
become payable in full, the Trustee, on behalf of the Holders of the notes, in
addition to any other rights or remedies available to it under the Indenture and
the Security Agreements, may take such action as it deems advisable to protect
and enforce its rights in the Collateral, including the institution of sale or
foreclosure proceedings. The proceeds received by the Trustee from any such sale
or foreclosure will be applied by the Trustee first to pay the expenses of such
sale or foreclosure and fees and other amounts then payable to the Trustee under
the Indenture, and thereafter to pay amounts due and payable with respect to the
notes.
The right of the Trustee and our right to repossess and dispose of the
Collateral, upon acceleration of the notes or the Loans is likely to be
significantly impaired by applicable bankruptcy or insolvency law if a
bankruptcy or insolvency proceeding were to be commenced by or against us, R&B
Falcon or any Subsidiary Guarantor prior to or possibly even after the Trustee
has repossessed and disposed of the Collateral. Under the United States
Bankruptcy Code, a secured creditor such as the Trustee is prohibited from
repossessing its security from a debtor in a bankruptcy case, or from disposing
of security repossessed from the debtor, without bankruptcy court approval.
Moreover, applicable U.S. bankruptcy law generally permits the debtor to
continue to retain and to use collateral (and the proceeds, products, offspring,
rents or profits of the collateral) even though the debtor is in default under
the applicable debt instruments, provided generally that the secured creditor is
given "adequate protection." The meaning of the term "adequate protection" may
vary according to circumstances, but it is intended in general to protect the
value of the secured creditor's interest in the collateral and may include, if
approved by the court, cash payments or the granting of additional or
replacement security for any diminution in the value of the collateral as a
result of the stay of repossession or disposition or any use of the collateral
by the debtor during the pendency of the bankruptcy case. In view of the lack of
a precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, it is impossible to predict how long
payments under the notes, the Loan Agreements, the Guarantee or any Subsidiary
Guarantees could be delayed following commencement of a bankruptcy case, whether
or when the Trustee would repossess or dispose of the Collateral or whether or
to what extent holders of the notes would be compensated for any delay in
payment or loss of value of the Collateral through the requirements of "adequate
protection." Furthermore, in the event that the bankruptcy court determines that
the value of the Collateral is not sufficient to repay all amounts due on the
Loans or the notes, we or Holders of the notes, as applicable, would have
"undersecured claims." Applicable U.S. bankruptcy laws do not permit the payment
or accrual of interest, costs and attorneys' fees for "undersecured claims"
during the debtor's bankruptcy case.
TRANSFER
The outstanding notes were, and the exchange notes will be, issued in
registered form and will be transferable (subject to applicable federal and
state securities laws) only upon the surrender of the notes being transferred
for registration of transfer. We may require payment of a sum sufficient to
cover any tax, assessment or other governmental charge payable in connection
with transfers and exchanges. The notes may not at any time, including after the
exchange offer, be transferred to, or held by, Persons other than Qualified
Institutional Buyers or Institutional Accredited Investors. See "Transfer
Restrictions."
DEFEASANCE
We may at any time terminate all of our obligations under the notes, the
Indenture and the Security Agreements ("legal defeasance"), except for certain
obligations, including those respecting the defeasance
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trust and obligations, to register the transfer or exchange of the notes, to
replace mutilated, destroyed, lost or stolen notes and to maintain a registrar
and paying agent in respect of the notes and except for our optional redemption
rights. We may at any time terminate our mandatory redemption and repurchase
obligations under "-- Redemptions," "-- Change of Control" and under the
covenants described under "-- Covenants" (other than the covenant described
under "-- Limitation on Mergers and Consolidations"), the operation of the cross
acceleration provision, the bankruptcy provisions with respect to Significant
Subsidiaries and the judgment default provision described under "-- Defaults"
above and the limitations contained in clause (3) of the first paragraph under,
and the second paragraph under, "-- Covenants -- Limitation on Mergers and
Consolidations" above ("covenant defeasance").
We may exercise our legal defeasance option notwithstanding our prior
exercise of our covenant defeasance option. If we exercise our legal defeasance
option, payment of the notes may not be accelerated because of an Event of
Default with respect thereto. If we exercise our covenant defeasance option,
payment of the Notes may not be accelerated because of an Event of Default
specified in clause (iii) (other than the covenant described under
"-- Limitation on Mergers and Consolidations") or (v) under "-- Defaults" above
or because of the failure of R&B Falcon to comply with clause (3) of the first
paragraph under, and the second paragraph under, "-- Covenants -- Limitation on
Mergers and Consolidations" above. If we exercise our legal defeasance option,
R&B Falcon and each Subsidiary Guarantor will be released from all its
obligations with respect to the Guarantee, the Subsidiary Guarantees and the
Security Agreements, as applicable.
In order to exercise either defeasance option, we must irrevocably deposit
in trust (the "defeasance trust") with the Trustee money or U.S. Government
Obligations for the payment of principal, premium, if any, and interest
(including Additional Amounts and Special Interest, if any) on the notes to
redemption or maturity, as the case may be, and must comply with other
conditions, including delivery to the Trustee of an opinion of counsel to the
effect that Holders of the notes will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance and will
be subject to federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable federal income tax law).
CONCERNING THE TRUSTEE
United States Trust Company of New York is the Trustee under the Indenture,
the Escrow Agent under the Escrow Agreements and the Collateral Agent under
certain other Security Agreements, and has been appointed by us as Registrar and
Paying Agent with regard to the notes.
The Holders of a majority in aggregate principal amount of the outstanding
notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent Person in the conduct of its own affairs.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any Holder of
notes, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense and then
only to the extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that the Indenture, the notes, the Loan Agreements
and each of the Security Agreements, other than the Mortgages, are governed by,
and construed in accordance with, the laws of the State of New York without
giving effect to applicable principles of conflicts of law, except to the extent
that the application of the law of another jurisdiction would be required
thereby.
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CONSENT TO JURISDICTION AND SERVICE
R&B Falcon has appointed CT Corporation System as its agent for actions
brought under federal or state securities laws brought in any federal or state
court located in the Borough of Manhattan in The City of New York and has
submitted to such jurisdiction under each of the Indenture and the Security
Agreements other than the Mortgages. Each of the Indenture and the Security
Agreements other than the Mortgages provides that each Subsidiary Guarantor will
appoint CT Corporation System as its agent for actions brought under federal or
state securities laws brought in any federal or state court located in the
Borough of Manhattan in The City of New York and will submit to such
jurisdiction.
DEFINITIONS
The following is a summary of some of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
these terms and for the definitions of other capitalized terms used in this
description of the notes and not defined below.
"Acquired Indebtedness" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other Person merging with or into, or becoming a
Subsidiary of such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by R&B Falcon or another Restricted Subsidiary or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; provided, however, that any such Restricted
Subsidiary described in clause (ii) or (iii) above is primarily engaged in a
Related Business.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date means the
amount by which the fair value of the assets and property of such Subsidiary
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under its Subsidiary Guarantee, of such Subsidiary Guarantor at such
date.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of Voting Stock, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing;
provided, however, that "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 5% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of such a Person or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable).
"Asset Sale" means any direct or indirect sale, capital lease, transfer or
other disposition (or series of related sales, capital leases, transfers or
dispositions) by R&B Falcon or any Restricted Subsidiary, including any
disposition by means of a merger, consolidation or similar transaction (each
referred to for the purposes of this definition as a "disposition") in one
transaction or a series of related transactions, of (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying shares or
shares required by applicable law to be held by a Person other than R&B Falcon
or a Restricted Subsidiary), (ii) any drillship or drilling rig or all or
substantially all the assets of any division or line of business of R&B Falcon
or any Restricted Subsidiary or (iii) any other assets of R&B Falcon or any
Restricted Subsidiary outside of the ordinary course of business of R&B Falcon
or such Restricted Subsidiary (other than, in the case of (i), (ii) and (iii)
above, (u) a disposition by a Restricted Subsidiary to R&B Falcon
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or by R&B Falcon or a Restricted Subsidiary to a Wholly Owned Restricted
Subsidiary, (v) for purposes of the covenant described under
"-- Covenants -- Limitation on Asset Sales" only, a disposition that constitutes
a Restricted Payment permitted by the covenant described under
"-- Covenants -- Limitation on Restricted Payments," (w) Asset Swaps permitted
under "-- Covenants -- Limitation on Asset Swaps," (x) dispositions of
Incidental Assets, (y) dispositions of Temporary Cash Investments and (z) a
disposition of assets with a fair market value of less than $100,000).
"Asset Swap" means a substantially concurrent purchase and sale, or
exchange, of assets constituting Additional Assets described in clause (i) of
the definition thereof between R&B Falcon or any Restricted Subsidiary and
another Person or group of Persons; provided, however, that the cash and other
assets to be received by R&B Falcon or such Restricted Subsidiary which do not
constitute Additional Assets do not constitute more than 25% of the total
consideration to be received by R&B Falcon or such Restricted Subsidiary in such
Asset Swap.
"Attributable Indebtedness," when used with respect to any Sale/Leaseback
Transaction, means, as at the time of determination, the present value
(discounted at the rate set forth or implicit in the terms of the lease included
in such transaction) of the total obligations of the lessee for rental payments
(other than amounts required to be paid on account of property taxes,
maintenance, repairs, insurance, assessments, utilities, operating and labor
costs and other items which do not constitute payments for property rights)
during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of a Person or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capitalized Lease Obligation" of any Person means any obligation of such
Person to pay rent or other amounts under a lease of property, real or personal,
that is required to be capitalized for financial reporting purposes in
accordance with generally accepted accounting principles and the amount of such
obligation shall be the capitalized amount thereof determined in accordance with
GAAP.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, rights to purchase, warrants or options (whether or not currently
exercisable), participations or other equivalents of or interests in (however
designated) the equity (which includes, but is not limited to, common stock,
preferred stock and partnership and joint venture interests) of such Person
(excluding any debt securities that are convertible into, or exchangeable for,
such equity).
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" shall include, in each case as pledged and assigned to the
Collateral Agent, the Trustee or us, as applicable, pursuant to the Security
Agreements, (1) all of the Loans and Loan Agreements (2) all cash held by the
Collateral Agent and the Trustee pursuant to the Indenture or the Security
Agreements and the Escrow Account and all Escrowed Property held pursuant to the
Escrow Agreement (including any cash collateral we deposit in the Escrow
Account); and (3) R&B Falcon's right, title and interest in and to (i) each of
its respective Mortgaged Rigs, pursuant to a Mortgage issued by R&B Falcon in
favor of us, which Mortgage contains covenants pursuant to which R&B Falcon,
among other things, will be prohibited from selling, mortgaging or transferring
any of its interest in such Mortgaged Rig (other than as permitted under the
Indenture), and which Mortgage will be collaterally assigned to the Trustee and
(ii) the R&B Falcon Escrow Account and the R&B Falcon Escrowed Property; and (4)
all
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proceeds of any of the foregoing including from all of R&B Falcon's policies and
contracts of insurance taken out from time to time in respect each of its
Mortgaged Rigs.
"Consolidated EBITDA Coverage Ratio" as of any date of determination means
the ratio of (a) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination to (b) Consolidated Interest Expense for such four
fiscal quarters; provided, however, that:
(1) if R&B Falcon or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding or
if the transaction giving rise to the need to calculate the Consolidated
EBITDA Coverage Ratio is an issuance of Indebtedness, or both, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been issued on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period,
(2) if since the beginning of such period R&B Falcon or any Restricted
Subsidiary shall have made any asset disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such asset
disposition for such period, or increased by an amount equal to the EBITDA
(if negative), directly attributable thereto for such period, and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of R&B Falcon or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to R&B Falcon
and its continuing Subsidiaries in connection with such asset dispositions
for such period (or, if the Capital Stock of any Restricted Subsidiary is
sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the
extent R&B Falcon and its continuing Subsidiaries are no longer liable for
such Indebtedness after such sale),
(3) if since the beginning of such period R&B Falcon or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring
in connection with a transaction causing a calculation to be made
hereunder, which constitutes all or substantially all of an operating unit
of a business (which shall include the acquisition or construction of a
vessel or drilling rig, provided R&B Falcon has paid 75% or more of the
cost thereof and such vessel or drilling rig is reasonably expected to be
delivered within 90 days), EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto
(including the issuance of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such period, and
(4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into R&B
Falcon or any Restricted Subsidiary since the beginning of such period)
shall have made any asset disposition or any Investment that would have
required an adjustment under clause (2) or (3) above if made by R&B Falcon
or a Restricted Subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such asset disposition or Investment occurred on the
first day of such period.
For purposes of this definition, whenever pro forma effect is to be given
to an acquisition of assets, the amount of income or earnings relating thereto,
and the amount of Consolidated Interest Expense associated with any Indebtedness
issued in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting officer of R&B Falcon. If
any Indebtedness bears a floating rate of interest and is being give pro forma
effect, the interest of such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the
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applicable rate for the entire period (taking into account any Interest Rate
Protection Agreement applicable to such Indebtedness if such Interest Rate
Protection Agreement has a remaining term in excess of 12 months).
For purposes of this definition, in the case of the acquisition since the
beginning of such period of a drilling rig or drillship (or of a Restricted
Subsidiary owning same) by R&B Falcon or by a Restricted Subsidiary pursuant to
a binding purchase agreement or the delivery since the beginning of such period
of a drilling rig or drillship to R&B Falcon or a Restricted Subsidiary pursuant
to a binding construction contract, which drilling rig or drillship has been
subject for at least one full fiscal quarter to a binding drilling contract
constituting a Qualifying Contract, then, for purposes of making the pro forma
calculations provided for in the first sentence of the preceding paragraph, the
financial or accounting officer of R&B Falcon shall give pro forma effect to the
earnings (losses) of such drilling rig or drillship as if such drilling rig or
drillship were acquired on the first day of such period, by basing such earnings
(losses) on the annualized (x) historical revenues actually earned from such
Qualifying Contract and (y) actual expenses related thereto, in each case for
each quarter during such period in which the Qualifying Contract is in effect.
"Consolidated Interest Expense" means, for any period, the total interest
expense of R&B Falcon and its consolidated Restricted Subsidiaries, plus, to the
extent not included in such interest expense:
(1) interest expense attributable to Capitalized Lease Obligations,
(2) amortization of debt discount and debt issuance cost,
(3) capitalized interest,
(4) non-cash interest payments,
(5) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(6) net costs under Interest Rate Protection Agreements (including
amortization of fees),
(7) dividends in respect of any Redeemable Stock held by Persons other
than R&B Falcon or a Restricted Subsidiary,
(8) interest expense attributable to deferred payment obligations, and
(9) interest expense on Indebtedness of another person to the extent
that such Indebtedness is guaranteed by R&B Falcon or a Restricted
Subsidiary.
"Consolidated Net Income" means, for any period, the net income of R&B
Falcon and its consolidated subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:
(a) any net income of any Person if such Person is not a Restricted
Subsidiary, except that (1) R&B Falcon's equity in the net income of any
such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to R&B Falcon or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in
clause (c) below) and (2) R&B Falcon's equity in a net loss of any such
Person for such period shall be included in determining such Consolidated
Net Income;
(b) any net income of any Person acquired by R&B Falcon or a
Restricted Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition;
(c) any net income of any Restricted Subsidiary to the extent such
Restricted Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to R&B Falcon, except that
(1) the net income of Cliffs Drilling Company shall be included
notwithstanding the foregoing, (2) the net
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income of a Restricted Subsidiary shall be included to the extent such net
income could be paid to R&B Falcon or a Restricted Subsidiary by loans,
advances, intercompany transfers, principal repayments or otherwise; (3)
R&B Falcon's equity in the net income of any such Restricted Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Restricted Subsidiary
during such period to R&B Falcon or another Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to another Restricted Subsidiary, to the limitation contained
in this clause) and (4) R&B Falcon's equity in a net loss of any such
Restricted Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(d) any gain (but not loss) realized upon the sale or other
disposition of any property, plant or equipment of R&B Falcon or its
consolidated subsidiaries (including pursuant to any sale-and-leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary
course of business and any gain (but not loss) realized upon the sale or
other disposition of any Capital Stock of any Person;
(e) extraordinary, unusual or nonrecurring charges;
(f) charges relating to the extinguishment of debt obligations of R&B
Falcon Holdings Inc.; and
(g) the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" of a Person means the consolidated stockholders'
equity of such Person and its Subsidiaries, as determined in accordance with
GAAP.
"Credit Facilities" means, with respect to R&B Falcon or any Restricted
Subsidiary, one or more debt facilities or commercial paper facilities, in each
case with banks or other institutional lenders providing for revolving credit
loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"Default" means any act, event or condition which is, or after notice or
passage of time or both would be, an Event of Default.
"EBITDA" for any period means the Consolidated Net Income for such period,
plus the following (but without duplication) to the extent deducted in
calculating such Consolidated Net Income for such period: (a) income tax
expense, (b) Consolidated Interest Expense, (c) depreciation expense and (d)
amortization expense.
"Event of Loss" is defined to mean any of the following events: (a) the
actual or constructive total loss of a Mortgaged Rig or the agreed or
compromised total loss of a Mortgaged Rig, (b) the destruction of a Mortgaged
Rig, (c) damage to a Mortgaged Rig to an extent, determined in good faith by R&B
Falcon within 90 days after the occurrence of such damage (and evidenced by an
officers' certificate to such effect delivered to the Trustee, within such
90-day period), as shall make repair thereof uneconomical or shall render such
Mortgaged Rig permanently unfit for normal use (other than obsolescence) or (d)
the condemnation, confiscation, requisition, seizure, forfeiture or other taking
of title to or use of a Mortgaged Rig that shall not be revoked within six
months. An Event of Loss shall be deemed to have occurred: (i) in the event of
the destruction or other actual total loss of a Mortgaged Rig, on the date of
such loss; (ii) in the event of a constructive, agreed or compromised total loss
of a Mortgaged Rig, on the date of the determination of such total loss pursuant
to the relevant insurance policy; (iii) in the case of any event referred to in
clause (c) above, upon the delivery of the officers' certificate to the Trustee;
or (iv) in the case of any event referred to in clause (d) above, on the date
six months after the occurrence of such event.
"Event of Loss Proceeds" means all compensation, damages and other payments
(including insurance proceeds) received by us, R&B Falcon, any Restricted
Subsidiary, the Collateral Agent, or the Trustee,
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jointly or severally, from any Person, including any governmental authority,
with respect to or in connection with an Event of Loss.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchangeable Stock" means any Capital Stock which is exchangeable or
convertible into another security (other than Capital Stock of R&B Falcon which
is neither Exchangeable Stock nor Redeemable Stock).
"GAAP" means generally accepted accounting principles in the United States
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, as in effect from time to time.
"guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term
"guarantee"used as a verb has a corresponding meaning. The term "guarantor"
shall mean any Person guaranteeing any obligation.
"Hedging Obligations" of any Person means the net obligation (not the
notional amount) of such Person pursuant to any interest rate swap agreement,
foreign currency exchange agreement, interest rate collar agreement, option or
futures contract or other similar agreement or arrangement relating to interest
rates or foreign exchange rates.
"Holder" or "Noteholder" means the Person in whose name a note is
registered on the Registrar's books.
"Incidental Asset" is defined to mean any equipment, outfit, furniture,
furnishings, appliances, spare or replacement parts or stores owned by R&B
Falcon or a Restricted Subsidiary that have become obsolete or unfit for use or
no longer useful, necessary or profitable in the conduct of the business of R&B
Falcon or such Restricted Subsidiary, as the case may be. In no event shall the
term "Incidental Asset" include a drilling rig or a drillship or a Mortgaged
Rig.
"Incur" means issue, assume, guarantee, incur or otherwise become liable
for, provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning.
"Indebtedness" of any Person at any date means, without duplication:
(1) all indebtedness of such Person for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof),
(2) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments,
(3) all obligations of such Person in respect of letters of credit or
other similar instruments (or reimbursement obligations with respect
thereto), other than standby letters of credit and performance bonds issued
by such Person in the ordinary course of business, to the extent not drawn
or, to the
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extent drawn, if such drawing is reimbursed not later than the third
Business Day following demand for reimbursement,
(4) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, except trade payables and accrued
expenses incurred in the ordinary course of business,
(5) all Capitalized Lease Obligations of such Person,
(6) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, to the
extent of the fair market value of all the assets of such Person subject to
such Lien,
(7) all Indebtedness of others guaranteed by such Person to the extent
of such guarantee,
(8) Redeemable Stock, and
(9) all Hedging Obligations of such Person.
For purposes of clause (8) of the preceding sentence, Redeemable Stock
shall be valued at the maximum fixed redemption, repayment or repurchase price,
which shall be calculated in accordance with the terms of such Redeemable Stock
as if such Redeemable Stock were repurchased on any date on which Indebtedness
shall be required to be determined under the Indenture; provided, however, that
if such Redeemable Stock is not then permitted to be redeemed, repaid or
repurchased, the redemption, repayment or repurchase price shall be the book
value of such Redeemable Stock. The amount of Indebtedness of any Person at any
date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability of any guarantees at
such date; provided that for purposes of calculating the amount of any
non-interest bearing or other discount security, such Indebtedness shall be
deemed to be the principal amount thereof that would be shown on the balance
sheet of the issuer thereof dated such date prepared in accordance with GAAP but
that such security shall be deemed to have been Incurred only on the date of the
original issuance thereof. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at such
date.
"Interest Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect R&B Falcon or any Restricted Subsidiary against
fluctuations in interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under the "Limitation on Restricted Payments" covenant (i)
"Investment" shall include the portion (proportionate to R&B Falcon's equity
interest in such Subsidiary) of the fair market value of the net assets of any
Subsidiary of R&B Falcon at the time that such Subsidiary is designated an
Unrestricted Subsidiary, provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, R&B Falcon shall be deemed to continue to
have a permanent "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to R&B Falcon's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by R&B
Falcon's Board of Directors.
"Investment Grade Rating" means BBB- or above, in the case of S&P (or its
equivalent under any successor rating categories of S&P), Baa3 or above, in the
case of Moody's (or its equivalent under any
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successor rating categories of Moody's), and the equivalent in respect of the
ratings categories of any Rating Agencies substituted for S&P or Moody's.
"Issue Date" means the date on which the outstanding notes were originally
issued.
"Lien" means any mortgage, pledge, hypothecation, charge, assignment,
deposit arrangement, encumbrance, security interest, lien (statutory or other),
or preference, priority or other security or similar agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
agreement to give or grant a Lien or any lease, condition sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing). For the purposes of this Indenture, R&B Falcon or any of its
Subsidiaries shall be deemed to own subject to a Lien any asset which R&B Falcon
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, Capitalized Lease Obligation or other title
retention agreement relating to such asset.
"Loss Excess Proceeds" is defined to mean the total of (i) amounts treated
as Loss Excess Proceeds under "-- Redemptions -- Redemption Upon Loss of a
Mortgaged Rig" and (ii) the amount by which the Net Event of Loss Proceeds
received by R&B Falcon or any of its Restricted Subsidiaries from one or more
Events of Loss with respect to drilling rigs or drillships other than Mortgaged
Rigs occurring on or after the Issue Date in the most recent period of 12
consecutive months exceeds $10.0 million, less (in the case of clause (ii)) the
amount of such excess Net Event of Loss Proceeds (A) used to repay Senior
Indebtedness of R&B Falcon or secured Senior Indebtedness of a Subsidiary
Guarantor then owning a Mortgaged Rig, in each case, with a permanent reduction
of availability in the case of revolving credit borrowings and owing to a Person
other than R&B Falcon or any of its Subsidiaries, or (B) invested in Additional
Assets (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board resolution).
"Moody's" is defined to mean Moody's Investor Service, Inc. and its
successors.
"Net Available Cash" from an Asset Sale means cash payments or Temporary
Cash Equivalents received from the Asset Sale (including any cash payments
received by way of deferred payment of principal under a note or installment
receivable or otherwise and proceeds from the sale or other disposition of any
securities received as consideration, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring Person of Indebtedness or other obligations relating to such
properties or assets or received in any other noncash form), in each case net of
(i) all legal, title and recording tax expenses, commissions and other fees and
expenses incurred, and all federal, state, provincial, foreign and local taxes
required to be accrued as a liability under GAAP, as a consequence of such Asset
Sale, (ii) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Sale, in accordance with the terms of any Lien upon or
other security agreement of any kind with respect to such assets, or which must
by its terms, or in order to obtain a necessary consent to such Asset Sale, or
by applicable law, be repaid out of the proceeds from such Asset Sale, (iii) all
distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Sale and
(iv) the deduction of appropriate amounts provided by the seller as a reserve,
in accordance with GAAP, against any liabilities associated with the property or
other assets disposed in such Asset Sale and retained by R&B Falcon or any
Restricted Subsidiary after such Asset Sale.
"Net Cash Proceeds" means, with respect to any issuance or sale of Capital
Stock, the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Net Event of Loss Proceeds" is defined to mean, with respect to any Event
of Loss, the Event of Loss Proceeds from such Event of Loss net of related fees
and expenses, distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Event of
Loss, and payments made to repay Indebtedness or any other obligation
outstanding at the time of such Event of Loss; provided, however, that such
Indebtedness or other obligation is either (A) secured by a
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Lien on the property or assets that suffered the Event of Loss or (B) required
to be paid as a result of such Event of Loss.
"Non-Convertible Capital Stock" means, with respect to any Person, any
non-convertible Capital Stock of such Person and any Capital Stock of such
Person convertible solely into non-convertible common stock of such Person;
provided, however, that Non-Convertible Capital Stock shall not include any
Redeemable Stock or Exchangeable Stock.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of an Unrestricted Subsidiary as to which neither R&B Falcon or any
Restricted Subsidiary:
(1) provides credit support including any undertaking, agreement or
instrument which would constitute Indebtedness; or
(2) is directly or indirectly liable for such Indebtedness.
"Pari Passu Indebtedness" means any Indebtedness of R&B Falcon, whether
outstanding on the date on which the outstanding notes were originally issued or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness the instrument creating or evidencing the same or pursuant to which
the same is outstanding expressly provides that such Indebtedness shall be
subordinated in right of payment to the Guarantee or the Loans, as applicable.
"Permitted Investments" means:
(a) certificates of deposit, bankers acceptances, time deposits,
Eurocurrency deposits and similar types of Investments routinely offered by
commercial banks with final maturities of one year or less issued by
commercial banks having capital and surplus in excess of $100 million;
(b) commercial paper issued by any corporation, if such commercial
paper has credit ratings of at least "A-1" by S&P and at least "P-1" by
Moody's;
(c) U.S. Government Obligations with a maturity of four years or less;
(d) repurchase obligations for instruments of the type described in
clause (c);
(e) shares of money market mutual or similar funds having assets in
excess of $100.0 million;
(f) payroll advances in the ordinary course of business;
(g) other advances and loans to officers and employees of R&B Falcon
or any Restricted Subsidiary, so long as the aggregate principal amount of
such advances and loans does not exceed $1.0 million at any one time
outstanding;
(h) Investments in any Person in the form of a capital contribution of
R&B Falcon's common stock;
(i) Investments made by R&B Falcon in its Restricted Subsidiaries (or
any Person that will be a Restricted Subsidiary as a result of such
Investment) or by a Restricted Subsidiary in R&B Falcon or in one or more
Restricted Subsidiaries (or any Person that will be a Restricted Subsidiary
as a result of such Investment);
(j) Investments in stock, obligations or securities received in
settlement of debts owing to R&B Falcon or any Restricted Subsidiary as a
result of bankruptcy or insolvency proceedings or upon the foreclosure,
perfection or enforcement of any Lien in favor of R&B Falcon or any
Restricted Subsidiary, in each case as to debt owing to R&B Falcon or any
Restricted Subsidiary that arose in the ordinary course of business of R&B
Falcon or any such Restricted Subsidiary;
(k) Investments made in exchange for Indebtedness permitted by
Sections (b)(4) and (b)(5) of the "Limitation of Indebtedness" covenant;
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(l) Investments in the capital stock of Navis ASA, a Norwegian
corporation, in exchange for cash and non-cash assets (the fair market
value of which shall be determined in good faith by the Board of Directors
of R&B Falcon), in an aggregate amount not to exceed $50 million at any
time outstanding;
(m) Investments consisting of the redesignation of the Subsidiary
owning or operating the drillship Deepwater Frontier or the semisubmersible
RBS8M as an Unrestricted Subsidiary, or the contribution, transfer or other
disposition of the drillship Deepwater Frontier or the semisubmersible
RBS8M and related equipment and assets (including any drilling contract) by
R&B Falcon or any Restricted Subsidiary to a Person other than a Restricted
Subsidiary, in connection with the refinancing of the Indebtedness Incurred
to finance the construction of such rigs;
(n) Investments in a Person other than a Restricted Subsidiary for the
purpose of financing the construction or upgrade prior to delivery of the
drillship Deepwater Frontier or the semisubmersible RBS8M pursuant to the
terms of applicable construction and equipment installation agreements;
(o) Investments in a Person other than a Restricted Subsidiary for the
purpose of financing the construction or upgrade of new drilling rigs,
drillships or similar vessels and related equipment, in an aggregate amount
not to exceed at any time outstanding (i) $100 million less (ii) the
aggregate amount of all payments actually made under paragraph (n) of this
definition that represent payments for amounts in excess of R&B Falcon's
estimated costs for the vessels referred to therein, as in effect on the
Issue Date; provided, however, that at the time of such Investment, R&B
Falcon or such Person has entered into a Qualifying Contract with respect
thereto;
(p) Investments represented by that portion of the proceeds from Asset
Sales that is not required to be cash or Temporary Cash Equivalents by the
covenant described in "-- Covenants -- Limitation on Asset Sales;" and
(q) Investments in Devco in an aggregate amount not to exceed $10.0
million at any time outstanding.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"Qualifying Contract" with respect to a drilling rig, drillship or similar
vessel means a contract for the use thereof (i) between R&B Falcon or a
Restricted Subsidiary or, for the purposes of clause (o) of the definition of
"Permitted Investments," a Person other than a Restricted Subsidiary and a
counterparty that, as certified in an officers' certificate delivered to the
Trustee in connection therewith, is either generally recognized in the offshore
drilling industry as a major oil company or has an investment grade rating on
its long-term debt from Moody's or S&P, (ii) having a minimum term of two years
and (iii) containing a minimum dayrate for such drilling, rig, drillship or
similar vessel.
"Rating Agencies" means (a) S&P and Moody's or (b) if S&P or Moody's or
both of them are not making ratings of the notes publicly available, a
nationally recognized U.S. rating agency or agencies, as the cases may be,
selected by R&B Falcon, which will be substituted for S&P or Moody's or both, as
the case may be.
"Redeemable Stock" means, with respect to any series of notes, any Capital
Stock that, by its terms (or by the terms of any security into which it is
convertible, or for which it is exchangeable, in each case at the option of the
holder thereof), or upon the happening of any event, matures or is mandatorily
redeemable, under a sinking fund obligation or otherwise, or redeemable at the
option of the holder
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thereof, in whole or in part, on or prior to the date on which the notes of such
series mature. Notwithstanding the preceding sentence, any Capital Stock that
would constitute Redeemable Stock solely because the holders thereof have the
right to require R&B Falcon to repurchase such Capital Stock upon the occurrence
of a change of control or an asset sale shall not constitute Redeemable Stock if
the terms of such Capital Stock provide that R&B Falcon may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenants described above under the caption
"-- Change of Control," "-- Covenants -- Limitation on Asset Sales,"
"Redemptions" and "-- Covenants -- Limitation on Restricted Payments."
"Related Business" means any business related, ancillary or complementary
to the businesses of R&B Falcon and the Restricted Subsidiaries on the Issue
Date.
"Restricted Subsidiary" means any Subsidiaries other than an Unrestricted
Subsidiary.
"S&P" is defined to mean Standard & Poors Ratings Group, a division of
McGraw-Hill Companies, Inc. and its successors.
"Sale Excess Proceeds" means (i) all amounts treated as Sale Excess
Proceeds under "-- Redemptions -- Redemption upon Sale of a Mortgaged Vessel"
and (ii) all amounts treated as Sale Excess Proceeds under paragraph (b) of
"-- Certain Covenants -- Limitation on Asset Sales."
"Sale/Leaseback Transaction" means any arrangement with any Person
providing for the leasing by R&B Falcon or any of its Restricted Subsidiaries,
for a period of more than three years, of any real or tangible personal
property, which property has been or is to be sold or transferred by R&B Falcon
or such Restricted Subsidiary to such Person in contemplation of such leasing.
"Security Agreements" has the meaning specified in the Indenture and
includes the Escrow Agreement, the Security Agreement among us, the Trustee and
United States Trust Company of New York, as Collateral Agent, the Mortgages, the
Escrow Agreement among us, the Trustee and the Escrow Agent, and the R&B Falcon
Escrow Agreement among R&B Falcon, the Trustee and the Escrow Agent.
"Senior Indebtedness" of any Person means (i) Indebtedness of such Person,
whether outstanding on the Issue Date or thereafter Incurred, and (ii) accrued
and unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to R&B Falcon to the
extent post-filing interest is allowed in such proceeding) in respect of (A)
indebtedness for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable unless, in the case of (i) and (ii), in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are subordinate in right of
payment to the notes, the Guarantee, the Loans or the Subsidiary Guarantees, as
applicable; provided, however, that Senior Indebtedness shall not include (1)
any obligation of such Person to any Subsidiary of such Person, (2) any
liability for federal, state, local, foreign or other taxes owed or owing by
such Person, (3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities), (4) any Indebtedness of such Person
(and any accrued and unpaid interest in respect thereof) which is subordinate or
junior in any respect to any other Indebtedness or other obligation of such
Person or (5) that portion of any Indebtedness which at the time of Incurrence
is Incurred in violation of the Indenture.
"Significant Subsidiary" means any Subsidiary Guarantor and any other
Restricted Subsidiary that would be a "Significant Subsidiary" of R&B Falcon
within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including under any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
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"Subordinated Obligation" means any Indebtedness of us, R&B Falcon or a
Subsidiary Guarantor, as the case may be (whether outstanding on the Issue Date
or thereafter Incurred) which is subordinate or junior in right of payment to
the notes, the Guarantee, the Loans or the Subsidiary Guarantee, as applicable,
whether pursuant to a written agreement to that effect or by operation of law.
"Subsidiary" means, with respect to any Person:
(1) any corporation of which more than 50% of the total voting power
of all classes of the capital stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors is
owned by such Person directly or through one or more other Subsidiaries of
such Person, and
(2) any entity other than a corporation of which at least a majority
of the capital stock or other equity interest (however designated) entitled
(without regard to the occurrence of any contingency) or vote in the
election of the governing body, partners, managers or others that will
control the management of such entity is owned by such Person directly or
through one or more other Subsidiaries of such Person.
"Subsidiary Guarantor" means each Subsidiary of R&B Falcon, whether now
owned or hereafter formed, which owns a Mortgaged Rig or which shall execute and
deliver a Subsidiary Guarantee.
"Subsidiary Guarantee" means a guarantee of our obligations with respect to
the notes issued by a Subsidiary of R&B Falcon.
"Tangible Property" means all land, buildings, machinery and equipment and
leasehold interests and improvements which would be reflected on a balance sheet
of R&B Falcon prepared in accordance with GAAP, excluding (a) all rights,
contracts and other intangible assets of any nature whatsoever and (b) all
inventories and other current assets.
"Temporary Cash Investments" means Investments described in clauses (a),
(b), (c) and (d) of the definition of "Permitted Investments."
"Unrestricted Subsidiary" means:
(a) any Subsidiary of R&B Falcon that at the time of determination
will be designated an Unrestricted subsidiary by the Board of Directors of
R&B Falcon as provided below and
(b) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors of R&B Falcon may designate any Subsidiary of R&B
Falcon as an Unrestricted Subsidiary so long as:
(1) it has no Indebtedness other than Non-Recourse Indebtedness;
provided, however, that notwithstanding any other provision of this
Indenture, a Subsidiary shall not fail to constitute an Unrestricted
Subsidiary by reason of (a) the guarantee by R&B Falcon or a Restricted
Subsidiary in connection with synthetic lease obligations Incurred to
finance the construction or upgrade of drilling rigs, drillships or similar
vessels; and (b) obligations of R&B Falcon or a Restricted Subsidiary
relating to Indebtedness of an Unrestricted Subsidiary if such Indebtedness
constituted a Permitted Investment or a Restricted Payment permitted by the
"Limitation on Restricted Payments" covenant at the time of its Incurrence
or at the time of designation of such Subsidiary as an Unrestricted
Subsidiary; and
(2) after giving effect thereto, such designation was permitted by the
"Limitation on Restricted Payments" covenant.
Any such designation by the Board of Directors of R&B Falcon shall be
evidenced to the Trustee by filing a resolution of the Board of Directors with
the Trustee giving effect to such designation. The Board of Directors of R&B
Falcon may designate any Unrestricted Subsidiary as a Restricted Subsidiary if,
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immediately after giving effect to such designation, (A) no Default or Event of
Default shall have occurred and be continuing and (B) R&B Falcon could incur
$1.00 of additional Indebtedness under paragraph (a) of the "Limitation on
Indebtedness" covenant.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares) is owned by R&B
Falcon or one or more Wholly Owned Restricted Subsidiaries.
DESCRIPTION OF SECURITY FOR THE NOTES
GENERAL
Our obligations under the notes are secured by a collateral assignment of
the ten loans we have made to R&B Falcon (the "Loans") and the security
documents securing those Loans. The Loans were initially secured by first
priority ship mortgages with respect to eight drilling rigs and assignments of
R&B Falcon's rights under the construction contracts for two other drilling rigs
and $100 million in an escrow account. One of these two drilling rigs, the
Deepwater Millennium, has been delivered since the date we issued the
outstanding notes, and the Loan relating to this drilling rig is now secured by
a first priority ship mortgage over this drilling rig. When R&B Falcon provided
the mortgage over this rig, we also released to R&B Falcon the $100 million that
had been held in escrow. When the remaining drilling rig, the Deepwater IV, is
completed, R&B Falcon will grant a first priority ship mortgage on that vessel
as security for the Loan relating to that rig. In addition, R&B Falcon has
guaranteed our obligations under the notes. In an Event of Default under the
notes, the Collateral Agent will be entitled to exercise rights and remedies
with respect to the Collateral.
THE LOANS
We have loaned the proceeds from the offerings of the notes to R&B Falcon
pursuant to ten separate Loans. Each Loan is secured by a security interest in a
different vessel. The Loans are not cross-collateralized, but they are
cross-defaulted. The Loans with respect to all of these vessels other than the
Deepwater IV are secured by a first priority ship mortgage over the applicable
drilling rig. The Loan with respect to the Deepwater IV, which is currently
under construction, is currently secured by a pledge by R&B Falcon of its rights
under the construction contract for this rig and a security interest in
equipment purchased by R&B Falcon for this rig. When this rigs is delivered, R&B
Falcon will grant a first priority ship mortgage to secure the Loan with respect
to this rig. When R&B Falcon grants a mortgage in our favor on the Deepwater IV,
we will increase the amount of the loan secured by this rig in exchange for a
reduction in the amounts of the Loans secured by some of the other Mortgaged
Rigs. The current amount of the Loans and the adjusted amounts of the Loans are
set forth in the table below.
Each Loan bears interest at a rate equal to the interest rate for the notes
plus 2 basis points per annum. Each Loan is evidenced by two promissory notes,
each in the aggregate principal amount of 50% of such Loan. One of such notes
will mature on March 15, 2006 and the other will mature on March 15, 2009. Each
Event of Default under the Indenture will constitute an event of default under
each loan agreement relating to the Loans.
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The drilling rigs, their expected delivery dates, the amount of the Loan
secured by each drilling rig, and R&B Falcon's estimated asset reconstruction
cost for each of these rigs is listed in the table below. R&B Falcon has
estimated these asset reconstruction costs based upon its experience in the
offshore drilling industry. However, R&B Falcon has not obtained any fair market
appraisal of these drilling rigs, and the estimated values set forth below may
not be indicative of the true value of these rigs.
<TABLE>
<CAPTION>
ESTIMATED
EXPECTED CURRENT ADJUSTED ASSET
DELIVERY LOAN LOAN RECONSTRUCTION
DRILLING RIG DATE AMOUNT AMOUNT COST(1)
- ------------ ---------- ------- -------- --------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Deepwater Millennium............................... in service $209.9 $167.2 $270
Deepwater IV....................................... 3Q00 22.0 188.9 305
Peregrine IV....................................... 2Q99 166.0 136.3 270
Peregrine VII...................................... 3Q99 225.6 167.2 270
Falcon 100......................................... 2Q99 105.3 73.3 175
Peregrine I........................................ in service 16.0 16.0 240
Peregrine II....................................... in service 28.5 28.5 200
Harvey Ward........................................ in service 4.0 4.0 100
W.D. Kent.......................................... in service 11.9 11.9 100
Falrig 82.......................................... in service 10.8 6.7 65
</TABLE>
- ---------------
(1) This is R&B Falcon's estimate of the current cost of constructing a rig of
comparable capability (assuming completion of the rigs currently undergoing
upgrade or construction). It should not be considered an accurate estimate
of the fair market value of the rig.
THE MORTGAGES
General
R&B Falcon has granted a mortgage on each of the rigs listed above other
than the Deepwater IV in our favor to secure the payment of all sums of money
(whether for principal, premium, if any, interest, fees, expenses or otherwise)
from time to time payable by R&B Falcon under the applicable loan agreement
relating to each Loan. These mortgages have been recorded in accordance with the
provisions of Panamanian, Bahamian or United States law, as applicable. Until
the completion and flagging of the Deepwater IV, the loan agreement relating to
this vessel will be secured only by a collateral assignment of the construction
contract and the equipment purchased by R&B Falcon for the uncompleted rig. The
maximum liability of R&B Falcon under each mortgage is limited to R&B Falcon's
maximum liability under the applicable Loan.
Covenants
Each mortgage contains the following covenants.
Registration and Documentation of the Mortgaged Rig. R&B Falcon will not
permit the mortgaged rig to be operated in any manner contrary to law, will not
engage in an unlawful trade or business that would expose the mortgaged rig to
penalty, forfeiture or capture, and will not permit to be done anything which
can or may injuriously affect the registration or enrollment of the mortgaged
rig under the laws and regulations of the jurisdiction of its flag and will at
all times keep the mortgaged rig duly documented thereunder.
Restriction on Liens. Except for the lien of the mortgage and other
permitted liens, R&B Falcon will not suffer to be continued any lien,
encumbrance or charge on the mortgaged rig for longer than 30 days after the
same becomes due and payable and will pay or cause to be discharged or make
adequate provision for the satisfaction or discharge of all claims or demands,
or will cause the mortgaged rig to be released or discharged from any lien,
encumbrance or charge.
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Maintenance of the Mortgaged Rig. R&B Falcon will at all times and without
cost or expense to us, the Collateral Agent or the Trustee for the notes (the
"Trustee") maintain and preserve, or cause to be maintained and preserved, the
mortgaged rig (i) in good running order and repair, and (ii) in at least as good
condition as when originally delivered by its builder, ordinary wear and tear
excepted; and will keep the mortgaged rig, or cause it to be kept, in such
condition as will entitle it to the highest classification rating for rigs of
the same type, size, age and flag in the classification society, and annually
will furnish to the Trustee a certificate by such classification society that
such classification is maintained.
Transfer of Flag or Sale of the Mortgaged Rig. R&B Falcon will not transfer
or change the flag or port of documentation of the mortgaged rig, except to
Panama, The Bahamas, the United States or any jurisdiction which at the time is
generally deemed acceptable by institutional lenders to the marine drilling
industry, as determined in good faith by its Board of Directors, as permitted by
the terms of the Indenture. Except as permitted by the terms of the Indenture,
R&B Falcon will not sell, mortgage, charter or transfer the mortgaged rig.
Insurance. R&B Falcon will at all times and at its own cost and expense
cause to be carried and maintained in respect of the mortgaged rig insurance
payable in United States Dollars in amounts, against risks and in a form which
is substantially equivalent to the coverage carried by other responsible and
experienced companies engaged in the operation of drilling rigs and drillships
similar to the mortgaged rig and with insurance companies, underwriters, funds,
mutual insurance associations or clubs of recognized standing. No insurance will
provide for a deductible amount in excess of $1.0 million per occurrence.
For purposes of insurance against total loss, each mortgaged rig is to be
insured for an amount not less than its fair value and not less, when aggregated
with the insurance on the other mortgaged rigs, than an amount equal to the
aggregate outstanding principal amount of the Loans and accrued interest on the
Loans. Unless the Trustee shall have otherwise directed, any loss involving
damage to a mortgaged rig which is not in excess of $1.0 million may be paid
directly for repair or salvage or to reimburse R&B Falcon for the same.
In the event of an actual, constructive or compromised total loss of a
mortgaged rig, any adjustment or compromise of such loss by R&B Falcon or the
Subsidiary Guarantor then owning the mortgaged rig will be at the highest amount
reasonably obtainable, and all insurance or other payments for such loss will be
applied as set forth above under "Description of the
Notes -- Redemptions -- Redemption upon Loss of a Mortgaged Vessel."
Events of Default and Remedies
An Event of Default under the Indenture will constitute an Event of Default
under the mortgages and, in case any one or more events of default under the
mortgages shall have occurred and be continuing, then, in each and every such
case we or the Collateral Agent will have the right to:
- declare all the obligations under the applicable loan agreements to be
immediately due and payable, and bring suit at law, in equity or in
admiralty, to recover judgment for the obligations and collect the
obligations out of any and all property of R&B Falcon, whether covered by
the mortgage or otherwise;
- exercise all the rights and remedies in foreclosure and otherwise given
to mortgagees by the provisions of applicable law;
- take and enter into possession of the mortgaged rig, at any time,
wherever it may be, without legal process and without being responsible
for loss or damage, and R&B Falcon or any other person in possession upon
our demand or the demand of the Collateral Agent will surrender to us or
the Collateral Agent possession of the mortgaged rig and we or the
Collateral Agent may, without being responsible for loss or damage, hold,
lay-up, lease charter, operate or otherwise use the mortgaged rig for
such time and upon such terms as we or it may deem to be for our or its
best advantage, and demand, collect and retain all hire, freights,
earnings, issues, revenues, income, profits, return premiums, salvage
awards or recoveries in general salvage, and all other sums due or
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to become due in respect of the mortgaged rig or in respect of any
insurance on the mortgaged rig from any person, in accordance with the
terms of the mortgage; and
- take and enter into possession of the mortgaged rig, at any time,
wherever it may be, without legal process, and if it seems desirable to
us or the Collateral Agent and without being responsible for loss or
damage, sell the mortgaged rig, at any place and at such time as we or
the Collateral Agent may specify and in any such manner and such place
(whether by public or private sale) as we or the Collateral Agent may
deem advisable, in accordance with the terms of the mortgage.
Any sale of a mortgaged rig made in pursuance of our right under the
mortgage will operate to divest all right, title and interest of any nature
whatsoever of R&B Falcon or a Subsidiary Guarantor, if applicable, therein and
thereto and shall bar any claim from R&B Falcon or such Subsidiary Guarantor,
and its respective successors and assigns, and all persons claiming by, through
or under them.
All the mortgaged rigs are currently registered under Panamanian flag,
Bahamian flag or U.S. flag. The mortgages on the mortgaged rigs are first
priority ship mortgages.
The priority that such a mortgage would have against the claims of other
lien creditors in an enforcement proceeding is generally determined by, and will
vary in accordance with, the law of the country where the proceeding is brought.
Panamanian Law provides that a first naval mortgage is prior to all claims
other than (1) court costs arising out of the foreclosure proceedings, (2)
salvage, (3) wages and other payments to the master and crew, (4) wages and fees
due to stevedores engaged by the owner or master of the vessel for loading or
unloading during its last voyage, (5) damages arising out of tort and (6)
general average. Amounts owing to the Panamanian government may also have
priority under provisions of the Panama Fiscal Code.
Bahamian law provides that a first priority ship mortgage has priority over
all other claims except (i) costs allowed by the court arising out of arrest and
sale proceedings, (ii) wages and other sums due to the master, officers and
other members of the ship's complement in respect of their employment on the
ship, (iii) port, canal and other waterway dues and pilotage dues and any other
outstanding fees payable under the Merchant Shipping Act of The Bahamas in
respect of the ship, (iv) claims against the owner in respect of loss of life or
personal injury occurring, whether on land or on water, in direct connection
with the operation of the ship, (v) claims against the owner, based on tort and
not capable of being based on contract, in respect of loss of or damage to
property occurring, whether on land or on water, in direct connection with the
operation of the ship, and (vi) claims for salvage, wreck removal and
contribution in general average.
Panamanian, Bahamian and U.S. ship mortgages may be enforced against a rig
physically present in the United States, but the claim under the mortgage would
rank behind preferred maritime liens, including those for supplies and other
necessaries provided in the United States. Since the mortgaged rigs will be
operating around the world, there is no assurance that, if enforcement
proceedings must be commenced against a mortgaged rig, the mortgaged rig will be
located in a jurisdiction having the same procedures and lien priorities as
Panama, The Bahamas or the United States. Other jurisdictions may provide no
legal remedy at all for the enforcement of the mortgages, or a remedy dependent
on court proceedings so expensive and time consuming as to be impractical.
Furthermore, certain jurisdictions, unlike Panama, The Bahamas or the United
States, may not permit the mortgaged rig to be sold prior to entry of a
judgment, entailing a long waiting time that could result in increased custodial
costs, deterioration in the condition of the mortgaged rig and substantial
reduction in her value.
CONSTRUCTION CONTRACTS AND EQUIPMENT
Samsung is currently constructing the Deepwater IV in Korea. This rig has
not yet been flagged. Therefore, R&B Falcon cannot currently grant a ship
mortgage on this rig. However, prior to this rig's delivery, R&B Falcon has (i)
collaterally assigned all of its rights under the construction contract for this
rig and (ii) granted a security interest in equipment purchased by R&B Falcon
for this rig to us as
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security for Loan relating to this rig. However, liens on some of the equipment
may not be perfected prior to its delivery to the respective drilling rig. See
"Risk Factors -- The Loan relating to the Deepwater IV is currently secured in
part by unperfected liens." Once this rig is flagged, R&B Falcon will grant a
first priority ship mortgage over the rig in our favor to secure the Loan
relating to this rig and the previous collateral will be released.
GUARANTEE
R&B Falcon has guaranteed, absolutely and unconditionally, on a senior
unsecured basis, our obligations under the notes. See "Description of the
Notes -- Guarantee."
DESCRIPTION OF R&B FALCON'S SIGNIFICANT INDEBTEDNESS
BANK FACILITIES
As of December 31, 1998, R&B Falcon had $150.0 million outstanding under
its revolving credit facility. R&B Falcon repaid all amounts on March 26, 1999
out of the proceeds of its borrowings from us. Upon repayment, R&B Falcon
terminated this Credit Facility.
Cliffs Drilling currently maintains a $35 million revolving credit facility
that matures May 31, 2000. At March 31, 1999, Cliffs Drilling had $0.4 million
in letters of credit outstanding, leaving $34.6 million available under this
credit facility.
R&B FALCON NOTES
In April 1998, R&B Falcon issued four series of the senior notes with an
aggregate principal amount of $1.1 billion (the "$1.1 Billion Senior Notes"). As
a result, R&B Falcon received net proceeds of $1,082 million after deducting
estimated offering related expenses. The $1.1 Billion Senior Notes bear interest
at varying rates from 6.5% to 7.375%. Interest on the $1.1 Billion Senior Notes
is payable semiannually on April 15 and October 15; and the $1.1 Billion Senior
Notes mature at varying times from 2003 to 2018. The $1.1 Billion Senior Notes
are unsecured obligations, ranking equally in right of payment with all of R&B
Falcon's other existing and future senior unsecured indebtedness. R&B Falcon
used the proceeds from the offering of the $1.1 Billion Senior Notes to repay
indebtedness of $874.4 million. R&B Falcon used the remainder of the net
proceeds for planned capital expenditures, working capital and other general
corporate purposes.
In December 1998, R&B Falcon issued $100 million principal amount of its
9 1/8% Senior Notes due 2003 and $300 million principal amount of its 9 1/2%
Senior Notes due 2008. Interest on these senior notes is payable semiannually on
June 15 and December 15. These senior notes are unsecured obligations, ranking
equally in right of payment with all of R&B Falcon's other existing and future
senior unsecured indebtedness. R&B Falcon received net proceeds from the
issuance of these senior notes of approximately $392 million, after deducting
estimated offering related expenses. R&B Falcon used the proceeds from the
offering of these notes to reduce borrowings under its then existing revolving
credit facility.
On March 26, 1999, R&B Falcon issued $200 million of its 12 1/4% Senior
Notes due 2006. Also on that date, we issued the $400 million of our 11% Senior
Secured Notes due 2006 and the $400 million of our 11 3/8% Senior Secured Notes
due 2009 that are the subject of the exchange offer. R&B Falcon borrowed the
proceeds from these notes from us in ten separate loans, each of which is
secured by one of R&B Falcon's drilling rigs or the construction contract to
build a drilling rig. R&B Falcon also guaranteed our notes. R&B Falcon is using
the proceeds from the loans from us to finance the costs of acquiring,
constructing, repairing and improving the drilling rigs that are security for
the loans. To the extent R&B Falcon had already paid these costs, it is using
the proceeds for general corporate purposes, including the repayment of debt.
R&B Falcon is using the net proceeds from its offering of the $200 million
senior notes for general corporate purposes, including the repayment of debt.
For accounting purposes, R&B Falcon will consolidate our company.
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CLIFFS DRILLING NOTES
Cliffs Drilling has outstanding an aggregate principal amount of $200.0
million of its 10 1/4% Senior Notes due 2003 (the "Cliffs Drilling Notes") and
debt premium, net of amortization, of $2.8 million as of March 31, 1999.
Interest on the Cliffs Drilling Notes is payable semi-annually during each May
and November. The Cliffs Drilling Notes are unconditionally guaranteed on a
senior unsecured basis by some of Cliffs Drilling's subsidiaries (the "Cliffs
Subsidiary Guarantors"), which guarantees rank equally in right of payment with
all senior indebtedness of the Cliffs Subsidiary Guarantors and senior to all
subordinated indebtedness of the Cliffs Subsidiary Guarantors. The Cliffs
Drilling Notes are redeemable on or after May 15, 2000 at a declining premium.
The indenture under which the Cliffs Drilling Notes are issued imposes
significant operating and financial restrictions on Cliffs Drilling. These
restrictions affect, and in many respects limit or prohibit, the ability of
Cliffs Drilling to incur additional indebtedness, make capital expenditures,
create liens, sell assets, make dividends or other payments and take other
actions.
TRANSFER RESTRICTIONS
The currently outstanding notes are subject to a transfer restriction that
prohibits transfers of the notes to any person who is not a Qualified
Institutional Buyer, an Institutional Accredited Investor, or an affiliate of
our company. The registered notes that we issue in the exchange offer will also
be subject to this transfer restriction. The Trustee and the Registrar may not
transfer any note in violation of these restrictions. All holders of the notes
will agree, by their acceptance of the notes, that the notes will bear a legend
to the following effect, and that they will be bound by the terms of the
following legend, unless we otherwise agree.
"The holder:
(1) represents that (a) it is a "Qualified Institutional Buyer" (as
defined in Rule 144A under the Securities Act) (a "QIB"), (b) it is an
institutional "Accredited Investor" (as defined in Rule 501(a)(1), (2), (3)
OR (7) of Regulation D under the Securities Act (an "IAI") or (c) it is a
person involved in the organization or operation of the company or an
affiliate (as defined in Rule 405 under the Securities Act) of the company.
(2) agrees that it will not resell, or otherwise transfer this note
except to (a) a QIB, (b) an IAI, Or (c) a person involved in the
organization or operation of the company or an affiliate (as defined in
Rule 405 under the Securities Act) of the company, and
(3) agrees that it will deliver to each person to whom this note or an
interest herein is transferred a notice substantially to the effect of this
legend.
The Indenture contains a provision requiring the Trustee to refuse to
register any transfer of this note in violation of the foregoing. The
Indenture also contains a provision requiring R&B Falcon Corporation and
the company to exercise reasonable care to ensure that the notes are resold
or otherwise transferred only to purchasers meeting the requirements
specified in clause (2) above.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the acquisition, ownership and disposition
of notes by an initial beneficial owner of notes that, for United States federal
tax purposes, is not a "United States person" (a "Non-United States Holder").
This discussion is based upon the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations thereunder, published
rulings and court decisions, all as in effect on the date hereof, which are
subject to change, possibly retroactively. For purposes of this discussion, a
"United States person" means a citizen or resident of the United States, a
corporation, partnership or
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other entity created or organized in the United States or under the law of the
United States or of any state thereof or the District of Columbia (unless, in
the case of a partnership, Treasury regulations provide otherwise), an estate
whose income is subject to United States federal income taxation regardless of
its source, or a trust if a U.S. court is able to exercise primary supervision
over the administration of the trust and one or more United States persons have
the authority to control all substantial decisions of the trust. Notwithstanding
the previous sentence, to the extent provided in Treasury regulations, certain
trusts in existence on August 20, 1996, and treated as United States persons
prior to such date, that elect to continue to be treated as United States
persons will also be United States persons. This discussion applies only to
those Non-United States Holders who purchase notes from the Initial Purchaser at
the price set forth on the cover page of this Prospectus and hold the notes as a
capital asset. The tax treatment of the holders of the notes may vary depending
upon their particular situations. United States persons acquiring the notes are
subject to different rules than those discussed below. In addition, certain
other holders (including insurance companies, tax exempt organizations,
financial institutions and broker-dealers) may be subject to special rules not
discussed below. Prospective investors are urged to consult their tax advisors
regarding the United States federal tax consequences of acquiring, holding and
disposing of notes, as well as any tax consequences that may arise under the
laws of any relevant foreign, state, local or other taxing jurisdiction.
INTEREST
Interest that we pay to a Non-United States Holder will not be subject to
United States federal income or withholding tax if such interest is not
effectively connected with the conduct of a trade or business within the United
States by such Non-United States Holder and, among other things, such Non-
United States Holder (i) does not actually or constructively own 10% or more of
the total combined voting power of all classes of our stock; (ii) is not a
controlled foreign corporation with respect to the United States and to which we
are a related person and (iii) certifies to us, our paying agent or the person
who would otherwise be required to withhold United States tax, on Form W-8 or
W-9 or substantially similar form signed under penalties of perjury, that such
holder is not a United States person and provides such holder's name and address
(the "Certification Requirement"). In the case of interest on a note that is not
"effectively connected with the conduct of a trade or business within the United
States" and does not satisfy the three requirements of the preceding sentence,
the Non-United States Holder's interest on a note would generally be subject to
United States withholding tax at a flat rate of 30% (or a lower applicable
treaty rate). If a Non-United States Holder's interest on a note is "effectively
connected with the conduct of a trade or business within the United States,"
then the Non-United States Holder will be subject to United States federal
income tax on such interest income in essentially the same manner as a United
States person and, in the case of a Non-United States Holder that is a foreign
corporation, may also be subject to the branch profits tax.
GAIN ON DISPOSITION
A Non-United States Holder generally will not be subject to United States
federal income tax with respect to gain recognized on a sale, redemption or
other disposition of a note unless (i) the gain is effectively connected with
the conduct of a trade or business within the United States by the Non-United
States Holder or (ii) in the case of a Non-United States Holder who is a
nonresident alien individual and holds the note as a capital asset, such holder
is present in the United States for 183 or more days in the taxable year and
certain other requirements are met.
FEDERAL ESTATE TAXES
If interest on a note is exempt from withholding of United States federal
income tax under the rules described above, the note held by an individual who
at the time of death is a Non-United States Holder generally will not be subject
to United States federal estate tax as a result of such individual's death.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
We will, when required, report to the holders of the notes and the Internal
Revenue Service ("IRS") the amount of any interest paid on the notes in each
calendar year and the amounts of tax withheld, if any, with respect to such
payments.
In the case of payments of interest to Non-United States Holders, the
general 31% backup withholding tax and certain information reporting will not
apply to such payments with respect to which either the Certification
Requirement has been satisfied or an exemption has otherwise been established,
provided that neither we nor our payment agent has actual knowledge that the
holder is a United States person or that the conditions of any other exemption
are not in fact satisfied. Information reporting and backup withholding
requirements will apply to the gross proceeds paid to a Non-United States Holder
on the disposition of the notes by or through a United States office of a United
States or foreign broker, unless the holder certifies to the broker under
penalties of perjury as to its name, address and status as a foreign person or
the holder otherwise establishes an exemption. Information reporting
requirements, but not backup withholding, will also apply to a payment of the
proceeds of a disposition of the notes by or through a foreign office of a
United States broker or foreign brokers with certain types of relationships to
the United States unless such broker has documentary evidence in its file that
the holder of the notes is not a United States person and such broker has no
actual knowledge to the contrary, or the holder establishes an exception.
Neither information reporting nor backup withholding generally will apply to a
payment of the proceeds of a disposition of the notes by or through a foreign
office of a foreign broker not subject to the preceding sentence.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that the
required information is furnished to the IRS.
The United States Treasury Department recently promulgated new regulations
regarding the withholding and information reporting rules discussed above. In
general, the new regulations do not significantly alter the substantive
withholding and information reporting requirements but rather unify current
certification procedures and forms and clarify reliance standards. The new
regulations require, however, that a foreign person furnish its taxpayer
identification number in certain circumstances to claim a reduction in United
States federal withholding tax and new rules are provided for foreign persons
that hold debt instruments thorough a foreign intermediary. The new regulations
are generally effective for payments made after December 31, 1999, subject to
certain transition rules. NON-UNITED STATES HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE IMPACT, IF ANY, OF THE NEW REGULATIONS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for outstanding notes where such outstanding notes were acquired as a
result of market-making activities or other trading activities. We have agreed
that for a period of 180 days after the Expiration Date, we will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resales.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such exchange notes. Any
broker-dealer that resells exchange notes that were received
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by it for its own account pursuant to the exchange offer and any broker or
dealer that participates in a distribution of such exchange notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of exchange notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
We have been advised by Donaldson, Lufkin & Jenrette Securities Corporation
that following completion of the exchange offer they intend to make a market in
the exchange notes to be issued in the exchange offer. However, they are under
no obligation to do so and any market activities with respect to the exchange
notes may be discontinued at any time.
WHERE YOU CAN FIND MORE INFORMATION
We do not currently file reports with the Securities and Exchange
Commission. No SEC rules or stock exchange rules will require us to send annual
reports to our security holders, and we do not intend to send annual reports to
our security holders.
R&B Falcon files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information filed by R&B Falcon at the SEC's public
reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. R&B Falcon's filings with the SEC are
also available to the public from commercial document retrieval services and at
the SEC's web site at "http://www.sec.gov."
This prospectus constitutes a part of a registration statement we have
filed with the SEC under the Securities Act of 1933. As permitted by the rules
and regulations of the SEC, this prospectus does not contain all of the
information contained in the registration statement and the exhibits and
schedules to the registration statement. Accordingly, in this prospectus, we
make reference to the registration statement and to its exhibits and schedules.
For further information about us and about the securities we are offering in
this prospectus, you should consult the registration statement and its exhibits
and schedules. You should be aware that statements contained in this prospectus
concerning the provisions of any documents filed as an exhibit to the
registration statement or otherwise filed with the SEC are not necessarily
complete, and in each instance reference is made to the copy of the document so
filed as an exhibit to the registration statement. These statements are
qualified in their entirety by these references.
89
<PAGE> 94
INCORPORATION BY REFERENCE
R&B Falcon is incorporating by reference the following documents it has
filed with the SEC:
- Annual Report on Form 10-K for the fiscal year ended December 31, 1998;
- Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1999; and
- Current Report on Form 8-K/A filed January 20, 1999, amending Current
Report on Form 8-K filed December 15, 1998; and
- Current Reports on Form 8-K filed March 16, 1999, April 19, 1999, April
21, 1999, May 20, 1999 and May 21, 1999.
You may request a copy of any of these filings, at no cost, by writing or
telephoning R&B Falcon at the following address or phone number:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
(281) 496-5000
Attention: Investor Relations
LEGAL MATTERS
Legal matters with respect to the exchange notes offered hereby will be
passed upon for us by Gardere Wynne Sewell & Riggs, L.L.P., Houston, Texas.
INDEPENDENT PUBLIC ACCOUNTANTS
The balance sheet of RBF Finance Co. as of March 31, 1999 and the related
statements of operations, stockholders' equity and cash flows for the period
from inception (March 19, 1999) to March 31, 1999, included in this prospectus
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
The consolidated balance sheets of R&B Falcon Corporation as of December
31, 1998 and 1997, and the related statements of operations, stockholders'
equity and cash flows for each of the years in the three year period ended
December 31, 1998, incorporated by reference in this prospectus and elsewhere in
the registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said report.
With respect to R&B Falcon Corporation's unaudited interim financial
information for the quarters ended March 31, 1999 and 1998, Arthur Andersen LLP
has applied limited procedures in accordance with professional standards for a
review of that information. However, their separate report thereon states that
they did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their report on that
information should be restricted in light of the limited nature of the review
procedures applied. In addition, the accountants are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
report on the unaudited interim financial information because that report is not
a "report" or a "part" of the registration statement prepared or certified by
the accountants within the meaning of Sections 7 and 11 of that Act.
The consolidated financial statements of Cliffs Drilling Company as of
December 31, 1997 and for each of the three years in the period ended December
31, 1997, incorporated by reference in this prospectus, have been audited by
Ernst & Young LLP, independent accountants, as stated in their report, which is
incorporated by reference herein.
90
<PAGE> 95
RBF FINANCE CO.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheet as of March 31, 1999.......................... F-3
Statement of Operations for the Period from Inception (March
19, 1999) to March 31, 1999............................... F-4
Statement of Cash Flows for the Period from Inception (March
19, 1999) to March 31, 1999............................... F-5
Statement of Stockholders' Equity for the Period from
Inception (March 19, 1999) to March 31, 1999.............. F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 96
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
RBF Finance Co.
We have audited the accompanying balance sheet of RBF Finance Co. (a
limited purpose Delaware corporation) as of March 31, 1999, and the related
statement of operations, cash flows and stockholders' equity for the period from
inception (March 19, 1999) to March 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RBF Finance Co. as of March
31, 1999, and the results of its operations and cash flows for the period from
inception (March 19, 1999) to March 31, 1999, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Houston, Texas
May 25, 1999
F-2
<PAGE> 97
RBF FINANCE CO.
(A LIMITED PURPOSE DELAWARE CORPORATION)
BALANCE SHEET
AS OF MARCH 31, 1999
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $303,101
Interest and commitment fee receivable.................... 1,316
--------
Total current assets.............................. 304,417
--------
LOANS TO R&B FALCON CORPORATION............................. 496,900
--------
TOTAL ASSETS................................................ $801,317
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued interest expense.................................. $ 1,226
Accrued income taxes...................................... 32
--------
Total current liabilities......................... 1,258
LONG-TERM OBLIGATIONS....................................... 800,000
--------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 1,000 shares authorized, 250
shares issued and outstanding at March 31, 1999........ --
Capital in excess of par value............................ 1
Retained earnings......................................... 58
--------
Total stockholders' equity........................ 59
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $801,317
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 98
RBF FINANCE CO.
(A LIMITED PURPOSE DELAWARE CORPORATION)
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(MARCH 19, 1999)
TO MARCH 31, 1999
-----------------
<S> <C>
REVENUES:
Interest income........................................... $1,021
Commitment fee............................................ 295
------
Total revenues.................................... 1,316
EXPENSE:
Interest expense.......................................... 1,226
------
INCOME BEFORE INCOME TAX EXPENSE............................ 90
INCOME TAX EXPENSE.......................................... 32
------
NET INCOME.................................................. $ 58
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 99
RBF FINANCE CO.
(A LIMITED PURPOSE DELAWARE CORPORATION)
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(MARCH 19, 1999)
TO MARCH 31, 1999
-----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 58
Adjustments to reconcile net income to net cash used in
operating activities:
Changes in assets and liabilities:
Accrued interest income and commitment fee................ (1,316)
Accrued interest expense.................................. 1,226
Accrued income taxes...................................... 32
---------
Net cash used in operating activities............. --
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to R&B Falcon Corporation........................... (496,900)
---------
Cash used in investing activities................. (496,900)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term obligations....................... 800,000
Issuance of common stock.................................. 1
---------
Cash provided by financing activities............. 800,001
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 303,101
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ --
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 303,101
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 100
RBF FINANCE CO.
(A LIMITED PURPOSE DELAWARE CORPORATION)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (MARCH 19, 1999)
TO MARCH 31, 1999
(IN THOUSANDS EXCEPT SHARES)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
--------------- EXCESS OF RETAINED
SHARES AMOUNT PAR VALUE EARNINGS
------ ------ ---------- --------
<S> <C> <C> <C> <C>
Initial capital contribution.............................. 250 $-- $1 $--
Net income................................................ -- -- -- 58
--- -- -- ---
BALANCE, at March 31, 1999................................ 250 $-- $1 $58
=== == == ===
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 101
RBF FINANCE CO.
NOTES TO FINANCIAL STATEMENTS
(A) BUSINESS, INDUSTRY CONDITIONS, LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES
RBF Finance Co. (the "Company") is a limited purpose Delaware corporation
organized on March 19, 1999 solely for the purpose of and limited to issuing
secured notes as full recourse obligations of the Company and loaning the
proceeds from the sale of the secured notes to R&B Falcon Corporation. The
Company is an affiliate of R&B Falcon Corporation through common management, and
all of the Company's shares are owned by management and shareholders of R&B
Falcon Corporation. On March 26, 1999, the Company issued two series of senior
secured notes with an aggregate principal amount of $800.0 million (the "Senior
Secured Notes"). The Senior Secured Notes consist of $400.0 million of 11%
senior secured notes due 2006 and $400.0 million of 11.375% senior secured notes
due 2009.
INDUSTRY CONDITIONS/LIQUIDITY -- All of the Company's future cash flows and
long-term obligations are guaranteed by R&B Falcon Corporation. The following is
a description of R&B Falcon Corporation's industry conditions and liquidity. R&B
Falcon Corporation is currently constructing or significantly upgrading six
wholly-owned deepwater drilling rigs and has recently completed the construction
of one deepwater drilling rig. R&B Falcon Corporation estimates the gross
capital expenditures on these projects will be approximately $1.9 billion, of
which approximately $.9 billion remains to be funded by R&B Falcon Corporation.
Since May 1998, there has been a downturn in demand for marine drilling rigs
resulting in a decline in rig utilization and dayrates. The decline has been
particularly dramatic in the domestic barge and jack-up rig markets where R&B
Falcon Corporation is one of the largest contractors. As a result, R&B Falcon
Corporation experienced a decline in operating revenues from the first quarter
of 1998 to the first quarter of 1999. Depending on the level of future cash
flows from operations, R&B Falcon Corporation's cash on hand, and funds
available under its existing credit facilities may not be sufficient to satisfy
R&B Falcon Corporation's short-term and long-term working capital needs, planned
investments, capital expenditures, debt, lease and other payment obligations,
without selling certain assets or terminating construction contracts.
On March 26, 1999, R&B Falcon Corporation issued a series of 12.25% senior
notes with an aggregate principal amount of $200.0 million due 2006 (the "Senior
Notes"). As a result, R&B Falcon Corporation received net proceeds of
approximately $194.3 million after deducting estimated offering related
expenses. R&B Falcon Corporation used the proceeds from such notes and from
loans from the Company 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.
On April 22, 1999, R&B Falcon Corporation issued 300,000 shares of 13.875%
Senior Cumulative Redeemable Preferred Stock (the "Preferred Stock") and
warrants to purchase 10,500,000 shares of R&B Falcon Corporation's common stock
at an exercise price of $9.50 per share (the "Warrants"). R&B Falcon Corporation
received net proceeds from the issuance of the Preferred Stock and Warrants of
approximately $289.0 million. Each share of Preferred Stock has a liquidation
preference of $1,000 per share and one Warrant entitles the holder to purchase
35 shares of R&B Falcon Corporation's common stock. The Preferred Stock is
mandatorily redeemable on, and the Warrants expire on, May 1, 2009. Dividends on
the Preferred Stock are to be paid quarterly commencing on August 1, 1999 and at
R&B Falcon Corporation's option may be paid in cash or, on or before May 1,
2004, in additional shares of Preferred Stock. R&B Falcon Corporation may redeem
any of 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, R&B Falcon Corporation
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. The Warrants'
estimated fair value of $48.0 million was recorded as a discount to the
Preferred Stock and will be amortized on a straight line basis over ten years.
Preferred Stock dividends and the amortization of the
F-7
<PAGE> 102
RBF FINANCE CO.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Warrants' initial value will be deducted from net income to arrive at net income
applicable to common stockholders.
Proceeds from the $200.0 million senior notes, loans from the Company and
the Preferred Stock met a portion of R&B Falcon Corporation's capital
requirements. However, it may also be necessary for R&B Falcon Corporation to
obtain additional capital through debt and/or equity financings to meet its
currently projected obligations. R&B Falcon Corporation is currently evaluating
two project financings to meet a portion of its additional capital requirements.
The first is an approximately $270.0 million financing in the form of a
synthetic lease that would be collateralized by the drillship Deepwater
Frontier, drilling contract revenues from such drillship and a letter of credit.
Proceeds of such financing, if obtained, would be used in part to repay advances
made to a limited liability R&B Falcon Corporation which will operate the
Deepwater Frontier and which is owned 60% by R&B Falcon Corporation and 40% by
Conoco. The second financing being contemplated is an approximately $250.0
million project financing that would be collateralized by the semisubmersible
RBS8M, as well as the drilling contract revenues from such rig.
R&B Falcon Corporation currently believes it will be able to consummate the
proposed project financings. However, there can be no assurance that these or
any other additional financings can be obtained, or if obtained, that they will
be on terms favorable to R&B Falcon Corporation or for the amounts needed.
Further, R&B Falcon Corporation has limited ability under its indenture
covenants to incur additional recourse indebtedness and to secure that debt. If
R&B Falcon Corporation is unable to obtain its requisite financing, R&B Falcon
Corporation may have to sell assets or terminate or suspend one or more
construction projects. Termination or suspension of a project may subject R&B
Falcon Corporation to claims for penalties or damages under the construction
contracts or drilling contracts for rigs that are being constructed. In
addition, asset sales made under duress in today's drilling market may not yield
attractive sales prices. Accordingly, the inability of R&B Falcon Corporation to
complete required financings would have a material adverse effect on R&B Falcon
Corporation's financial condition and its ability to repay its outstanding
indebtedness.
Three of R&B Falcon Corporation's outstanding credit facilities were repaid
and terminated in March 1999 from proceeds from the Senior Secured Notes and the
Senior Notes. To assist R&B Falcon Corporation's liquidity position, R&B Falcon
Corporation may seek to establish a new revolving bank credit facility of up to
$180.0 million, and may sell certain assets. There can be no assurance, however,
that such facility will be obtained or sales completed.
The liquidity of R&B Falcon Corporation should also be considered in light
of the significant fluctuations in demand that may be experienced by drilling
contractors as changes in oil and gas producers' expectations and budgets occur,
primarily in response to declines in prices for oil and gas. These fluctuations
can rapidly impact R&B Falcon Corporation's liquidity as supply and demand
factors directly affect utilization and dayrates, which are the primary
determinants of cash flow from R&B Falcon Corporation's operations. The decline
in oil and gas prices since 1997 has negatively impacted R&B Falcon
Corporation's performance, particularly in the shallow water U.S. Gulf market,
by adversely affecting R&B Falcon Corporation's rig utilization and dayrates.
Utilization of R&B Falcon Corporation's domestic jack-up fleet has declined from
approximately 97% in the first quarter of 1998 to approximately 49% in the first
quarter of 1999, and dayrates have declined from an average of $35,000 during
the first quarter of 1998 to an average of $21,000 during the first quarter of
1999. Dayrates for R&B Falcon Corporation's domestic barge drilling rig fleet
have not declined materially, but utilization of the fleet declined from
approximately 93% in the first quarter of 1998 to approximately 27% in the first
quarter of 1999. R&B Falcon Corporation believes a continued depression in oil
and gas prices would have a material adverse effect on R&B Falcon Corporation's
financial position and results from operations.
In December 1998, Mobil U.K. Ltd. ("Mobil") terminated its contract to use
R&B Falcon Corporation's Jack Bates semisubmersible rig on the grounds that two
of the rig's anchor cables broke.
F-8
<PAGE> 103
RBF FINANCE CO.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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. R&B Falcon
Corporation does not believe that Mobil had the right to terminate this
contract. R&B Falcon Corporation has recontracted the Jack Bates to Mobil for
one well at a dayrate of $156,000. This contract is without prejudice to either
party's rights in the dispute over the termination of the original contract. If
R&B Falcon Corporation is not successful in settling its dispute over the
termination of the original contract, R&B Falcon Corporation intends to commence
legal proceedings to enforce its rights under the contract.
In April 1999, BP Amoco cancelled its contract with R&B Falcon Corporation
for the drillship Peregrine VII in accordance with the contract's terms because
the drillship had not been delivered on time. R&B Falcon Corporation is
currently marketing this rig for work.
In May 1999, R&B Falcon Corporation received notice from Petrobras of
cancellation of the drilling contract on the semisubmersible Falcon 100, based
upon alleged late delivery of the rig. R&B Falcon Corporation does not believe
that Petrobras has the right to cancel the contract and has engaged Brazilian
counsel to pursue its rights under the contract.
CASH AND CASH EQUIVALENTS -- The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents. Included in cash and cash equivalents at March 31, 1999 was
$303.1 million that was restricted for and was subsequently loaned to R&B Falcon
Corporation during April and May 1999 under the Senior Secured Loan Agreements
dated as of March 26, 1999.
COMPREHENSIVE INCOME -- The Company did not have any non-owner changes in
equity.
CONCENTRATION OF CREDIT RISKS -- The Company maintains cash balances and
short-term investments with commercial banks in the United States. The Company's
cash equivalents and short-term investments generally consist of commercial
paper, money-market mutual funds and interest-bearing deposits with strong
credit rated financial institutions, therefore, bearing minimal risk. No losses
were incurred from inception (March 19, 1999) through March 31, 1999.
The Company's revenues were generated primarily from interest income on
notes from R&B Falcon Corporation.
NEWLY ISSUED ACCOUNTING STANDARDS -- Statement of Financial Accounting
Standards (SFAS) No. 131, Disclosures about Segments of an Enterprise and
Related Information Disclosures about Segments of an Enterprise and Related
Information, requires that companies report financial and descriptive
information about their reportable operating segments. Segment information to be
reported is to be based upon the way management organizes the segments for
making operating decisions and assessing performance. The Company's revenues are
generated primarily from its interest income on the loans made to R&B Falcon
Corporation and all of the activities of the Company occur in the United States.
Therefore no segment information is required.
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities
was issued. SFAS 133 establishes accounting and reporting standards requiring
that every derivative instrument be measured at its fair value, recorded in the
balance sheet as either an asset or liability and that changes in the
derivative's fair value be recognized currently in earnings. SFAS 133 is
effective for fiscal years beginning after June 15, 1999. The Company has not
yet quantified the impacts of adopting SFAS 133 on its financial statements nor
has it determined the timing of its adoption.
ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
F-9
<PAGE> 104
RBF FINANCE CO.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(B) LOANS TO R&B FALCON CORPORATION
On March 26, 1999, the Company entered into ten Senior Secured Loan
Agreements with R&B Falcon Corporation each of which is secured by one of R&B
Falcon Corporation's drilling rigs or the construction contract to build a
drilling rig (the "Loans to R&B Falcon Corporation"). Interest on the Loans to
R&B Falcon Corporation is receivable semiannually on March 15 and September 15.
Each loan is equally divided into a 7-year tranche and a 10-year tranche. The
7-year tranche of the loans bear interest on the unpaid principal amount thereof
from the date funded through maturity at a rate equal to 11% per annum plus 2
basis points per annum. The 10-year tranche of the loans bear interest on the
unpaid principal amount thereof from the date funded through maturity at a rate
equal to 11.375% per annum plus 2 basis points per annum. In addition, the
Company charges R&B Falcon Corporation a commitment fee of 7% per annum on any
undrawn balance under the loans. The loan agreements contain conditions that
must be met by R&B Falcon Corporation before funding of the loans. As of March
31, 1999, R&B Falcon Corporation had met the conditions on three of the ten
loans, which in aggregate amounted to $496.9 million. During April and May 1999,
R&B Falcon Corporation satisfied the conditions on the seven remaining loans,
which were subsequently funded in the amount of $303.1 million.
Loans to R&B Falcon Corporation at March 31, 1999 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
7-YEAR 10-YEAR TOTAL COLLATERAL
-------- -------- -------- -------------
<S> <C> <C> <C> <C>
Loan to R&B Falcon Corporation........ $112,800 $112,800 $225,600 Peregrine VII
Loan to R&B Falcon Corporation........ 83,000 83,000 166,000 Peregrine IV
Loan to R&B Falcon Corporation........ 52,650 52,650 105,300 Falcon 100
-------- -------- --------
Total....................... $248,450 $248,450 $496,900
======== ======== ========
</TABLE>
(C) LONG-TERM OBLIGATIONS
Long-term obligations at March 31, 1999 consisted of the following (in
thousands):
<TABLE>
<S> <C>
11% Senior Secured Notes due March 2006.................. $400,000
11.375% Senior Secured Notes due March 2009.............. 400,000
--------
Long-term obligations.................................... $800,000
========
</TABLE>
In March 1999, the Company issued $400.0 million of 11% senior secured
notes due March 2006 and $400.0 million of 11.375% senior secured notes due
March 2009. As a result, the Company received proceeds of approximately $800.0
million. The Senior Secured Notes are secured by the Loans to R&B Falcon
Corporation. R&B Falcon Corporation also guaranteed the payment of the Senior
Secured Notes by the Company. Interest is payable semiannually on March 15 and
September 15 on the Senior Secured Notes. R&B Falcon Corporation paid expenses
related to the offering. The Company used the proceeds to loan approximately
$496.9 million to R&B Falcon Corporation and has invested $303.1 million in
short-term investments. The Senior Secured Notes have covenants related to R&B
Falcon Corporation (with which R&B Falcon Corporation was in compliance at March
31, 1999), which limit or prohibit R&B Falcon Corporation's ability to incur
additional indebtedness, create liens and sell assets.
As of March 31, 1999, the Company estimates the fair value of its debt
obligations to be equal to the book value of $800.0 million.
F-10
<PAGE> 105
RBF FINANCE CO.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(D) COMMITMENTS AND CONTINGENCIES
At March 31, 1999, the Company was committed to loan an additional $303.1
million to R&B Falcon Corporation. As of May 24, 1999, all such commitments were
satisfied.
(E) INCOME TAXES
All income before income tax expense was current and generated
domestically. The U.S. statutory tax rate of 35% was used to compute the income
tax expense on income before income tax expense.
(F) CAPITAL SHARES
In March 1999, the Company issued 250 shares of its common stock for their
estimated fair market value of $1,000. As of March 31, 1999, 250 shares of
common stock were issued out of 1,000 shares authorized.
F-11
<PAGE> 106
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Amended and Restated Certificate of Incorporation and Bylaws of RBF
Finance Co. require the indemnification of directors and officers to the fullest
extent permitted by law.
Section 145 of the Delaware General Corporation Law authorizes and empowers
RBF Finance Co. to indemnify the directors, officers, employees and agents of
RBF Finance Co. against liabilities incurred in connection with, and related
expenses resulting from, any claim, action or suit brought against any such
person as a result of his relationship with RBF Finance Co., provided that such
person acted in good faith and in a manner such person reasonably believed to be
in, and not opposed to, the best interests of RBF Finance Co. in connection with
the acts or events on which such claim, action or suit is based. The finding of
either civil or criminal liability on the part of such persons in connection
with such acts or events is not necessarily determinative of the question of
whether such persons have met the required standard of conduct and are,
accordingly, entitled to be indemnified. The foregoing statements are subject to
the detailed provisions of Section 145 of the General Corporation law of the
State of Delaware.
Article VI of the Bylaws of RBF Finance Co. provides that RBF Finance Co.
shall indemnify to the fullest extent authorized or permitted by law, any person
made, or threatened to be made, a party to or otherwise involved in any action
or proceeding by reason of the fact that he or she is or was a director or
officer of RBF Finance Co., at the request of RBF Finance Co. or by reason of
the fact that such director or officer at the request of RBF Finance Co., is or
was serving any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, in any capacity.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<C> <S>
3.1* -- Amended and Restated Certificate of Incorporation of RBF
Finance Co.
3.2* -- Bylaws of RBF Finance Co.
4.1* -- Indenture dated as of March 26, 1999, between RBF Finance
Co., as Issuer, and United States Trust Company of New
York, as Trustee, with respect to $400,000,000 11% Senior
Secured Notes due 2006 and $400,000,000 11 3/8% Senior
Secured Notes due 2009.
4.2* -- Registration Rights Agreement dated March 26, 1999 among
RBF Finance Co., R&B Falcon Corporation and Donaldson,
Lufkin & Jenrette Securities Corporation.
5.1* -- Opinion of Gardere Wynne Sewell & Riggs, L.L.P., counsel
for R&B Falcon Corporation.
10.1* -- Purchase Agreement dated March 19, 1999 between R&B
Falcon Corporation and Donaldson, Lufkin & Jenrette
Securities Corporation.
10.2* -- Issuer Loan Escrow Agreement dated March 26, 1999 among
United States Trust Company of New York, R&B Falcon
Corporation and RBF Finance Co.
10.3* -- Senior Secured Note Escrow Agreement dated March 26, 1999
among United States Trust Company of New York and RBF
Finance Co.
10.4 -- Senior Secured Loan Agreement, Harvey Ward, dated March
26, 1999 between R&B Falcon Corporation, as Borrower, and
RBF Finance Co., as Lender (incorporated by reference to
Exhibit 10.1 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
</TABLE>
II-1
<PAGE> 107
<TABLE>
<C> <S>
10.5 -- Senior Secured Loan Agreement, Peregrine II, dated March
26, 1999 between R&B Falcon Corporation, as Borrower, and
RBF Finance Co., as Lender (incorporated by reference to
Exhibit 10.2 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.6 -- Senior Secured Loan Agreement, Peregrine I, dated March
26, 1999 between R&B Falcon Corporation, as Borrower, and
RBF Finance Co., as Lender (incorporated by reference to
Exhibit 10.3 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.7 -- Senior Secured Loan Agreement, Deepwater IV, dated March
26, 1999 between R&B Falcon Corporation, as Borrower, and
RBF Finance Co., as Lender (incorporated by reference to
Exhibit 10.4 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.8 -- Senior Secured Loan Agreement, Falrig 82, dated March 26,
1999 between R&B Falcon Corporation, as Borrower, and RBF
Finance Co., as Lender (incorporated by reference to
Exhibit 10.5 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.9 -- Senior Secured Loan Agreement, Peregrine IV, dated March
26, 1999 between R&B Falcon Corporation, as Borrower, and
RBF Finance Co., as Lender (incorporated by reference to
Exhibit 10.6 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.10 -- Senior Secured Loan Agreement, Peregrine VII, dated March
26, 1999 between R&B Falcon Corporation, as Borrower, and
RBF Finance Co., as Lender (incorporated by reference to
Exhibit 10.7 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.11 -- Senior Secured Loan Agreement, Falcon 100, dated March
26, 1999 between R&B Falcon Corporation, as Borrower, and
RBF Finance Co., as Lender (incorporated by reference to
Exhibit 10.8 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.12 -- Senior Secured Loan Agreement, W.D. Kent, dated March 26,
1999 between R&B Falcon Corporation, as Borrower, and RBF
Finance Co., as Lender (incorporated by reference to
Exhibit 10.9 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.13 -- Senior Secured Loan Agreement, Deepwater Millennium,
dated March 26, 1999 between R&B Falcon Corporation, as
Borrower, and RBF Finance Co., as Lender (incorporated by
reference to Exhibit 10.10 of R&B Falcon's Quarterly
Report on Form 10-Q for the quarter ended March 31,
1999).
10.14* -- Security Agreement dated as of March 26, 1999 from R&B
Falcon Corporation to RBF Finance Co. (Deepwater
Millenium).
10.15* -- Security Agreement dated as of March 26, 1999 from R&B
Falcon Corporation to RBF Finance Co. (Deepwater IV).
10.16* -- Senior Secured Note Security and Pledge Agreement dated
as of March 26, 1999 by RBF Finance Co. in favor of
United States Trust Company.
10.17* -- First Preferred Ship Mortgage made March 26, 1999 by R&B
Falcon Corporation and RBF Finance Co. (Peregrine IV).
10.18* -- First Preferred Ship Mortgage made March 26, 1999 by R&B
Falcon Corporation and RBF Finance Co. (Peregrine VII).
10.19* -- First Preferred Ship Mortgage made March 26, 1999 by R&B
Falcon Corporation and RBF Finance Co. (Falcon 100).
</TABLE>
II-2
<PAGE> 108
<TABLE>
<C> <S>
10.20* -- Deed of Covenants dated March 26, 1999 by and between R&B
Falcon Corporation and R&B Finance Co. (Peregrine I).
10.21* -- Deed of Covenants dated March 26, 1999 by and between R&B
Falcon Corporation and R&B Finance Co. (Peregrine II).
10.22* -- First Naval Mortgage dated April 12, 1999 by R&B Falcon
Corporation to R&B Finance Co. (Harvey Ward).
10.23* -- First Naval Mortgage dated April 12, 1999 by R&B Falcon
Corporation to R&B Finance Co. (W.D. Kent).
10.24* -- First Preferred Ship Mortgage made March 26, 1999 by R&B
Falcon Corporation and R&B Finance Co. (Falrig 82).
12.1* -- Statement regarding computation of ratio of earnings to
fixed charges of R&B Falcon Corporation.
12.2* -- Statement regarding computation of ratio of earnings to
fixed charges of RBF Finance Co.
15.1* -- Letter regarding unaudited interim financial information.
23.1* -- Consent of Arthur Andersen LLP.
23.2* -- Consent of Arthur Andersen LLP.
23.3* -- Consent of Ernst & Young LLP.
24.1* -- Power of Attorney (set forth on the signature pages
contained in Part II of this Registration Statement).
25.1* -- Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 on Form T-1 of United States
Trust Company of New York.
99.1* -- Form of Letter of Transmittal.
99.2* -- Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* Filed herewith
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) of 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(c) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 109
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 110
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on May 19, 1999.
RBF FINANCE CO.
By: /s/ STEVEN A. WEBSTER
------------------------------------
Steven A. Webster
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul B. Loyd, Robert F. Fulton and Leighton E.
Moss, and each of them, each of whom may act without joinder of the other, his
or her true and lawful attorneys and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all pre- and post-effective amendments to
this Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, and each of them, or
the substitute or substitutes of any or all of them, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ STEVEN A. WEBSTER President and Director May 19, 1999
- ----------------------------------------------------- (Principal Executive Officer)
Steven A. Webster
/s/ ROBERT F. FULTON Vice President (Principal May 19, 1999
- ----------------------------------------------------- Financial and Accounting
Robert F. Fulton Officer)
/s/ PAUL B. LOYD Director May 19, 1999
- -----------------------------------------------------
Paul B. Loyd
Director , 1999
- -----------------------------------------------------
Roger Abel
</TABLE>
II-5
<PAGE> 111
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on May 19, 1999.
R&B FALCON CORPORATION
By: /s/ STEVEN A. WEBSTER
----------------------------------
Steven A. Webster
Chief Executive Officer and
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Tim W. Nagle, Robert F. Fulton and Leighton E.
Moss, and each of them, each of whom may act without joinder of the other, his
or her true and lawful attorneys and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all pre- and post-effective amendments to
this Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, and each of them, or
the substitute or substitutes of any or all of them, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ STEVEN A. WEBSTER Chief Executive Officer, May 19, 1999
- ----------------------------------------------------- President and Director
Steven A. Webster (Principal Executive Officer)
/s/ PAUL B. LOYD Chairman of the Board May 19, 1999
- ----------------------------------------------------- and Director
Paul B. Loyd
/s/ ROBERT F. FULTON Executive Vice President May 19, 1999
- ----------------------------------------------------- (Principal Financial and
Robert F. Fulton Accounting Officer)
/s/ TIM W. NAGLE Executive Vice President May 19, 1999
- ----------------------------------------------------- (Principal Accounting Officer)
Tim W. Nagle
/s/ PURNENDU CHATTERJEE Director May 19, 1999
- -----------------------------------------------------
Purnendu Chatterjee
/s/ ARNOLD L. CHAVKIN Director May 19, 1999
- -----------------------------------------------------
Arnold L. Chavkin
/s/ CHARLES A. DONABEDIAN Director May 19, 1999
- -----------------------------------------------------
Charles A. Donabedian
</TABLE>
II-6
<PAGE> 112
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DOUGLAS A.P. HAMILTON Director May 19, 1999
- -----------------------------------------------------
Douglas A.P. Hamilton
Director , 1999
- -----------------------------------------------------
Macko A.E. Laqueur
Director , 1999
- -----------------------------------------------------
Michael E. Porter
/s/ ROBERT L. SANDMEYER Director May 19, 1999
- -----------------------------------------------------
Robert L. Sandmeyer
/s/ WILLIAM R. ZIEGLER Director May 19, 1999
- -----------------------------------------------------
William R. Ziegler
/s/ DOUGLAS E. SWANSON Director May 19, 1999
- -----------------------------------------------------
Douglas E. Swanson
</TABLE>
II-7
<PAGE> 113
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1* -- Amended and Restated Certificate of Incorporation of RBF
Finance Co.
3.2* -- Bylaws of RBF Finance Co.
4.1* -- Indenture dated as of March 26, 1999, between RBF Finance
Co., as Issuer, and United States Trust Company of New
York, as Trustee, with respect to $400,000,000 11% Senior
Secured Notes due 2006 and $400,000,000 11 3/8% Senior
Secured Notes due 2009.
4.2* -- Registration Rights Agreement dated March 26, 1999 among
RBF Finance Co., R&B Falcon Corporation and Donaldson,
Lufkin & Jenrette Securities Corporation.
5.1* -- Opinion of Gardere Wynne Sewell & Riggs, L.L.P., counsel
for R&B Falcon Corporation.
10.1* -- Purchase Agreement dated March 19, 1999 between R&B
Falcon Corporation and Donaldson, Lufkin & Jenrette
Securities Corporation.
10.2* -- Issuer Loan Escrow Agreement dated March 26, 1999 among
United States Trust Company of New York, R&B Falcon
Corporation and RBF Finance Co.
10.3* -- Senior Secured Note Escrow Agreement dated March 26, 1999
among United States Trust Company of New York and RBF
Finance Co.
10.4 -- Senior Secured Loan Agreement, Harvey Ward, dated March
26, 1999 between R&B Falcon Corporation, as Borrower, and
RBF Finance Co., as Lender (incorporated by reference to
Exhibit 10.1 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.5 -- Senior Secured Loan Agreement, Peregrine II, dated March
26, 1999 between R&B Falcon Corporation, as Borrower, and
RBF Finance Co., as Lender (incorporated by reference to
Exhibit 10.2 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.6 -- Senior Secured Loan Agreement, Peregrine I, dated March
26, 1999 between R&B Falcon Corporation, as Borrower, and
RBF Finance Co., as Lender (incorporated by reference to
Exhibit 10.3 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.7 -- Senior Secured Loan Agreement, Deepwater IV, dated March
26, 1999 between R&B Falcon Corporation, as Borrower, and
RBF Finance Co., as Lender (incorporated by reference to
Exhibit 10.4 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.8 -- Senior Secured Loan Agreement, Falrig 82, dated March 26,
1999 between R&B Falcon Corporation, as Borrower, and RBF
Finance Co., as Lender (incorporated by reference to
Exhibit 10.5 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.9 -- Senior Secured Loan Agreement, Peregrine IV, dated March
26, 1999 between R&B Falcon Corporation, as Borrower, and
RBF Finance Co., as Lender (incorporated by reference to
Exhibit 10.6 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.10 -- Senior Secured Loan Agreement, Peregrine VII, dated March
26, 1999 between R&B Falcon Corporation, as Borrower, and
RBF Finance Co., as Lender (incorporated by reference to
Exhibit 10.7 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.11 -- Senior Secured Loan Agreement, Falcon 100, dated March
26, 1999 between R&B Falcon Corporation, as Borrower, and
RBF Finance Co., as Lender (incorporated by reference to
Exhibit 10.8 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
</TABLE>
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.12 -- Senior Secured Loan Agreement, W.D. Kent, dated March 26,
1999 between R&B Falcon Corporation, as Borrower, and RBF
Finance Co., as Lender (incorporated by reference to
Exhibit 10.9 of R&B Falcon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
10.13 -- Senior Secured Loan Agreement, Deepwater Millennium,
dated March 26, 1999 between R&B Falcon Corporation, as
Borrower, and RBF Finance Co., as Lender (incorporated by
reference to Exhibit 10.10 of R&B Falcon's Quarterly
Report on Form 10-Q for the quarter ended March 31,
1999).
10.14* -- Security Agreement dated as of March 26, 1999 from R&B
Falcon Corporation to RBF Finance Co. (Deepwater
Millenium).
10.15* -- Security Agreement dated as of March 26, 1999 from R&B
Falcon Corporation to RBF Finance Co. (Deepwater IV).
10.16* -- Senior Secured Note Security and Pledge Agreement dated
as of March 26, 1999 by RBF Finance Co. in favor of
United States Trust Company.
10.17* -- First Preferred Ship Mortgage made March 26, 1999 by R&B
Falcon Corporation and RBF Finance Co. (Peregrine IV).
10.18* -- First Preferred Ship Mortgage made March 26, 1999 by R&B
Falcon Corporation and RBF Finance Co. (Peregrine VII).
10.19* -- First Preferred Ship Mortgage made March 26, 1999 by R&B
Falcon Corporation and RBF Finance Co. (Falcon 100).
10.20* -- Deed of Covenants dated March 26, 1999 by and between R&B
Falcon Corporation and R&B Finance Co. (Peregrine I).
10.21* -- Deed of Covenants dated March 26, 1999 by and between R&B
Falcon Corporation and R&B Finance Co. (Peregrine II).
10.22* -- First Naval Mortgage dated April 12, 1999 by R&B Falcon
Corporation to R&B Finance Co. (Harvey Ward).
10.23* -- First Naval Mortgage dated April 12, 1999 by R&B Falcon
Corporation to R&B Finance Co. (W.D. Kent).
10.24* -- First Preferred Ship Mortgage made March 26, 1999 by R&B
Falcon Corporation and R&B Finance Co. (Falrig 82).
12.1* -- Statement regarding computation of ratio of earnings to
fixed charges of R&B Falcon Corporation.
12.2* -- Statement regarding computation of ratio of earnings to
fixed charges of RBF Finance Co.
15.1* -- Letter regarding unaudited interim financial information.
23.1* -- Consent of Arthur Andersen LLP.
23.2* -- Consent of Arthur Andersen LLP.
23.3* -- Consent of Ernst & Young LLP.
24.1* -- Power of Attorney (set forth on the signature pages
contained in Part II of this Registration Statement).
25.1* -- Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 on Form T-1 of United States
Trust Company of New York.
99.1* -- Form of Letter of Transmittal.
99.2* -- Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* Filed herewith
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
RBF FINANCE CO.
Pursuant to Section 245 of the Delaware General Corporation Law, RBF
FINANCE CO., a corporation organized and existing under the laws of the State of
Delaware, hereby certifies as follows:
1. The name of the corporation is RBF Finance Co. The date of
filing of its original Certificate of Incorporation with the
Secretary of State was March 19, 1999
2. This Amended and Restated Certificate of Incorporation
restates and amends the Certificate of Incorporation of this
corporation by adding Article TWELFTH, as follows:
"TWELFTH; At least one director of the Company (an
"Independent Director") shall be none of (i) a member of the Board of
Directors, officer, employee or 10% beneficial owner of the outstanding
Capital Stock of any Affiliate or other person or entity owning
beneficially more than 10% of the outstanding shares of capital stock
of the Company (an "Affiliated Entity") or (ii) a director, officer,
employee or 5% beneficial owner of the outstanding Capital Stock, of
any such Affiliated Entity's Subsidiaries or Affiliates (other than
Company).
For purposes of this Article TWELFTH, "Affiliate" means, as to
any Person, any other Person which directly or indirectly controls, or
is under common control with, or is controlled by, such Person. For
purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "under common control with," and
"controlled by") and as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through
the ownership of Voting Stock, by agreement or otherwise, provided,
further, that beneficial ownership of 10% or more of the Voting Stock
of a Person (on a fully diluted basis) shall be deemed to be control."
3. The text of the Certificate of Incorporation is amended hereby
to read as herein set forth in full:
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
RBF FINANCE CO.
I, the undersigned, for the purposes of incorporating and organizing a
corporation under the General Corporation Law of the State of Delaware, do
execute this Certificate of Incorporation and do hereby certify as follows:
FIRST: The name of the Company is RBF FINANCE CO. (hereinafter
the "Company").
<PAGE> 2
SECOND: The address of the registered office of the Company in
the State of Delaware is 1209 Orange Street, Corporation Trust Center,
in the City of Wilmington, County of New Castle. The name of its
registered agent at that address is The Corporation Trust Company.
THIRD: The purposes of the Company are:
(1) to issue and sell up to $400 million of its
Senior Secured Notes due 2006, and up to $400 million
of its Senior Secured Notes due 2009 (collectively,
the "Secured Notes"), pursuant to a Purchase
Agreement (the "Purchase Agreement"), which notes
will be governed by the Indenture and subject to a
Registration Rights Agreement (the "Registration
Rights Agreement");
(2) to loan the proceeds from the issuance and sale
of the Secured Notes to R&B Falcon Corporation
("R&B"), which loans shall be evidenced by notes
issued by R&B (the "R&B Notes") and secured by:
(i) first priority ship mortgages on eight
drilling rigs owned by R&B (the "Ship
Mortgages");
(ii) by the collateral assignment of certain
rights of R&B in shipyard contracts for the
construction of two additional drilling
rigs, to be replaced by first priority ship
mortgages on such rigs upon their completion
and delivery (the "Additional Ship
Mortgages");
(iii) by security interests in certain equipment
purchased by R&B for use in the construction
of the two additional drilling rigs; and
(iv) by certain other collateral (the assignments
of the contract rights, the security
interests and the other collateral referred
to herein, collectively, the "Additional
Security");
(3) to collaterally assign to a collateral agent for
the benefit of the holders of the Secured Notes, as
security for the performance of the Company's
obligations under the Secured Notes, the Company's
rights under the R&B Notes and the liens securing
such R&B Notes; and
(4) to do all other things the Company deems
necessary, incidental or convenient to achieve the
purposes of the Company as set forth herein,
including, without limitation, modifying, amending or
supplementing the Secured Notes, the R&B Notes or the
Indenture, enforcing or protecting its rights under
or to the R&B Notes, the Ship Mortgages, the
Additional Ship Mortgages and the Additional
Security, and satisfying the requirements of or its
obligations under the Secured
-2-
<PAGE> 3
Notes, the Purchase Agreement, the Indenture and the
Registration Rights Agreement.
(5) to, in addition to the powers and authority
hereinbefore or by statute expressly conferred upon
them, exercise all such powers and do all such acts
and things as may be exercised or done by the
Company, subject, nevertheless, to the provisions of
the GCL, this Certificate of Incorporation, and any
By-Laws adopted by the stockholders; provided,
however, that no By-Laws hereafter adopted by the
stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws
had not been adopted.
FOURTH: Notwithstanding any other provision of this
Certificate of Incorporation, the Bylaws or any provision of law that
otherwise so empowers the Company, the Company shall do each of the
following:
(1) maintain its own bank accounts separate from any
other Person;
(2) maintain its own corporate books and records
separate from any other Person;
(3) produce annual financial statements which
disclose the effects of its operations in accordance
with generally accepted accounting principles in the
United States;
(4) fund its own operating expenses and other
obligations; and
(5) identify itself in all dealings with the other
Persons and the public under its own name and as a
separate and distinct entity and not identify itself
as being a division or part of any other Person.
FIFTH: Notwithstanding any other provision of this Certificate
of Incorporation, the Bylaws of the Company or any provision of law
that otherwise so empowers the Company, the Company shall not do any of
the following:
(1) engage in any business or activity other than in
connection with, relating to or facilitating the
activities set forth above in Articles THIRD and
FOURTH;
(2) incur any Indebtedness, or assume or guaranty any
Indebtedness of any other entity other than
Subordinated Obligations owing to R&B;
(3) commingle its assets with those of other Persons;
(4) dissolve or liquidate, in whole or in part;
(5) without the affirmative vote of 100% of the
members of the Board of Directors of the Company,
consolidate or merge with or into any other entity or
-3-
<PAGE> 4
convey or transfer its properties and assets
substantially as an entirety to any other entity; or
(6) without the affirmative vote of 100% of the
members of the Board of Directors of the Company,
institute proceedings to wind up, liquidate or be
adjudicated a bankrupt or insolvent, or consent to
the institution of winding up, liquidation,
bankruptcy or insolvency proceedings against it, or
file a petition seeking or consent to reorganization
or relief under any applicable law relating to
bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or a
substantial part of its property, or make any
assignment for the benefit of creditors, or admit in
writing its inability to pay its debts generally as
they become due, or take any corporate action in
furtherance of any such action.
SIXTH; The total number of shares of stock which the Company
shall have authority to issue is One Thousand (1,000) shares of Common
Stock, each having a par value of one cent ($.01) per share.
SEVENTH; The following provisions are inserted for the
management of the business and the conduct of the affairs of the
Company, and for further definition, limitation and regulation of the
powers of the Company and of its directors and stockholders:
(1) The business and affairs of the Company shall be
managed by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with
the stockholders to make, alter, amend, change, add to or
repeal the By-Laws of the Company.
(3) The number of directors of the Company shall be
as from time to time fixed by, or in the manner provided in,
the By-Laws of the Company. Election of directors need not be
by written ballot unless the By-Laws so provide.
(4) No director shall be personally liable to the
Company or any of its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the
GCL or (iv) for any transaction from which the director
derived an improper personal benefit. Any repeal or
modification of this Article FIFTH by the stockholders of the
Company shall not adversely affect any right or protection of
a director of the Company existing at the time of such repeal
or modification with respect to acts or omissions occurring
prior to such repeal or modification.
(5) In addition to the powers and authority
hereinbefore or by statute expressly conferred upon them, the
directors are hereby empowered to exercise all such powers and
do all such acts and things as may be exercised or done by the
Company, subject, nevertheless, to the provisions of the GCL,
this Certificate of Incorporation, and any By-
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Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate
any prior act of the directors which would have been valid if
such By-Laws had not been adopted.
EIGHTH; Meetings of stockholders may be held within or without
the State of Delaware, as the By-Laws may provide. The books of the
Company may be kept (subject to any provision contained in the GCL)
outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the
By-Laws of the Company.
NINTH: The Company reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights
conferred upon stockholders herein are granted subject to this
reservation.
TENTH: Notwithstanding any other provision of this
Certificate, the Bylaws of the Company, or any other provision of law
that so empowers the Company, the Company shall not, without the prior
written consent of each Trustee under the Indenture and the consent of
the entire Board of Directors, amend, alter, change or repeal Articles
THIRD, FOURTH, FIFTH or SEVENTH or this Article TENTH of this
Certificate of Incorporation.
ELEVENTH; For the purposes of this Certificate of
Incorporation, the following terms are defined as follows:
(1) "Capital Lease Obligation" of any Person means the
obligation to pay rent or other payment amounts under a lease
of (or other Indebtedness arrangement conveying the right to
use) real or personal property of such Person which is
required to be classified and accounted for as a capital lease
or a liability on the face of a balance sheet of such Person
in accordance with generally accepted accounting principles.
(2) "Capital Stock" means, with respect to any Person, any and
all shares, interests, rights to purchase, warrants or options
(whether or not currently exercisable), participations or
other equivalents of or interest in (however designated) the
equity (which includes, but is not limited to, common stock,
preferred stock and partnership and joint venture interests)
of such Person (excluding any debt securities that are
convertible into, or exchangeable for, such equity).
(3) "Incur" means issue, assume, guarantee, incur or otherwise
become liable for, provided however, that any Indebtedness or
Capital Stock of a Person existing at the time such person
becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be Incurred by
such Subsidiary at the time it becomes a Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative
meaning.
(4) "Indebtedness" means at any time (without duplication),
with respect to any Person, whether recourse is to all or a
portion of the assets of such Person, and whether or not
contingent, (i) any obligation of such Person for money
borrowed, (ii) any obligation of such Person evidenced by
bonds, debentures, notes, guarantees or other similar
instruments, including, without limitation, any such
obligations incurred in connection with acquisition of
Property, assets or businesses, excluding trade accounts
payable made in the ordinary
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course of business, (iii) any reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances
or similar facilities issued for the account of such Person,
(iv) any obligations of such Person issued or assumed as the
deferred purchase price of Property of services (but excluding
trade accounts payable or accrued liabilities arising in the
ordinary course of business, which in either case are not more
than 60 days overdue or which are being contested in good
faith), (v) any Capital Lease Obligation of such Person, (vi)
the maximum fixed redemption or repurchase price of
Disqualified Stock of such Person and (vii) any obligation of
the type referred to in clauses (i) through (vi) of this
definition of another Person and all dividends and
distributions of another Person the payment of which, in
either case, such Person has guaranteed or is responsible or
liable, directly or indirectly, as obligor, guarantor or
otherwise.
(5) "Indenture" means the indenture to be entered into by and
among the Company, R&B Falcon Corporation and United States
Trust Company, as Trustee (the "Trustee"), relating to the
issuance by the Company of $400.0 million of Senior Secured
Notes due 2006 and $400.0 million of Senior Secured Notes due
2009.
(6) "Issue Date" means the date on which the Secured Notes are
originally issued.
(7) "Person" means any individual, corporation, partnership,
joint venture, trust, unincorporated organization or
government or any agency or political subdivision thereof.
(8) "Subsidiary" means, with respect to any Person:
(a) any corporation of which more than 50% of the
total voting power of all classes of the capital
stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors
is owned by such Person directly or through one or
more other Subsidiaries of such Person, and
(b) any entity other than a corporation of which at
least a majority of the capital stock or other equity
interest (however designated) entitled (without
regard to the occurrence of any contingency) or vote
in the election of the governing body, partners,
managers or others that will control the management
of such entity is owned by such Person directly or
through one or more other Subsidiaries of such
Person.
(9) "Subordinated Obligation" means any Indebtedness of the
Company or R&B, as the case may be (whether outstanding on the
Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Secured Notes, the Guarantee
or the R&B Loans, as applicable, whether pursuant to a written
agreement to that effect or by operation of law.
TWELFTH; At least one director of the Company (an "Independent
Director") shall be none of (i) a member of the Board of Directors,
officer, employee or 10% beneficial owner of the outstanding Capital
Stock of any Affiliate or other person or entity owning beneficially
more than 10% of the outstanding shares of capital stock of the Company
(an "Affiliated Entity") or (ii) a
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director, officer, employee or 5% beneficial owner of the outstanding
Capital Stock, of any such Affiliated Entity's Subsidiaries or
Affiliates (other than Company).
For purposes of this Article TWELFTH, "Affiliate" means, as to
any Person, any other Person which directly or indirectly controls, or
is under common control with, or is controlled by, such Person. For
purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "under common control with," and
"controlled by") and as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through
the ownership of Voting Stock, by agreement or otherwise, provided,
further, that beneficial ownership of 10% or more of the Voting Stock
of a Person (on a fully diluted basis) shall be deemed to be control.
4. This Amended and Restated Certificate of Incorporation was duly adopted
by the vote of the stockholders in accordance with Sections 242 and 245
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said RBF Finance Co. has caused this Certificate to
be signed by Steven A. Webster, its President, this 25TH day of March 1999.
RBF FINANCE CO.
By: /s/ LEIGHTON E. MOSS
-------------------------------------
Leighton E. Moss, Vice President
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EXHIBIT 3.2
BYLAWS
OF
RBF FINANCE CO.
Article I
Offices
Section 1. Registered Office. The registered office of the Company
required by the General Corporation Law of the State of Delaware to be
maintained in the State of Delaware shall be the registered office named in the
original Certificate of Incorporation of the Company, or such other office as
may be designated from time to time by the Board of Directors in the manner
provided by law. Should the Company maintain a principal office within the State
of Delaware such registered office need not be identical to such principal
office of the Company.
Section 2. Other Offices. The Company may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Company may
require.
Article II
Stockholders
Section 1. Place of Meetings. All meetings of the stockholders shall be
held at the principal office of the Company, or at such other place within or
without the State of Delaware as shall be specified or fixed in the notices or
waivers of notice thereof.
Section 2. Quorum; Adjournment of Meetings. Unless otherwise required
by law or provided in the Certificate of Incorporation or these bylaws, the
holders of a majority of the stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum at
any meeting of stockholders for the transaction of business and the act of a
majority of such stock so represented at any meeting of stockholders at which a
quorum is present shall constitute the act of the meeting of stockholders. The
stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Notwithstanding the other provisions of the Certificate of
Incorporation or these bylaws, the chairman of the meeting or the holders of a
majority of the issued and outstanding stock, present in person or represented
by proxy, at any meeting of stockholders, whether or not a quorum is present,
shall have the power to adjourn such meeting from time to time, without any
notice other than
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announcement at the meeting of the time and place of the holding of the
adjourned meeting. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at such meeting. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally called.
Section 3. Annual Meetings. An annual meeting of the stockholders, for
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, within or without the State of Delaware, on such
date, and at such time as the Board of Directors shall fix and set forth in the
notice of the meeting, which date shall be within thirteen (13) months
subsequent to the later of the date of incorporation or the last annual meeting
of stockholders.
Section 4. Special Meetings. Unless otherwise provided in the
Certificate of Incorporation, special meetings of the stockholders for any
purpose or purposes may be called at any time by the Chairman of the Board (if
any), by the President or by a majority of the Board of Directors, or by a
majority of the executive committee (if any), and shall be called by the
Chairman of the Board (if any), by the President or the Secretary upon the
written request therefor, stating the purpose or purposes of the meeting,
delivered to such officer, signed by the holder(s) of at least ten percent (10%)
of the issued and outstanding stock entitled to vote at such meeting.
Section 5. Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors of the Company may
fix, in advance, a date as the record date for any such determination of
stockholders, which date shall not be more than sixty (60) days nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action.
If the Board of Directors does not fix a record date for any meeting of
the stockholders, the record date for determining stockholders entitled to
notice of or to vote at such meeting shall be at the close of business on the
day next preceding the day on which notice is given, or, if in accordance with
Article VIII, Section 3 of these bylaws notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. If, in
accordance with Section 12 of this Article II, corporate action without a
meeting of stockholders is to be taken, the record date for determining
stockholders entitled to express consent to such corporate action in writing,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed. The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
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Section 6. Notice of Meetings. Written notice of the place, date and
hour of all meetings, and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given by or at the direction of the
Chairman of the Board (if any) or the President, the Secretary or the other
person(s) calling the meeting to each stockholder entitled to vote thereat not
less than ten (10) nor more than sixty (60) days before the date of the meeting.
Such notice may be delivered either personally or by mail. If mailed, notice is
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Company.
Section 7. Stock List. A complete list of stockholders entitled to vote
at any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in the name of such stockholder, shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held. The stock list shall also be produced and
kept at the time and place of the meeting during the whole time thereof, and may
be inspected by any stockholder who is present.
Section 8. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to a corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. Proxies for use at any meeting of stockholders shall be filed with the
Secretary, or such other officer as the Board of Directors may from time to time
determine by resolution, before or at the time of the meeting. All proxies shall
be received and taken charge of and all ballots shall be received and canvassed
by the secretary of the meeting who shall decide all questions touching upon the
qualification of voters, the validity of the proxies, and the acceptance or
rejection of votes, unless an inspector or inspectors shall have been appointed
by the chairman of the meeting, in which event such inspector or inspectors
shall decide all such questions.
No proxy shall be valid after three (3) years from its date, unless the
proxy provides for a longer period. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power.
Should a proxy designate two or more persons to act as proxies, unless
such instrument shall provide the contrary, a majority of such persons present
at any meeting at which their powers thereunder are to be exercised shall have
and may exercise all the powers of voting or giving consents thereby conferred,
or if only one be present, then such powers may be exercised by that one; or, if
an even number attend and a majority do not agree on any particular issue, each
proxy so attending shall be entitled to exercise such powers in respect of the
same portion of the shares as he is of the proxies representing such shares.
Section 9. Voting; Elections; Inspectors. Unless otherwise required by
law or provided in the Certificate of Incorporation, each stockholder shall have
one vote for each share of stock entitled to vote which is registered in his
name on the record date for the meeting. Shares registered in the name of
another corporation, domestic or foreign, may be voted by such officer, agent or
proxy as
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the bylaw (or comparable instrument) of such corporation may prescribe, or in
the absence of such provision, as the Board of Directors (or comparable body) of
such corporation may determine. Shares registered in the name of a deceased
person may be voted by his executor or administrator, either in person or by
proxy.
All voting, except as required by the Certificate of Incorporation or
where otherwise required by law, may be by a voice vote; provided, however, that
upon demand therefor by stockholders holding a majority of the issued and
outstanding stock present in person or by proxy at any meeting a stock vote
shall be taken. Every stock vote shall be taken by written ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
All elections of directors shall be by ballot, unless otherwise provided in the
Certificate of Incorporation.
At any meeting at which a vote is taken by ballots, the chairman of the
meeting may appoint one or more inspectors, each of whom shall subscribe an oath
or affirmation to execute faithfully the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. Such
inspector shall receive the ballots, count the votes and make and sign a
certificate of the result thereof. The chairman of the meeting may appoint any
person to serve as inspector, except no candidate for the office of director
shall be appointed as an inspector.
Unless otherwise provided in the Certificate of Incorporation,
cumulative voting for the election of directors shall be prohibited.
Section 10. Conduct of Meetings. The meetings of the stockholders shall
be presided over by the Chairman of the Board (if any), or if he is not present,
by the President, or if neither the Chairman of the Board (if any), nor
President is present, by a chairman elected at the meeting. The Secretary of the
Company, if present, shall act as secretary of such meetings, or if he is not
present, an Assistant Secretary shall so act; if neither the Secretary nor an
Assistant Secretary is present, then a secretary shall be appointed by the
chairman of the meeting. The chairman of any meeting of stockholders shall
determine the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seem to him
in order. Unless the chairman of the meeting of stockholders shall otherwise
determine, the order of business shall be as follows:
(a) Calling of meeting to order.
(b) Election of a chairman and the appointment of a secretary if
necessary.
(c) Presentation of proof of the due calling of the meeting.
(d) Presentation and examination of proxies and determination of a
quorum.
(e) Reading and settlement of the minutes of the previous meeting.
(f) Reports of officers and committees.
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(g) The election of directors if an annual meeting, or a meeting
called for that purpose.
(h) Unfinished business.
(i) New business.
(j) Adjournment.
Section 11. Treasury Stock. The Company shall not vote, directly or
indirectly, shares of its own stock owned by it and such shares shall not be
counted for quorum purposes.
Section 12. Action Without Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action permitted or required by law, the
Certificate of Incorporation or these bylaws to be taken at a meeting of
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than a unanimous written consent shall be given by the Secretary to those
stockholders who have not consented in writing.
Article III
Board of Directors
Section 1. Power; Number; Term of Office. The business and affairs of
the Company shall be managed by or under the direction of the Board of
Directors, and subject to the restrictions imposed by law or the Certificate of
Incorporation, they may exercise all the powers of the Company.
The number of directors which shall constitute the whole Board of
Directors shall be no less than one and no more than five, the exact number of
which shall initially be fixed by the Incorporator and thereafter from time to
time by the Board of Directors (provided that no decrease in the number of
directors which would have the effect of shortening the term of an incumbent
director may be made by the stockholders). Each director shall hold office for
the term for which he is elected, and until his successor shall have been
elected and qualified or until his earlier death, resignation or removal.
Unless otherwise provided in the Certificate of Incorporation,
directors need not be stockholders nor residents of the State of Delaware.
Section 2. Quorum. Unless otherwise provided in the Certificate of
Incorporation, a majority of the total number of directors shall constitute a
quorum for the transaction of business of the Board of Directors and the vote of
a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
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Section 3. Place of Meetings; Order of Business. The directors may hold
their meetings and may have an office and keep the books of the Company, except
as otherwise provided by law, in such place or places, within or without the
State of Delaware, as the Board of Directors may from time to time determine by
resolution. At all meetings of the Board of Directors business shall be
transacted in such order as shall from time to time be determined by the
Chairman of the Board (if any), or in his absence by the President, or by
resolution of the Board of Directors.
Section 4. First Meeting. Each newly elected Board of Directors may
hold its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as the
annual meeting of the stockholders. Notice of such meeting shall not be
required. At the first meeting of the Board of Directors in each year at which a
quorum shall be present, held next after the annual meeting of stockholders, the
Board of Directors shall proceed to the election of the officers of the Company.
Section 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as shall be designated from time to time
by resolution of the Board of Directors. Notice of such regular meetings shall
not be required.
Section 6. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board (if any), the President or, on the
written request of any two directors, by the Secretary, in each case on at least
twenty-four (24) hours personal, written, telegraphic, cable or wireless notice
to each director. Such notice, or any waiver thereof pursuant to Article VIII,
Section 3 hereof, need not state the purpose or purposes of such meeting, except
as may otherwise be required by law or provided for in the Certificate of
Incorporation or these bylaws.
Section 7. Removal. Any director or the entire Board of Directors may
be removed, with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors; provided that, if the
Certificate of Incorporation expressly grants to stockholders the right to
cumulate votes for the election of directors and if less than the entire board
is to be removed, no director may be removed without cause if the votes cast
against his removal would be sufficient to elect him if then cumulatively voted
at an election of the entire Board of Directors, or, if there be classes of
directors, at an election of the class of directors of which such director is a
part.
Section 8. Vacancies; Increases in the Number of Directors. Unless
otherwise provided in the Certificate of Incorporation, vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office, although
less than a quorum, or a sole remaining director; and any director so chosen
shall hold office until the next annual election and until his successor shall
be duly elected and shall qualify, unless sooner displaced.
If the directors of the Company are divided into classes, any directors
elected to fill vacancies or newly created directorships shall hold office until
the next election of the class for which such directors shall have been chosen,
and until their successors shall be duly elected and shall qualify.
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Section 9. Compensation. Unless otherwise restricted by the Certificate
of Incorporation, the Board of Directors shall have the authority to fix the
compensation of directors.
Section 10. Action Without a Meeting; Telephone Conference Meeting.
Unless otherwise restricted by the Certificate of Incorporation, any action
required or permitted to be taken at any meeting of the Board of Directors, or
any committee designated by the Board of Directors, may be taken without a
meeting if all members of the Board of Directors or committee, as the case may
be consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or committee. Such consent
shall have the same force and effect as a unanimous vote at a meeting, and may
be stated as such in any document or instrument filed with the Secretary of
State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation,
subject to the requirement for notice of meetings, members of the Board of
Directors, or members of any committee designated by the Board of Directors, may
participate in a meeting of such Board of Directors or committee, as the case
may be, by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in such a meeting shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
Section 11. Approval or Ratification of Acts or Contracts by
Stockholders. The Board of Directors in its discretion may submit any act or
contract for approval or ratification at any annual meeting of the stockholders,
or at any special meeting of the stockholders called for the purpose of
considering any such act or contract, and any act or contract that shall be
approved or be ratified by the vote of the stockholders holding a majority of
the issued and outstanding shares of stock of the Company entitled to vote and
present in person or by proxy at such meeting (provided that a quorum is
present), shall be as valid and as binding upon the Company and upon all the
stockholders as if it has been approved or ratified by every stockholder of the
Company. In addition, any such act or contract may be approved or ratified by
the written consent of stockholders holding a majority of the issued and
outstanding shares of capital stock of the Company entitled to vote and such
consent shall be as valid and as binding upon the Company and upon all the
stockholders as if it had been approved or ratified by every stockholder of the
Company.
Article IV
Committees
Section 1. Designation; Powers. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, including, if they shall so determine, an executive committee, each
such committee to consist of one or more of the directors of the Company. Any
such designated committee shall have and may exercise such of the powers and
authority of the Board of Directors in the management of the business and
affairs of the Company as may be provided in such resolution, except that no
such committee shall have the power or authority of the Board of Directors in
reference to amending the Certificate of Incorporation,
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adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Company's property and assets, recommending to the stockholders a dissolution of
the Company or a revocation of a dissolution of the Company, or amending,
altering or repealing the bylaws or adopting new bylaws for the Company and,
unless such resolution or the Certificate of Incorporation expressly so
provides, no such committee shall have the power of authority to declare a
dividend or to authorize the issuance of stock. Any such designated committee
may authorize the seal of the Company to be affixed to all papers which may
require it. In addition to the above such committee or committees shall have
such other powers and limitations of authority as may be determined from time to
time by resolution adopted by the Board of Directors.
Section 2. Procedure; Meetings; Quorum. Any committee designated
pursuant to Section 1 of this Article shall choose its own chairman, shall keep
regular minutes of its proceedings and report the same to the Board of Directors
when requested, shall fix its own rules or procedures, and shall meet at such
times and at such place or places as may be provided by such rules, or buy
resolution of such committee or resolution of the Board of Directors. At every
meeting of any such committee, the presence of a majority of all the members
thereof shall constitute a quorum and the affirmative vote of a majority of the
members present shall be necessary for the adoption by it of any resolution.
Section 3. Substitution of Members. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of such committee. In
the absence or disqualification of a member of a committee, the member or
members present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of the absent or disqualified
member.
Article V
Officers
Section 1. Number, Titles and Term of Office. The officers of the
Company shall be a President, a Secretary and, if the Board of Directors so
elects, a Chairman of the Board and such other officers as the Board of
Directors may from time to time elect or appoint. Each officer shall hold office
until his successor shall be duly elected and shall qualify or until his death
or until he shall resign or shall have been removed in the manner hereinafter
provided. Any number of offices may be held by the same person, unless the
Certificate of Incorporation provides otherwise. Except for the Chairman of the
Board, if any, no officer need be a director.
Section 2. Salaries. The salaries or other compensation of the officers
and agents of the Company shall be fixed from time to time by the Board of
Directors.
Section 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed, either with or without cause, by the vote of
a majority of the whole Board of Directors at a special meeting called for the
purpose, or at any regular meeting of the Board of Directors,
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<PAGE> 9
provided the notice for such meeting shall specify that the matter of any such
proposed removal will be considered at the meeting but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
Section 4. Vacancies. Any vacancy occurring in any office of the
Company may be filled by the Board of Directors.
Section 5. Powers and Duties of the Chief Executive Officer. The
President shall be the chief executive officer of the Company unless the Board
of Directors designates the Chairman of the Board as chief executive officer.
Subject to the control of the Board of Directors and the executive committee (if
any), the chief executive officer shall have general executive charge,
management and control of the properties, business and operations of the Company
with all such powers as may be reasonably incident to such responsibilities; he
may agree upon and execute all leases, contracts, evidences of indebtedness and
other obligations in the name of the Company and may sign all certificates for
shares of capital stock of the Company; and shall have such other powers and
duties as designated in accordance with these bylaws and as from time to time
may be assigned to him by the Board of Directors.
Section 6. Powers and Duties of the Chairman of the Board. If elected,
the Chairman of the Board shall preside at all meetings of the stockholders and
of the Board of Directors; and he shall have such other powers and duties as
designated in these bylaws and as from time to time may be assigned to him by
the Board of Directors.
Section 7. Powers and Duties of the President. Unless the Board of
Directors otherwise determines, the President shall have the authority to agree
upon and execute all leases, contracts, evidences of indebtedness and other
obligations in the name of the Company; and, unless the Board of Directors
otherwise determines, he shall, in the absence of the Chairman of the Board or
if there be no Chairman of the Board, preside at all meetings of the
stockholders and (should he be a director) of the Board of Directors; and he
shall have such other powers and duties as designated in accordance with these
bylaws and as from time to time may be assigned to him by the Board of
Directors.
Section 8. Vice Presidents. In the absence of the President, or in the
event of his inability or refusal to act, a Vice President designated by the
Board of Directors shall perform the duties of the President, and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President. In the absence of a designation by the Board of Directors of a Vice
President to perform the duties of the President, or in the event of his absence
or inability or refusal to act, the Vice President who is present and who is
senior in terms of time as a Vice President of the Company shall so act. The
Vice Presidents shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
Section 9. Treasurer. The Treasurer shall have responsibility for the
custody and control of all the funds and securities of the Company, and he shall
have such other powers and duties as designated in these bylaws and as from time
to time may be assigned to him by the Board of
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<PAGE> 10
Directors. He shall perform all acts incident to the position of Treasurer,
subject to the control of the chief executive officer and the Board of
Directors; and he shall, if required by the Board of Directors, give such bond
for the faithful discharge of his duties in such form as the Board of Directors
may require.
Section 10. Assistant Treasurers. Each Assistant Treasurer shall have
the usual powers and duties pertaining to his office, together with such other
powers and duties as designated in these bylaws and as from time to time may be
assigned to him by the chief executive officer or the Board of Directors. The
Assistant Treasurers shall exercise the powers of the Treasurer during that
officer's absence or inability or refusal to act.
Section 11. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors, committees of directors and the
stockholders, in books provided for that purpose; he shall attend to the giving
and serving of all notices; he may in the name of the Company affix the seal of
the Company to all contracts of the Company and attest the affixation of the
seal of the Company thereto; he may sign with the other appointed officers all
certificates for shares of capital stock of the Company; he shall have charge of
the certificate books, transfer books and stock ledgers, and such other books
and papers as the Board of Directors may direct, all of which shall at all
reasonable times be open to inspection of any director upon application at the
office of the Company during business hours; he shall have such other powers and
duties as designated in these bylaws and as from time to time may be assigned to
him by the Board of Directors; and he shall in general perform all acts incident
to the office of Secretary, subject to the control of the chief executive
officer and the Board of Directors.
Section 12. Assistant Secretaries. Each Assistant Secretary shall have
the usual powers and duties pertaining to his office, together with such other
powers and duties as designated in these bylaws and as from time to time may be
assigned to him by the chief executive officer or the Board of Directors. The
Assistant Secretaries shall exercise the powers of the Secretary during that
officer's absence or inability or refusal to act.
Section 13. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the chief executive officer
shall have power to vote and otherwise act on behalf of the Company, in person
or by proxy, at any meeting of security holders of or with respect to any action
of security holders of any other corporation in which this Company may hold
securities and otherwise to exercise any and all rights and powers which this
Company may possess by reason of its ownership of securities in such other
corporation.
Article VI
Indemnification of Directors,
Officers, Employees and Agents
Section 1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he
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<PAGE> 11
or she, or a person of whom he or she is the legal representative, is or was or
has agreed to become a director or officer of the Company or is or was serving
or has agreed to serve at the request of the Company as a director or officer of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director or officer or in any other capacity while serving or having agreed to
serve as a director or officer, shall be indemnified and held harmless by the
Company to the fullest extent authorized by the Delaware General Company Law, as
the same exists or may hereafter be amended, (but, in the case of any such
amendment, only to the extent that such amendment permits the Company to provide
broader indemnification rights than said law permitted the Company to provide
prior to such amendment) against all expense, liability and loss (including,
without limitation, attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to serve in the capacity which initially
entitled such person to indemnity hereunder and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that the
Company shall indemnify any such person seeking indemnification in connection
with a proceeding (or part thereof) initiated by such person only if such
proceeding (or part thereof) was authorized by the board of directors of the
Company. The right to indemnification conferred in this Article VI shall be a
contract right and shall include the right to be paid by the Company the
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General Company Law
requires, the payment of such expenses incurred by a current, former or proposed
director or officer in his or her capacity as a director or officer or proposed
director or officer (and not in any other capacity in which service was or is or
has been agreed to be rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Company of an undertaking, by or on behalf of such indemnified person, to
repay all amounts so advanced if it shall ultimately be determined that such
indemnified person is not entitled to be indemnified under this Section or
otherwise.
Section 2. Indemnification of Employees and Agents. The Company may, by
action of its Board of Directors, provide indemnification to employees and
agents of the Company, individually or as a group, with the same scope and
effect as the indemnification of directors and officers provided for in this
Article.
Section 3. Right of Claimant to Bring Suit. If a written claim received
by the Company from or on behalf of an indemnified party under this Article VI
is not paid in full by the Company within ninety days after such receipt, the
claimant may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Company) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law for
the Company to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Company. Neither the failure of the Company
(including its Board of Directors, independent legal counsel, or
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<PAGE> 12
its stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Company
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 4. Nonexclusivity of Rights. The right to indemnification and
the advancement and payment of expenses conferred. in this Article VI shall not
be exclusive of any other right which any person may have or hereafter acquire
under any law (common or statutory), provision of the Certificate of
Incorporation of the Company, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 5. Insurance. The Company may maintain insurance, at its
expense, to protect itself and any person who is or was serving as a director,
officer, employee or agent of the Company or is or was serving at the request of
the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Company would have the power to indemnify
such person against such expense, liability or loss under the Delaware General
Corporation Law.
Section 6. Savings Clause. If this Article VI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Company shall nevertheless indemnify and hold harmless each director and
officer of the Company as to costs, charges and expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement with respect to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative to the full extent permitted by any applicable portion of this
Article VI that shall not have been invalidated and to the fullest extent
permitted by applicable law.
Article VII
Capital Stock
Section 1. Certificates of Stock. The certificates for shares of the
capital stock of the Company shall be in such form, not inconsistent with that
required by law and the Certificate of Incorporation, as shall be approved by
the Board of Directors. The Chairman of the Board (if any), President or a Vice
President shall cause to be issued to each stockholder one or more certificates,
under the seal of the Company or a facsimile thereof if the Board of Directors
shall have provided for such seal, and signed by the Chairman of the Board (if
any), President or a Vice President and the Secretary or an Assistant Secretary
or the Treasurer or an Assistant Treasurer certifying the number of shares (and,
if the stock of the Company shall be divided into classes or series, the class
and series of such shares) owned by such stockholder in the Company; provided,
however, that any of or all the signatures on the certificate may be facsimile.
The stock record books and the blank stock certificate books shall be kept by
the Secretary, or at the office of such transfer agent or transfer agents as the
Board of Directors may from time to time by resolution determine. In case any
officer,
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<PAGE> 13
transfer agent or registrar who shall have signed or whose facsimile signature
or signatures shall have been placed upon any such certificate or certificates
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued by the Company, such certificate may nevertheless be
issued by the Company with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue. The stock certificates shall
be consecutively numbered and shall be entered in the books of the Company as
they are issued and shall exhibit the holder's name and number of shares.
Section 2. Transfer of Shares. The shares of stock of the Company shall
be transferable only on the books of the Company by the holders thereof in
person or by their duly authorized attorneys or legal representatives upon
surrender and cancellation of certificates for a like number of shares. Upon
surrender to the Company or a transfer agent of the Company of a certificate for
shares duly endorsed or accompanied by proper evidence of succession, assignment
or authority to transfer, it shall be the duty of the Company to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 3. Ownership of Shares. The Company shall be entitled to treat
the holder of record of any share or shares of capital stock of the Company as
the holder in fact thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of the State of Delaware.
Section 4. Regulations Regarding Certificates. The Board of Directors
shall have the power and authority to make all such rules and regulations as
they may deem expedient concerning the issue, transfer and registration or the
replacement of certificates for shares of capital stock of the Company.
Section 5. Lost or Destroyed Certificates. The Board of Directors may
determine the conditions upon which a new certificate of stock may be issued in
place of a certificate which is alleged to have been lost, stolen or destroyed;
and may, in their discretion, require the owner of such certificate or his legal
representative to give bond, with sufficient surety, to indemnify the Company
and each transfer agent and registrar against any and all losses or claims which
may arise by reason of the issue of a new certificate in the place of the one so
lost, stolen or destroyed.
Article VIII
Miscellaneous Provisions
Section 1. Fiscal Year. The fiscal year of the Company shall be such as
established from time to time by the Board of Directors.
Section 2. Corporate Seal. The Board of Directors may provide a
suitable seal, containing the name of the Company. The Secretary shall have
charge of the seal (if any). If and when so directed by the Board of Directors
or a committee thereof, duplicates of the seal may be kept and used by the
Treasurer or by the Assistant Secretary or Assistant Treasurer.
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<PAGE> 14
Section 3. Notice and Waiver of Notice. Whenever any notice is required
to be given by law, the Certificate of Incorporation or under the provisions of
these bylaws, said notice shall be deemed to be sufficient if given (i) by
telegraphic, cable or wireless transmission or (ii) by deposit of the same in a
post office box in a sealed prepaid wrapper addressed to the person entitled
thereto at his post office address, as it appears on the records of the Company,
and such notice shall be deemed to have been given on the day of such
transmission or mailing, as the case may be.
Whenever notice is required to be given by law, the Certificate of
Incorporation or under any of the provisions of these bylaws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors, or members of a committee of directors need be specified in any
written waiver of notice unless so required by the Certificate of Incorporation
or the bylaws.
Section 4. Resignations. Any director, member of a committee or officer
may resign at any time. Such resignation shall be made in writing and shall take
effect at the time specified therein, or if no time be specified, at the time of
its receipt by the chief executive officer or Secretary. The acceptance of a
resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation.
Section 5. Facsimile Signatures. In addition to the provisions for the
use of facsimile signatures elsewhere specifically authorized in these bylaws,
facsimile signatures of any officer or officers of the Company may be used
whenever and as authorized by the Board of Directors.
Section 6. Reliance upon Books, Reports and Records. Each director and
each member of any committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon the
books of account or reports made to the Company by any of its officers, or by an
independent certified public accountant, or by an appraiser selected with
reasonable care by the Board of Directors or by any such committee, or in
relying in good faith upon other records of the Company.
Article IX
Amendments
If provided in the Certificate of Incorporation of the Company, the
Board of Directors shall have the power to adopt, amend and repeal from time to
time bylaws of the Company, subject to the right of the stockholders entitled to
vote with respect thereto to amend or repeal such bylaws as adopted or amended
by the Board of Directors.
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EXHIBIT 4.1
RBF FINANCE CO.
as Issuer
$800,000,000
11% Senior Secured Notes due 2006
11 3/8% Senior Secured Notes due 2009
----------------
INDENTURE
Dated as of March 26, 1999
----------------
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
----------------
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS AND INCORPORATION.............................................................................1
SECTION 1.1 Definitions.....................................................................................1
SECTION 1.2 Other Definitions..............................................................................24
SECTION 1.3 Incorporation By Reference of Trust Indenture Act..............................................25
SECTION 1.4 Rules of Construction..........................................................................26
ARTICLE II THE NOTES...............................................................................................26
SECTION 2.1 Form and Dating................................................................................26
SECTION 2.2 Execution and Authentication...................................................................30
SECTION 2.3 Registrar and Paying Agent.....................................................................30
SECTION 2.4 Paying Agent to Hold Money in Trust............................................................31
SECTION 2.5 Holder Lists...................................................................................31
SECTION 2.6 Transfer and Exchange..........................................................................31
SECTION 2.7 Replacement of Secured Notes...................................................................41
SECTION 2.8 Outstanding Secured Notes......................................................................41
SECTION 2.9 Treasury Secured Notes.........................................................................42
SECTION 2.10 Temporary Secured Notes........................................................................42
SECTION 2.11 Cancellation...................................................................................42
SECTION 2.12 Payment of Interest; Interest Rights Preserved.................................................43
SECTION 2.13 Computation of Interest........................................................................44
SECTION 2.14 CUSIP Number...................................................................................44
ARTICLE III REDEMPTION AND PREPAYMENT..............................................................................44
SECTION 3.1 Notices to Trustee.............................................................................44
SECTION 3.2 Selection of Secured Notes to be Redeemed......................................................44
SECTION 3.3 Notice of Redemption...........................................................................45
SECTION 3.4 Effect of Notice of Redemption.................................................................46
SECTION 3.5 Deposit of Redemption Price....................................................................46
SECTION 3.6 Secured Notes Redeemed in Part.................................................................46
SECTION 3.7 Optional Redemptions...........................................................................47
SECTION 3.8 Redemption Upon Loss of a Mortgaged Rig........................................................49
SECTION 3.9 Redemption Upon Sale of a Mortgaged Rig........................................................49
SECTION 3.10 Excess Proceeds Offer..........................................................................51
ARTICLE IV COVENANTS...............................................................................................54
SECTION 4.1 Payment of Secured Notes.......................................................................54
SECTION 4.2 Maintenance of Office or Agency................................................................54
SECTION 4.3 Corporate Existence............................................................................55
SECTION 4.4 Maintenance of Properties and Insurance........................................................55
SECTION 4.5 Compliance With Laws...........................................................................56
SECTION 4.6 Taxes and Other Claims.........................................................................56
</TABLE>
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SECTION 4.7 Stay, Extension and Usury Laws.................................................................56
SECTION 4.8 Change of Control..............................................................................57
SECTION 4.9 Limitations on Indebtedness....................................................................60
SECTION 4.10 Limitation on Liens............................................................................62
SECTION 4.11 Limitation on Restricted Payments..............................................................63
SECTION 4.12 Limitation on Sale/Leaseback Transactions......................................................66
SECTION 4.13 SEC Reports....................................................................................67
SECTION 4.14 Limitation on Restrictions on Distributions from Restricted Subsidiaries.......................67
SECTION 4.15 Limitation on Asset Sales......................................................................68
SECTION 4.16 Limitation on Asset Swaps......................................................................69
SECTION 4.17 Limitation on Affiliate Transactions...........................................................70
SECTION 4.18 Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries.................70
SECTION 4.19 Future Subsidiary Guarantor....................................................................71
SECTION 4.20 Impairment of Liens............................................................................71
SECTION 4.21 Limitation on Issuer Activities................................................................72
SECTION 4.22 Compliance Certificate; Notice of Default or Event of Default..................................72
SECTION 4.23 Prohibition on Issuer and Guarantor Becoming an Investment Company.............................73
SECTION 4.24 Additional Amounts.............................................................................73
ARTICLE V CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER.....................................................75
SECTION 5.1 Limitations on Mergers and Consolidations......................................................75
SECTION 5.2 Successor Corporation Substituted..............................................................76
ARTICLE VI DEFAULTS AND REMEDIES...................................................................................77
SECTION 6.1 Events of Default..............................................................................77
SECTION 6.2 Acceleration...................................................................................79
SECTION 6.3 Other Remedies.................................................................................80
SECTION 6.4 Waiver of Past Defaults........................................................................80
SECTION 6.5 Control By Majority............................................................................81
SECTION 6.6 Limitation on Suits............................................................................81
SECTION 6.7 Rights of Holders of Secured Notes to Receive Payment..........................................82
SECTION 6.8 Collection Suit by Trustee.....................................................................82
SECTION 6.9 Trustee May File Proofs of Claim...............................................................82
SECTION 6.10 Priorities.....................................................................................83
SECTION 6.11 Undertaking For Costs..........................................................................84
SECTION 6.12 Restoration of Rights and Remedies.............................................................84
SECTION 6.13 Rights and Remedies Cumulative.................................................................84
SECTION 6.14 Delay or Omission Not Waiver...................................................................84
ARTICLE VII TRUSTEE................................................................................................85
SECTION 7.1 Duties of Trustee..............................................................................85
SECTION 7.2 Rights of Trustee..............................................................................86
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SECTION 7.3 Individual Rights of Trustee...................................................................87
SECTION 7.4 Trustee's Disclaimer...........................................................................87
SECTION 7.5 Notice of Defaults.............................................................................88
SECTION 7.6 Reports by Trustee to Holders of the Secured Notes.............................................88
SECTION 7.7 Compensation and Indemnity.....................................................................88
SECTION 7.8 Replacement of Trustee.........................................................................89
SECTION 7.9 Successor Trustee by Merger, Etc...............................................................91
SECTION 7.10 Eligibility; Disqualification..................................................................91
SECTION 7.11 Preferential Collection of Claims Against the Issuer...........................................91
ARTICLE VIII SATISFACTION AND DISCHARGE............................................................................91
SECTION 8.1 Satisfaction and Discharge.....................................................................91
SECTION 8.2 Application of Trust Money.....................................................................92
SECTION 8.3 Repayment of the Issuer........................................................................93
SECTION 8.4 Reinstatement..................................................................................93
ARTICLE IX DEFEASANCE AND COVENANT DEFEASANCE......................................................................93
SECTION 9.1 Option to Effect Defeasance or Covenant Defeasance.............................................93
SECTION 9.2 Defeasance and Discharge.......................................................................94
SECTION 9.3 Covenant Defeasance............................................................................94
SECTION 9.4 Conditions to Defeasance or Covenant Defeasance................................................95
SECTION 9.5 Deposited Money and U.S. Government Obligations To Be Held in Trust; Other Miscellaneous
Provisions..................................................................................96
SECTION 9.6 Repayment to the Issuer........................................................................97
SECTION 9.7 Reinstatement..................................................................................97
ARTICLE X AMENDMENT, SUPPLEMENT AND WAIVER.........................................................................98
SECTION 10.1 Without Consent of Holders of Secured Notes....................................................98
SECTION 10.2 With Consent of Holders of Secured Notes.......................................................99
SECTION 10.3 Effect of Supplemental Indentures.............................................................101
SECTION 10.4 Compliance with Trust Indenture Act...........................................................101
SECTION 10.5 Revocation and Effect of Consents.............................................................101
SECTION 10.6 Notation on or Exchange of Secured Notes......................................................102
SECTION 10.7 Trustee to Sign Supplemental Indentures.......................................................102
SECTION 10.8 Payment for Consent...........................................................................103
ARTICLE XI COLLATERAL AND SECURITY................................................................................103
SECTION 11.1 Security Agreements...........................................................................103
SECTION 11.2 Recording and Opinions........................................................................104
SECTION 11.3 Further Assurances and Security...............................................................105
SECTION 11.4 Possession, Use and Release of Collateral.....................................................105
SECTION 11.5 Certificates of the Issuer....................................................................107
SECTION 11.6 Authorization of Actions to be Taken by the Trustee Under the Security Agreements.............107
SECTION 11.7 Authorization of Receipt of Funds by the Trustee Under the Security Agreements................108
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ARTICLE XII MISCELLANEOUS.........................................................................................108
SECTION 12.1 Trust Indenture Act Controls..................................................................108
SECTION 12.2 Notices.......................................................................................109
SECTION 12.3 Communication By Holders of Secured Notes With Other Holders of Secured Notes.................109
SECTION 12.4 Certificate and Opinion as to Conditions Precedent............................................109
SECTION 12.5 Statements Required in a Certificate or Opinion...............................................110
SECTION 12.6 Acts of Holders...............................................................................110
SECTION 12.7 Rules by Trustee and Agents...................................................................112
SECTION 12.8 No Personal Liability of Directors, Officers, Employees and Stockholders......................112
SECTION 12.9 Governing Law.................................................................................112
SECTION 12.10 Agent for Service; Submission to Jurisdiction; Waiver of Immunities...........................112
SECTION 12.11 No Adverse Interpretation of Other Agreements.................................................113
SECTION 12.12 Successors....................................................................................113
SECTION 12.13 Severability..................................................................................113
SECTION 12.14 Counterpart Originals.........................................................................114
SECTION 12.15 Table of Contents, Headings, Etc..............................................................114
ARTICLE XIII GUARANTEES...........................................................................................114
SECTION 13.1 Guarantor.....................................................................................114
SECTION 13.2 Limitation on Liability.......................................................................117
SECTION 13.3 Execution and Delivery of Guarantees..........................................................117
SECTION 13.4 No Waiver.....................................................................................117
SECTION 13.5 Modification..................................................................................118
SECTION 13.6 Release of Subsidiary Guarantor...............................................................118
SECTION 13.7 Future Guarantor; Execution of Supplemental Indentures for Future Guarantor...................118
</TABLE>
SCHEDULES
SCHEDULE 1.1(a) ............... Existing Investments
SCHEDULE 4.13 ............... Existing Indebtedness and
Preferred Stock of Subsidiaries
SCHEDULE A ............... Guarantor
iv
<PAGE> 6
EXHIBITS
EXHIBIT A ........... Form of Secured Note
EXHIBIT B-1 ........... Form of Certificate for Exchange or
Registration of Transfer from U.S.
Global Note to Regulation S Global Note
EXHIBIT B-2 ........... Form of Certificate for Exchange or
Registration of Transfer from Regulation
S Global Note to U.S. Global Note
EXHIBIT B-3 ........... Form of Certificate for Exchange or
Registration of Transfer of Certificated
Secured Notes
EXHIBIT B-4 ........... Form of Certificate for Exchange or
Registration of Transfer from U.S.
Global Note or Regulation S Permanent
Global Note to Certificated Note
EXHIBIT C ........... Form of Certificate From Acquiring
Institutional Accredited Investor
v
<PAGE> 7
INDENTURE, dated as of March 26, 1999, among RBF Finance Co., a
Delaware corporation (the "Issuer"), R&B Falcon Corporation, a Delaware
corporation (the "Guarantor" or "Company"), and United States Trust Company of
New York as trustee (the "Trustee").
RECITALS
The Issuer has duly authorized the creation and issuance of its 11%
Senior Secured Notes due 2006 and its 11 3/8% Senior Secured Notes due 2009
(each series together referred to as the "Initial Secured Notes") of
substantially the tenor and amount hereinafter set forth; and to provide
therefor and for, if and when issued as further evidence of the Issuer's
indebtedness and in substitution for the Initial Secured Notes pursuant to this
Indenture and the Registration Rights Agreement (as defined herein), the
Issuer's 11% Senior Secured Notes due 2006 and its 11 3/8% Senior Secured Notes
due 2009 (each series together referred to as the "Exchange Secured Notes," and
together with the Initial Secured Notes, the "Secured Notes"), the Issuer has
duly authorized the execution and delivery of this Indenture. Unless otherwise
stated, "Secured Note" or "Secured Notes" refers to a note or notes of both
series.
All things necessary to make the Secured Notes, when executed by the
Issuer and authenticated and delivered by the Trustee hereunder and duly issued
by the Issuer, the valid obligations of the Issuer, and to make this Indenture a
valid instrument of the Issuer and the Guarantor, in accordance with their
respective terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, for and in
consideration of the premises and the purchase of the Initial Secured Notes by
the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Secured Notes, as follows:
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.1 Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
"Acquired Indebtedness" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other Person merging with or into, or becoming a
Subsidiary of such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a
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Restricted Subsidiary as a result of the acquisition of such Capital Stock by
the Company or another Restricted Subsidiary or (iii) Capital Stock constituting
a minority interest in any Person that at such time is a Restricted Subsidiary;
provided, however, that any such Restricted Subsidiary described in clause (ii)
or (iii) above is primarily engaged in a Related Business. Proceeds of insurance
arising from damage for an asset shall be deemed to have been invested in
Additional Assets to the extent of the cost of such repairs made to such asset.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date means the
amount by which the fair value of the assets and property of such Subsidiary
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under its Subsidiary Guarantee, of such Subsidiary Guarantor at such
date.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of Voting Stock, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing;
provided, however, that "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 5% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of such a Person or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable).
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange
of beneficial interests in a Global Note, the rules and procedures of the
Depository and the Trustee that apply to such transfer and exchange.
"Asset Sale" means any direct or indirect sale, capital lease, transfer
or other disposition (or series of related sales, capital leases, transfers or
dispositions) by the Company or any Restricted Subsidiary, including any
disposition by means of a merger, consolidation or similar transaction (each
referred to for the purposes of this definition as a "disposition") in one
transaction or a series of related transactions, of (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying shares or
shares required by applicable law to be held by a Person other than the Company
or a Restricted Subsidiary), (ii) any drillship or drilling rig or all or
substantially all the assets of any division or line of business of the Company
or any Restricted Subsidiary or (iii) any other assets of the Company or any
Restricted Subsidiary outside of the ordinary course of business of the Company
or such Restricted Subsidiary (other than, in the case of (i), (ii) and (iii)
above, (u) a disposition by a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Wholly Owned Restricted Subsidiary, (v)
for purposes of the covenant described under Section 4.15 hereof only, a
disposition that constitutes a Restricted Payment permitted by the covenant
described under Section 4.11 hereof, (w) Asset Swaps permitted under Section
4.16 hereof, (x) dispositions of Incidental Assets, (y) dispositions of
Temporary Cash Investments and (z) a disposition of assets with a fair market
value of less than $100,000).
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"Asset Swap" means a substantially concurrent purchase and sale, or
exchange, of assets constituting Additional Assets described in clause (i) of
the definition thereof between the Company or any Restricted Subsidiary and
another Person or group of Persons; provided, however, that the cash and other
assets to be received by the Company or such Restricted Subsidiary which do not
constitute Additional Assets do not constitute more than 25% of the total
consideration to be received by the Company or such Restricted Subsidiary in
such Asset Swap.
"Attributable Indebtedness," when used with respect to any
Sale/Leaseback Transaction, means, as at the time of determination, the present
value (discounted at the rate set forth or implicit in the terms of the lease
included in such transaction) of the total obligations of the lessee for rental
payments (other than amounts required to be paid on account of property taxes,
maintenance, repairs, insurance, assessments, utilities, operating and labor
costs and other items which do not constitute payments for property rights)
during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of a Person or any
committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" means a copy of a resolution certified by a
Secretary or Assistant Secretary of a Person to have been duly adopted by the
Board of Directors thereof and to be in full force and effect on the date of
such certification and delivered to the Trustee.
"Business Day" means each day which is not a Legal Holiday.
"Capitalized Lease Obligation" of any Person means any obligation of
such Person to pay rent or other amounts under a lease of property, real or
person, that is required to be capitalized for financial reporting purposes in
accordance with generally accepted accounting principles and the amount of such
obligation shall be the capitalized amount thereof determined in accordance with
GAAP.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, rights to purchase, warrants or options (whether or not currently
exercisable), participations or other equivalents of or interests in (however
designated) the equity (which includes, but is not limited to, common stock,
preferred stock and partnership and joint venture interests) of such Person
(excluding any debt securities that are convertible into, or exchangeable for,
such equity).
"Cedel" means Cedel Bank, societe anonyme (or any successor securities
clearing agency).
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"Certificated Secured Notes" means Secured Notes that are substantially
in the form of the Secured Note attached hereto as Exhibit A that do not include
the information or text called for by footnotes 1, 2 and 3 thereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" shall include, in each case as pledged and assigned to the
Collateral Agent, the Trustee or the Issuer, as applicable, pursuant to the
Security Agreements, (1) all of the Issuer Loans and Issuer Loan Agreements (2)
all cash held by the Collateral Agent and the Trustee pursuant to the Indenture
or the Security Agreements and the Issuer Escrow Account and all Issuer Escrowed
Property held pursuant to the Issuer Escrow Agreement (including any cash
collateral deposited therein by the Issuer); and (3) the Company's right, title
and interest in and to (i) each of its respective Mortgaged Rigs, pursuant to a
Mortgage issued by the Company in favor of the Issuer, which Mortgage contains
covenants pursuant to which the Company, among other things, will be prohibited
from selling, mortgaging or transferring any of its interest in such Mortgaged
Rig (other than as permitted under the Indenture), and which Mortgage will be
collaterally assigned to the Trustee, (ii) the Company's interest in
construction contracts and equipment purchased by the Company for Mortgaged Rigs
pursuant to a Company Security Agreement and (iii) the Company Escrow Account
and the Company Escrowed Property; and (4) all proceeds of any of the foregoing
including from all the Company's policies and contracts of insurance taken out
from time to time in respect each of its Mortgaged Rigs.
"Common Stock" means Capital Stock other than Preferred Stock.
"Company Order" means a written order or request signed in the name of
an Officer and delivered to the Trustee.
"Company" means the Person named as such in the preamble of this
Indenture unless and until a successor replaces it pursuant to the applicable
provisions hereof and thereafter means such successor.
"Company Escrow Account" means the escrow account established under the
Company Escrow Agreement.
"Company Escrow Agreement" means the Issuer Loan Escrow Agreement of
even date herewith among the Company, the Issuer, the Trustee and United States
Trust Company of New York as escrow agent providing for deposit into escrow of
$100,000,000 pending completion, flagging and mortgaging of the Mortgaged Rig
Deepwater Millennium.
"Company Escrowed Property" means the funds and Investments contained
in the Company Escrow Account.
"Company Security Agreement" means a each Security and Pledge Agreement
entered into between the Company and the Issuer as security for an Issuer Loan.
"Consolidated EBITDA Coverage Ratio" as of any date of determination
means the ratio of (a) the aggregate amount of EBITDA for the period of the most
recent four
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consecutive fiscal quarters ending at least 45 days prior to the date of such
determination to (b) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that:
(1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding or
if the transaction giving rise to the need to calculate the Consolidated
EBITDA Coverage Ratio is an issuance of Indebtedness, or both, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been issued on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period;
(2) if since the beginning of such period the Company or any Restricted
Subsidiary shall have made any asset disposition, the EBITDA for such period
shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such asset disposition
for such period, or increased by an amount equal to the EBITDA (if
negative), directly attributable thereto for such period, and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of
the Company or any Restricted Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to the Company and its continuing
Subsidiaries in connection with such asset dispositions for such period (or,
if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness
of such Restricted Subsidiary to the extent the Company and its continuing
Subsidiaries are no longer liable for such Indebtedness after such sale);
(3) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring
in connection with a transaction causing a calculation to be made hereunder,
which constitutes all or substantially all of an operating unit of a
business (which shall include the acquisition or construction of a vessel or
drilling rig, provided the Company has paid 75% or more of the cost thereof
and such vessel or drilling rig is reasonably expected to be delivered
within 90 days), EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto (including the
issuance of any Indebtedness) as if such Investment or acquisition occurred
on the first day of such period; and
(4) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall have made
any asset disposition or any Investment that would have required an
adjustment pursuant to clause (2) or (3) above if made by the Company or a
Restricted Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto as if such asset disposition or Investment occurred on the first day
of such period.
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For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings relating
thereto, and the amount of Consolidated Interest Expense associated with any
Indebtedness issued in connection therewith, the pro forma calculations shall be
determined in good faith by a responsible financial or accounting officer of the
Company. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest of such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Protection
Agreement applicable to such Indebtedness if such Interest Rate Protection
Agreement has a remaining term in excess of 12 months).
For purposes of this definition, in the case of the acquisition since
the beginning of such period of a drilling rig or drillship (or of a Restricted
Subsidiary owning same) by the Company or by a Restricted Subsidiary since the
beginning of such period of a drilling rig or drillship to the Company or a
Restricted Subsidiary pursuant to a binding construction contract, which
drilling rig or drillship has been subject for at least one full fiscal quarter
to a binding drilling contract constituting a Qualifying Contract, then, for
purposes of making the pro forma calculations provided for in the first sentence
of the preceding paragraph, the financial or accounting officer of the Company
shall give pro forma effect to the earnings (losses) of such drilling rig or
drillship as if such drilling rig or drillship were acquired on the first day of
such period, by basing such earnings (losses) on the annualized (x) historical
revenues actually earned from such Qualifying Contract and (y) actual expenses
related thereto, in each case for each quarter during such period in which the
Qualifying Contract is in effect.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
plus, to the extent not included in such interest expense:
(1) interest expense attributable to Capitalized Lease Obligations;
(2) amortization of debt discount and debt issuance cost;
(3) capitalized interest;
(4) non-cash interest payments;
(5) commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers' acceptance financing;
(6) net costs under Interest Rate Protection Agreements (including
amortization of fees);
(7) dividends in respect of any Redeemable Stock held by Persons other
than the Company or a Restricted Subsidiary;
(8) interest expense attributable to deferred payment obligations; and
(9) interest expense on Indebtedness of another Person to the extent
that such Indebtedness is guaranteed by the Company or a Restricted
Subsidiary.
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"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:
(a) any net income of any Person if such Person is not a Restricted
Subsidiary, except that (1) the Company's equity in the net income of any
such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in
clause (c) below) and (2) the Company's equity in a net loss of any such
Person for such period shall be included in determining such Consolidated
Net Income;
(b) any net income of any Person acquired by the Company or a
Restricted Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition;
(c) any net income of any Restricted Subsidiary to the extent such
Restricted Subsidiary is subject to restrictions, directly or indirectly, on
the payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (1) the net
income of Cliffs Drilling Company shall be included notwithstanding the
foregoing, (2) the net income of a Restricted Subsidiary shall be included
to the extent such net income could be paid to the Company or a Restricted
Subsidiary by loans, advances, intercompany transfers, principal repayments
or otherwise; (3) the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution to another Restricted Subsidiary,
to the limitation contained in this clause) and (4) the Company's equity in
a net loss of any such Restricted Subsidiary for such period shall be
included in determining such Consolidated Net Income;
(d) any gain (but not loss) realized upon the sale or other disposition
of any property, plant or equipment of the Company or its consolidated
subsidiaries (including pursuant to any sale-and-leaseback arrangement)
which is not sold or otherwise disposed of in the ordinary course of
business and any gain (but not loss) realized upon the sale or other
disposition of any Capital Stock of any Person;
(e) extraordinary, unusual or nonrecurring charges;
(f) charges relating to the extinguishment of debt obligations of R&B
Falcon Holdings Inc.; and
(g) the cumulative effect of a change in accounting principles.
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"Consolidated Net Worth" of a Person means the consolidated
stockholders' equity of such Person and its Subsidiaries, as determined in
accordance with GAAP.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.2 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company or any
Restricted Subsidiary, one or more debt facilities or commercial paper
facilities, in each case with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Default" means any act, event or condition which is, or after notice
or passage of time or both would be, an Event of Default.
"Depositary" means, with respect to the Secured Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.3
hereof as the Depositary with respect to the Secured Notes, until a successor
shall have been appointed and become such Depositary pursuant to the applicable
provision of this Indenture, and thereafter, "Depositary" shall mean or include
such successor.
"Devco" means Reading & Bates Development Co., a Delaware corporation
and a Restricted Subsidiary of the Company.
"EBITDA" for any period means the Consolidated Net Income for such
period, plus the following (but without duplication) to the extent deducted in
calculating such Consolidated Net Income for such period: (a) income tax
expense, (b) Consolidated Interest Expense, (c) depreciation expense and (d)
amortization expense.
"Euroclear" means the Euroclear System (or any successor securities
clearing agency).
"Event of Loss" is defined to mean any of the following events: (a) the
actual or constructive total loss of a Mortgaged Rig or the agreed or
compromised total loss of a Mortgaged Rig, (b) the destruction of a Mortgaged
Rig, (c) damage to a Mortgaged Rig to an extent, determined in good faith by the
Company within 90 days after the occurrence of such damage (and evidenced by an
officers' certificate to such effect delivered to the Trustee, within such
90-day period), as shall make repair thereof uneconomical or shall render such
Mortgaged Rig permanently unfit for normal use (other than obsolescence) or (d)
the condemnation, confiscation, requisition, seizure, forfeiture or other taking
of title to or use of a Mortgaged Rig that shall not be revoked within six
months. An Event of Loss shall be deemed to have occurred: (i) in the event of
the destruction or other actual total loss of a Mortgaged Rig, on the date of
such loss; (ii) in the event of a constructive, agreed or compromised total loss
of a Mortgaged Rig, on the date of the determination of such total loss pursuant
to the relevant insurance policy;
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(iii) in the case of any event referred to in clause (c) above, upon the
delivery of the officers' certificate to the Trustee; or (iv) in the case of any
event referred to in clause (d) above, on the date six months after the
occurrence of such event.
"Event of Loss Proceeds" is defined to mean all compensation, damages
and other payments (including insurance proceeds) received by the Issuer, the
Company, any Restricted Subsidiary, the Collateral Agent or the Trustee, jointly
or severally, from any Person, including any governmental authority, with
respect to or in connection with an Event of Loss.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Global Note" means one or more Global Notes that do not and
are not required to bear the Private Placement Legend.
"Exchange Offer" means the offer that may be made by the Issuer and the
Company pursuant to the Registration Rights Agreement to exchange Exchange
Secured Notes for Initial Secured Notes.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Exchange Secured Notes" has the meaning set forth in the Recitals to
this Indenture and more particularly means any series of the Secured Notes
authenticated and delivered under this Indenture pursuant to the Exchange Offer.
"Exchangeable Stock" means any Capital Stock which is exchangeable or
convertible into another security (other than Capital Stock of the Company which
is neither Exchangeable Stock nor Redeemable Stock).
"GAAP" means generally accepted accounting principles in the United
States set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, as in effect from time to time.
"Global Note" means, individually and collectively, the Regulation S
Temporary Global Note, the Regulation S Permanent Note, the U.S. Global Notes
and the Exchange Global Notes.
"guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any Person and
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation of such Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the
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obligee of such Indebtedness of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); provided, however, that
the term "guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business. The term "guarantee" used as a verb has a
corresponding meaning. The term "guarantor" shall mean any Person guaranteeing
any obligation.
"Guarantee" means the guarantee of the Secured Notes pursuant to the
provisions described in Article XIII hereof.
"Hedging Obligations" of any Person means the net obligation (not the
notional amount) of such Person pursuant to any interest rate swap agreement,
foreign currency exchange agreement, interest rate collar agreement, option or
futures contract or other similar agreement or arrangement relating to interest
rates or foreign exchange rates.
"Holder" or "Noteholder" means the Person in whose name a Secured Note
is registered on the Registrar's books.
"Incidental Asset" is defined to mean any equipment, outfit, furniture,
furnishings, appliances, spare or replacement parts or stores owned by the
Company or a Restricted Subsidiary that have become obsolete or unfit for use or
no longer useful, necessary or profitable in the conduct of the business of the
Company or such Restricted Subsidiary, as the case may be. In no event shall the
term "Incidental Asset" include a drilling rig or a drillship or a Mortgaged
Rig.
"Incur" means issue, assume, guarantee, incur or otherwise become
liable for, provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning.
"Indebtedness" of any Person at any date means, without duplication:
(1) all indebtedness of such Person for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof);
(2) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(3) all obligations of such Person in respect of letters of credit or
other similar instruments (or reimbursement obligations with respect
thereto), other than standby letters of credit and performance bonds issued
by such Person in the ordinary course of business, to the extent not drawn
or, to the extent drawn, if such drawing is reimbursed not later than the
third Business Day following demand for reimbursement;
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(4) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, except trade payables and accrued
expenses incurred in the ordinary course of business;
(5) all Capitalized Lease Obligations of such Person;
(6) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, to the
extent of the fair market value of all the assets of such Person subject to
such Lien;
(7) all Indebtedness of others guaranteed by such Person to the extent
of such guarantee;
(8) Redeemable Stock; and
(9) all Hedging Obligations of such Person.
For purposes of clause (8) of the preceding sentence, Redeemable Stock shall be
valued at the maximum fixed redemption, repayment or repurchase price, which
shall be calculated in accordance with the terms of such Redeemable Stock as if
such Redeemable Stock were repurchased on any date on which Indebtedness shall
be required to be determined pursuant to this Indenture; provided, however, that
if such Redeemable Stock is not then permitted to be redeemed, repaid or
repurchased, the redemption, repayment or repurchase price shall be the book
value of such Redeemable Stock. The amount of Indebtedness of any Person at any
date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability of any guarantees at
such date; provided that for purposes of calculating the amount of any
non-interest bearing or other discount security, such Indebtedness shall be
deemed to be the principal amount thereof that would be shown on the balance
sheet of the issuer thereof dated such date prepared in accordance with GAAP but
that such security shall be deemed to have been Incurred only on the date of the
original issuance thereof. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at such
date.
"Indenture" means this Indenture, as amended or supplemented from time
to time by one or more indentures supplemental hereto entered into pursuant to
the applicable provisions hereof, including for all purposes of this Indenture
and any supplemental indenture the provisions of the Trust Indenture Act that
are deemed to be a part of and govern this Indenture and any supplemental
indenture.
"Indirect Participant" means a Person who holds an interest through a
Participant.
"Initial Purchaser" means Donaldson, Lufkin & Jenrette Securities
Corporation.
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"Initial Secured Notes" has the meaning set forth in the Recitals to
this Indenture and more particularly means any of the Secured Notes
authenticated and delivered under this Indenture other than Exchange Secured
Notes.
"Institutional Accredited Investor" means an entity which is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Interest Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Company or any Restricted Subsidiary against
fluctuations in interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under the "Limitation on Restricted Payments" covenant (i)
"Investment" shall include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of any
Subsidiary of the Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary, provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in such Subsidiary at the time of such
redesignation equal to (x) the amount of such Investment immediately prior to
such redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Company's Board of Directors.
"Investment Grade Rating" means BBB- or above, in the case of S&P (or
its equivalent under any successor rating categories of S&P), Baa3 or above, in
the case of Moody's (or its equivalent under any successor rating categories of
Moody's), and the equivalent in respect of the ratings categories of any Rating
Agencies substituted for S&P or Moody's.
"Issue Date" means the date on which the Secured Notes are originally
issued.
"Issuer" means the Person named as such in the preamble of this
Indenture unless and until a successor replaces it pursuant to the applicable
provisions hereof and thereafter means such successor.
"Issuer Escrow Account" means the escrow account established pursuant
to the Issuer Escrow Agreement.
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"Issuer Escrow Agreement" means the Senior Secured Note Escrow
Agreement of even date herewith among the Issuer, the Trustee and United States
Trust Company of New York as escrow agent.
"Issuer Escrowed Property" means the funds and Investments contained in
the Issuer Escrow Account.
"Issuer Loan" means a loan made under an Issuer Loan Agreement.
"Issuer Loan Agreement" means a loan agreement between the Issuer and
the Company pursuant to which the Issuer will make a loan for the purpose of:
(a) Financing all or a portion of the cost of acquiring, constructing,
altering, improving or repairing the Mortgaged Rig or improvements used or
to be used in connection with such Mortgaged Rig; or
(b) Financing all or any part of the purchase price of the Mortgaged
Rig or improvements used or to be used in connection with such Mortgaged
Rig, which Issuer Loan is incurred prior to or within one year after the
later of the completion of construction, alteration, improvement or repair
or the commencement of commercial operations thereof.
"Issuer Security Agreement" means the Senior Secured Note Security and
Pledge Agreement of even date among the Issuer, the Trustee and United States
Trust Company of New York as collateral agent.
"Legal Holiday" means a Saturday, a Sunday or a day on which federal
offices or banking institutions in The City of New York, in the city of the
corporate trust office of the Trustee, or at a place of payment are authorized
by law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday, payment may be made on the next succeeding day that is not a
Legal Holiday, and no interest shall accrue for the intervening period.
"Lien" means any mortgage, pledge, hypothecation, charge, assignment,
deposit arrangement, encumbrance, security interest, lien (statutory or other),
or preference, priority or other security or similar agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
agreement to give or grant a Lien or any lease, condition sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing). For the purposes of this Indenture, the Company or any of its
Subsidiaries shall be deemed to own subject to a Lien any asset which the
Company has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, Capitalized Lease Obligation or other
title retention agreement relating to such asset.
"Loss Excess Proceeds" is defined to mean the total of (i) amounts
treated as Loss Excess Proceeds under Section 3.8 and (ii) the amount by which
the Net Event of Loss Proceeds received by the Company or any of its Restricted
Subsidiaries from one or more Events of Loss with respect to drilling rigs or
drillships other than Mortgaged Rigs occurring on or after the Issue Date in the
most receipt period of 12 consecutive months exceeds $10,000,000, less (in the
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case of clause (ii)) the amount of such excess Net Event of Loss Proceeds (A)
used to repay Senior Indebtedness of the Company or secured Senior Indebtedness
of a Subsidiary Guarantor then owning a Mortgaged Rig, in each case, with a
permanent reduction of availability in the case of revolving credit borrowings
and owing to a Person other than the Company or any of its Subsidiaries, or (B)
invested in Additional Assets (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a Board
Resolution).
"Maturity" means the date on which the principal of a Secured Note
becomes due and payable as provided therein or in this Indenture, whether at the
Stated Maturity or the Change of Control Payment Date or the purchase date
established pursuant to the terms of this Indenture for an Excess Proceeds Offer
or by declaration of acceleration, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc., or if Moody's
Investors Services, Inc. shall cease rating the specified debt securities and
such ratings business with respect thereto shall have been transferred to a
successor Person, such successor Person.
"Mortgage" means a vessel mortgage, First Naval Mortgage or Deed of
Covenant substantially in the form and to the effect set forth as an exhibit to
an Issuer Loan Agreement.
"Mortgaged Rigs" means the drilling rigs, drillships or other vessels
owned by the Company and mortgaged to secure an Issuer Loan, including the
Mortgage Rigs listed on Schedule 1.1.
"Net Available Cash" from an Asset Sale means cash payments or
Temporary Cash Equivalents received therefrom (including any cash payments
received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise and proceeds from the sale or other
disposition of any securities received as consideration, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to such properties or assets or received in any other noncash form), in each
case net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all federal, state, provincial, foreign
and local taxes required to be accrued as a liability under GAAP, as a
consequence of such Asset Sale, (ii) all payments made on any Indebtedness which
is secured by any assets subject to such Asset Sale, in accordance with the
terms of any Lien upon or other security agreement of any kind with respect to
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Sale, or by applicable law, be repaid out of the proceeds
from such Asset Sale, (iii) all distributions and other payments required to be
made to minority interest holders in Subsidiaries or joint ventures as a result
of such Asset Sale and (iv) the deduction of appropriate amounts provided by the
seller as a reserve, in accordance with GAAP, against any liabilities associated
with the property or other assets disposed in such Asset Sale and retained by
the Company or any Restricted Subsidiary after such Asset Sale.
"Net Cash Proceeds" means, with respect to any issuance or sale of
Capital Stock, the cash proceeds of such issuance or sale net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and
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<PAGE> 21
other fees actually incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
"Net Event of Loss Proceeds" means, with respect to any Event of Loss,
the Event of Loss Proceeds from such Event of Loss net of related fees and
expenses, distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Event of
Loss, and payments made to repay Indebtedness or any other obligation
outstanding at the time of such Event of Loss; provided, however, that such
Indebtedness or other obligation is either (A) secured by a Lien on the property
or assets that suffered the Event of Loss or (B) required to be paid as a result
of such Event of Loss.
"New Senior Note Indenture" means the Indenture, dated the date hereof,
among the Company and U.S. Trust Company of Texas, National Association, as
trustee thereunder, relating to the New Senior Notes, as amended and
supplemented from time to time.
"New Senior Notes" means the 121/4% Senior Notes due 2006 of the
Company to be issued pursuant to the New Senior Note Indenture.
"Non-Convertible Capital Stock" means, with respect to any Person, any
non-convertible Capital Stock of such Person and any Capital Stock of such
Person convertible solely into non-convertible common stock of such Person;
provided, however, that Non-Convertible Capital Stock shall not include any
Redeemable Stock or Exchangeable Stock.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of an Unrestricted Subsidiary as to which neither the Company or
any Restricted Subsidiary:
(1) provides credit support including any undertaking, agreement or
instrument which would constitute Indebtedness; or
(2) is directly or indirectly liable for such Indebtedness.
"Obligations" means, with respect to any Indebtedness, any obligation
thereunder, including, without limitation, principal, premium and interest
(including post petition interest thereon and, with respect to the Secured
Notes, Special Interest and Additional Amounts), penalties, fees, costs,
expenses, indemnifications, reimbursements, damages and other liabilities.
"Obligors" means the Issuer, the Company and the Subsidiary Guarantors,
if any, collectively; "Obligor" means the Issuer, the Company or any Subsidiary
Guarantor.
"Offering Memorandum" means the Offering Memorandum, dated March 19,
1999 relating to the Issuer's offering and placement of the Initial Secured
Notes.
"Offering" means the Offering of the Initial Secured Notes by the
Issuer.
"Officer" means, with respect to any Person, the Chairman of the Board,
a Vice Chairman of the Board, the Chief Executive Officer, the President, the
Chief Financial Officer,
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the Chief Accounting Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary, an Assistant Secretary or any Vice President of such
Person.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President, the Chief Executive
Officer or a Vice President, and by the Chief Financial Officer, the Chief
Accounting Officer, the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of the Issuer, the Company or a Subsidiary and delivered to
the Trustee, which shall comply with this Indenture.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee that meets the requirements of Sections
12.4 and 12.5 hereof. The counsel may be an employee of or counsel to the
Issuer, the Company, any Subsidiary or the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of the Company,
whether outstanding on the date on which the Secured Notes are originally issued
or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall be subordinated in right of payment to the Guarantee or the
Issuer Loans, as applicable.
"Participant" means, with respect to DTC, Euroclear or Cedel, a Person
who has an account with DTC, Euroclear or Cedel, respectively (and, with respect
to DTC, shall include Euroclear and Cedel).
"Permitted Investments" means:
(a) certificates of deposit, bankers acceptances, time deposits,
Eurocurrency deposits and similar types of Investments routinely offered by
commercial banks with final maturities of one year or less issued by
commercial banks having capital and surplus in excess of $100,000,000;
(b) commercial paper issued by any corporation, if such commercial
paper has credit ratings of at least "A-1" by S&P and at least `P-1" by
Moody's;
(c) U.S. Government Obligations with a maturity of four years or less;
(d) repurchase obligations of instruments of the type described in
clause (c);
(e) shares of money market mutual or similar funds having assets in
excess of $100,000,000;
(f) payroll advances in the ordinary course of business;
(g) other advances and loans to officers and employees of the Company
or any Restricted Subsidiary, so long as the aggregate principal amount of
such advances and loans does not exceed $1,000,000 at any one time
outstanding;
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(h) Investments in any Person in the form of a capital contribution of
the Company's Common Stock;
(i) Investments made by the Company in its Restricted Subsidiaries (or
any Person that will be a Restricted Subsidiary as a result of such
Investment) or by a Restricted Subsidiary in the Company or in one or more
Restricted Subsidiaries (or any Person that will be a Restricted Subsidiary
as a result of such Investment);
(j) Investments in stock, obligations or securities received in
settlement of debts owing to the Company or any Restricted Subsidiary as a
result of bankruptcy or insolvency proceedings or upon the foreclosure,
perfection or enforcement of any Lien in favor of the Company or any
Restricted Subsidiary, in each case as to debt owing to the Company or any
Restricted Subsidiary that arose in the ordinary course of business of the
Company or any such Restricted Subsidiary;
(k) Investments made in exchange for Indebtedness permitted by clauses
(b)(4) and (b)(5) of Section 4.9;
(l) Investments in the capital stock of Navis ASA, a Norwegian
corporation, in exchange for cash and non-cash assets (the fair market value
of which shall be determined in good faith by the Board of Directors of the
Company), in an aggregate amount not to exceed $50,000,000 at any time
outstanding;
(m) Investments consisting of the redesignation of the Subsidiary
owning or operating the drillship Deepwater Frontier or the semisubmersible
RBS8M as an Unrestricted Subsidiary, or the contribution, transfer or other
disposition of the drillship Deepwater Frontier or the semisubmersible RBS8M
and related equipment and assets (including any drilling contract) by the
Company or any Restricted Subsidiary to a Person other than a Restricted
Subsidiary, in connection with the refinancing of the Indebtedness Incurred
to finance the construction of such rigs;
(n) Investments in a Person other than a Restricted Subsidiary for the
purpose of financing the construction or upgrade prior to delivery of the
drillship Deepwater Frontier or the semisubmersible RBS8M pursuant to the
terms of applicable construction and equipment installation agreements;
(o) Investments in a Person other than a Restricted Subsidiary for the
purpose of financing the construction or upgrade of new drilling rigs,
drillships or similar vessels and related equipment, in an aggregate amount
not to exceed at any time outstanding (i) $100,000,000 less (ii) the
aggregate amount of all payments actually made pursuant to paragraph (n) of
this definition that represent payments for amounts in excess of the
Company's estimated costs for the vessels referred to therein, as in effect
on the Issue Date; provided, however, that at the time of such Investment,
the Company or such Person has entered into a Qualifying Contract with
respect thereto;
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(p) Investments represented by that portion of the proceeds from Asset
Sales that is not required to be cash or Temporary Cash Equivalents by the
covenant described in Section 4.15 hereof; and
(q) Investments in Devco in an aggregate amount not to exceed
$10,000,000 at any time outstanding.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Qualifying Contract" with respect to a drilling rig, drillship or
similar vessel means a contract for the use thereof (i) between the Company or a
Restricted Subsidiary or, for the purposes of clause (o) of the definition of
"Permitted Investments," a Person other than a Restricted Subsidiary and a
counterparty that, as certified in an officers' certificate delivered to the
Trustee in connection therewith, is either generally recognized in the offshore
drilling industry as a major oil company or has an investment grade rating on
its long-term debt from Moody's or S&P, (ii) having a minimum term of two years
and (iii) containing a minimum dayrate for such drilling, rig, drillship or
similar vessel.
"Rating Agencies" means (a) S&P and Moody's or (b) if S&P or Moody's or
both of them are not making ratings of the Secured Notes publicly available, a
nationally recognized U.S. rating agency or agencies, as the cases may be,
selected by the Company, which will be substituted for S&P or Moody's or both,
as the case may be.
"Record Date" means, for the interest payment on any Interest Payment
Date, the date specified in Section 2.12 hereof.
"Redeemable Stock" means, with respect to any series of Secured Notes,
any Capital Stock that, by its terms (or by the terms of any security into which
it is convertible, or for which it is exchangeable, in each case at the option
of the holder thereof), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the date on which the Secured Notes of such series mature. Notwithstanding
the preceding sentence, any Capital Stock that would constitute Redeemable Stock
solely because the holders thereof have the right to require the Company to
repurchase such Capital Stock upon the occurrence of a change of control or an
asset sale shall not constitute Redeemable Stock if the terms of such Capital
Stock provide that the Company may not repurchase or redeem any such Capital
Stock
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pursuant to such provisions unless such repurchase or redemption complies with
the covenants described in Sections 3.10, 4.8, 4.11 and 4.15.
"Redemption Date" means, when used with respect to any Secured Note or
part thereof to be redeemed hereunder, the date fixed for redemption of such
Secured Notes pursuant to the terms of the Secured Notes and this Indenture.
"Redemption Price" means, when used with respect to any Secured Note or
part thereof to be redeemed hereunder, the price fixed for redemption of such
Secured Note pursuant to the terms of the Secured Notes and this Indenture, plus
accrued and unpaid interest, if any, and Special Interest, if any, thereon, to
the Redemption Date.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Indenture, by and among the Issuer,
Company and the Initial Purchaser, as such agreement may be amended, modified or
supplemented from time to time.
"Regulation S" means Regulation S under the Securities Act (including
any successor regulation thereto), as it may be amended from time to time.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global senior
note that contains the paragraph referred to in footnote 1, the phrase referred
to in footnote 4 and the additional schedule referred to in footnote 5 to the
form of the Secured Note attached hereto as Exhibit A, and that is deposited
with the Secured Note Custodian and registered in the name of the Depositary or
its nominee, representing the Initial Secured Notes sold in reliance on
Regulation S.
"Regulation S Temporary Global Note" means a single temporary global
senior note that contains the paragraphs referred to in footnote 1, the phrase
referred to in Footnote 4 and the additional schedule referred to in footnote 4
to the form of the Senior Secured Note attached hereto as Exhibit A, in the form
of the Secured Note attached hereto as Exhibit A that is deposited with the
Secured Note Custodian and registered in the name of the Depositary or its
nominee, representing the Initial Secured Notes sold in reliance on Regulation
S.
"Related Business" means any business related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Issue Date.
"Responsible Officer," when used with respect to the Trustee, means any
officer of the Trustee with direct responsibility of the administration of this
Indenture and also means,
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with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Subsidiary" means any Subsidiaries other than an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act (including any
successor regulation thereto), as it may be amended from time to time.
"S&P" is defined to mean Standard & Poors Ratings Group, a division of
McGraw-Hill Companies, Inc. and its successors.
"Sale Excess Proceeds" is defined to mean (i) all amounts treated as
Sale Excess Proceeds under Section 3.10 and (ii) all amounts treated as Sale
Excess Proceeds under Section 4.15(b) hereof.
"Sale/Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any of its Restricted Subsidiaries,
for a period of more than three years, of any real or tangible personal
property, which property has been or is to be sold or transferred by the Company
or such Restricted Subsidiary to such Person in contemplation of such leasing.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Secured Note Custodian" means the Trustee, as custodian for the
Depositary with respect to the Secured Notes in global form, or any successor
entity thereto.
"Secured Notes" has the meaning set forth in the Recitals of this
Indenture and more particularly means any of the Secured Notes authenticated and
delivered under this Indenture.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Security Agreements" means the Issuer Escrow Agreement, the Issuer
Security Agreement, the Mortgages, the Company Escrow Agreement and the Company
Security Agreement and any other document that secures the Secured Notes or an
Issuer Loan.
"Senior Indebtedness" of any Person means (i) Indebtedness of such
Person, whether outstanding on the Issue Date or thereafter Incurred, and (ii)
accrued and unpaid interest (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Company to
the extent post-filing interest is allowed in such proceeding) in respect of (A)
indebtedness for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable unless, in the case of (i) and (ii), in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are subordinate in right of
payment to the Secured Notes, the Guarantee, the Issuer Loans or the Subsidiary
Guarantees, as applicable; provided, however, that Senior Indebtedness shall not
include (1) any obligation of such Person to any Subsidiary of such Person, (2)
any liability for
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federal, state, local, foreign or other taxes owed or owing by such Person, (3)
any accounts payable or other liability to trade creditors arising in the
ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities), (4) any Indebtedness of such Person (and any
accrued and unpaid interest in respect thereof) which is subordinate or junior
in any respect to any other Indebtedness or other obligation of such Person or
(5) that portion of any Indebtedness which at the time of Incurrence is Incurred
in violation of this Indenture.
"Significant Subsidiary" means any Subsidiary Guarantor and any other
Restricted Subsidiary that would be a "Significant Subsidiary" of the Company
within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. For
purposes of Section 6.1(g) and Section 6.1(h) hereof only, the term "Significant
Subsidiary" shall also include any group of Restricted Subsidiaries that, taken
as a whole as of the latest audited consolidated financial statements for the
Company and its Subsidiaries, would constitute a Significant Subsidiary.
"Special Interest" means all "special interest" owing pursuant to the
Registration Rights Agreement.
"Special Record Date" means a date fixed by the Trustee pursuant to
Section 2.12 hereof for the payment of Defaulted Interest.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Issuer, the
Company or a Subsidiary Guarantor, as the case may be (whether outstanding on
the Issue Date or thereafter Incurred) which is subordinate or junior in right
of payment to the Secured Notes, the Guarantee, the Issuer Loans or the
Subsidiary Guarantee, as applicable, whether pursuant to a written agreement to
that effect or by operation of law.
"Subsidiary" means, with respect to any Person:
(1) any corporation of which more than 50% of the total voting power of
all classes of the capital stock entitled (without regard to the occurrence
of any contingency) to vote in the election of directors is owned by such
Person directly or through one or more other Subsidiaries of such Person,
and
(2) any entity other than a corporation of which at least a majority of
the capital stock or other equity interest (however designated) entitled
(without regard to the occurrence of any contingency) or vote in the
election of the governing body, partners, managers or others that will
control the management of such entity is owned by such Person directly or
through one or more other Subsidiaries of such Person.
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"Subsidiary Guarantor" means each Subsidiary of the Company, whether
now owned or hereafter formed, which owns a Mortgaged Rig or which shall execute
and deliver a Subsidiary Guarantee.
"Subsidiary Guarantee" means a guarantee of the Issuer's obligations
with respect to the Secured Notes issued by a Subsidiary of the Company.
"Tangible Property" means all land, buildings, machinery and equipment
and leasehold interests and improvements which would be reflected on a balance
sheet of the Company prepared in accordance with GAAP, excluding (a) all rights,
contracts and other intangible assets of any nature whatsoever and (b) all
inventories and other current assets.
"Temporary Cash Investments" means Investments described in clauses
(a), (b), (c) and (d) of the definition of "Permitted Investments."
"Transfer Restricted Notes" means Secured Notes that bear or are
required to bear the Private Placement Legend.
"Trust Indenture Act" or "TIA" means the U.S. Trust Indenture Act of
1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date on which this
Indenture is qualified under the Trust Indenture Act except as required by
Section 9.3 hereof, provided that if the Trust Indenture Act of 1939 is amended
after such date, "Trust Indenture Act" or "TIA" means, if so required by such
amendment, the Trust Indenture Act of 1939, as so amended.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means:
(a) any Subsidiary of the Company that at the time of determination
will be designated an Unrestricted subsidiary by the Board of Directors of
the Company as provided below and
(b) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors of the Company may designate any Subsidiary of
the Company as an Unrestricted Subsidiary so long as:
(1) it has no Indebtedness other than Non-Recourse Indebtedness;
provided, however, that notwithstanding any other provision of this
Indenture, a Subsidiary shall not fail to constitute an Unrestricted
Subsidiary by reason of (a) the guarantee by the Company or a Restricted
Subsidiary in connection with synthetic lease obligations Incurred to
finance the construction or upgrade of drilling rigs, drillships or similar
vessels; and (b) obligations of the Company or a Restricted Subsidiary
relating to Indebtedness of an Unrestricted Subsidiary if such Indebtedness
constituted a Permitted Investment or a Restricted Payment permitted by
Section 4.11 hereof at the time of its
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Incurrence or at the time of designation of such Subsidiary as an
Unrestricted Subsidiary; and
(2) after giving effect thereto, such designation was permitted by
Section 4.11.
Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing a resolution of the Board of Directors with
the Trustee giving effect to such designation. The Board of Directors of the
Company may designate any Unrestricted Subsidiary as a Restricted Subsidiary if,
immediately after giving effect to such designation, (A) no Default or Event of
Default shall have occurred and be continuing and (B) the Company could incur
$1.00 of additional Indebtedness under Section 4.9(a) hereof.
"U.S. Global Note" means a permanent Global Note that contains the
paragraphs referred to in footnote 1 or footnote 3, in the phrase referred to in
footnote 4 and the additional schedule referred to in footnote 5 to the form of
the Secured Note attached hereto as Exhibit A, and that is deposited with the
Secured Note Custodian and registered in the name of the Depositary or its
nominee, representing Secured Notes sold in reliance on Rule 144A or in reliance
on another exemption from the registration requirements of the Securities Act.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"U.S. Person" means (i) any individual resident in the United States,
(ii) any partnership or corporation organized or incorporated under the laws of
the United States, (iii) any estate of which an executor or administrator is a
U.S. Person (other than an estate governed by foreign law and of which at least
one executor or administrator is a non-U.S. Person who has sole or shared
investment discretion with respects to its assets), (iv) any trust of which any
trustee is a U.S. Person (other than a trust of which at least one trustee is an
non-U.S. Person who has sole or shared investment discretion with respect to its
assets and no beneficiary of the trust (and no settler, if the trust is
revocable) is a U.S. Person), (v) any agency or branch of a foreign entity
located in the United States, (vi) any non-discretionary or similar account
(other than an estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. person, (vii) any discretionary or similar account
(other than an estate or trust) held by a dealer or other fiduciary organized,
incorporated or (if an individual) resident in the United States (other than
such an account held for the benefit or account of a non-U.S. Person), (viii)
any partnership or corporation organized or incorporated under the laws of a
foreign jurisdiction and formed by a U.S. Person principally for the purpose of
investing in securities not registered under the Securities Act (unless it is
organized or incorporated and owned, by "accredited investors" within the
meaning of Rule 501(a) under the Securities Act who are not natural persons,
estates or trusts); provided, however, that the term "U.S. Person" shall not
include (A) a branch or agency of a U.S. Person that is located and operating
outside the United States for valid business purposes as a locally regulated
branch or agency engaged in the banking or insurance business, (B) any employee
benefit plan established and administered in accordance with the law, customary
practices and documentation of a foreign country and (C) the international
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organizations set forth in Section 902(k)(vi) of Regulation S and any other
similar international organizations, and their agencies, affiliates and pension
plans.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary all
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or one or more Wholly Owned Restricted Subsidiaries.
SECTION 1.2 Other Definitions.
<TABLE>
<CAPTION>
Defined
Term in Section
---- ----------
<S> <C>
"Act"........................................................................12.6(a)
"Additional Amounts"..........................................................______
"Affiliate Transaction.......................................................4.17(a)
"Change of Control"...........................................................4.8(a)
"Change of Control Offer".....................................................4.8(a)
"Change of Control Purchase Price"............................................4.8(a)
"Change of Control Offer Period"..............................................4.8(a)
"Change of Control Payment Date"..............................................4.8(b)
"Comparable Treasury Price"......................................................3.9
"Comparable Treasury Rate".......................................................3.9
"Covenant Defeasance"............................................................9.3
"DTC"............................................................................2.3
"Defaulted Interest"............................................................2.12
"Defeasance".....................................................................9.2
"Event of Default"...............................................................6.1
"Excess Proceeds".............................................................______
"Excess Proceeds Offer"......................................................3.10(a)
"Excess Proceeds Offer Amount"...............................................3.10(b)
"Excess Proceeds Offer Period"...............................................3.10(b)
"Excess Proceeds Purchase Date...............................................3.10(b)
"40-day restricted period"....................................................2.1(b)
"Guaranteed Indebtedness".................................................4.19, 13.7
"Independent Investment Banker"..................................................3.9
"Interest Payment Date".........................................................2.12
"Loss Proceeds Receipt Date".....................................................3.8
"Loss Date"......................................................................3.8
"Loss Redemption Amount".........................................................3.8
"Lost Mortgaged Rig".............................................................3.8
"Make-Whole Premium"..........................................................3.7(c)
"Mortgaged Rig Asset"........................................................4.15(a)
</TABLE>
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<PAGE> 31
<TABLE>
<CAPTION>
Defined
Term in Section
---- ----------
<S> <C>
"Paying Agent"...................................................................2.3
"Primary Treasury Dealer"........................................................3.9
"Private Placement Legend".................................................2.6(e)(i)
"Process Agent"................................................................12.10
"Reference Treasury Dealer"......................................................3.9
"Reference Treasury Dealer Quotations"...........................................3.9
"Registrar"......................................................................2.3
"Restricted Payment".........................................................4.11(a)
"Sale Date"......................................................................3.9
"Sale Proceeds Receipt Date".....................................................3.9
"Sale Redemption Amount".........................................................3.9
"Securities Register"............................................................2.3
"7-Year Secured Notes"........................................................2.1(b)
"Sold Mortgaged Rig".............................................................3.9
"Successor"...................................................................5.1(a)
"Suspended Covenants"........................................................Art. IV
"10-Year Secured Notes".......................................................2.1(b)
"Treasury Rate"..................................................................3.9
</TABLE>
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the Trust Indenture
Act, the provision is incorporated by reference in and made a part of this
Indenture.
The following Trust Indenture Act terms used in this Indenture have the
following meanings:
"indenture securities" means the Secured Notes;
"indenture security holder" means a Holder of a Secured Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Secured Notes means the Issuer or any other obligor on
the Secured Notes.
All other terms used in this Indenture that are defined by the Trust
Indenture Act, defined by the Trust Indenture Act reference to another statute
or defined by Commission rule under the Trust Indenture Act have the meanings so
assigned to them therein.
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<PAGE> 32
SECTION 1.4 Rules of Construction.
Unless the context otherwise requires:
(1) the words "herein," "hereof" and "hereunder," and other words of
similar import, refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(2) a term has the meaning assigned to it;
(3) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(4) "or" is not exclusive;
(5) words in the singular include the plural, and in the plural include
the singular;
(6) provisions apply to successive events and transactions;
(7) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement of successor sections or rules
adopted by the Commission from time to time;
(8) the principal amount of any non-interest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with generally accepted accounting principles;
(9) when used with respect to the Secured Notes, the term "principal
amount" shall mean the principal amount thereof at Maturity;
(10) unless otherwise expressly provided herein, the principal amount
of any preferred stock shall be greater of (i) the maximum liquidation value
of such preferred stock or (ii) the maximum mandatory redemption or
mandatory repurchase price with respect to such preferred stock; and
(11) all references to amounts of money or $ mean U.S. Dollars.
ARTICLE II
THE SECURED NOTES
SECTION 2.1 Form and Dating.
(a) General. The Secured Notes, together with the Trustee's certificate
of authentication and the Company's notation of the Guarantee, shall be
substantially in the form set forth in Exhibit A hereto. The Secured Notes may
have notations, legends or endorsements required by law, stock exchange rule or
usage. Each Secured Note shall be dated the date of its
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<PAGE> 33
authentication. The Secured Notes shall be issued only in fully registered form,
without coupons, in denominations of $1,000 and integral multiples thereof. The
Initial Secured Notes and the Exchange Secured Notes will be the same except
that the Private Placement Legend and paragraph 18 will be omitted from the
Exchange Secured Notes.
The terms and provisions contained in the Secured Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Issuer, the Guarantor and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
(b) Authorized Principal Amount; Issuable in Series; Terms. The
aggregate principal amount of Secured Notes which may be authenticated and
delivered under this Indenture is $800,000,000 issuable in two series. All
Secured Notes of each series under this Indenture shall in all respects be
equally and ratably entitled to the benefits hereof with respect to such series
without preference, priority or distinction on account of the actual time of the
authentication and delivery of the Secured Notes of such series.
(i) There is created a series of Secured Notes with the following
terms:
The title of the series of Secured Notes will be 11% Senior Secured
Notes due 2006 (the "7-Year Secured Notes"). Such series will be
limited to (A) Initial 7-Year Secured Notes in an aggregate principal
amount not to exceed $400,000,000 (B) Exchange Secured Notes for issue
only in the Exchange Offer pursuant to the Exchange Offer Registration
Statement for a like principal amount of Initial 7-Year Secured Notes
exchanged in such Exchange Offer, in each case upon the receipt of a
Company Order directing the Trustee to authenticate such 7-Year Secured
Notes and certifying that all conditions precedent to the issuance of
the relevant 7-Year Secured Notes contained herein have been complied
with. The aggregate principal amount of 7-Year Secured Notes
outstanding at any time may not exceed $400,000,000, except as provided
in Section 2.7 hereof. Such 10-Year Secured Notes will mature on March
15, 2006.
(ii) There is also created a series of Secured Notes under this
Indenture with the following terms:
The title of the series of Secured Notes will be 11 3/8% Secured
Notes due 2009 (the "10-Year Secured Notes"). Such series will be
limited to (A) Initial 10-year Secured Notes in an aggregate principal
amount not to exceed $400,000,000; (B) Exchange Secured Notes for issue
only in the Exchange Offer pursuant to the Exchange Offer Registration
Statement for a like principal amount of Initial 10-Year Secured Notes
exchanged in such Exchange Offer, in each case upon the receipt of a
Company Order directing the Trustee to authenticate such 10-Year
Secured Notes and certifying that all conditions precedent to the
issuance of the relevant 10-Year Secured Notes contained herein have
been complied with. The aggregate principal amount of 10-Year Secured
Notes outstanding at any time may not exceed $400,000,000, except as
provided in Section 2.7 hereof. Such 10-Year Secured Notes will mature
on March 15, 2009.
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(c) Initial Secured Notes. Initial Secured Notes, with the notations of
the Guarantee endorsed thereon, shall be issued in the form of one or more
permanent Global Notes in definitive fully registered form without interest
coupons. Secured Notes offered and sold to QIBs in reliance on Rule 144A, shall
be issued initially in the form of the U.S. Global Notes, which shall be
deposited on behalf of the purchasers of the Secured Notes represented thereby
with the Secured Note Custodian, and registered in the name of the Depositary or
a nominee of the Depositary, duly executed by the Issuer and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the U.S.
Global Notes may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depositary or its nominee as hereinafter
provided. Initial Secured Notes offered and sold in reliance on Regulation S
shall be issued initially in the form of the Regulation S Temporary Global Note,
which shall be deposited on behalf of the purchasers of the Secured Notes
represented thereby with the Secured Note Custodian, and registered in the name
of the Depositary or the nominee of the Depositary for the accounts of
designated agents holding on behalf of Euroclear or Cedel, duly executed by the
Issuer and authenticated by the Trustee as hereinafter provided. The "40-day
restricted period" (as defined in Regulation S) shall be terminated upon the
receipt by the Trustee of a written certificate from the Depositary, together
with copies of certificates from Euroclear and Cedel certifying that they have
received certification of non-United States beneficial ownership of 100% of the
aggregate principal amount of the Regulation S Temporary Global Note (except to
the extent of any beneficial owners thereof who acquired an interest therein
pursuant to another exemption from registration under the Securities Act and who
will take delivery of a beneficial ownership interest in a 144A Global Note, all
as contemplated by Section 2.6(a)(ii) hereof). Following the termination of the
40-day restricted period, beneficial interests in the Regulation S Temporary
Global Note shall be exchanged for beneficial interests in Regulation S
Permanent Global Note pursuant to the Applicable Procedures. Simultaneously with
the authentication of Regulation S Permanent Global Note, the Trustee shall
cancel the Regulation S Temporary Global Note. The aggregate principal amount of
the Regulation S Temporary Global Note and the Regulation S Permanent Global
Note may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depository or its nominee, as the case may be, in
connection with transfers of interest as hereinafter provided.
Each Global Note shall represent such of the outstanding Secured
Notes as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Secured Notes from time to time
endorsed on Schedule A thereto and that the aggregate amount of outstanding
Secured Notes represented thereby may from time to time be reduced or increased,
as appropriate, to reflect exchanges, redemptions and transfers of interests.
Any endorsement of Schedule A of a Global Note to reflect the amount of any
increase or decrease in the amount of outstanding Secured Notes represented
thereby shall be made by the Trustee or the Secured Note Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.6 hereof.
The provisions of the "Operating Procedures of the Euroclear
Clearance System" and "Terms and Conditions Governing Use of Euroclear" and the
"Management Regulations" and "Instructions to Participants" of Cedel shall be
applicable to interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Note that are held by
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<PAGE> 35
Participants through Euroclear or Cedel. The Trustee shall have no obligation to
notify Holders of any such procedures or to monitor or enforce compliance with
the same.
Except as set forth in Section 2.6 hereof, the Global Notes may be
transferred, in whole and not in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
(d) Book-Entry Provisions. This Section 2.1(d) shall apply only to
Global Notes deposited with or on behalf of the Depositary.
The Issuer shall execute and the Trustee shall, in accordance with
this Section 2.1(d), authenticate and deliver the Global Secured Notes that (i)
shall be registered in the name of the Depositary or the nominee of the
Depositary and (ii) shall be delivered by the Trustee to the Depositary or
pursuant to the Depositary's instructions or held by the Secured Note Custodian.
Participants shall have no rights either under this Indenture with
respect to any Global Note held on their behalf by the Depositary or by the
Secured Note Custodian as custodian for the Depositary or under such Global
Note, and the Depositary may be treated by the Issuer, the Trustee and any agent
of the Issuer or the Trustee as the absolute owner of such Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Issuer, the Trustee or any agent of the Issuer or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Participants, the
operation of customary practices of such Depositary governing the exercise of
the rights of an owner of a beneficial interest in any Global Note.
(e) Certificated Secured Notes. Secured Notes issued in certificated
form shall be substantially in the form of Exhibit A attached hereto (but
without including the text referred to in footnotes 1 and 4 thereto) and shall
be printed, typewritten, lithographed or engraved or produced by any combination
of these methods or may be produced by any other method permitted by the rules
of any securities exchange on which the Secured Notes may be listed, as
evidenced by the execution of such Secured Notes.
(f) Provisions Applicable to Forms of Secured Notes. The Secured Notes
may also have such additional provisions, omissions, variations or substitutions
as are not inconsistent with the provisions of this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with this Indenture,
any applicable law or with any rules made pursuant thereto or with the rules of
any securities exchange or governmental agency or as may be determined
consistently herewith by the Officers of the Issuer executing such Secured
Notes, as conclusively evidenced by their execution of such Secured Notes. All
Secured Notes will be otherwise substantially identical except as provided
herein.
Subject to the provisions of this Article II, a Holder of a Global
Note may grant proxies and otherwise authorize any Person to take any action
that a Holder is entitled to take under this Indenture or the Secured Notes.
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<PAGE> 36
SECTION 2.2 Execution and Authentication.
Two Officers shall sign the Secured Notes for the Issuer by manual
or facsimile signature.
If an Officer whose signature is on a Secured Note no longer holds
that office at the time a Secured Note is authenticated, the Secured Note shall
nevertheless be valid.
A Secured Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Secured Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Secured Notes shall be
substantially as set forth in Exhibit A hereto.
The Trustee shall authenticate (i) Initial 7-Year Secured Notes for
original issue in an aggregate principal amount not to exceed $400,000,000 and
Initial 10-Year Secured Notes in an aggregate principal amount not to exceed
$400,000,000 and (ii) Exchange 7-Year Secured Notes or Exchange 10-Year Secured
Notes for issue only in the Exchange Offer pursuant to the Exchange Offer
Registration Statement for a like principal amount of Initial 7-Year Secured
Notes or Initial 10-Year Secured Notes exchanged in such Exchange Offer, in each
case upon the receipt of a Company Order directing the Trustee to authenticate
such Secured Notes and certifying that all conditions precedent to the issuance
of the relevant Secured Notes contained herein have been complied with.
The aggregate principal amount of 7-Year Secured Notes and 10-Year
Secured Notes outstanding at any time may not exceed $400,000,000 or
$400,000,000, as the case may be, except as provided in Section 2.7 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Issuer to authenticate Secured Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Secured Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Issuer or an Affiliate of the Issuer.
SECTION 2.3 Registrar and Paying Agent.
The Issuer shall maintain (i) an office or agency where Secured
Notes may be presented for registration of transfer or for exchange
("Registrar"), (ii) an office or agency where Secured Notes may be presented for
payment ("Paying Agent"), and (iii) and an office or agency where notices or
demands to or upon the Issuer and the Guarantor in respect of the Secured Notes
and this Indenture may be served. The Registrar shall keep a register of the
Secured Notes and of their transfer and exchange (the "Securities Register").
The Issuer may appoint one or more co-registrars and one or more additional
paying agents except as otherwise provided in this Indenture. The term
"Registrar" includes any co-registrar and the term "Paying Agent" includes any
additional paying agent. The Issuer may change any Paying Agent or Registrar
without notice to any Holder. The Issuer shall notify the Trustee in writing of
the name and address of any Agent not a party to this Indenture. If the Issuer
fails to appoint or maintain another entity as
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<PAGE> 37
Registrar or Paying Agent, the Trustee shall act as such. The Issuer or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Issuer initially appoints The Depository Trust Issuer ("DTC")
to act as Depositary with respect to the Global Secured Notes.
The Issuer initially appoints the Trustee (at the Corporate Trust
Office of the Trustee) to act as the Registrar and Paying Agent and to act as
Secured Note Custodian with respect to the Global Notes.
SECTION 2.4 Paying Agent to Hold Money in Trust.
The Issuer shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal of, premium, if any, on, interest on, and Special Interest and
Additional Amounts, if any, on, the Secured Notes, and shall notify the Trustee
of any default by the Issuer in making any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all money held by it to
the Trustee. The Issuer at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent
(if other than the Issuer or a Subsidiary) shall have no further liability for
the money. If the Issuer, the Company or a Subsidiary acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Issuer, the Trustee shall serve as Paying Agent for
the Secured Notes.
SECTION 2.5 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Issuer shall furnish to the Trustee at least seven
Business Days before each Interest Payment Date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Secured Notes, and the Issuer shall otherwise comply with TIA Section 312(a).
SECTION 2.6 Transfer and Exchange.
(a) Transfer and Exchange of Global Secured Notes. The transfer and
exchange of beneficial interests in Global Secured Notes shall be effected
through the Depositary, in accordance with this Indenture and the Applicable
Procedures, which shall include restrictions on transfer comparable to those set
forth herein to the extent required by the Securities Act. Beneficial interests
in a Global Note may be transferred to Persons who take delivery thereof in the
form of a beneficial interest in the same Global Note in accordance with the
transfer restrictions set forth in subsection (e) of this Section 2.6 and in the
legend in subsection (f) of this Section 2.6. Transfers of beneficial interests
in the Global Notes to Persons required to take delivery thereof in the form of
an interest in another Global Note shall be permitted as follows:
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<PAGE> 38
(i) U.S. Global Note to Regulation S Global Note. Prior to the
expiration of the 40-day restricted period, an owner of a beneficial
interest in a U.S. Global Note deposited with the Depositary (or the Secured
Note Custodian) will not be permitted to transfer its interest to a Person
who wishes to take delivery thereof in the form of an interest in the
Regulation S Global Note of the same series. If, at any time after the
expiration of the 40-day restricted period, an owner of a beneficial
interest in a U.S. Global Note deposited with the Depositary (or the Secured
Note Custodian) wishes to transfer its beneficial interest in such U.S.
Global Note to a Person who is required or permitted to take delivery
thereof in the form of an interest in a Regulation S Global Note of the same
series, such owner shall, subject to the Applicable Procedures, exchange or
cause the exchange of such interest for an equivalent beneficial interest in
a Regulation S Global Note of the same series as provided in this Section
2.6(a)(i). Upon receipt by the Trustee of (1) instructions given in
accordance with the Applicable Procedures from a Participant directing the
Trustee to credit or cause to be credited a beneficial interest in the
Regulation S Global Note of the same series in an amount equal to the
beneficial interest in the U.S. Global Note to be exchanged, (2) a written
order given in accordance with the Applicable Procedures containing
information regarding the Participant account of the Depositary and the
Euroclear or Cedel account to be credited with such increase, and (3) a
certificate in the form of Exhibit B-1 hereto given by the owner of such
beneficial interest stating that the transfer of such interest has been made
in compliance with the transfer restrictions applicable to the Global Notes
and pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S,
then the Trustee, as Registrar, shall instruct the Depositary to reduce or
cause to be reduced the aggregate principal amount at Maturity of the
applicable U.S. Global Note and to increase or cause to be increased the
aggregate principal amount at Maturity of the applicable Regulation S Global
Note by the principal amount at Maturity of the beneficial interest in the
U.S. Global Note to be exchanged or transferred, to credit or cause to be
credited to the account of the Person specified in such instructions, a
beneficial interest in the Regulation S Global Note equal to the reduction
in the aggregate principal amount at Maturity of the U.S. Global Note, and
to debit, or cause to be debited, from the account of the Person making such
exchange or transfer the beneficial interest in the U.S. Global Note that is
being exchanged or transferred.
(ii) Regulation S Global Note to U.S. Global Note. Prior to the
expiration of the 40-day restricted period, an owner of a beneficial
interest in a Regulation S Global Note deposited with the Depositary (or the
Secured Note Custodian) will not be permitted to transfer its interest to a
Person who wishes to take delivery thereof in the form of an interest in a
U.S. Global Note of the same series. If, at any time, after the expiration
of the 40-day restricted period, an owner of a beneficial interest in a
Regulation S Global Note deposited with the Depositary or with the Secured
Note Custodian wishes to transfer its beneficial interest in such Regulation
S Global Note to a Person who is required or permitted to take delivery
thereof in the form of an interest in a U.S. Global Note of the same series,
such owner shall, subject to the Applicable Procedures, exchange or cause
the exchange of such interest for an equivalent beneficial interest in a
U.S. Global Note of the same series as provided in this Section 2.6(a)(ii).
Upon receipt by the Trustee of (1) instructions from Euroclear or Cedel, if
applicable, and the Depositary, directing the
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<PAGE> 39
Trustee, as Registrar, to credit or cause to be credited a beneficial
interest in the U.S. Global Note of the same series equal to the beneficial
interest in the Regulation S Global Note to be exchanged, such instructions
to contain information regarding the Participant account with the Depositary
to be credited with such increase, (2) a written order given in accordance
with the Applicable Procedures containing information regarding the
Participant account of the Depositary and (3) a certificate in the form of
Exhibit B-2 attached hereto given by the owner of such beneficial interest
stating (A) if the transfer is pursuant to Rule 144A, that the Person
transferring such interest in a Regulation S Global Note reasonably believes
that the Person acquiring such interest in a U.S. Global Note is a QIB and
is obtaining such beneficial interest in a transaction meeting the
requirements of Rule 144A and any applicable blue sky or securities laws of
any state of the United States, (B) that the transfer complies with the
requirements of Rule 144 under the Securities Act, (C) if the transfer is to
an Institutional Accredited Investor that such transfer is in compliance
with the Securities Act and that a certificate in the form of Exhibit C
attached hereto is attached thereto, together with, if the Issuer should so
request or if the transfer is in respect of an aggregate principal amount of
Secured Notes less than $250,000, an Opinion of Counsel in form reasonably
acceptable to the Issuer that such transfer is in compliance with the
Securities Act or (D) if the transfer is pursuant to any other exemption
from the registration requirements of the Securities Act, that the transfer
of such interest has been made in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in accordance with the
requirements of the exemption claimed, such statement to be supported by an
Opinion of Counsel from the transferee or the transferor in form reasonably
acceptable to the Issuer and to the Registrar and, in each case, in
accordance with any applicable securities laws of any state of the United
States or any other applicable jurisdiction, then the Trustee, as Registrar,
shall instruct the Depositary to reduce or cause to be reduced the aggregate
principal amount at Maturity of such Regulation S Global Note and to
increase or cause to be increased the aggregate principal amount at Maturity
of the applicable U.S. Global Note by the principal amount at Maturity of
the beneficial interest in the Regulation S Global Note to be exchanged or
transferred, and the Trustee, as Registrar, shall instruct the Depositary,
concurrently with such redemption, to credit or cause to be credited to the
account of the Person specified in such instructions a beneficial interest
in the applicable U.S. Global Note equal to the reduction in the aggregate
principal amount at Maturity of such Regulation S Global Note and to debit
or cause to be debited from the account of the Person making such transfer
the beneficial interest in the Regulation S Global Note that is being
exchanged or transferred.
(iii) U.S. Global Notes to Institutional Accredited Investor. If, at
any time, an owner of a beneficial interest in a U.S. Global Note deposited
with the Depositary (or the Secured Note Custodian) wishes to transfer its
beneficial interest in such U.S. Global Note to a Person who is an
Institutional Accredited Investor, such owner shall, subject to the
Applicable Procedures and the other provisions of this Section 2.6, exchange
or cause the exchange of such interest for an equivalent beneficial interest
in a U.S. Global Note of the same series as provided in this Section
2.6(a)(iii). Upon receipt by the Trustee of (1) instructions given in
accordance with the Applicable Procedures from a Participant directing the
Trustee to credit or cause to be credited a beneficial interest in the U.S.
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Global Note of the same series in an amount equal to the beneficial interest
in the U.S. Global Note to be exchanged, (2) a written order given in
accordance with the Applicable Procedures containing information regarding
the Participant account of the Depositary to be credited with such increase,
and (3) a certificate in the form of Exhibit C hereto given by the proposed
transferee, and, if the Issuer should so request, an Opinion of Counsel
provided by the transferor or the transferee (a copy of which the Transferor
attaches to such certificate), in form reasonably acceptable to the Issuer
and to the Registrar, to the effect that such transfer is in compliance with
the Securities Act, then the Trustee, as Registrar, shall instruct the
Depositary to credit or cause to be credited to the account of the Person
specified in such instructions, a beneficial interest in the U.S. Global
Note equal to the aggregate principal amount being transferred, and to
debit, or cause to be debited, from the account of the Person making such
exchange or transfer the beneficial interest in the U.S. Global Note that is
being exchanged or transferred.
(b) Transfer and Exchange of Certificated Secured Notes. When Certificated
Secured Notes are presented by a Holder to the Registrar with a request to
register the transfer of the Certificated Secured Notes or to exchange such
Certificated Secured Notes of the same series for an equal principal amount of
Certificated Secured Notes of other authorized denominations of the same series,
the Registrar shall register the transfer or make the exchange as requested only
if the Certificated Secured Notes are presented or surrendered for registration
of transfer or exchange, are endorsed and contain a signature guarantee or are
accompanied by a written instrument of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his attorney and contains a
signature guarantee, duly authorized in writing and the Registrar received the
following documentation (all of which may be submitted by facsimile):
in the case of Certificated Secured Notes that are Transfer Restricted
Secured Notes, such request shall be accompanied by the following
additional information and documents, as applicable:
(1) if such Transfer Restricted Note is being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, or such Transfer Restricted Note is being transferred
to the Issuer, a certification to that effect from such Holder (in
substantially the form of Exhibit B-3 hereto); or
(2) if such Transfer Restricted Note is being transferred to a QIB
in accordance with Rule 144A under the Securities Act or pursuant to an
exemption from registration in accordance with Rule 144 under the
Securities Act or in an offshore transaction pursuant to and in
compliance with Rule 904 under the Securities Act or pursuant to an
effective registration statement under the Securities Act, a
certification to that effect from such Holder (in substantially the
form of Exhibit B-3 hereto); or
(3) if such Transfer Restricted Note is being transferred in
reliance on any other exemption from the registration requirements of
the Securities Act, a certification to that effect from such Holder (in
substantially the form of Exhibit B-3 hereto) and an Opinion of Counsel
from such Holder or the transferee in form
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reasonably acceptable to the Issuer and to the Registrar to the effect
that such transfer is in compliance with the Securities Act.
(c) Transfer of a Beneficial Interests in Global Notes for Certificated
Secured Notes.
(i) The Global Notes that are Transfer Restricted Notes or the Exchange
Global Notes, as the case may be, shall be exchanged by the Issuer for one
or more Certificated Secured Notes of the same series representing Initial
Secured Notes or Exchange Secured Notes, as the case may be, if (x) the
Depositary (i) has notified the Issuer that it is unwilling or unable to
continue as, or ceases to be, a "Clearing Agency" registered under Section
17A of the Exchange Act and (ii) a successor to the Depositary registered as
a "Clearing Agency" under Section 17A of the Exchange Act is not able to be
appointed by the Issuer within 90 calendar days or (y) the Depositary is at
any time unwilling or unable to continue as Depositary and a successor to
the Depositary is not able to be appointed by the Issuer within 90 calendar
days or (iii) the Issuer, at its option, delivers a notice in the form of an
Officers' Certificate that it elects to cause the issuance of Certificated
Secured Notes of the same series. If an Event of Default occurs and is
continuing, the Issuer shall, at the request of the Holder thereof, exchange
all or part of a Global Note that is a Transfer Restricted Note or an
Exchange Global Note, as the case may be, for one or more Certificated
Secured Notes of the same series representing Initial Secured Notes or
Exchange Secured Notes, as the case may be; provided that the principal
amount of each of such Certificated Secured Notes, and such Global Note,
after such exchange, shall be $1,000 or an integral multiple thereof.
Whenever a Global Note is exchanged as a whole for one or more Certificated
Secured Notes, it shall be surrendered by the Holder thereof to the Trustee
for cancellation. Whenever a Global Note is exchanged in part for one or
more Certificated Secured Notes, it shall be surrendered by the Holder
thereof to the Trustee and the Trustee shall make the appropriate notations
to Schedule A thereof pursuant to Section 2.1 hereof. All Certificated
Secured Notes or Exchange Secured Notes, as the case may be, issued in
exchange for a Global Note or any portion thereof shall be registered in
such names, and delivered, as the Depositary shall instruct the Trustee. Any
Certificated Secured Notes issued pursuant to this Section 2.6(c)(i) shall
include the Private Placement Legend, except as otherwise provided for by
this Section 2.6. Interests in a Global Note may not be exchanged for
Certificated Secured Notes other than as provided in this Section 2.6. If a
beneficial interest in a Transfer Restricted Note is being transferred, the
following additional documents and information must be submitted (including
by facsimile):
(1) if such beneficial interest is being transferred to the Person
designated by the Depositary as being the beneficial owner, a
certification to that effect from such Person (in substantially the
form of Exhibit B-4 hereto);
(2) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act or pursuant to an
exemption from registration in accordance with Rule 144 under the
Securities Act or in an offshore transaction pursuant to and in
compliance with Rule 904 under the Securities Act or pursuant to an
effective registration statement under the
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Securities Act, a certification to that effect from the transferor (in
substantially the form of Exhibit B-4 hereto);
(3) if such beneficial interest is being transferred in reliance on
any other exemption from the registration requirements of the
Securities Act, a certification to that effect from the transferor (in
substantially the form of Exhibit B-4 hereto) and an Opinion of Counsel
from the transferee or the transferor in form reasonably acceptable to
the Issuer and to the Registrar to the effect that such transfer is in
compliance with the Securities Act, in which case the Trustee or the
Secured Note Custodian, at the direction of the Trustee, shall, in
accordance with the standing instructions and procedures existing
between the Depositary and the Secured Note Custodian, cause the
aggregate principal amount of U.S. Global Notes or Regulation S
Permanent Global Notes, as applicable, to be reduced accordingly and,
following such reduction, the Issuer shall execute and, the Trustee
shall authenticate and deliver to the transferee a Certificated Secured
Note of the same series in the appropriate principal amount.
(ii) Certificated Secured Notes issued in exchange for a beneficial
interest in a U.S. Global Note or Regulation S Permanent Global Note, as
applicable, pursuant to this Section 2.6(c) shall be registered in such
names and in such authorized denominations as the Depositary, pursuant to
instructions from its Participants or Indirect Participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such Certificated
Secured Notes to the Persons in whose names such Secured Notes are so
registered. Following any such issuance of Certificated Secured Notes, the
Trustee, as Registrar, shall instruct the Depositary to reduce or cause to
be reduced the aggregate principal amount at maturity of the applicable
Global Note to reflect the transfer.
(d) Restrictions on Transfer and Exchange of Global Notes. Notwithstanding
any other provision of this Indenture (other than the provisions set forth in
subsections (e) and (f) of this Section 2.6), a Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary. Any Holder of a beneficial interest in a
Global Note shall, by acceptance of such Global Note, agree that transfers of
beneficial interests in such Global Note may be effected only through a book
entry system maintained by the Holder of such Global Note (or its agent), and
that ownership of a beneficial interest in the Secured Notes represented hereby
shall be required to be reflected in book entry form. Interests of beneficial
owners in a Global Note may be transferred in accordance with the rules and
procedures of the Depositary (or its successors).
(e) Continuous Restrictions on Transfer and Exchange of Secured Notes.
Notwithstanding any other provision of this Indenture, the Secured Notes may not
at any time, including after consummation of the Exchange Offer, be transferred
to, or held by Persons other than QIBs, Institutional Accredited Investors or a
Person involved in the organization or operation of the Company or an affiliate
(as defined in Rule 465 under the Securities Act) of the Company. Any Holder or
beneficial owner of a Secured
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Note shall, by acceptance of such Secured Note, agree that such Holder or owner
will deliver to each Person to whom a Secured Note or an interest therein is
transferred a notice provided for in the legend specified in subsection (f) of
this Section 2.6. No Secured Note may be transferred by the Trustee or the
Registrar in violation of the foregoing.
(f) Legends.
(i) Except as permitted by the following paragraphs (iii), (iv) and
(v), each Secured Note certificate evidencing Global Notes and Certificated
Secured Notes (and all Secured Notes issued in exchange therefor or
substitution thereof) shall bear a legend (the "Private Placement Legend")
in substantially the following form:
THIS SECURED NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. ACCORDINGLY, THIS SECURED NOTE MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET
FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT IS
AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1),
(2), (3) OR (7) UNDER REGULATION D UNDER THE SECURITIES ACT (AN "IAI"));
(2) AGREES THAT IT WILL NOT RESELL, OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) TO AN IAI THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE TRUSTEE WITH A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE
(THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS
THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (D) TO A PERSON
INVOLVED IN THE ORGANIZATION OR OPERATION OF THE COMPANY OR AN AFFILIATE
(AS DEFINED IN RULE 405 UNDER THE SECURITIES ACT) OF THE COMPANY AND,
AND IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAW OF
ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND
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(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
(ii) After the registration of the Exchange Secured Notes under the
Securities Act, the Secured Exchange Notes when issued, will bear a legend
to the following effect unless otherwise agreed by Finco and the holder
thereof.
THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI") OR (C) IT
IS A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE COMPANY OR
AN AFFILIATE (AS DEFINED IN RULE 405 UNDER THE SECURITIES ACT) OF THE
COMPANY.
(2) AGREES THAT IT WILL NOT RESELL, OR OTHERWISE TRANSFER THIS NOTE
EXCEPT TO (A) A QIB, (B) AN IAI, OR (C) A PERSON INVOLVED IN THE
ORGANIZATION OR OPERATION OF THE COMPANY OR AN AFFILIATE (AS DEFINED IN
RULE 405 UNDER THE SECURITIES ACT) OF THE COMPANY, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR
AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND.
(4) THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE
FOREGOING. THE INDENTURE ALSO CONTAINS A PROVISION REQUIRING FINCO AND
THE COMPANY TO EXERCISE REASONABLE CARE TO ENSURE THAT THE SECURED NOTES
ARE RESOLD OR OTHERWISE TRANSFERRED ONLY TO PURCHASERS MEETING THE
REQUIREMENTS SPECIFIED IN CLAUSE (2) ABOVE.
(iii) Upon any sale or transfer of a Transfer Restricted Note
(including any Transfer Restricted Note represented by a Global Note) pursuant
to Rule 144 under the Securities Act or pursuant to a effective registration
statement under the Securities Act:
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(1) in the case of any Transfer Restricted Note that is a
Certificated Secured Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Note for a Certificated
Secured Note of the same series that does not bear the legend set forth
in (i) above and rescind any restriction on the transfer of such
Transfer Restricted Note upon receipt of a certification from the
transferring Holder substantially in the form of Exhibit B-4 hereto;
and
(2) in the case of any Transfer Restricted Note represented by a
Global Note, such Transfer Restricted Note shall not be required to
bear the legend set forth in (i) above, but shall continue to be
subject to the provisions of Section 2.6(a) and (b) hereof; provided,
however, that with respect to any request for an exchange of a Transfer
Restricted Note that is represented by a Global Note for a Certificated
Secured Note of the same series that does not bear the legend set forth
in (i) above, which request is made in reliance upon Rule 144, the
Holder thereof shall certify in writing to the Registrar that such
request is being made pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit B-4 hereto).
(iv) Upon any sale or transfer of a Transfer Restricted Note (including
any Transfer Restricted Note represented by a Global Note) in reliance on
any exemption from the registration requirements of the Securities Act
(other than exemptions pursuant to Rule 144A or Rule 144 under the
Securities Act) in which the Holder or the transferee provides an Opinion of
Counsel to the Issuer and the Registrar in form and substance reasonably
acceptable to the Issuer and the Registrar (which Opinion of Counsel shall
also state that the transfer restrictions contained in the legend are no
longer applicable):
(1) in the case of any Transfer Restricted Note that is a
Certificated Secured Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Note for a Certificated
Secured Note that does not bear the legend set forth in (i) above and
rescind any restriction on the transfer of such Transfer Restricted
Note; and
(2) in the case of any Transfer Restricted Note represented by a
Global Note, such Transfer Restricted Note shall not be required to
bear the legend set forth in (i) above, but shall continue to be
subject to the provisions of Section 2.6(a) and (b) hereof.
(v) By its acceptance of any Initial Secured Note represented by a
certificate bearing the Private Placement Legend, each Holder of, and
beneficial owner of an interest in, such Initial Secured Note acknowledges
the restrictions on transfer of such Initial Secured Note set forth in the
Private Placement Legend and the legend specified in paragraph (ii) above
and under the heading "Notice to Investors in the Secured Notes" in the
Offering Memorandum and agrees that it will transfer such Initial Secured
Note only in accordance with the Private Placement Legend and the
restrictions set forth under the heading "Notice to Investors" in the
Offering Memorandum.
(vi) Notwithstanding the foregoing, upon the occurrence of the Exchange
Offer in accordance with the Registration Rights Agreement, the Issuer shall
issue and, upon
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receipt of an authentication order in accordance with Section 2.2
hereof, the Trustee shall authenticate (i) one or more Global Notes in
aggregate principal amount equal to the principal amount of the
restricted beneficial interests validly tendered and not properly
withdrawn by Persons that certify in the letter of transmittal
delivered in the Exchange Offer that they are not (x) broker-dealers,
(y) Persons participating in the distribution of the Exchange Secured
Notes or (z) Persons who are affiliates (as defined in Rule 144 under
the Securities Act) of the Issuer and accepted for exchange in the
Exchange Offer and (ii) Certificated Secured Notes that do not bear
the Private Placement Legend but continue to bear the legend specified
in clause (ii) of this Section 2.6(f) in an aggregate principal amount
equal to the principal amount of the Certificated Secured Notes that
are Transfer Restricted Notes accepted for exchange in the Exchange
Offer. Concurrently with the issuance of such Secured Notes, the
Trustee shall cause the aggregate principal amount of the applicable
Global Notes of a series to be reduced accordingly and the Issuer
shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Certificated Secured Notes so
accepted Certificated Secured Notes of such series in the appropriate
principal amount.
(g) Cancellation and/or Adjustment of Global Notes. At such time
as all beneficial interests in Global Notes of a series have been exchanged for
Certificated Secured Notes, redeemed, repurchased or cancelled, all Global
Notes of such series shall be returned to or retained and cancelled by the
Trustee in accordance with Section 2.11 hereof. At any time prior to such
cancellation, if any beneficial interest in a Global Note is exchanged for
Certificated Secured Notes, redeemed, repurchased or cancelled, the principal
amount of Secured Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note, by the
Trustee or the Secured Note Custodian, at the direction of the Trustee, to
reflect such reduction.
(h) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges,
the Issuer shall execute and the Trustee shall authenticate Global
Notes and Certificated Secured Notes of each series at the Registrar's
request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Issuer may require
payment of a sum sufficient to cover any stamp or transfer tax or
similar governmental charge payable in connection therewith (other
than any such stamp or transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.6,
3.10, 4.8, and 10.6 hereto).
(iii) All Global Notes and Certificated Secured Notes
issued upon any registration of transfer or exchange of Global Notes
or Certificated Secured Notes shall be the valid obligations of the
Issuer, evidencing the same debt, and entitled to the same benefits
under this Indenture, as the Global Notes or Certificated Secured
Notes surrendered upon such registration of transfer or exchange.
(iv) The Registrar shall not be required: (A) to issue, to
register the transfer of or to exchange Secured Notes during a period
beginning at the opening of fifteen (15)
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Business Days before the day of any selection of Secured Notes for
redemption under Article III hereof and ending at the close of
business on the day of selection, (B) to register the transfer of or
to exchange any Secured Note so selected for redemption in whole or in
part, except the unredeemed portion of any Secured Note being redeemed
in part, or (C) to register the transfer of or to exchange a Secured
Note between a Record Date and the next succeeding Interest Payment
Date.
(v) Prior to due presentment for the registration of a
transfer of any Secured Note, the Trustee, any Agent and the Issuer
may deem and treat the Person in whose name any Secured Note is
registered as the absolute owner of such Secured Note for the purpose
of receiving payment of principal of and interest on such Secured
Notes and for all other purposes, and neither the Trustee, any Agent
nor the Issuer shall be affected by notice to the contrary.
(vi) The Trustee shall authenticate Global Notes and
Certificated Secured Notes in accordance with the provisions of
Section 2.2 hereof.
Notwithstanding anything herein to the contrary, as to any certifications or
certificates delivered to the Trustee or Registrar pursuant to this Section
2.6, the Trustee's or the Registrar's duties shall be limited to confirming
that any such certifications and certificates delivered to it are in the form
of Exhibits B-1 through B-4 and C attached hereto. The Trustee or Registrar
shall not be responsible for confirming the truth or accuracy of
representations made in any such certifications or certificates.
SECTION 2.7 Replacement of Secured Notes.
If any mutilated Secured Note is surrendered to the Trustee or
the Issuer and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Secured Note, the Issuer shall issue, and the
Trustee, upon the receipt of a Company Order, shall authenticate, a replacement
Secured Note of the same series if the Trustee's requirements are met. If
required by the Trustee or the Issuer, an indemnity bond must be supplied by
the Holder that is sufficient in the judgment of the Trustee and the Issuer to
protect the Issuer, each Guarantor, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Secured
Note is replaced. The Issuer may charge for its expenses in replacing a
Secured Note.
Every replacement Secured Note is an additional obligation of
the Issuer and shall be entitled to all of the benefits of this Indenture
equally and proportionately with all other Secured Notes of the same series
duly issued hereunder. The provisions of this Section 2.7 are exclusive and
shall preclude (to the extent lawful) all other rights and remedies with
respect to the replacement of mutilated, destroyed, lost or stolen Secured
Notes.
SECTION 2.8 Outstanding Secured Notes.
The Secured Notes of a series outstanding at any time are all
the Secured Notes of such series authenticated by the Trustee except for those
cancelled by it, those delivered to it for cancellation, those reductions in
the interest in a Global Note of such series effected by the Trustee in
accordance with the provisions hereof, and those described in this Section as
not
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outstanding. Except as set forth in Section 2.9 hereof, a Secured Note does not
cease to be outstanding because the Issuer or an Affiliate of the Issuer holds
the Secured Note.
If a Secured Note is replaced pursuant to Section 2.7 hereof,
it ceases to be outstanding unless the Trustee receives proof satisfactory to
it that the replaced Secured Note is held by a bona fide purchaser.
If the principal amount of any Secured Note is considered paid
under Section 4.1 hereof, it ceases to be outstanding and interest (including
Special Interest and Additional Amounts, if any) on it ceases to accrue.
If the Paying Agent (other than the Issuer, the Company, a
Subsidiary, Guarantor, a Subsidiary or an Affiliate of any thereof) holds, on a
Redemption Date or Maturity, money sufficient to pay Secured Notes payable on
that date, then on and after that date such Secured Notes shall be deemed to be
no longer outstanding and shall cease to accrue interest (including Special
Interest and Additional Amounts, if any).
SECTION 2.9 Treasury Secured Notes.
In determining whether the Holders of the required principal
amount of Secured Notes have concurred in any direction, waiver or consent,
Secured Notes owned by the Issuer, the Company, a Subsidiary, any Subsidiary
Guarantor, or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Issuer, the Company or any
Subsidiary Guarantor, shall be considered as though not outstanding, except
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Secured Notes that a
Responsible Officer knows are so owned shall be so disregarded.
SECTION 2.10 Temporary Secured Notes.
Until definitive Secured Notes are ready for delivery, the
Issuer may prepare and the Trustee shall authenticate temporary Secured Notes
upon a Issuer Order. Temporary Secured Notes shall be substantially in the form
of definitive Secured Notes but may have variations that the Issuer considers
appropriate for temporary Secured Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Issuer shall prepare and the
Trustee shall authenticate definitive Secured Notes in exchange for temporary
Secured Notes.
Holders of temporary Secured Notes shall be entitled to all of
the benefits of this Indenture.
SECTION 2.11 Cancellation.
The Issuer at any time may deliver Secured Notes to the
Trustee for cancellation. The Registrar and Paying Agent shall forward to the
Trustee any Secured Notes surrendered to them for registration of transfer,
exchange or payment. The Trustee and no one else shall cancel all Secured Notes
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall upon the written request of the Issuer, return such
cancelled Secured Notes
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to the Issuer. The Issuer may not issue new Secured Notes to replace Secured
Notes that it has paid or that have been delivered to the Trustee for
cancellation.
SECTION 2.12 Payment of Interest; Interest Rights Preserved.
Interest (including Additional Amounts, if any, and Special
Interest, if any) on any Secured Note which is payable, and is punctually paid
or duly provided for, on any March 15 or September 15 (an "Interest Payment
Date"), commencing on September 15, 1999, shall be paid to the Person in whose
name such Secured Note is registered at the close of business on the Record
Date for such interest payment, which shall be the March 1 or September 1
(whether or not a Business Day) immediately preceding such Interest Payment
Date.
Any interest on any Secured Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
registered Holder on the relevant Record Date, and, except as hereinafter
provided, such Defaulted Interest and any interest payable on such Defaulted
Interest may be paid by the Issuer, at its election, as provided in clause (a)
or (b) below:
(a) The Issuer may elect to make payment of any Defaulted
Interest, and any interest payable on such Defaulted Interest, to the Persons
in whose names the Secured Notes are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Issuer shall notify the Trustee in writing
of the amount of Defaulted Interest proposed to be paid on the Secured Notes
and the date of the proposed payment, and at the same time the Issuer shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest (including Additional
Amounts, if any, and Special Interest, if any) or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as provided in this clause (a).
Thereupon the Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 calendar days and not less
than 10 calendar days prior to the date of the proposed payment and not less
than 10 calendar days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Issuer of such Special
Record Date and, in the name and at the expense of the Issuer, shall cause
notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be sent, first class mail, postage prepaid, to each
Holder at such Holder's address as it appears in the Securities Register, not
less than 10 calendar days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been mailed as aforesaid, such Defaulted Interest shall be paid
to the Persons in whose names the Secured Notes are registered at the close of
business on such Special Record Date and shall no longer be payable pursuant to
the following clause (b).
(b) The Issuer may make payment of any Defaulted Interest
(including Additional Amounts, if any, and Special Interest, if any), and any
interest payable on such Defaulted Interest, on the Secured Notes in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Secured Notes may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Issuer to the Trustee
of the
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proposed payment pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.12, each
Secured Note delivered under this Indenture upon registration of transfer of,
or in exchange for, or in lieu of, or in substitution for, any other Secured
Note, shall carry the rights to interest (Additional Amounts, if any, and
Special Interest, if any) accrued and unpaid, and to accrue, which were carried
by such other Secured Note.
SECTION 2.13 Computation of Interest.
Interest on the Secured Notes shall be computed on the basis
of a 360-day year comprised of twelve 30- day months.
SECTION 2.14 CUSIP Number.
The Issuer in issuing the Secured Notes may use a "CUSIP"
number, and if it does so, the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Secured Notes and
that reliance may be placed only on the other identification numbers printed on
the Secured Notes. The Issuer shall promptly notify the Trustee of any change
in the CUSIP number.
ARTICLE III
REDEMPTION AND PREPAYMENT
SECTION 3.1 Notices to Trustee.
If the Issuer elects to redeem Secured Notes of a series
pursuant to the optional redemption provisions of Section 3.7 hereof and of the
Secured Notes of such series, it shall furnish to the Trustee, at least 45 days
(unless a shorter period is acceptable to the Trustee) but not more than 60
days before a Redemption Date, an Officers' Certificate setting forth (i) the
clause of this Indenture pursuant to which the redemption shall occur, (ii) the
Redemption Date, (iii) the principal amount of Secured Notes to be redeemed and
(iv) the Redemption Price.
SECTION 3.2 Selection of Secured Notes to be Redeemed.
In the case of any partial redemption provided for in Section
3.7 hereof, selection of the Secured Notes for redemption will be made by the
Trustee on a pro rata basis, by lot or by such other method as the Trustee in
its sole discretion shall deem to be fair and appropriate, although no Secured
Note of $1,000 in then outstanding principal amount or less shall be redeemed
in part. If any Secured Note is to be redeemed in part only, the notice of
redemption relating to such Secured Note shall state the portion of the
principal amount thereof to be redeemed. A new Secured Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Secured Note. Partial
Redemptions provided for in Section 3.8 and Section 3.9 hereof will be applied
to all
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Secured Notes on a pro rata basis, although no Secured Note of $1000 in then
outstanding principal amount shall be redeemed in part.
The Trustee shall promptly notify the Issuer in writing of the
Secured Notes selected for redemption and, in the case of any Secured Note
selected for partial redemption, the portion of the principal amount thereof to
be redeemed. Secured Notes and portions of Secured Notes selected shall be in
amounts of $1,000 or integral multiples of $1,000, except that if all of the
Secured Notes of a Holder are to be redeemed, the entire outstanding amount of
Secured Notes held by such Holder, even if not an integral multiple of $1,000,
shall be redeemed. Except as provided in the preceding sentence, provisions of
this Indenture that apply to Secured Notes called for redemption also apply to
portions of Secured Notes called for redemption.
SECTION 3.3 Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption
Date, the Issuer shall mail or cause to be mailed, by first class mail, a
notice of redemption to each Holder whose Secured Notes are to be redeemed at
its registered address as it appears in the Securities Register.
The notice shall identify the Secured Notes to be redeemed
including CUSIP number and shall state:
(a) the Redemption Date;
(b) the Redemption Price and the method of calculating such
Redemption Price pursuant to this Indenture;
(c) if any Secured Note is being redeemed in part, the portion of
the principal amount of such Secured Note to be redeemed and that, after the
Redemption Date upon surrender of such Secured Note, a new Secured Note or
Secured Notes of the same series in principal amount equal to the unredeemed
portion shall be issued upon cancellation of the original Secured Note;
(d) the name and address of the Paying Agent;
(e) that Secured Notes called for redemption (other than a Global
Note) must be surrendered to the Paying Agent to collect the Redemption Price;
(f) that, unless the Issuer defaults in making such Redemption
Payment, interest (Additional Amounts, if any, and Special Interest, if any) on
Secured Notes (or portions thereof) called for redemption cease to accrue on
and after the Redemption Date;
(g) the paragraph of the Secured Notes and/or Section of this
Indenture pursuant to which the Secured Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Secured Notes.
At the Issuer's request, the Trustee shall give the notice of
redemption in the Issuer's name and at its expense; provided, however, that the
Issuer shall have delivered to the
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Trustee, at least 45 days prior to the Redemption Date (unless a shorter time
is acceptable to the Trustee), an Officers' Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.
SECTION 3.4 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section
3.3 hereof, Secured Notes called for redemption become irrevocably due and
payable on the Redemption Date at the Redemption Price including interest and
Special Interest, if any, accrued and unpaid on the Redemption Date. Upon
surrender to the Paying Agent, such Secured Notes shall be paid at the
Redemption Price stated in such notice. Failure to give notice or any defect in
the notice to any Holder shall not affect the validity of the notice to any
other Holder. A notice of redemption may not be conditional.
SECTION 3.5 Deposit of Redemption Price.
On or prior to the Redemption Date, the Issuer shall deposit
with the Trustee or with the Paying Agent immediately available funds
sufficient to pay the Redemption Price of and accrued and unpaid interest, if
any, on (and Special Interest, if any, and Additional Amounts, if any on) all
Secured Notes to be redeemed on that date. The Trustee or the Paying Agent
shall promptly return to the Issuer any money deposited with the Trustee or the
Paying Agent by the Issuer in excess of the amounts necessary to pay the
Redemption Price of, and accrued interest (including Special Interest, if any)
on, all Secured Notes to be redeemed.
If the Issuer complies with the provisions of the preceding
paragraph, on and after the Redemption Date, interest (and Special Interest, if
any, and Additional Amounts, if any) shall cease to accrue on the Secured Notes
or the portions of Secured Notes called for redemption. If a Secured Note is
redeemed on or after a Record Date but on or prior to the related Interest
Payment Date, then any accrued and unpaid interest (and Special Interest, if
any) shall be paid to the Person in whose name such Secured Note was registered
at the close of business on such Record Date. If any Secured Note called for
redemption shall not be so paid upon surrender for redemption because of the
failure of the Issuer to comply with the preceding paragraph, interest (and
Special Interest, if any, and Additional Amounts, if any) shall be paid on the
unpaid principal, from the Redemption Date until such principal is paid, and to
the extent lawful on any interest not paid on such unpaid principal, in each
case at the rate provided in the Secured Notes and in Section 4.1 hereof.
SECTION 3.6 Secured Notes Redeemed in Part.
Upon surrender of a Secured Note that is redeemed in part, the
Issuer shall issue and, upon the Issuer's written request, the Trustee shall
authenticate for the Holder at the expense of the Issuer a new Secured Note of
the same series equal in principal amount to the unredeemed portion of the
Secured Note surrendered. The records of the Registrar and the Depositary shall
reflect any partial redemption of any Global Note.
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SECTION 3.7 Optional Redemptions.
(a) 10-Year Secured Notes. On or after March 15, 2004, the
10-Year Secured Notes will be redeemable, at the Issuer's option, in whole or
in part, at any time or from time to time, upon not less than 30 nor more than
60 days' prior notice mailed by first-class mail to each Holder's registered
address, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest (including Special
Interest, if any, and Additional Amounts, if any) to the Redemption Date
(subject to the right of Holders of record on the relevant Record Date to
receive interest due on the relevant Interest Payment Date), if redeemed during
the 12-month period commencing on March 15 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Period Price
------ --------------
<S> <C>
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.6875%
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.7917%
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.8958%
--------
2007 and thereafter . . . . . . . . . . . . . . . . . . . 100.0000%
</TABLE>
Any prepayments by the Company on the Issuer Loans required to
be made to provide funds for the Issuer to make this redemption shall be made
on the 10-Year Tranche (as defined in the applicable Issuer Loan Agreement) of
each Issuer Loan on a pro rata basis.
(b) 7-Year Secured Notes. The 7-Year Secured Notes will be
redeemable, at the Issuer's option, at any time in whole or from time to time
in part upon not less than 30 and not more than 60 days' prior notice mailed by
first class mail to each Holder's registered address appearing in the
Securities Register on any date prior to Maturity at a price equal to 100% of
the principal amount thereof plus accrued and unpaid interest (including
Special Interest, if any, and Additional Amounts, if any) to the Redemption
Date (subject to the right of Holders of record on the relevant Record Date to
receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date) plus the Make-Whole Premium applicable to the 7-Year Secured
Notes. In no event will the Redemption Price ever be less than 100% of the
principal amount of the 7-Year Secured Notes plus accrued and unpaid interest
(including Special Interest, if any, and Additional Amounts, if any) to the
Redemption Date.
The amount of the Make-Whole Premium with respect to any
7-Year Secured Notes (or portion thereof) to be redeemed will be equal to the
excess, if any, of:
(i) the sum of the present values, calculated as of the
redemption date, of:
(1) each interest payment that, but for such
redemption, would have been payable on the 7- Year Secured
Notes (or portion thereof) of such series being redeemed on
each Interest Payment Date occurring after the Redemption Date
(excluding any accrued and unpaid interest for the period
prior to the Redemption Date); and
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(2) the principal amount that, but for such
redemption, would have been payable at the final maturity of
the 7-Year Secured Notes (or portion thereof) of such series
being redeemed, over
(ii) the principal amount of the 7-Year Secured Notes (or
portion thereof) of such series being redeemed.
The present values of interest and principal payments referred
to in clause (i) above will be determined in accordance with generally accepted
principles of financial analysis. Such present values will be calculated by
discounting the amount of each payment of interest or principal from the date
that each such payment would have been payable, but for the redemption, to the
redemption date at a discount rate equal to the Treasury Yield (as defined
below) plus 50 basis points.
The Make-Whole Premium will be calculated by the Independent
Investment Banker. For purposes of determining the Make-Whole Premium,
"Treasury Yield" means a rate of interest per annum equal to the weekly average
yield to maturity of United States Treasury Notes that have a constant maturity
that corresponds to the remaining term to maturity of the 7-Year Secured Notes,
calculated to the nearest 1/12th of a year (the "Remaining Term"). The Treasury
Yield will be determined as of the third business day immediately preceding the
applicable redemption date.
The weekly average yields of United States Treasury Notes will
be determined by reference to the most recent statistical release published by
the Federal Reserve Bank of New York and designated "H.15(519) Selected
Interest Rates" or any successor release (the "H.15 Statistical Release"). If
the H.15 Statistical Release sets forth a weekly average yield for United
States Treasury Notes having a constant maturity that is the same as the
Remaining Term, then the Treasury Yield will be equal to such weekly average
yield. In all other cases, the Treasury Yield will be calculated by
interpolation, on a straight-line basis, between the weekly average yields on
the United States Treasury Notes that have a constant maturity closest to and
greater than the Remaining Term and the United States Treasury Notes that have
a constant maturity closest to and less than the Remaining Term (in each case
as set forth in H.15 Statistical Release). Any weekly average yields so
calculated by interpolation will be rounded to the nearest 1/100th of 1%, with
any figure of 1/200 of 1% or above being rounded upward. If weekly average
yields for United States Treasury Notes are not available in comparable the
H.15 Statistical Release or otherwise, then the Treasury Yield will be
calculated by interpolation of comparable rates selected by the Independent
Investment Banker.
Any prepayments by the Company on the Issuer Loans required to
be made to provide funds for the Issuer to make the redemption shall be made on
the 7-Year Tranche (as defined in the applicable Issuer Loan Agreement) of each
Issuer Loan on a pro rata basis.
(c) Any redemption pursuant to this Section 3.7 shall be made
pursuant to the provisions of Section 3.1 through 3.6 hereof.
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SECTION 3.8 Redemption Upon Loss of a Mortgaged Rig.
If an Event of Loss occurs at any time with respect to a
Mortgaged Rig (the Mortgaged Rig suffering such Event of Loss being the "Lost
Mortgaged Rig"), the Company shall apply the Event of Loss Proceeds in respect
thereof in an amount (the "Loss Redemption Amount") equal to the principal
amount of the applicable Issuer Loan secured by the Lost Mortgaged Rig
outstanding on the date (the "Loss Date") on which such Event of Loss was
deemed to have occurred, together with all accrued and unpaid interest
(including Special Interest, if any, and Additional Amounts, if any) thereon to
the prepayment of such Issuer Loan; if a Default shall have occurred and be
continuing at the time of receipt of the Event of Loss Proceeds with respect to
such Event of Loss, the Company will also be required to prepay all Issuer
Loans on a pro rata basis in an aggregate amount equal to the excess of the Net
Event of Loss Proceeds over the Loss Redemption Amount, if any, together with
all accrued and unpaid interest (including Special Interest, if any, and
Additional Amounts, if any) thereon. Such payments on the Issuer Loan or Loans
shall be made directly to the Trustee for deposit into the Issuer Escrow
Account. Such funds shall constitute part of the Collateral pending
application in accordance with the next paragraph.
Upon the earlier to occur of (A) 30 days after the receipt of
such Event of Loss Proceeds by the Company (the "Loss Proceeds Receipt Date")
and (B) 180 days after the Loss Date, the Issuer shall redeem Secured Notes of
both series, in whole or in part on a pro rata basis, at a Redemption Price
equal to 100% of their principal amount, plus accrued and unpaid interest
(including Additional Amounts and Special Interest, if any) to the Redemption
Date, in an aggregate principal amount equal to the Loss Redemption Amount or
the Net Event of Loss Proceeds, as the case may be. The Issuer and the Company
shall treat as Loss Excess Proceeds the amount equal to (i) the excess of the
Net Event of Loss Proceeds from such Event of Loss over the funds applied
pursuant to the preceding sentence, less (ii) the amount of such excess Net
Event of Loss Proceeds (A) used to repay Senior Indebtedness of the Company or
secured Senior Indebtedness of a Subsidiary Guarantor then owning a Mortgaged
Rig, in each case, with a permanent reduction of availability in the case of
revolving credit borrowings and owing to a Person other than the Company or any
of its Subsidiaries, or (B) invested in Additional Assets (as determined in
good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a Board Resolution).
SECTION 3.9 Redemption Upon Sale of a Mortgaged Rig.
If a Mortgaged Rig or the Capital Stock of Subsidiary
Guarantor then owning a Mortgaged Rig is sold in compliance with the terms of
this Indenture (the Mortgaged Rig so sold or owned by the Subsidiary Guarantor
whose Capital Stock is so sold being the "Sold Mortgaged Rig"), the Company
shall apply funds in an amount (the "Sale Redemption Amount") equal to the
principal amount of the Issuer Loan secured by such Sold Mortgaged Rig on the
date of such sale (the "Sale Date"), together with all accrued and unpaid
interest (including Special Interest, if any, and Additional Amounts, if any)
thereon, plus any additional amounts required by the Issuer to redeem the
Secured Notes to the extent required by the next paragraph, to the repayment of
such Issuer Loan. If a Default shall have occurred and be continuing at the
time of receipt of the cash consideration with respect to such Sold Mortgaged
Rig, the Company will also be required to prepay other Issuer Loans on a pro
rata basis in an aggregate amount equal to the
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excess of such Net Available Cash attributable to such Sold Mortgaged Rig over
such Sale Redemption Amount. Such payments on the Issuer Loan or Loans shall
be allocated between the 7-Year Tranche and the 10-Year Tranche of each such
Issuer Loan on a pro rata basis and shall be made directly to the Trustee for
deposit into the Issuer Escrow Account. Such funds shall constitute part of
the Collateral pending application in accordance with the next paragraph.
Upon the earlier to occur of (A) 30 days after the receipt of
such Net Available Cash (the "Sale Proceeds Receipt Date") and (B) 60 days
after the Sale Date, the Issuer shall redeem Secured Notes of both series, in
whole or in part on a pro rata basis, in an aggregate principal amount equal to
the Sale Redemption Amount or the Net Available Cash, as the case may be, at a
Redemption Price equal to:
(x) In respect to the 10-year Secured Notes (i) if such redemption
is before March 15, 2004, the sum of the remaining scheduled
payments of interest, through March 15, 2004 (including
Additional Amounts and Special Interest, if any) and the
Redemption Price as of March 15, 2004 as set forth in Section
3.7(a) as discounted to their present values to the redemption
date on a semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Treasury Rate plus 50 basis
points, plus accrued and unpaid interest on the Secured Notes
to the date of redemption or (ii) if such redemption is on or
after March 15, 2004, the redemption price then applicable as
described in Section 3.7(a), or
(y) In respect of the 7-Year Secured Notes, the sum of the
remaining scheduled payments of principal and interest
(including Additional Amounts and Special Interest, if any)
thereon, as discounted to their present values to the
Redemption Date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus
50 basis points,
(z) in each case plus accrued and unpaid interest (including
Special Interest, if any, and Additional Amounts, if any) on
the Secured Notes to the Redemption Date.
The excess of the Net Available Cash from the sale of a Mortgaged Rig over the
funds applied as payment of Issuer Loans shall be treated in the manner
provided in the last sentence of Section 4.15(b).
For purposes of this Section 3.9, the following definitions
apply:
"Treasury Rate" is defined to mean, with respect to any
redemption date, the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such redemption date.
"Comparable Treasury Issue" is defined to mean the United
States Treasury security selected by an Independent Investment Banker as having
a maturity comparable to the weighted average maturity of the remaining term of
the Secured Notes outstanding that would be utilized, at the time of selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to such weighted average
maturity
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of such Secured Notes. "Independent Investment Banker" means the Reference
Treasury Dealer appointed by the Trustee after consultation with the Issuer and
the Company.
"Comparable Treasury Price" is defined to mean, with respect
to any Redemption Date, the average of the Reference Treasury Dealer Quotations
for such Redemption Date. The "Reference Treasury Dealer Quotations" means,
with respect to the Reference Treasury Dealer and any Redemption Date, the
average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by the Reference Treasury
Dealer at 5:00 p.m. (New York City time) on the third business day preceding
such Redemption Date.
"Reference Treasury Dealer" is defined to mean each of
Donaldson, Lufkin & Jenrette Securities Corporation and its successors;
provided, however, that if Donaldson, Lufkin & Jenrette Securities Corporation
shall cease to be a primary U.S. Government securities dealer in New York City
(a "Primary Treasury Dealer"), the Issuer shall substitute therefor another
Primary Treasury Dealer.
SECTION 3.10 Excess Proceeds Offer.
(a) If, as of the first day of any calendar month, the aggregate
amount of Sale Excess Proceeds and Loss Excess Proceeds exceeds 10% of
consolidated total assets of the Company, and if the aggregate amount of Sale
Excess Proceeds and Loss Excess Proceeds in excess of 10% of consolidated total
assets that has not theretofore been subject to an Excess Proceeds Offer (the
"Excess Proceeds Offer Amount"), totals at least $10,000,000, the Issuer must,
not later than the fifteenth Business Day of such month, make an offer (an
"Excess Proceeds Offer") to purchase from the Holders pursuant to and subject
to the conditions contained in this Indenture, Secured Notes at a purchase
price equal to 100% of their principal amount, plus any accrued interest
(including Additional Amounts and Special Interest, if any) to the date of
purchase. The New Senior Note Indenture requires that the Company must, not
later than the fifteenth Business Day of such month, also make an offer to
purchase new Senior Notes at a purchase price equal to 100% of their principal
amount, plus any accrued interest (including "Special Interest" (as defined in
the New Senior Note Indenture), if any) to the date of purchase. The total
amount of the Secured Notes that are required to be purchased by the Issuer and
of New Senior Notes that are required to be purchased by the Company shall
equal the Excess Proceeds Offer Amount (an "Excess Proceeds Payment"). The
Company will prepay the appropriate tranches of the Issuer Loans on a pro rata
basis, or make loans constituting Subordinated Obligations to the Issuer, to
permit the Issuer to purchase any Secured Notes validly tendered pursuant to an
Excess Proceeds Offer. Any amounts remaining after all Secured Notes and all
New Senior Notes validly tendered are purchased shall no longer constitute Sale
Excess Proceeds or Loss Excess Proceeds.
(b) The Excess Proceeds Offer will remain open for a period of at
least 30 days following its commencement but no longer than 60 days, except to
the extent that a longer period is required by applicable law (the "Excess
Proceeds Offer Period"). On the Business Day following the termination of the
Excess Proceeds Offer Period (the "Excess Proceeds Purchase Date"), the Issuer
will purchase the principal amount of Secured Notes required to be purchased
pursuant to this Section 3.10 (i.e., the portion of the Excess Proceeds Offer
Amount allocable to the Secured Notes) or, if less than the portion of Excess
Proceeds Offer Amount allocable to the
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Secured Notes has been so validly tendered and not properly withdrawn, all
Secured Notes validly tendered and not properly withdrawn in response to the
Excess Proceeds Offer. Payment for any Secured Notes so purchased will be made
in the same manner as interest payments are made on the Secured Notes. If the
Excess Proceeds Purchase Date is on or after a Record Date and on or before the
related Interest Payment Date, any accrued and unpaid interest and Special
Interest, if any, and Additional Amounts, if any, shall be paid to the Person
in whose name a Secured Note is registered at the close of business on such
Record Date, and no additional interest (or Special Interest (to the extent
involving interest that is due and payable on such Interest Payment Date), if
any) shall be payable to Holders who tender Secured Notes pursuant to the
Excess Proceeds Offer.
(c) Upon the commencement of an Excess Proceeds Offer, the Issuer
shall send, by first class mail, a notice to the Trustee and each of the
Holders. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Secured Notes pursuant to the Excess Proceeds
Offer. The Excess Proceeds Offer shall be made to all Holders. The notice,
which shall govern the terms of the Excess Proceeds Offer, shall state:
(i) that the Excess Proceeds Offer is being made pursuant
to this Section 3.10 and the Excess Proceeds Offer Period during which
the Excess Proceeds Offer shall remain open;
(ii) the Excess Proceeds Offer Amount, the Excess Proceeds
Offer Purchase Price and the Excess Proceeds Purchase Date;
(iii) that any Secured Notes which are not validly tendered
or are not otherwise accepted for payment shall continue to accrue
interest and Additional Amounts and Special Interest, if applicable;
(iv) that, unless the Company defaults in making such
payment, any Secured Note accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest and Additional Amounts
and Special Interest, if applicable, after the Excess Proceeds
Purchase Date;
(v) that any Holder electing to have a Secured Note
purchased pursuant to any Excess Proceeds Offer shall be required to
surrender the Secured Note, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Secured Note completed, or
transfer by book-entry transfer, to the Issuer, a depositary, if
appointed by the Issuer, or a Paying Agent at the address specified in
the notice at least (1) one Business Day before the Excess Proceeds
Purchase Date;
(vi) that Holders shall be entitled to withdraw their
election if the Issuer, the depositary or the Paying Agent, as the
case may be, receives, no later than the expiration of the Excess
Proceeds Offer Period, a telegram, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the
Secured Note the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Secured Note
purchased;
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(vii) that, if the aggregate principal amount of Secured
Notes surrendered by Holders exceeds the portion of the Excess
Proceeds Offer Amount allocable to the Secured Notes, the Trustee
shall select the Secured Notes to be purchased on a pro rata basis
(with such adjustments as may be deemed appropriate by the Trustee so
that only Secured Notes in denominations of $1,000, or integral
multiples thereof, shall be purchased); and
(viii) that Holders whose Secured Notes were purchased only
in part shall be issued new Secured Notes equal in principal amount to
the unpurchased portion of the Secured Notes surrendered (or
transferred by book-entry transfer).
(d) On or before the Excess Proceeds Purchase Date, the Issuer
shall, to the extent lawful, (1) accept for payment, on a pro rata basis to the
extent necessary, the Secured Notes or portions thereof in an aggregate amount
equal to the portion of the Excess Proceeds Offer Amount allocable to Secured
Notes so validly tendered and not properly withdrawn pursuant to the Excess
Proceeds Offer, or if less than such portion of the Excess Proceeds Offer
Amount allocable to Secured Notes has been so validly tendered and not properly
withdrawn, all Secured Notes validly tendered and not properly withdrawn, (2)
deposit by 12:00 noon New York City time, on such date with the Paying Agent an
amount equal to such portion of the Excess Proceeds Offer Amount, plus accrued
and unpaid interest, and Special Interest, if any, and Additional Amounts, if
any, in respect of all Secured Notes, or portions thereof, so accepted and (3)
shall deliver to the Trustee an Officers' Certificate stating that such Secured
Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.10. The Issuer, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Excess Proceeds Purchase Date) mail or deliver to each
tendering Holder an amount equal to the Excess Proceeds Purchase Price of the
Secured Notes validly tendered and not properly withdrawn by such Holder and
accepted by the Issuer for purchase. Upon surrender and cancellation of a
Certificated Secured Note that is purchased in part, the Company shall promptly
issue and the Trustee shall authenticate and deliver to the surrendering Holder
of such Certificated Secured Note a new Certificated Secured Note equal in
principal amount to the unpurchased portion of such surrendered Certificated
Secured Note; provided that each such new Certificated Secured Note shall be in
a principal amount at Maturity of $1,000 or an integral multiple thereof. Upon
surrender of a Global Note that is purchased in part pursuant to an Excess
Proceeds Offer, the Paying Agent shall forward such Global Note to the Trustee
who shall make a notation on Schedule A thereof to reduce the principal amount
of such Global Note to an amount equal to the unpurchased portion of such
Global Note, as provided in Section 2.6 hereof. Any Secured Note not so
accepted shall be promptly mailed or delivered by the Issuer to the Holder
thereof. The Issuer shall publicly announce the results of the Excess Proceeds
Offer on the Excess Proceeds Purchase Date. For purposes of this Section 3.10,
the Trustee shall act as the Paying Agent.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the purchase of Secured Notes pursuant to an
Excess Proceeds Offer. To the extent that the provisions of any securities laws
or regulations conflict with provisions in this Indenture governing Excess
Proceeds Offers, the Issuer shall comply with the applicable securities laws
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and regulations and shall not be deemed to have breached its obligations under
the covenant described hereunder by virtue thereof.
ARTICLE IV
COVENANTS
In the event that at any time (a) the ratings assigned to the
Secured Notes by both of the Rating Agencies are Investment Grade Ratings and
(b) no Default has occurred and is continuing under this Indenture, the Company
and its Restricted Subsidiaries will no longer be subject to the provisions of
this Indenture described below under Section 4.9 and Section 4.11 (together,
the "Suspended Covenants"). In the event that the Company is not subject to the
Suspended Covenants for any period of time as a result of the preceding
sentence and, subsequently, one or both Rating Agencies withdraws its ratings
or downgrades the ratings assigned to the Secured Notes below the required
Investment Grade Ratings, then the Company and its Restricted Subsidiaries will
again be subject to the Suspended Covenants and compliance with the Suspended
Covenants with respect to Restricted Payments made after the time of such
withdrawal or downgrade will be calculated in accordance with the terms of
Section 4.11 as if such covenant had been in effect during the entire period of
time from the date of this Indenture.
SECTION 4.1 Payment of Secured Notes.
The Issuer shall pay or cause to be paid the principal of,
premium, if any, and interest (and Special Interest, if any, and Additional
Amounts, if any) on, the Secured Notes on the dates and in the manner provided
in the Secured Notes and in this Indenture. Principal, premium, if any, and
interest (and Special Interest, if any, and Additional Amounts, if any) shall
be considered paid on the date due if the Trustee or the Paying Agent, if other
than the Issuer, the Company or a Subsidiary thereof, holds as of 11:00 noon,
New York time, on the due date money deposited by the Issuer in immediately
available funds and designated for and sufficient to pay all principal,
premium, if any, and interest (and Special Interest, if any) then due. The
Issuer shall pay all Special Interest, if any, in the same manner on the dates
and in the amounts set forth in the Registration Rights Agreement. The Issuer
will promptly notify the Trustee of a Registration Default (as defined in the
Registration Rights Agreement) under the Registration Rights Agreement and any
cure thereof.
The Issuer shall pay interest (including post-petition
interest in any proceeding under any applicable Federal, state or foreign
bankruptcy law) on Defaulted Interest and Special Interest, if any, (without
regard to any applicable grace period) at the same rate to the extent lawful.
SECTION 4.2 Maintenance of Office or Agency.
Each of the Issuer and the Company shall maintain in the
Borough of Manhattan, The City of New York, an office or agency (which may be
an office of the Trustee or an affiliate of the Trustee, Registrar or
co-registrar) where Secured Notes may be surrendered for registration of
transfer or for exchange and where notices and demands to or upon the Issuer
and/or the Company in respect of the Secured Notes and this Indenture may be
served. The Issuer and the Company shall give prompt written notice to the
Trustee of the location, and any change in the
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location, of such office or agency. If at any time the Issuer and/or the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Issuer may also from time to time designate one or more
other offices or agencies where the Secured Notes may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall
in any manner relieve the Issuer or the Company of its obligation to maintain
an office or agency in the Borough of Manhattan, The City of New York for such
purposes. The Issuer shall give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
The Issuer hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Issuer in accordance with Section
2.3 hereof.
SECTION 4.3 Corporate Existence.
Subject to the provisions of Article 5 hereof, each of the
Issuer and the Company shall do or cause to be done all things necessary to
preserve and keep in full force and effect (i) its respective corporate
existence, and the corporate, partnership or other existence of each of the
Restricted Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of each of the Issuer,
the Company or any such Subsidiary of the Company and (ii) the rights (charter
and statutory), licenses and franchises of each of the Issuer, the Company and
the Subsidiaries of the Company; provided, however, that the Issuer and the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of the Restricted
Subsidiaries, if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and the Restricted Subsidiaries taken as a whole and that the loss
thereof is not adverse in any material respect to the Holders of the Secured
Notes.
SECTION 4.4 Maintenance of Properties and Insurance.
(a) The Company shall cause all material properties and assets
owned by or leased by it or any of the Restricted Subsidiaries useful and
necessary to the conduct of its business or the business of any of its
Restricted Subsidiaries to be maintained and kept in good condition, repair and
working order (reasonable wear and tear excepted) and shall cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in its judgment may be necessary, so that the business carried
on in connection therewith may be properly conducted at all times; provided,
however, that nothing in this Section 4.4 shall prevent the Company or any of
the Restricted Subsidiaries from discontinuing the use, operation or
maintenance of any of such properties and assets, or disposing of any of them,
if such discontinuance or disposal is, in the judgment of the Board of
Directors of the Company or the Restricted Subsidiary so concerned, or of an
officer (or other agent employed by the Company or of the Subsidiary so
concerned) of the Company or a Restricted Subsidiary having managerial
responsibility for any such properties or assets, desirable in the conduct of
the business of the
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Company or such Restricted Subsidiary of the Company, and if such
discontinuance or disposal is not adverse in any material respect to the
Holders.
(b) To the extent available at commercially reasonable rates, the
Company shall maintain, and shall cause the Restricted Subsidiaries, to the
extent such Restricted Subsidiaries maintain operations, to maintain, insurance
with responsible carriers against such risks and in such amounts, and with such
deductibles, retentions, self-insured amounts and co-insurance provisions, as
are customarily carried by similar businesses of similar size.
SECTION 4.5 Compliance With Laws.
The Issuer and the Company shall comply, and shall cause each
of the Subsidiaries of the Company to comply, with all applicable statutes,
rules, regulations, orders and restrictions in respect of the conduct of their
respective businesses and the ownership of their respective properties, except
for such noncompliances as would not in the aggregate have a material adverse
effect on the financial condition or results of operations of the Issuer or the
Company and the Restricted Subsidiaries taken as a whole.
SECTION 4.6 Taxes and Other Claims.
The Issuer and the Company shall pay, and shall cause each of
the Restricted Subsidiaries to pay, prior to delinquency, (a) all material
taxes, assessments, and governmental charges levied or imposed upon the Issuer,
the Company or any of the Restricted Subsidiaries or upon the income, profits
or property or assets of the Issuer, the Company or any of the Restricted
Subsidiaries and (b) all lawful claims for labor, materials and supplies,
which, if unpaid, might by law become a Lien upon the property or assets of the
Issuer, the Company or any of the Restricted Subsidiaries, except such as are
contested in good faith and by appropriate proceedings or where the failure to
effect such payment is not adverse in any material respect to the Holders of
the Secured Notes and for which adequate reserves in accordance with GAAP or
other appropriate provisions have been made.
SECTION 4.7 Stay, Extension and Usury Laws.
The Issuer, the Company and each of Subsidiary Guarantors
covenant (to the extent that they may lawfully do so) that they shall not at
any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law wherever enacted, now
or at any time hereafter in force, that may affect the covenants or the
performance of this Indenture; and the Issuer, the Company and each of
Subsidiary Guarantors (to the extent that they may lawfully do so) hereby
expressly waive all benefit or advantage of any such law, and covenant that
they shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been
enacted.
SECTION 4.8 Change of Control.
(a) Upon the occurrence of any of the following events (each a
"Change of Control"), the Issuer shall make an offer to repurchase all
outstanding Secured Notes in whole or
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in part (the "Change of Control Offer") at a purchase price (the "Change of
Control Purchase Price") in cash equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, and
Additional Amounts and Special Interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant Record Date to
receive interest (including Special Interest, if any, and Additional Amounts,
if any) due on the relevant Interest Payment Date).
(i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), is or becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
for purposes of this clause (i) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than
50% of [the total voting power of the Voting Stock of] the Company;
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board
of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election
by the shareholders of the Company was approved by a vote of 66- 2/3%
of the directors of the Company then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors then in
office; and
(iii) the merger or consolidation of the Company with or
into another Person or the merger of another Person with or into the
Company, or the sale of all or substantially all the assets of the
Company or the Company and its Restricted Subsidiaries taken as a
whole to another Person and, in the case of any such merger or
consolidation, the securities of the Company that are outstanding
immediately prior to such transaction and which represent 100% of the
aggregate voting power of the Voting Stock of the Company are changed
into or exchanged for cash, securities or property, unless pursuant to
such transaction such securities are changed into or exchanged for, in
addition to any other consideration, securities of the surviving
corporation that represent immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of
the surviving corporation.
Notwithstanding the foregoing, a Change of Control shall not
be deemed to have occurred if (a) the ratings assigned to the Secured Notes by
Moody's and S&P prior to the announcement are not downgraded or placed on a
negative credit watch by either such rating agency as a result thereof and (b)
no Default has occurred and is continuing.
(b) The Change of Control Offer will remain open for a period of
at least 30 days following its commencement but no longer than 60 days, except
to the extent that a longer period is required by applicable law (the "Change
of Control Offer Period"). On the first Business Day after the termination of
the Change of Control Offer Period (the "Change of Control Payment Date"), the
Issuer will purchase all Secured Notes validly tendered and not properly
withdrawn pursuant to the Change of Control Offer. Payment for any Secured
Notes so purchased will be
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made in the same manner as interest payments are made on the Secured Notes. If
the Change of Control Payment Date is on or after a Record Date and on or
before the related Interest Payment Date, any accrued and unpaid interest and
Special Interest and Additional Amounts (to the extent involving interest that
is due and payable on such Interest Payment Date), if any, shall be paid to the
Person in whose name a Secured Note is registered at the close of business on
such Record Date, and no additional interest (or Additional Amounts or Special
Interest, if any) (to the extent involving interest that is due and payable on
such Interest Payment Date)) shall be payable to Holders who validly tender
Secured Notes pursuant to the Change of Control Offer.
(c) Within 30 days following any Change of Control, the Issuer or
the Trustee (at the expense of the Issuer) shall mail by first class mail, a
notice to each Holder, with a copy of such notice to the Trustee. The notice,
which shall govern the terms of the Change of Control Offer, shall state, among
other things:
(i) that a Change of Control has occurred and a Change of
Control Offer is being made as provided for herein that each Holder
has the right to require the Issuer to purchase such Holder's Secured
Notes at the Change of Control Purchase Price, and that, although
Holders are not required to tender their Secured Notes, all Secured
Notes that are validly tendered shall be accepted for payment;
(ii) the circumstances and relevant facts regarding such
Change of Control (including information with respect to pro forma
historical income, cash flow and capitalization after giving effect to
such Change of Control);
(iii) the Change of Control Purchase Price and the Change
of Control Payment Date, which will be no earlier than 30 days and no
later than 60 days after the date such notice is mailed;
(iv) that any Secured Note accepted for payment pursuant
to the Change of Control Offer (and duly paid for on the Change of
Control Payment Date) shall cease to accrue interest and Special
Interest and Additional Amounts, if applicable, after the Change of
Control Payment Date;
(v) that any Secured Notes (or portions thereof) not
validly tendered shall continue to accrue interest and Special
Interest and Additional Amounts, if applicable;
(vi) that any Holder electing to have a Secured Note
purchased pursuant to any Change of Control Offer shall be required to
surrender the Secured Note, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Secured Note completed, or
transfer by book-entry transfer, to the Issuer, a depositary, if
appointed by the Issuer, or a Paying Agent at the address specified in
the notice at least one (1) Business Day before the Change of Control
Purchase Date;
(vii) that Holders shall be entitled to withdraw their
election if the Issuer, the depositary or the Paying Agent, as the
case may be, receives, not later than the expiration of the Change of
Control Offer Period, a telegram, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the
Secured Note the Holder
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delivered for purchase and a statement that such Holder is withdrawing
his election to have such Secured Note purchased; and
(viii) the instructions and any other information necessary
to enable Holders to tender their Secured Notes (or portions thereof)
and have such Secured Notes (or portions thereof) purchased pursuant
to the Change of Control Offer.
(d) The Company will also be required to prepay appropriate
tranches of the Issuer Loans on a pro rata basis at a redemption price equal to
101% of the principal amount thereof being repaid, plus accrued and unpaid
interest (including Special Interest, if any, and Additional Amounts, if any)
thereon, in order to provide funds sufficient to permit the Issuer to purchase
any Secured Notes validly tendered pursuant to the foregoing Change of Control
Offer.
(e) On or before the Change of Control Payment Date, the Issuer
shall, to the extent lawful, (1) accept for payment all Secured Notes or
portions thereof validly tendered and not properly withdrawn pursuant to the
Change of Control Offer, (2) deposit by 11:00 a.m., New York City time, on such
date with the Paying Agent an amount equal to the Change of Control Purchase
Price in respect of all Secured Notes or portions thereof so validly tendered
and not properly withdrawn and (3) deliver or cause to be delivered to the
Trustee the Secured Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Secured Notes or portions thereof
being purchased by the Issuer. The Paying Agent shall promptly (but in any
case not later than five days after the Change of Control Payment Date) mail to
each Holder of Secured Notes so validly tendered and not properly withdrawn the
Change of Control Purchase Price for such Secured Notes.
(f) Upon surrender and cancellation of a Certificated Secured Note
that is purchased in part pursuant to the Change of Control Offer, the Issuer
shall promptly issue and the Trustee shall authenticate and mail (or cause to
be transferred by book entry) to the surrendering Holder of such Certificated
Secured Note, a new Certificated Secured Note equal in principal amount to the
unpurchased portion of such surrendered Certificated Secured Note; provided
that each such new Certificated Secured Note shall be in a principal amount of
$1,000 or an integral multiple thereof. Upon surrender of a Global Note that
is purchased in part pursuant to a Change of Control Offer, the Paying Agent
shall forward such Global Note to the Trustee who shall make a notation on
Schedule A thereof to reduce the principal amount of such Global Note to an
amount equal to the unpurchased portion of such Global Note, as provided in
Section 2.6 hereof. The Issuer shall publicly announce the results of the
Change of Control Offer on the Change of Control Payment Date. For purposes of
this Section 4.8, the Trustee shall act as the Paying Agent.
(g) The Issuer shall comply with the requirements of Rules 13e-4
and 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Secured Notes as a result of a Change of Control.
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SECTION 4.9 Limitations on Indebtedness.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided,
however, that the Company may Incur Indebtedness if the Consolidated EBITDA
Coverage Ratio at the date of such Incurrence and after giving effect thereto
exceeds 2.25 to 1.0.
(b) Notwithstanding paragraph (a), the following Indebtedness may
be Incurred:
(1) Indebtedness of the Company pursuant to one
or more Credit Facilities (and the guarantee of such
Indebtedness by Restricted Subsidiaries); provided, however,
that the aggregate amount of such Indebtedness outstanding at
such time shall not exceed $350,000,000, less any amounts
derived from Asset Sales and applied to the required permanent
reduction of Senior Indebtedness (and a permanent reduction of
the related commitment to lend or amount available to be
reborrowed in the case of a revolving credit facility) under
such Credit Facilities as contemplated by Section 4.15;
(2) Indebtedness of the Company or a Restricted
Subsidiary owed to and held by a Restricted Subsidiary or
Indebtedness of a Restricted Subsidiary owed to and held by
the Company; provided, however, that any subsequent issuance
or transfer of any Capital Stock that results in such
Restricted Subsidiary to whom Indebtedness is owed ceasing to
be a Restricted Subsidiary or any transfer of such
Indebtedness (other than to the Company or another Restricted
Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness;
(3) The Guarantee, the Subsidiary Guarantees, if
any, the Issuer Loans and Indebtedness incurred in exchange
for, or the proceeds of which are used to Refinance any
Indebtedness permitted by this clause (iii); provided,
however, that (i) the principal amount of the Indebtedness so
Incurred shall not exceed the principal amount of the
Indebtedness so Refinanced (plus the amount of reasonable fees
and expenses incurred in connection therewith, including any
premium or defeasance costs) and (ii) the Indebtedness so
Incurred (A) shall not mature prior to the Stated Maturity of
the Indebtedness so Refinanced and (B) shall have an Average
Life equal to or greater than the remaining Average Life of
the Indebtedness so Refinanced;
(4) Indebtedness of the Company or any Restricted
Subsidiary (other than Indebtedness described in clause (1),
(2) or (3) above) (x) outstanding on the Issue Date (including
without limitation, the New Senior Notes and any subsidiary
guarantee issued under the New Senior Note Indenture, the
Company's 6 1/2% Senior Notes due 2003, the Company's 6 3/4%
Senior Notes due 2005, the Company's 6.95% Senior Notes due
2008, the Company's 7 3/8% Senior Notes due 2018, the
Company's 9 1/8% Senior Notes due 2003, the Company's 9 1/2%
Senior Notes due 2008, and the 10 1/4% Senior Notes due 2003
of Cliffs Drilling Company) or Incurred pursuant to agreements
as in effect on the Issue Date and
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(y) Indebtedness Incurred in exchange for, or the proceeds of
which are used to Refinance, any Indebtedness permitted by
this clause (iv) or permitted by clause (a) above; provided,
however, that (i) the principal amount of the Indebtedness so
Incurred shall not exceed the principal amount of the
Indebtedness Refinanced (plus the amount of reasonable fees
and expenses incurred in connection therewith, including any
premium or defeasance costs); and (ii) the Indebtedness so
Incurred (A) shall not mature prior to the Stated Maturity of
the Indebtedness so Refinanced and (B) shall have an Average
Life equal to or greater than the remaining Average Life of
the Indebtedness so Refinanced;
(5) Indebtedness of the Company or any Restricted
Subsidiary consisting of guarantees in connection with any
synthetic lease obligations of Persons Incurred to finance the
construction or upgrade of the drillship Deepwater Frontier
and the drillship Deepwater Pathfinder pursuant to agreements
governing such obligations;
(6) Acquired Indebtedness of any Restricted
Subsidiary in an aggregate amount not to exceed $300,000,000,
provided that the Company on a pro forma basis could Incur
$1.00 of additional Indebtedness pursuant to paragraph (a) of
this covenant;
(7) Indebtedness of the Company or any Restricted
Subsidiary consisting of guarantees, indemnities or
obligations in respect of purchase price adjustments in
connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock;
(8) The Incurrence by the Company's Unrestricted
Subsidiaries of Non-Recourse Indebtedness; provided, however,
that if any such Indebtedness ceases to be Non-Recourse
Indebtedness of any Unrestricted Subsidiary, subject to the
definition of "Unrestricted Subsidiary," such event shall be
deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of the Company that was not permitted by
this clause (8);
(9) Obligations of the Company or a Restricted
Subsidiary under performance or surety bonds relating to
building contracts for the construction of drilling rigs,
drillships or similar vessels or contracts for the
installation of related equipment;
(10) Hedging Obligations; and
(11) Indebtedness of the Company or any Restricted
Subsidiary in an aggregate principal amount which, together
with all other Indebtedness of the Company then outstanding
(other than Indebtedness permitted by clauses (1) through (10)
of this paragraph (b) or paragraph (a)) does not exceed
$50,000,000.
(c) Notwithstanding paragraphs (a) and (b), the Company shall not
issue any Indebtedness if the proceeds thereof are used, directly or
indirectly, to repay, prepay, redeem,
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defease, retire, refund or refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Guarantee and Issuer Loans to at
least the same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with the foregoing
covenant, (i) in the event that an item of Indebtedness meets the criteria of
more than one of the types of Indebtedness described above, the Issuer, in its
sole discretion, will classify such item of Indebtedness and only be required
to include the amount and type of such Indebtedness in one of the above clauses
and (ii) an item of Indebtedness may be divided and classified in more than one
of the types of Indebtedness described above.
SECTION 4.10 Limitation on Liens.
The Company will not, and will not permit any Restricted
Subsidiary of the Company to, issue, assume or guarantee any Indebtedness for
borrowed money secured by any Lien on any property or asset now owned or
hereafter acquired by the Company or such Restricted Subsidiary without making
effective provision whereby any and all Secured Notes then or thereafter
outstanding and/or the Guarantee will be secured by a Lien equally and ratably
with any and all other obligations thereby secured for so long as any such
obligations shall be so secured.
The foregoing restriction does not, however, apply to:
(1) Liens securing the Secured Notes, the
Guarantee and the Issuer Loans;
(2) Liens existing on the date on which the
Secured Notes are originally issued or provided for under the
terms of agreements existing on such date;
(3) Liens on property securing (a) all or any
portion of the cost of acquiring, constructing, altering,
improving or repairing any property or assets, real or
personal, or improvements used or to be used in connection
with such property or (b) Indebtedness incurred by the Company
or any Restricted Subsidiary of the Company prior to or within
one year after the later of the acquisition, the completion of
construction, alteration, improvement or repair or the
commencement of commercial operation thereof, which
Indebtedness is incurred for the purpose of financing all or
any part of the purchase price thereof or construction or
improvements thereon;
(4) Liens securing Indebtedness owed by a
Restricted Subsidiary of the Company or to any other
Restricted Subsidiary of the Company;
(5) Liens on property existing at the time of
acquisition of such property by the Company or any of its
Restricted Subsidiary or Liens on the property of any Person
existing at the time such Person becomes a Restricted
Subsidiary of the Company and, in any case, not incurred as a
result of (or in
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connection with or in anticipation of) the acquisition of such
property or such Person becoming a Restricted Subsidiary of
the Company, provided that such Liens do not extend to or
cover any property or assets of the Company or any of its
Restricted Subsidiaries other than the property encumbered at
the time such property is acquired by the Company or any of
its Restricted Subsidiaries or such Person becomes a
Restricted Subsidiaries of the Company and, in any case, do
not secure Indebtedness with a principal amount in excess of
the principal amount outstanding at such time;
(6) Liens on any property securing (a)
Indebtedness incurred in connection with the construction,
installation or financing of pollution control or abatement
facilities or other forms of industrial revenue bond financing
or (b) Indebtedness issued or guaranteed by the United States
or any State thereof or any department, agency or
instrumentality of either;
(7) any Lien extending, renewing or replacing (or
successive extensions, renewals or replacements of) any Lien
of any type permitted under clause (1), (2), (3), (5) or (6)
above, provided that such Lien extends to or covers only the
property that is subject to the Lien being extended, renewed
or replaced and that the principal amount of the Indebtedness
secured thereby shall not exceed the principal amount of
Indebtedness so secured at the time of such extension, renewal
or replacement; or
(8) Liens (exclusive of any Lien of any type
otherwise permitted under clauses (1) through (7) above)
securing Indebtedness for borrowed money of the Company or any
Restricted Subsidiary of the Company in an aggregate principal
amount which, together with the aggregate amount of
Attributable Indebtedness deemed to be outstanding in respect
of all Sale/Leaseback Transactions entered into pursuant to
clause (a) of Section 4.12 (exclusive of any such
Sale/Leaseback Transactions otherwise permitted under clauses
(1) through (7) above), does not at the time such Indebtedness
is incurred exceed 15% of the Consolidated Net Worth of the
Company (as shown in the most recent audited consolidated
balance sheet of the Company and its Restricted Subsidiaries).
SECTION 4.11 Limitation on Restricted Payments.
(a) The Company will not, and will not permit any Restricted
Subsidiary, directly or indirectly, to:
(i) declare or pay any dividend or make any distribution
on or in respect of its Capital Stock (including any payment in
connection with any merger or consolidation involving the Company) or
to the direct or indirect holders of its Capital Stock, except:
(A) dividends or distributions payable solely in
its Non-Convertible Capital Stock or in options, warrants or
other rights to purchase its Non-Convertible Capital Stock;
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(B) dividends or distributions payable to the
Company or a Restricted Subsidiary; and
(C) pro rata dividends or distributions on the
Capital Stock of a Restricted Subsidiary held by minority
stockholders (including, without limitation, minority
stockholders of Arcade Drilling AS, a Norwegian corporation);
(ii) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or of any direct or indirect
parent of the Company, or any Restricted Subsidiary (except Capital
Stock held by the Company or a Restricted Subsidiary);
(iii) purchase, repurchase, redeem, defease or otherwise
acquire or retire for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Subordinated
Obligation (other than the purchase, repurchase or other acquisition
of Subordinated Obligations purchased in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in
each case due within one year of the date of acquisition); or
(iv) make any Investment other than a Permitted Investment
(any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment being herein
referred to as a "Restricted Payment"),
if at the time the Company or such Restricted Subsidiary makes such Restricted
Payment:
(1) a Default shall have occurred and be
continuing (or would result therefrom); or
(2) the Company would not be permitted to Incur
an additional $1.00 of Indebtedness pursuant to Section 4.9(a)
after giving pro forma effect to such Restricted Payment; or
(3) the aggregate amount of such Restricted
Payment and all other Restricted Payments since the Issue Date
would exceed the sum of:
(A) 50% of the Consolidated Net Income
accrued during the period (treated as one accounting
period) from the beginning of the fiscal quarter
during which the Secured Notes were originally issued
to the end of the most recent fiscal quarter ending
at least 45 days prior to the date of such Restricted
Payment (or, in case such Consolidated Net Income
shall be a deficit, minus 100% of such deficit);
(B) 100% of the aggregate net proceeds
(including the fair market value of non- cash
proceeds, which shall be determined in good faith by
the Board of Directors of the Company) received by
the Company from the issue or sale of its Capital
Stock (other than Redeemable Stock or Exchangeable
Stock) subsequent to the Issue Date (other than an
issuance
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or sale to a Restricted Subsidiary or an employee
stock ownership plan or similar trust);
(C) the amount by which Indebtedness of
the Company is reduced on the Company's balance sheet
upon the conversion or exchange (other than by a
Restricted Subsidiary) subsequent to the Incurrence
of any Indebtedness of the Company convertible or
exchangeable for Capital Stock (other than Redeemable
Stock or Exchangeable Stock) of the Company (less the
amount of any cash, or other property, distributed by
the Company upon such conversion or exchange);
(D) to the extent not otherwise included
in Consolidated Net Income, the net reduction in
Investments in Unrestricted Subsidiaries resulting
from dividends, repayments of loans or advances, or
other transfers of assets, in each case to the
Company or any Restricted Subsidiary after the Issue
Date from any Unrestricted Subsidiary or from the
redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary (valued in each case as
provided in the definition of Investment), not to
exceed in the case of any Restricted Subsidiary the
total amount of Investments (other than Permitted
Investments) in such Restricted Subsidiary made by
the Company and its Restricted Subsidiaries in such
Unrestricted Subsidiary after the Issue Date; and
(E) $20 million.
(b) The provisions of Section (a) shall not prohibit:
(i) Any purchase or redemption of Capital Stock or
Subordinated Obligations of the Company made by exchange for, or out
of the proceeds of the substantially concurrent sale of, Capital Stock
of the Company (other than Redeemable Stock or Exchangeable Stock and
other Capital Stock issued or sold to a Restricted Subsidiary or an
employee stock ownership plan); provided, however, that (i) such
purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments and (ii) the Net Cash Proceeds from such
sale shall be excluded from clauses (3)(B) and (3)(C) of Section (a);
(ii) Any purchase or redemption of Subordinated
Obligations of the Company made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Indebtedness of the
Company which is permitted to be issued pursuant to the provision of
Section 4.09 hereof above; provided, however, that such purchase or
redemption shall be excluded in the calculation of the amount of
Restricted Payments;
(iii) Dividends paid within 60 days after the date of
declaration if at such date of declaration such dividend would have
complied with this provision; provided, however, that at the time of
payment of such dividend, no other Default shall have occurred and be
continuing (or would result therefrom); provided further, however,
that such dividend shall be included in the calculation of the amount
of Restricted Payments
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(unless already included in determining the amount of Restricted
Payments previously made upon the declaration of such dividend); and
(iv) If the Company issues Preferred Stock which is
Non-Convertible Capital Stock and receives at least $100,000,000
million of net proceeds therefrom, dividends on such Preferred Stock
in an aggregate amount not to exceed $30,000,000 million, provided
that such dividends constitute Restricted Payments for purposes of
calculating the amount of Restricted Payments made pursuant to Section
4.11(a)(iii) above.
SECTION 4.12 Limitation on Sale/Leaseback Transactions.
The Company will not, and will not permit any Restricted
Subsidiary to, enter into any Sale/Leaseback Transaction with any Person (other
than the Company or a Restricted Subsidiary) unless:
(a) the Company or such Restricted Subsidiary would be entitled to
incur Indebtedness, in a principal amount equal to the Attributable
Indebtedness with respect to such Sale/Leaseback Transaction, secured by a Lien
on the property subject to such Sale/Leaseback Transaction pursuant to Section
4.10 above without equally and ratably securing the Secured Notes and/or the
Guarantee pursuant to such Section;
(b) after the Issue Date and within a period commencing six months
prior to the consummation of such Sale/Leaseback Transaction and ending six
months after the consummation thereof, the Company or such Restricted
Subsidiary shall have expended for property used or to be used in the ordinary
course of business of the Company and its Restricted Subsidiaries an amount
equal to all or a portion of the net proceeds of such Sale/Leaseback
Transaction and the Company shall have elected to designate such amount as a
credit against such Sale/Leaseback Transaction (with any such amount not being
so designated to be applied as set forth in clause (c) below); or
(c) the Company during the 12-month period after the effective
date of such Sale/Leaseback Transaction, shall have applied to the voluntary
defeasance or retirement of Issuer Loans and Secured Notes or any Pari Passu
Indebtedness an amount equal to the greater of the net proceeds of the sale or
transfer of the property leased in such Sale/Leaseback Transaction and the fair
value, as determined by the Board of Directors of the Company, of such property
at the time of entering into such Sale/Leaseback Transaction (in either case
adjusted to reflect the remaining term of the lease and any amount expended by
the Company as set forth in clause (b) above), less an amount equal to the
principal amount of Issuer Loans and Secured Notes and Pari Passu Indebtedness
voluntarily defeased or retired by the Issuer and the Company within such
12-month period and not designated as a credit against any other Sale/Leaseback
Transaction entered into by the Company or any Restricted Subsidiary during
such period.
SECTION 4.13 SEC Reports.
Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with
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the SEC and provide the Trustee and Noteholders with such annual reports and
such information, documents and other reports specified in Sections 13 and
15(d) of the Exchange Act.
In addition, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability (unless the
Commission will not accept such filing). In addition, the Issuer and the
Company shall furnish to the Noteholders and to prospective investors, upon the
requests of such Noteholders, any information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act so long as the Secured Notes are
not freely transferable under the Securities Act.
SECTION 4.14 Limitation on Restrictions on Distributions from
Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (a) pay dividends or make any other distributions, in cash or
otherwise, on its Capital Stock to the Company or any Restricted Subsidiary or
pay any Indebtedness owed to the Company or any Restricted Subsidiary, (b) make
any loans or advances to the Company or any Restricted Subsidiary or (c)
transfer any of its property or assets to the Company or any Restricted
Subsidiary, except:
(i) any encumbrance or restriction pursuant to an
agreement in effect or entered into on the Issue Date;
(ii) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any
Acquired Indebtedness or Preferred Stock Incurred by such Restricted
Subsidiary on or prior to the date on which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by the Company (other
than Indebtedness or Preferred Stock Incurred as consideration in, or
to provide all or any portion of the funds or credit support utilized
to consummate, the transaction or series of related transactions
pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company or other Incurred in
anticipation of such acquisition) and outstanding on such date;
(iii) any encumbrance or restriction relating to any assets
acquired after the Issue Date, so long as such encumbrance or
restriction relates only to the assets so acquired and is not or was
not created in anticipation of such acquisition;
(iv) any encumbrance or restriction pursuant to an
agreement effecting a Refinancing of Indebtedness or Preferred Stock
Incurred pursuant to an agreement referred to in clause (i), (ii) or
(iii) of this covenant or this clause (iv) or contained in any
amendment to an agreement referred to in clause (i), (ii) or (iii) of
this covenant or this clause (iv); provided, however, that the
encumbrances and restrictions with respect to such Restricted
Subsidiary contained in any such refinancing agreement or amendment
are in the aggregate no less favorable to the Holders of Secured Notes
than the encumbrances and restrictions with respect to such Restricted
Subsidiary contained in such predecessor agreements;
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(v) any such encumbrance or restriction consisting of
customary nonassignment provisions in leases governing leasehold
interests or in license agreements to the extent such provisions
restrict the assignment of such agreement and any rights granted or
property leased thereunder;
(vi) in the case of clause (iii) above, restrictions
contained in security agreements or mortgages securing Indebtedness of
a Restricted Subsidiary to the extent such restrictions restrict the
transfer of the property subject to such security agreements or
mortgages; and
(vii) any temporary encumbrance or restriction with respect
to a Restricted Subsidiary imposed pursuant to an agreement entered
into for the sale or disposition of all or substantially all the
Capital Stock or assets of such Restricted Subsidiary pending the
closing of such sale or disposition.
Nothing contained in this covenant shall prevent the Company
or any Restricted Subsidiary from entering into any agreement permitting the
incurrence of Liens otherwise permitted by Section 4.10 hereof.
SECTION 4.15 Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any Subsidiary
Guarantor to, sell, assign, convey, transfer or otherwise dispose of a
Mortgaged Rig or any other portion of the Collateral (other than an Incidental
Asset or Temporary Cash Investments in the Issuer Escrow Account or the Company
Escrow Account and other than a transfer of a Mortgaged Rig to a Wholly-Owned
Restricted Subsidiary that becomes a Subsidiary Guarantor); provided, however,
that the Company or a Subsidiary Guarantor may sell a Mortgaged Rig or the
Company may sell all the Capital Stock of a Subsidiary Guarantor owning a
Mortgaged Rig (any such asset proposed to be sold is referred to herein as a
"Mortgaged Rig Asset") if such sale of a Mortgaged Rig Asset shall be made in
compliance with each of the following conditions:
(i) no Default shall have occurred and be continuing;
(ii) the sale shall be effected in a commercially
reasonable manner as determined by the Board of Directors and
evidenced by a Board Resolution;
(iii) at least 75% of the consideration received shall be
in the form of cash or Temporary Cash Equivalents, provided that Net
Available Cash shall not be less than an amount equal to the Sale
Redemption Amount for the Issuer Loan secured by a Lien on such
Mortgaged Rig Asset;
(iv) funds in an amount equal to the Sale Redemption
Amount (or if required by the provisions of Section 3.9, the Net
Available Cash of such sale) shall be applied as repayments on the
appropriate Issuer Loan or Loans and paid in full directly to the
Trustee for deposit in the Escrow Account and shall be received by the
Trustee free of any Lien (other than the Lien of this Indenture and
the Security Agreements); and
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(v) the Company shall have complied with the other
provisions of this Indenture applicable to such sale.
(b) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, engage in any Asset Sales (other than Asset Sales
permitted by Section 4.15(a) unless (i) the Company or the applicable
Restricted Subsidiary, as the case may be, receives consideration at the time
of such Asset Sale at least equal to the fair market value of the assets sold
or otherwise disposed of (as determined in good faith by the Company's Board of
Directors), and (ii) at least 75% of the consideration received by the Company
or the Restricted Subsidiary, as the case may be, from such Asset Sale at the
time of such disposition shall be in the form of cash or Temporary Cash
Equivalents (or the assumption of indebtedness and liabilities of the Company
or such Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability thereon) or notes or marketable securities that
are converted into cash or Temporary Cash Equivalents within 180 days after the
date of such Asset Sale; provided that any Asset Sale of shares of Capital
Stock of Devco or of assets owned by Devco not constituting a Mortgaged Rig
shall not have to comply with the provisions of this clause (ii). If the
Company or a Restricted Subsidiary engages in an Asset Sale in compliance with
the previous sentence, then the Company shall or shall cause a Restricted
Subsidiary to apply an amount equal to such excess Net Available Cash within
360 days of the Asset Sale either (i) to repay Senior Indebtedness of the
Company or of a Restricted Subsidiary (other than in each case Indebtedness
owed to an Affiliate of the Company), (ii) to invest in Additional Assets or
(iii) treat (no later than the end of such 360-day period) such excess Net
Available Cash (to the extent not applied pursuant to clauses (i) or (ii)
above) as Sale Excess Proceeds.
SECTION 4.16 Limitation on Asset Swaps.
The Company will not, and will not permit any Restricted
Subsidiary to, engage in any Asset Swaps, unless:
(i) at the time of entering into the agreement with
respect thereto and immediately after giving effect to the proposed
Asset Swap, no Default shall have occurred and be continuing;
(ii) the aggregate fair market values of the Additional
Assets and other consideration to be received by the Company or the
applicable Restricted Subsidiary is, at the time the Asset Swap is
agreed to, substantially equal to the aggregate fair market of the
property being disposed of by the Company or the applicable Restricted
Subsidiary (to be determined in good faith by the Board of Directors
of the Company and to be evidenced by a resolution of such Board set
forth in an Officer's Certificate delivered to the Trustee); and
(iii) the cash payments, if any, received by the Company or
such Restricted Subsidiary in connection with such Asset Swap are
treated as Net Available Cash received from an Asset Sale.
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SECTION 4.17 Limitation on Affiliate Transactions.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property, employee compensation
arrangements or the rendering of any service) with any Affiliate of the Company
(an "Affiliate Transaction") unless the terms thereof (1) are no less favorable
to the Company or such Restricted Subsidiary than those that could be obtained
at the time of such transaction in arm's-length dealings with a Person who is
not such an Affiliate, (2) if such Affiliate Transaction involves an amount in
excess of $500,000, (i) are set forth in writing and (ii) have been approved by
a majority of the members of the Board of Directors of the Company having no
personal stake in such Affiliate Transaction and (3) if such Affiliate
Transaction involves an amount in excess of $10,000,000, have been determined
by an investment banking firm of national reputation or, in the case of the
sale or transfer of assets subject to valuation, an appropriate independent
qualified appraiser of national reputation, given the size and nature of the
transaction, to be fair, from a financial standpoint, to the Company and its
Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not
prohibit (i) any Restricted Payment permitted to be paid pursuant to the
covenant described under Section 4.11 hereof, (ii) any issuance of securities,
or other payments, awards or grants in cash, securities or otherwise pursuant
to, or the funding of, employment arrangements of the Company, stock options,
stock ownership and other employee benefit plans approved by the Board of
Directors of the Company, (iii) the grant of stock options or similar rights to
employees, officers and directors of the Company pursuant to plans approved by
its Board of Directors, (iv) loans or advances to employees in the ordinary
course of business in accordance with the past practices of the Company or its
Subsidiaries, but in any event not to exceed $1,000,000 in aggregate principal
amount outstanding at any one time, (v) the payment of reasonable fees to
directors of the Company and its Restricted Subsidiaries who are not employees
of the Company or its Restricted Subsidiaries and (vi) any Affiliate
Transaction among any of the Issuer, the Company, the Restricted Subsidiaries,
Arcade Drilling AS, any entity owning or operating any of the Deepwater
Pathfinder, the Deepwater Frontier or the Seillean (but only for transactions
relating to such vessels) and Navis ASA.
SECTION 4.18 Limitation on the Sale or Issuance of Capital Stock
of Restricted Subsidiaries.
The Company shall not sell or otherwise dispose of any Capital
Stock of a Restricted Subsidiary, and shall not permit any such Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of
any of its Capital Stock except (i) to the Company or a Wholly Owned Restricted
Subsidiary, (ii) if, immediately after giving effect to such issuance, sale or
other disposition, neither the Company nor any of its Subsidiaries own any
Capital Stock of such Restricted Subsidiary, (iii) other than with respect to
shares of Capital Stock of a Subsidiary Guarantor owning a Mortgaged Rig, to
Persons who are entering into joint ventures or other similar business
relationships with the Company or any Subsidiary other than a Subsidiary
Guarantor; provided, however, that transactions pursuant to this clause (iii)
are approved in the manner set forth in paragraph (a) under Section 4.17, (iv)
directors' qualifying shares, (v) other than with respect to shares of Capital
Stock of a Subsidiary Guarantor which
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owns a Mortgaged Rig, if, immediately after giving effect to such issuance,
sale or other disposition, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary and any Investment in such Person remaining
after giving effect thereto would have been permitted to be made under the
covenant described under Section 4.11 if made on the date of such issuance,
sale or other disposition or (vi) pursuant to the loan arrangement with
Nisho-Iwai. The Company shall apply the proceeds from any applicable sale of
Capital Stock of a Subsidiary Guarantor which owns a Mortgaged Rig, in
accordance with the provisions described above under Section 3.9.
SECTION 4.19 Future Subsidiary Guarantors.
The Company may not permit any Restricted Subsidiary, directly
or indirectly, to guarantee any Indebtedness of the Company or any other
Obligor ("Guaranteed Indebtedness") or to acquire a Mortgaged Rig unless (i)
such Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to this Indenture providing for a Subsidiary Guarantee of payment of
the Secured Notes by such Restricted Subsidiary and (ii) such Restricted
Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Issuer, the Company or any other Restricted
Subsidiary as a result of any payment by such Restricted Subsidiary under its
Subsidiary Guarantee. If the Guaranteed Indebtedness is pari passu with the
Guarantee, then the guarantee of such Guaranteed Indebtedness shall be pari
passu with or subordinated to the Subsidiary Guarantee; and if the Guaranteed
Indebtedness is subordinated to the Guarantee, then the guarantee of such
Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee at
least to the extent that all Guaranteed Indebtedness is subordinated to the
Guarantee. Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary which does not own a Mortgaged Rig that was incurred
pursuant to the terms of this Section 4.19 (but not otherwise) shall provide by
its terms that it shall be automatically and unconditionally released and
discharged upon the release or discharge of the guarantee which resulted in the
creation of such Restricted Subsidiary's Subsidiary Guarantee, except a
discharge or release by, or as a result of, payment under such guarantee.
SECTION 4.20 Impairment of Liens.
The Issuer and the Company shall not, and the Issuer and the
Company shall not permit any Restricted Subsidiary to, take or knowingly or
negligently omit to take, any action which action or omission might or would
have the result of materially impairing the Liens granted by the Issuer with
respect to the Collateral for the benefit of the Trustee and the Holders of the
Secured Notes and the Liens granted by the Company with respect to Collateral
for the benefit of the Issuer, and except as permitted by this Indenture and
the Security Agreements, the Issuer and the Company shall not, and shall not
permit any Restricted Subsidiary to, grant to any Person other than the
Trustee, for the benefit of the Trustee and the Holders of the Secured Notes,
any interest whatsoever in any of the Collateral.
SECTION 4.21 Limitation on Issuer Activities.
The Issuer will not engage in any business activity or
undertake any activity, except any activity (i) relating to the offering, sale
or issuance of the Secured Notes or the
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lending of the proceeds of such sale of Secured Notes to the Company pursuant
to the Issuer Loans, or (ii) undertaken with the purpose of, and directly
related to, exercising its rights under, and fulfilling the obligations of the
Company, the Issuer or the Restricted Subsidiaries under, the Secured Notes,
this Indenture, the Issuer Loans and Security Agreements. The Indenture
provides that the Issuer will be a limited purpose entity with corporate
organizational documents containing certain limitations (including the
foregoing restrictions on the Issuer's business activities, the requirement of
an independent director on its Board of Directors, and a restriction on its
ability to commence a voluntary case or proceeding under any applicable
bankruptcy or insolvency laws without the prior unanimous affirmative vote of
all of its directors). The Issuer shall not (i) incur any Indebtedness other
than the Secured Notes or Subordinated Obligations owing to the Company or (ii)
enter into any derivative product transactions.
SECTION 4.22 Compliance Certificate; Notice of Default or Event of
Default.
(a) The Issuer, the Company and each Subsidiary Guarantor shall
deliver to the Trustee, within 90 days after the end of each fiscal year, an
Officers' Certificate (which shall be signed by Officers satisfying the
requirements of Section 314 of the Trust Indenture Act) stating that a review
of the activities of the Issuer, the Company and the Restricted Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether the Issuer and the Company
have kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Issuer has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event
of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Issuer is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of, interest, if any, or Special Interest,
if any, or Additional Amounts, if any, on the Secured Notes is prohibited or if
such event has occurred, a description of the event and what action the Issuer
is taking or proposes to take with respect thereto.
(b) The year-end financial statements delivered pursuant to
Section 4.13 hereof shall be accompanied by a written statement of the
independent public accountants of the Company (who shall be a firm of
established national reputation) that in making the examination necessary for
certification of such financial statements, nothing has come to their attention
that would lead them to believe that the Issuer has violated any provisions of
Article 4 or Article 5 hereof (except that, such written statement need not
address the Issuer's compliance with the provisions of Sections 4.2, 4.5, 4.7,
4.8, 4.17 or 4.23 hereof) or, if any such violation has occurred, specifying
the nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Issuer and the Company shall, so long as any of the
Secured Notes are outstanding, deliver to the Trustee, forthwith upon, but in
any event within five Business Days after, any Officer's becoming aware of any
Default or Event of Default, an Officers' Certificate
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specifying such Default or Event of Default and what action the Issuer and/or
the Company is taking or proposes to take with respect thereto.
(d) For purposes of this Section 4.22, compliance shall be
determined without required by any period of grace or requirement of notice
under this Indenture.
SECTION 4.23 Prohibition on Issuer and Guarantor Becoming an
Investment Company.
Neither the Issuer nor the Company shall become an "Investment
Company" as defined in the Investment Company Act of 1940, as amended.
SECTION 4.24 Additional Amounts.
(a) Except to the extent required by any applicable law,
regulation or governmental policy, any and all payments of, or in respect of,
any Secured Note shall be made free and clear of and without deduction for or
on account of any and all present or future taxes, levies, imposts, deduction,
charges or withholdings and all liabilities with respect thereto imposed by
Panama, The Bahamas or any other jurisdiction with which the Company or any
Subsidiary Guarantor has some connection (including any jurisdiction (other
than the United States of America) from or through which payments under the
Issuer Loans, the Secured Notes, the Guarantee or the Subsidiary Guarantees (if
any) are made) or any political subdivision of or any taxing authority in any
such jurisdiction ("Panamanian Taxes," "Bahamian Taxes," or "Other Taxes,"
respectively). If the Issuer, the Company or any Subsidiary Guarantor shall be
required by law to withhold or deduct any Panamanian Taxes, Bahamian Taxes, or
Other Taxes from or in respect of any sum payable under an Issuer Loan
Agreement, the Secured Notes, the Guarantee or a Subsidiary Guarantee, the sum
payable by the Issuer, the Company or such Subsidiary Guarantor, as the case
may be, thereunder shall be increased by the amount ("Additional Amounts")
necessary so that after making all required withholdings and deductions, the
Holder or beneficial owner of a Secured Note shall receive an amount equal to
the sum that it would have received had not such withholdings and deductions
been made; provided that any such sum shall not be paid in respect of any
Panamanian Taxes, Bahamian Taxes or Other Taxes to a Holder (an "Excluded
Holder") (i) resulting from the beneficial owner of such Secured Note carrying
on business or being deemed to carry on business in or through a permanent
establishment or fixed base in the relevant taxing jurisdiction or having any
other connection with the relevant taxing jurisdiction or any political
subdivision thereof or any taxing authority therein other than the mere holding
or owning of such Secured Note, being a beneficiary of the Guarantee or any
applicable Subsidiary Guarantee, the receipt of any income or payments in
respect of such Secured Note, any Issuer Loan, the Guarantee or any applicable
Subsidiary Guarantee or the enforcement of such Secured Note, such Issuer Loan,
the Guarantee or any applicable Subsidiary Guarantee, or (ii) that would not
have been imposed but for the presentation (where presentation is required) of
such Secured Note for payment more than 180 days after the date such payment
became due and payable or was duly provided for, whichever occurs later. The
Issuer, the Company or the Subsidiary Guarantors, as applicable, will also (i)
make such withholding or deduction and (ii) remit the full amount deducted or
withheld to the relevant authority in accordance with applicable law, and, in
any such case, the Issuer will furnish to each Holder on whose behalf an amount
was so remitted, within 30 calendar days after the date the payment of any
Panamanian Taxes, Bahamian Taxes or Other Taxes is due pursuant
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to applicable law, certified copies of tax receipts evidencing such payment by
the Issuer, the Company or the Subsidiary Guarantors, as applicable. The Issuer
will, upon written request of each Holder (other than an Excluded Holder),
reimburse each such holder for the amount of (i) any Panamanian Taxes, Bahamian
Taxes or Other Taxes so levied or imposed and paid by such holder as a result
of payments made under or with respect to any Secured Notes, and (ii) any
Panamanian Taxes, Bahamian Taxes, or Other Taxes so levied or imposed with
respect to any reimbursement under the foregoing clause (i) so that the net
amount received by such Holder (net of payments made under or with respect to
such Secured Notes, such Issuer Loans, the Guarantee or the applicable
Subsidiary Guarantees) after such reimbursement will not be less than the net
amount the Holder would have received if Panamanian Taxes, Bahamian Taxes or
Other Taxes on such reimbursement had not been imposed.
(b) At least 30 calendar days prior to each date on which any
payment under or with respect to the Secured Notes is due and payable, if the
Issuer, the Company or the Subsidiary Guarantors, as applicable, will be
obligated to pay Additional Amounts with respect to such payment, the Issuer,
the Company or the Subsidiary Guarantors, as applicable, will deliver to the
Trustee an officer's certificate stating the fact that such Additional Amounts
will be payable and the amounts so payable and will set forth such other
information necessary to enable the Trustee to pay such Additional Amounts to
Holders on the payment date.
(c) If any Holder or beneficial owner of any Secured Note receives
a refund of the Panamanian Taxes, Bahamian Taxes or Other Taxes after the
Issuer, the Company or any Subsidiary Guarantor, as applicable, has paid any
Additional Amounts, such Holder or beneficial owner shall reimburse the Issuer,
the Company or any Subsidiary Guarantor, as applicable, for any amount of such
refund.
(d) The Issuer, the Company or the Subsidiary Guarantors will pay
any stamp, issue, registration, documentary or other similar taxes and duties,
including interest and penalties, in respect of the creation, issue and
offering of the Secured Notes payable in the United States, Panama, The Bahamas
or any political subdivision thereof or taxing authority of or in the
foregoing. The Issuer, the Company and the Subsidiary Guarantors, as
applicable, will also pay and indemnify the Trustee and the Holders of the
Secured Notes from and against all court fees and taxes or other taxes and
duties, including interest and penalties, paid by any of them in any
jurisdiction in connection with any action permitted to be taken by the Holders
or the Trustee to create Liens on the Collateral or to enforce the Obligations
of the Company or the Subsidiary Guarantors under the Secured Notes, this
Indenture, the Guarantee, the Subsidiary Guarantees, the Issuer Loans or the
Security Agreements.
(e) Whenever there is mentioned, in any context, the payment of
principal, premium or interest in respect of any Secured Note or the net
proceeds received on the sale or exchange of any Secured Note, such mention
shall be deemed to include the payment of Additional Amounts or Special
Interest provided for in this Indenture to the extent that, in such context,
Additional Amounts are, were or would be payable in respect thereof pursuant to
this Indenture.
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ARTICLE V
CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER
SECTION 5.1 Limitations on Mergers and Consolidations.
(a) Neither the Company nor any Subsidiary Guarantor (other than
any Subsidiary Guarantor that shall have been released from its Subsidiary
Guarantee pursuant to the provisions of this Indenture) will consolidate with
or merge into any Person, continue in another jurisdiction, or sell, lease,
convey, transfer or otherwise dispose of all or substantially all of its assets
to any Person, unless:
(i) the Person formed by or surviving such consolidation
or merger (if other than the Company or such Subsidiary Guarantor, as
the case may be), or to which such sale, lease, conveyance, transfer
or other disposition shall be made (collectively, the "Successor"), is
a corporation organized and existing under the laws of the United
States or any State thereof or the District of Columbia (or,
alternatively, in the case of a Subsidiary Guarantor organized under
the laws of a jurisdiction outside the United States, a corporation
organized and existing under the laws of such foreign jurisdiction),
and the Successor assumes by supplemental indenture in a form
satisfactory to the Trustee all of the applicable Obligations of the
Issuer or such Subsidiary Guarantor, as the case may be, under this
Indenture, the Guarantee, the Subsidiary Guarantees and the Issuer
Secured Notes;
(ii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing;
and
(iii) in the case of the Company, immediately after giving
effect to such transactions, the resulting, surviving or transferee
Person would be able to incur at least $1.00 of Indebtedness pursuant
to Section 4.9 (a) hereof.
The provision of clause (iii) shall not apply to any merger or
consolidation into or with, or any such transfer of all or substantially all of
the property and assets of the Issuer or a Restricted Subsidiary into the
Company.
(b) The Issuer shall not consolidate or merge with or into any
other Person, continue in another jurisdiction, or convey, transfer or lease
any assets to any other Person (other than as permitted under "Collateral").
The Issuer shall not become a Subsidiary of the Company so long as any of the
Company's 6 1/2% Senior Notes due 2003, the Company's 6 3/4% Senior Notes due
2005, the Company's 6.95% Senior Notes due 2008, the Company's 7 3/8% Senior
Notes due 2018, the Company's 9 1/8% Senior Notes due 2003, the Company's
9 1/2% Senior Notes due 2008 or the New Senior Notes remain outstanding.
(c) In connection with any consolidation, merger, continuance,
transfer of assets or other transactions contemplated by this Section 5.1, the
Issuer shall deliver, or cause to be delivered to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an Officers' Certificate and
an Opinion of Counsel, each stating that such consolidation, merger,
continuance, sale, assignment, conveyance or transfer and the supplemental
indenture in respect
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thereto comply with the provisions of this Indenture and that all conditions
precedent in this Indenture relating to such transactions have been complied
with.
(d) Upon any transaction or series of transactions that are of the
type described in, and are effected in accordance with, this Section 5.1, the
Successor shall succeed to, and be substituted for, and may exercise every
right and power of, the Company or Subsidiary Guarantor, as applicable, under
this Indenture and the Secured Notes with the same effect as if such Successor
had been named as the Company or Subsidiary Guarantor, as applicable, in this
Indenture; and when a Successor duly assumes all of the Obligations and
covenants of the Company or a Subsidiary Guarantor pursuant to this Indenture
and the Secured Notes, except in the case of a lease, the predecessor Person
shall be relieved of all such Obligations.
SECTION 5.2 Successor Corporation Substituted.
Upon any consolidation or merger by the Company with or into
any other corporation, or any sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of the assets of the Company, in
accordance with Section 5.1 hereof, the successor corporation formed by such
consolidation into or with which the Company is merged or to which such sale,
assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for (so that from and after the date of such
consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to "the Company" shall refer instead to
the Successor and not to the Company), and may exercise every right and power
of the Company under this Indenture with the same effect as if such Successor
had been named as the Company herein; provided, however, that the predecessor
of the Company shall not be relieved from the obligation to pay the principal,
premium, if any, and interest and Special Interest, if any, and Additional
Amounts, if any, on the Secured Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.1 hereof.
If the Successor shall have succeeded to and been substituted
for the Company, such Successor may cause to be signed, and may issue either in
its own name or in the name of the Company prior to such succession any or all
of the notation of Guarantee on the Secured Notes issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee.
In case of any such consolidation, merger, continuance, sale,
transfer, conveyance or other disposal, such changes in phraseology and form
(but not in substance) may be made in the Secured Notes thereafter to be issued
or the Guarantee to be endorsed thereon as may be appropriate.
For all purposes of this Indenture and the Secured Notes,
Subsidiaries of any Successor will, upon such transaction or series of
transactions, become Restricted Subsidiaries or Unrestricted Subsidiaries as
provided pursuant to this Indenture and all Indebtedness, and all Liens on the
property or assets, of the Successor and its Restricted Subsidiaries
immediately prior to such transaction or series of transactions shall be deemed
to have been incurred upon such transaction or series of transactions.
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ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1 Events of Default.
Each of the following is an "Event of Default" hereunder:
(a) default in the payment of interest (including Special Interest
and Additional Amounts, if any) on the Secured Notes or an Issuer Loan when
due, continued for 30 days;
(b) (i) default in the payment of principal of, or premium,
if any, on, any Secured Note or Issuer Loan when due at its Stated Maturity,
upon redemption, required repurchase, declaration of acceleration or otherwise;
or
(ii) the failure to redeem or purchase Secured Notes or
the Issuer Loans when required pursuant to this Indenture or the
Issuer Loan Agreements;
(c) the failure by the Company to comply with its obligations
under Sections 3.8, 3.9, 3.10, 4.8, 4.15 or 5.1;
(d) the failure by the Issuer, the Company and the Subsidiary
Guarantors to comply with its other agreements contained in this Indenture or
in the Security Agreements, or the occurrence of an event of default under a
Mortgage, and such failure or event of default continues for 60 days after
notice;
(e) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of this Indenture, which default (i) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness prior to
the expiration of the grace period provided in such Indebtedness on the date of
such default unless being contested in good faith by appropriate proceedings (a
"Payment Default") or (ii) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $20,000,000 or more; provided,
however, that a default under this clause (e) will not constitute an Event of
Default until the Trustee provides a written notice to the Issuer, or the
Holders of 25% in aggregate principal amount of the outstanding Secured Notes
provide a written notice to the Issuer and the Trustee, of the default and the
Issuer does not cure such default within the time specified after receipt of
such notice;
(f) failure by the Company or any of its Restricted Subsidiaries
to pay final judgments aggregating in excess of $20,000,000, which judgments
are not paid, discharged or stayed for a period of 30 days;
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(g) the entry by a court having jurisdiction in the premises of
(i) a decree or order for relief in respect of the Issuer, the Company or any
Significant Subsidiary in an involuntary case or proceeding under U.S.
bankruptcy laws, as now or hereafter constituted, or any other applicable
Federal, state, or foreign bankruptcy, insolvency, or other similar law or (ii)
a decree or order adjudging the Issuer, the Company or any Significant
Subsidiary a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Issuer, the Company or any Significant Subsidiary under U.S. bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal, state
or foreign bankruptcy, insolvency, or similar law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar official
of the Issuer, the Company or any Significant Subsidiary or of any substantial
part of the property or assets of the Issuer, the Company or any Significant
Subsidiary, or ordering the winding up or liquidation of the affairs of the
Issuer, the Company or any Significant Subsidiary, and the continuance of any
such decree or order for relief or any such other decree or order unstayed and
in effect for a period of 60 consecutive days;
(h) (i) the commencement by the Issuer, the Company or any
Significant Subsidiary of a voluntary case or proceeding under U.S. bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal, state
or foreign bankruptcy, insolvency or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent; or (ii) the consent by
the Issuer, the Company or any Significant Subsidiary to the entry of a decree
or order for relief in respect of the Issuer, the Company or any Significant
Subsidiary in an involuntary case or proceeding under U.S. bankruptcy laws, as
now or hereafter constituted, or any other applicable Federal, state, or
foreign bankruptcy, insolvency or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against the Issuer, the Company
or any Significant Subsidiary; or (iii) the filing by the Issuer, the Company
or any Significant Subsidiary of a petition or answer or consent seeking
reorganization or relief under U.S. bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal, state or foreign bankruptcy,
insolvency or other similar law; or (iv) the consent by the Issuer, the Company
or any Significant Subsidiary to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Issuer, the Company
or any Significant Subsidiary or of any substantial part of the Property or
assets of the Issuer, the Company or any Significant Subsidiary, or the making
by the Issuer, the Company or any Significant Subsidiary of an assignment for
the benefit of creditors; or (v) the admission by the Issuer, the Company or
any Significant Subsidiary in writing of its inability to pay its debts
generally as they become due; or (vi) the taking of corporate action by the
Issuer, the Company or any Significant Subsidiary in furtherance of any such
action; or
(i) the Guarantee or any Subsidiary Guarantee ceases to be in full
force and effect (other than in accordance with the terms of this Indenture and
such Subsidiary Guarantee) or the Company or a Subsidiary Guarantor denies or
disaffirms its obligations under the Guarantee or its Subsidiary Guarantee, as
applicable; or
(j) the Liens under the Security Agreements shall, at any time,
cease to be in full force and effect for any reason (other than by operation of
the provisions of this Indenture and the Security Agreements) other than the
satisfaction in full of all obligations under this Indenture
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and discharge of this Indenture, or any Lien created thereunder shall be
declared invalid or unenforceable or the Issuer, the Company or any Subsidiary
Guarantor shall assert, in any pleading in any court of competent jurisdiction,
that any such Lien is invalid or unenforceable.
SECTION 6.2 Acceleration.
If any Event of Default (other than an Event of Default
specified in clause (g) or (h) of Section 6.1) occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than 25% of the
outstanding aggregate principal amount at Stated Maturity of the Secured Notes,
may declare the principal amount at Stated Maturity of, premium, if any, and
any accrued and unpaid interest (and Special Interest, if any) on all such
Secured Notes then outstanding to be immediately due and payable by a notice in
writing to the Issuer (and to the Trustee if given by Holders of such Secured
Notes), and upon any such declaration all amounts payable in respect of the
Secured Notes will become and be immediately due and payable. If any Event of
Default specified in clause (g) or (h) of Section 6.1 occurs, the principal
amount at Stated Maturity of, premium, if any, and any accrued and unpaid
interest (including Special Interest, if any) on, the Secured Notes then
outstanding shall become immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder of such Secured Notes. In
the event of a declaration of acceleration because an Event of Default set
forth in clause (e) of Section 6.1 has occurred and is continuing, such
declaration of acceleration shall be automatically rescinded and annulled if
the event of default triggering such Event of Default pursuant to clause (e) of
Section 6.1 shall be remedied or cured or waived by the holders of the relevant
Indebtedness within 30 days after such event of default; provided that no
judgment or decree for the payment of the money due on the Secured Notes has
been obtained by the Trustee as provided in this Indenture.
After any such acceleration, but before a judgment or decree
based on acceleration, Holders of a majority in principal amount at Stated
Maturity of the outstanding Secured Notes by notice to the Issuer and the
Trustee may rescind an acceleration and its consequences if:
(a) the Issuer or any Guarantor has paid or deposited with the
Trustee a sum sufficient to pay
(i) all money paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursement and
advances of the Trustee, its agents and counsel, and any other
amounts due to the Trustee under Section 7.7;
(ii) all overdue installments of interest and Special
Interest, if any, on, and any other amounts due in respect of,
all Secured Notes;
(iii) the principal of (and premium, if any, on) any
Secured Notes that have become due otherwise than by such
declaration of acceleration and interest thereon at the rate
or rates prescribed therefor in the Secured Notes and this
Indenture; and
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(iv) to the extent that payment of such interest is
lawful, interest upon Defaulted Interest at the rate or rates
prescribed therefor in the Secured Notes and this Indenture;
(b) all Events of Default, other than the nonpayment of principal
of Secured Notes which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 6.4;
(c) the annulment of such acceleration would not conflict with any
judgment or decree of a court of competent jurisdiction; and
(d) the Issuer has delivered an Officers' Certificate to the
Trustee to the effect of clauses (b) and (c) of this sentence.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal of,
premium, on, if any, any interest on, Special Interest, if any, on, Additional
Amounts, if any, with regard to, and any other amounts owing and unpaid on, the
Secured Notes or to enforce the performance of any provision of the Secured
Notes, the Security Agreements or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Secured Notes or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder of a Note in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
SECTION 6.4 Waiver of Past Defaults.
Subject to Section 6.7 hereof, Holders of not less than a
majority in aggregate principal amount of the then outstanding Secured Notes by
notice to the Trustee may on behalf of the Holders of all of the Secured Notes
waive an existing Default or Event of Default and its consequences hereunder,
except (i) an existing Default or Event of Default in the payment of the
principal of, premium, if any, on, or interest and Special Interest, if any,
on, the Secured Notes (including in connection with an offer to purchase) or
(ii) an existing Default or Event of Default in respect of a provision that
under Section 10.2 cannot be amended without the consent of each Holder
affected thereby. Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured for
every purpose of this Indenture and the Security Agreements; but no such waiver
shall extend to any subsequent or other Default or impair any right consequent
thereon.
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SECTION 6.5 Control By Majority.
The Holders of a majority in aggregate principal amount of the
Secured Notes then outstanding may direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture or the
Security Agreements or, subject to Section 7.1 hereof, that the Trustee
determines may be unduly prejudicial to the rights of other Holders of Secured
Notes or that may involve the Trustee in personal liability; provided that the
Trustee may take any other action deemed by the Trustee that is not
inconsistent with such direction. Prior to taking any action hereunder, the
Trustee shall be entitled to indemnification satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.
SECTION 6.6 Limitation on Suits.
No Holder of any Secured Note shall have the right to
institute any proceeding, judicial or otherwise, with respect to this
Indenture, the Guarantee, the Secured Notes or the Security Agreements, or for
the appointment of a receiver or a trustee, or for any other remedy, unless:
(a) the Holder of a Secured Note has given to the Trustee written
notice of a continuing Event of Default;
(b) a Holder or Holders of at least 25% in principal amount of the
then outstanding Secured Notes make a written request to the Trustee to pursue
the remedy;
(c) such Holder of a Secured Note or Holders of Secured Notes
offer and, if requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the Secured Notes then outstanding do not give the Trustee
a direction inconsistent with the request;
in any event, it being understood and intended that no one or more Holders of
Secured Notes shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture or the Security Agreements to
affect, disturb or prejudice the rights of any Holders of Secured Notes, or to
obtain or to seek to obtain priority or preference over any other of such
Holders or to enforce any right under this Indenture or the Security
Agreements, except in the manner herein provided and for the equal and ratable
benefit of all Holders of Secured Notes.
A Holder of a Secured Note may not use this Indenture or any
Security Agreement to prejudice the rights of another Holder of a Secured Note
or to obtain a preference or priority over another Holder of a Secured Note.
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SECTION 6.7 Rights of Holders of Secured Notes to Receive
Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of, premium, if any, on,
Additional Amounts, if any, on, and interest and Special Interest, if any, on,
the Secured Notes held by such Holder, on or after the respective due dates
expressed in the Secured Note or this Indenture (including in connection with
an offer to purchase), or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without
the consent of such Holder; except that no Holder shall have the right to
institute any such suit, if and to the extent that the institution or
prosecution thereof or the entry of judgment therein would under applicable law
result in the surrender, impairment, waiver, or loss of the Liens of the
Security Agreements upon any property or assets subject to the Liens.
SECTION 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Issuer for the whole
amount of principal of, premium, if any, on, interest and Special Interest, if
any, and Additional Amounts, if any, remaining unpaid on, the Secured Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due to
the Trustee under Section 7.7.
SECTION 6.9 Trustee May File Proofs of Claim.
The Trustee shall be entitled and empowered, without regard to
whether the Trustee or any Holder shall have made any demand or performed any
other act pursuant to the provisions of this Article and without regard to
whether the principal of the Secured Notes shall then be due and payable as
therein expressed or by declaration or otherwise, by intervention in any
proceedings relative to the Issuer, the Company or any Obligor upon the Secured
Notes, or to the creditors or property or assets of the Issuer, the Company,
any Subsidiary Guarantor or any other Obligor or otherwise, to take any and all
actions authorized under the Trust Indenture Act in order to have claims of the
Holders and the Trustee allowed in any such proceeding. In particular, the
Trustee shall be entitled and empowered in such instances:
(a) to file and prove a claim or claims for the whole amount of
principal (and premium, if any), interest, Additional Amounts, if any, Special
Interest, if any, and any other amounts owing and unpaid in respect of the
Secured Notes, and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including all amounts
owing to the Trustee and each predecessor Trustee pursuant to Section 7.7
hereof) and of the Holders allowed in any judicial proceedings relative to the
Issuer, the Company or other Obligor upon the Secured Notes, or to the
creditors or property of the Issuer, the Company, any Subsidiary Guarantor or
any such other Obligor;
(b) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of the Secured Notes in any election of a trustee or a
standby trustee in arrangement,
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reorganization, liquidation or other bankruptcy or insolvency proceedings or
Person performing similar functions in comparable proceedings; and
(c) to collect and receive any moneys or other property or assets
payable or deliverable on any such claims, and to distribute all amounts
received with respect to the claims of the Holders and of the Trustee on their
behalf; and any trustee, receiver, or liquidator, custodian or other similar
official is hereby authorized by each of the Holders to make payments to the
Trustee, and, in the event that the Trustee shall consent to the making of
payments directly to the Holders, to pay to the Trustee such amounts as shall
be sufficient to cover all amounts owing to the Trustee and each predecessor
Trustee pursuant to Section 7.7 hereof.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Secured Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding except, as aforesaid, to vote for the election of a trustee in
bankruptcy or similar person.
In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture to
which the Trustee shall be a party), the Trustee shall be held to represent all
the Holders of the Secured Notes, and it shall not be necessary to make any
Holders of the Secured Notes parties to any such proceedings.
SECTION 6.10 Priorities.
If the Trustee collects any money or property pursuant to this
Article (including funds received from collateral agents and escrow agents
pursuant to the Security Agreements), it shall pay out the money or property in
the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.7 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Secured Notes for amounts due and
unpaid on the Secured Notes for principal, premium, if any, interest, and
Special Interest, if any, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Secured Notes for principal
(premium, if any), interest, and Special Interest, if any, and Additional
Amounts, if any, respectively; and
Third: to the Issuer or to the Company or Subsidiary
Guarantors or to such other party as a court of competent jurisdiction shall
direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Secured Notes pursuant to this Section 6.10. At least 15
days before such record date, the Issuer shall mail to each Holder and the
Trustee a notice that states the record date, the payment date and amount to be
paid. The Trustee may mail such notice in the name and at the expense of the
Issuer.
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SECTION 6.11 Undertaking For Costs.
In any suit for the enforcement of any right or remedy under
this Indenture and the Security Agreements or in any suit against the Trustee
for any action taken or omitted by it as a Trustee, a court in its discretion
may require the filing by any party litigant in the suit of an undertaking to
pay the costs of the suit, and the court in its discretion may assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder of a Secured Note pursuant to Section
6.7 hereof, or a suit by Holders of more than 10% in aggregate principal amount
of the then outstanding Secured Notes.
SECTION 6.12 Restoration of Rights and Remedies.
If the Trustee or any Holder of Secured Notes has instituted
any proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case the Issuer, the Company, the Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding has been
instituted.
SECTION 6.13 Rights and Remedies Cumulative.
Except as otherwise provided in Section 2.7 hereof, no right
or remedy conferred herein, or in the Security Agreements, upon or reserved to
the Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 6.14 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Secured Note to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article VI, by the Security Agreements, or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
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ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely
by the express provisions of this Indenture and the Trustee
need perform only those duties that are specifically set forth
in this Indenture and no others, and no implied covenants or
obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph
(b) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless
it is proved that the Trustee was negligent in ascertaining
the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 6.5
hereof.
(d) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture or the Security Agreements
shall require the Trustee to expend or risk its own funds or incur any
liability. The Trustee shall be under no obligation to exercise any of its
rights and powers under this Indenture or the Security Agreements at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
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(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuer and
the Company. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the Trust
Indenture Act.
SECTION 7.2 Rights of Trustee.
(a) Subject to the provisions of Section 7.1(a) hereof, the
Trustee may rely upon any document believed by it to be genuine and to have
been signed or presented by the proper Person. The Trustee need not investigate
any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the oral or written advice of such counsel or any
Opinion of Counsel with respect to legal matters relating to this Indenture,
the Security Agreements and the Secured Notes shall be full and complete
authorization and protection from liability in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any attorney or agent
appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture; provided, however, that
the Trustee's conduct does not constitute willful misconduct or negligence.
(e) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(f) Except with respect to Section 4.1 hereof, the Trustee shall
have no duty to inquire as to the performance of the Issuer's covenants in
Article 4 hereof. In addition, the Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any Event of Default
occurring pursuant to Sections 6.1(a) (except that the Trustee shall not be
deemed to have knowledge of a default in the payment of Special Interest or
Additional Amounts) or 6.1(b), or (ii) any Default or Event of Default of which
a Responsible Officer of the Trustee shall have received written notification;
provided that the Trustee shall comply with the "automatic stay" provisions
contained in U.S. bankruptcy laws, if applicable. As used herein, the term
"actual knowledge" means the actual fact or statement of knowing, without any
duty to make any investigation with regard thereto.
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(g) Prior to the occurrence of an Event of Default hereunder and
after the curing and waiving of all Events of Default, the Trustee shall not 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, debenture, note, other evidence of
indebtedness or other paper or document unless requested in writing to do so by
the Holders of not less than a majority in aggregate principal amount of the
Secured Notes then outstanding; provided that if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely to
be incurred by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to it
by the terms of this Indenture, the Trustee may require reasonable indemnity
against such expenses or liabilities as a condition to proceeding; the
reasonable expenses of every such examination shall be paid by the Issuer or,
if advanced by the Trustee, shall be repaid by the Issuer upon demand. The
Trustee shall not be bound to ascertain or inquire as to the performance or
observance of any covenants, conditions, or agreements on the part of the
Issuer, except as otherwise set forth herein, but the Trustee may, in its
discretion, make such further inquiry or investigation into such facts or
matters as it may see fit and if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Issuer personally or by agent or attorney.
(h) The Trustee shall not be required to give any bond or surety
in respect of the performance of its powers and duties hereunder.
(i) The permissive rights of the Trustee to do things enumerated
in this Indenture shall not be construed as a duty.
SECTION 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Secured Notes and may otherwise deal with the Issuer,
the Company or any Affiliate of the Issuer or the Company with the same rights
it would have if it were not Trustee. However, in the event that the Trustee
acquires any conflicting interest (as defined in the Trust Indenture Act) it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue as Trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
SECTION 7.4 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture, the Security
Agreements, the Guarantee, any Subsidiary Guarantee or the Secured Notes, it
shall not be accountable for the Company's use of the proceeds from the Issuer
Loans or any money paid to the Issuer or the Company or upon the Company's
direction under any provision of this Indenture, it shall not be responsible
for the use or application of any money received by any Paying Agent other than
the Trustee, and it shall not be responsible for any statement or recital
herein or any statement in the Secured Notes or any other document in
connection with the sale of the Secured Notes, any Security Agreement or
pursuant to this Indenture or the Security Agreements, other than its
certificate of authentication.
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SECTION 7.5 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Secured
Notes a notice of the Default or Event of Default within 90 days after it
occurs. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, or interest on any Secured Note (including
payments pursuant to the mandatory repurchase provisions of such Secured Notes,
if any), the Trustee may withhold the notice if and so long as a committee of
its Responsible Officers in good faith determines that withholding the notice
is in the interests of the Holders of the Secured Notes.
SECTION 7.6 Reports by Trustee to Holders of the Secured Notes.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Secured Notes remain
outstanding, the Trustee shall mail to the Holders of the Secured Notes a brief
report dated as of such reporting date that complies with TIA Section 313(a)
(but if no event described in TIA Section 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The
Trustee also shall comply with TIA Section 313(b). The Trustee shall also
transmit by mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the
Holders of Secured Notes shall be mailed to the Issuer and filed with the
Commission and each stock exchange on which the Secured Notes are listed in
accordance with TIA Section 313(d). The Issuer shall promptly notify the
Trustee whenever the Secured Notes become listed on any stock exchange and of
any delisting thereof.
SECTION 7.7 Compensation and Indemnity.
The Issuer and the Company shall pay to the Trustee promptly
from time to time such compensation for its acceptance of this Indenture and
services hereunder as agreed to by the parties from time to time. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred
or made by it, including the costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Issuer and the Company shall indemnify the Trustee against
any and all losses, liabilities or expenses (including reasonable attorneys'
fees) incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against the Issuer (including this Section
7.7) and defending itself against any claim (whether asserted by the Issuer or
any Holder or any other Person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent any
such loss, liability or expense may be attributable to its negligence or bad
faith. The Trustee shall notify the Issuer and the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Issuer or the Company shall not relieve the Issuer and the Company of their
respective
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obligations hereunder. The Issuer shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Issuer
shall pay the reasonable fees and expenses of such counsel. The Issuer need not
pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of the Issuer under this Section 7.7 shall
survive the resignation or removal of the Trustee and the satisfaction and
discharge of this Indenture.
To secure the Issuer's payment obligations in this Section,
the Trustee shall have a Lien prior to the Secured Notes on all money or
property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Secured Notes. Such Lien shall be a Lien
permitted by this Indenture and shall survive the satisfaction and discharge of
this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Sections 6.1(g) or 6.1(h) hereof occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of
administration under any applicable bankruptcy laws.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.8 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Issuer. The
Holders of Secured Notes of a majority in principal amount of the then
outstanding Secured Notes may remove the Trustee by so notifying the Trustee
and the Issuer in writing. If at any time:
(a) the Trustee shall fail to comply with Section 310(b) of the
Trust Indenture Act after written request thereof by the Issuer or by any
Holder who has been a bona fide Holder of a Secured Note for at least six
months, unless the Trustee's duty to resign is stayed in accordance with the
provisions of TIA Section 310(b); or
(b) the Trustee shall cease to be eligible under Section 7.10
hereof and shall fail to resign after written request therefor by the Issuer or
by any Holder; or
(c) the Trustee shall become incapable of acting or a decree or
order for relief by a court having jurisdiction in the premises shall have been
entered in respect of the Trustee in an involuntary case under the U.S.
bankruptcy laws, as now or hereinafter constituted, or a decree or order by a
court having jurisdiction in the premises shall have been entered for the
appointment of a receiver, custodian, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Trustee or of its property and
assets or affairs, or any public officer shall take charge or control of
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the Trustee or of its property and assets or affairs for the purpose of
rehabilitation, conservation, winding-up or liquidation; or
(d) the Trustee shall commence a voluntary case under the U.S.
bankruptcy laws, as now or hereafter constituted, or shall consent to the
appointment of or taking possession by a receiver, custodian, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Trustee or
of its property and assets or affairs, or shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall take corporate action in furtherance of
any such action; or
(e) the Trustee becomes incapable of acting,
then, in any such case, (i) the Issuer by a Board Resolution may remove the
Trustee with respect to the Secured Notes, or (ii) subject to Section 6.11
hereof, any Holder who has been a bona fide Holder of a Secured Note for at
least six months may, on behalf of such Holder and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee for the Secured Notes.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Issuer shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Secured
Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Issuer.
If a successor Trustee does not take office within 60 days
after the retiring Trustee notifies the Issuer of its resignation or is
removed, the retiring Trustee, the Issuer, or the Holders of Secured Notes of
at least 10% in principal amount of the then outstanding Secured Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee, after written request by any Holder of a
Secured Note who has been a Holder of a Secured Note for at least six months,
fails to comply with Section 7.10, such Holder of a Secured Note may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Secured Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
that all sums owing to the Trustee hereunder have been paid and subject to the
Lien provided for in Section 7.7 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 7.8, the Issuer's obligations under Section
7.7 hereof shall continue for the benefit of the retiring Trustee.
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SECTION 7.9 Successor Trustee by Merger, Etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor entity without any further act shall be the
successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Secured Notes shall have been authenticated but
not delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Secured Notes so
authenticated; and in case at that time any of the Secured Notes shall not have
been authenticated, any successor to the Trustee may authenticate such Secured
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have
the full force which it is anywhere in the Secured Notes or in this Indenture
provided that the certificate of the Trustee shall have.
SECTION 7.10 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $75,000,000 as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee shall comply
with TIA Section 310(b); provided, however, that there shall be excluded from
the operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities or certificates of interest or participation in other
securities of the Issuer are outstanding if the requirements for such exclusion
set forth in TIA Section 310(b)(1) are met.
SECTION 7.11 Preferential Collection of Claims Against the Issuer.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE VIII
SATISFACTION AND DISCHARGE
SECTION 8.1 Satisfaction and Discharge.
This Indenture shall upon the request of the Issuer cease to
be of further effect (except as to surviving rights of registration of
transfer, substitution or exchange of Secured Notes herein expressly provided
for, the Issuer's and the Company's obligations under Sections 7.7 and 8.4
hereof, the Issuer's rights of optional redemption under Article III hereof,
and the Issuer's, the Trustee's and the Paying Agent's obligations under
Section 8.3 hereof) and the
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Trustee, at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture when:
(a) either
(i) all outstanding Secured Notes have been delivered to
the Trustee for cancellation; or
(ii) all such Secured Notes not theretofore delivered to
the Trustee for cancellation have become due and payable, will become
due and payable within one year or are to be called for redemption
within one year under irrevocable arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the
name and at the expense of the Issuer, and the Issuer has irrevocably
deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire debt on the Secured
Notes not theretofore delivered to the Trustee for cancellation, for
principal of (premium, if any, on) and interest (including Additional
Amounts and Special Interest, if any) to the date of deposit or
Maturity or date of redemption;
(b) the Issuer has paid or caused to be paid all sums then due and
payable by the Issuer under this Indenture; and
(c) the Issuer has delivered an Officers' Certificate and an
Opinion of Counsel relating to compliance with the conditions set forth in this
Indenture.
Notwithstanding the satisfaction and discharge of this
Indenture, the Issuer's obligations in Sections 2.3, 2.4, 2.6, 2.7, 2.11, 2.13,
4.23, 7.7, 7.8, 8.2, 8.3 and 8.4, and the Trustee's and Paying Agent's
obligations in Section 8.3 shall survive until the Secured Notes are no longer
outstanding. Thereafter, only the Issuer's obligations in Sections 7.7, 8.3
and 8.4 and the Trustee's and Paying Agent's obligations in Section 8.3 shall
survive.
In order to have money available on a payment date to pay
principal (and premium, if any, on) or interest (and Additional Amounts, if
any, and Special Interest, if any) on the Secured Notes, the U.S. Government
Obligations shall be payable as to principal (and premium, if any) or interest
(and Additional Amounts, if any, and Special Interest, if any) at least one
Business Day before such payment date in such amounts as will provide the
necessary money. U.S. Government Obligations shall not be callable at the
Issuer's option.
SECTION 8.2 Application of Trust Money.
All money deposited with the Trustee pursuant to Section 8.1
shall be held in trust and, at the written direction of the Issuer, be invested
prior to maturity in non-callable U.S. Government Obligations, and applied by
the Trustee in accordance with the provisions of the Secured Notes and this
Indenture, to the payment, either directly or through any Paying Agent as the
Trustee may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest (and Additional Amounts, if any, and Special
Interest, if any) for the payment of which money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
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SECTION 8.3 Repayment of the Issuer.
The Trustee and the Paying Agent shall promptly pay to the
Issuer upon written request any excess money or securities held by them at any
time.
The Trustee and the Paying Agent shall pay to the Issuer upon
written request any money held by them for the payment of principal or interest
that remains unclaimed for two years after the date upon which such payment
shall have become due; provided that the Issuer shall have either caused notice
of such payment to be mailed to each Holder of the Secured Notes entitled
thereto no less than 30 days prior to such repayment or within such period
shall have published such notice in a financial newspaper of widespread
circulation published in The City of New York, including, without limitation,
The Wall Street Journal (national edition). After payment to the Issuer,
Holders entitled to the money must look to the Issuer for payment as general
creditors unless an applicable abandoned property law designates another
Person, and all liability of the Trustee and such Paying Agent with respect to
such money shall cease.
SECTION 8.4 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money
or U.S. Government Obligations in accordance with Section 8.1 by reason of any
legal proceeding or by reason of any order or judgment of any court of
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Issuer's, the Company's and Subsidiary Guarantor's obligations
under this Indenture, the Secured Notes, the Security Agreements and the
Subsidiary Guarantees shall be revived and reinstated as though no deposit has
occurred pursuant to Section 8.1 until such time as the Trustee or Paying Agent
is permitted to apply all such money or U.S. Government Obligations in
accordance with Section 8.2; provided, however, that if the Issuer, the Company
or a Subsidiary Guarantor has made any payment of interest (including Special
Interest and Additional Amounts, if any) on or principal of any Secured Notes
because of the reinstatement of their Obligations, the Issuer, the Company or
such Subsidiary Guarantor shall be subrogated to the rights of the Holders of
such Secured Notes to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE IX
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 9.1 Option to Effect Defeasance or Covenant Defeasance.
The Issuer may, at the option of its Board of Directors
evidenced by a Board Resolution, at any time, elect to have either Section 9.2
or 9.3 hereof be applied to all outstanding Secured Notes upon compliance with
the conditions set forth below in this Article 9.
SECTION 9.2 Defeasance and Discharge.
Upon the Issuer's exercise under Section 9.1 hereof of the
option applicable to this Section 9.2, the Issuer, the Company and the
Subsidiary Guarantors, if any, shall, subject to the satisfaction of the
conditions set forth in Section 9.4 hereof, be deemed to have been discharged
from their respective Obligations with respect to all outstanding Secured
Notes, this
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Indenture and the Guarantee and the Subsidiary Guarantees, if any, on the date
the conditions set forth below are satisfied (hereinafter, "Defeasance"). For
this purpose, Defeasance means that the Issuer shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Secured Notes
and the Issuer, the Company and the Subsidiary Guarantors shall be deemed to
have satisfied all of their obligations under such Secured Notes, this
Indenture, the Security Agreements and the Subsidiary Guarantees (and the
Trustee, at the expense of the Issuer, shall execute proper instruments
acknowledging the same), subject to the following which shall survive until
otherwise terminated or discharged hereunder:
(a) the rights of Holders of such Secured Notes to receive, solely
from the trust fund described in Section 9.4 hereof and as more fully set forth
in Section 9.4, payments in respect of the principal and of and any premium and
interest (including Special Interest, if any, and Additional Amounts, if any)
on such Secured Notes when payments are due, (but not a Redemption upon an
Event of Loss or upon a Sale of a Mortgaged Rig, the Change of Control Purchase
Price or the Excess Proceeds Offer Amount);
(b) the Issuer's obligations with respect to such Secured Notes
under Sections 2.6, 2.7, 2.10, and 4.2 hereof;
(c) the rights, powers, trusts, duties and immunities of the
Trustee under this Indenture;
(d) Article III hereof other than Sections 3.8, 3.9 and 3.10
thereof; and
(e) this Article IX.
Subject to compliance with this Article 9, the Issuer may
exercise its option under this Section 9.2 notwithstanding the prior exercise
of its option under Section 9.3 hereof.
SECTION 9.3 Covenant Defeasance.
Upon the Issuer's exercise under Section 9.1 hereof of the
option applicable to this Section 9.3, (i) the Issuer and the Guarantor shall,
subject to the satisfaction of the conditions set forth in Section 9.4 hereof,
be released from its obligations under the covenants contained in Sections 3.8,
3.9, 4.4, 4.6, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18,
4.19 and 4.20 and Section 5.1(a)(iii) hereof and any covenant added to this
Indenture subsequent to the Issue Date pursuant to Section 10.1 hereof with
respect to the outstanding Secured Notes and (ii) the occurrence of any event
specified in Section 6.1(c) or 6.1(d) hereof, with respect to any of Sections
4.4, 4.6, 4.8, 4.9, 4.10, 4.11, 4.12, 4.12, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19
and 4.20] and Section 5.1(a)(iii) hereof, and any covenant added to this
Indenture subsequent to the Issue Date pursuant to Section 10.1 hereof, shall
be deemed not to be or result in an Event of Default, in each case with respect
to such Secured Notes as provided in this Section 9.3 on and after the date on
which the conditions set forth in Section 9.4 hereof are satisfied, and the
Secured Notes shall thereafter be deemed not "outstanding" for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Secured Notes shall not be deemed outstanding for
accounting
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purposes). For this purpose, "Covenant Defeasance" means that, with respect to
the outstanding Secured Notes, the Issuer, the Company and the Subsidiary
Guarantors may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant (to the extent
so specified in the case of Section 6.1(c) or 6.1(d) hereof), whether directly
or indirectly, by reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other provision
herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.1 hereof, but,
except as specified above, the remainder of this Indenture, the Security
Agreements, the Subsidiary Guarantees and the Secured Notes shall be unaffected
thereby.
SECTION 9.4 Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of
either Section 9.2 or 9.3 hereof to the outstanding Secured Notes:
In order to exercise either Defeasance or Covenant Defeasance:
(a) the Issuer shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of making
the following payments, specifically pledged as security for, and dedicated
solely to the benefits of the Holders of such Secured Notes, (i) money in an
amount, or (ii) U.S. Government Obligations which through the scheduled payment
of principal and interest in respect thereof in accordance with their terms
will provide, not later than one Business Day before the due date of any
payment, money in an amount, or (iii) a combination thereof, in each case
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge the principal of (premium, if any, on) and
any installment of interest on and Special Interest, if any, on the Secured
Notes at the Maturity thereof or Redemption Date therefor in accordance with
the terms of this Indenture and the Secured Notes;
(b) in the case of an election under Section 9.2 hereof, the
Issuer shall have delivered to the Trustee an Opinion of Counsel confirming
that (A) the Issuer has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of this Indenture,
there has been a change in the applicable U.S. federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Holders of the outstanding Secured Notes will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of such
Defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
Defeasance had not occurred;
(c) in the case of an election under Section 9.3 hereof, the
Issuer shall have delivered to the Trustee an Opinion of Counsel confirming
that the Holders of the outstanding Secured Notes will not recognize income,
gain or loss for U.S. federal income tax purposes as a result of such Covenant
Defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred;
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(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of the
proceeds of which will be used to defease the Secured Notes pursuant to this
Article 9 concurrently with such incurrence) or insofar as Section 6.1(g) or
6.1(h) hereof is concerned, shall have occurred at any time on or prior to the
91st day after the date of such deposit and be continuing on such 91st day (it
being understood that this condition shall not be deemed satisfied until after
such 91st day);
(e) such Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement
or instrument (other than this Indenture) to which the Issuer, the Company or
any of the Company's Subsidiaries is a party or by which the Issuer, the
Company or any of the Company's Subsidiaries is bound;
(f) such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming for the purpose of this clause (f) that all Secured
Notes are in default within the meaning of such Act);
(g) such Defeasance or Covenant Defeasance shall not result in the
trust arising from such deposit constituting an investment Issuer within the
meaning of the Investment Issuer Act of 1940, as amended, unless such trust
shall be registered under such Act or exempt from registration thereunder;
(h) the Issuer shall have delivered to the Trustee an Opinion of
Counsel to the effect that on the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(i) the Issuer shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuer with the intent
of preferring the Holders over any other creditors of the Issuer or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Issuer; and
(j) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Defeasance or the Covenant Defeasance
have been complied with.
SECTION 9.5 Deposited Money and U.S. Government Obligations To Be
Held in Trust; Other Miscellaneous Provisions.
Subject to Section 9.6 hereof, all money and U.S. Government
Obligations (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 9.5, the
"Trustee") pursuant to Section 9.4 hereof in respect of the outstanding Secured
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Secured Notes and this Indenture, to the payment, either
directly or through any such Paying Agent as the Trustee may determine, to the
Holders of such Secured Notes of all sums due and to become due thereon in
respect of principal, premium, if
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any, and interest (including Special Interest, if any), but such money need not
be segregated from other funds except to the extent required by law.
The Issuer shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or U.S.
Government Obligations deposited pursuant to Section 9.4 hereof or the
principal and interest received in respect thereof.
Anything in this Article 9 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Issuer from time to time upon the
request of the Issuer any money or U.S. Government Obligations held by it as
provided in Section 9.4 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 9.4(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Defeasance or Covenant
Defeasance.
SECTION 9.6 Repayment to the Issuer.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Issuer, in trust for the payment of the principal of, premium,
if any, Additional Amounts, if any, Special Interest, if any, or interest on
any Secured Note and remaining unclaimed for two years after such principal,
and premium, if any Special Interest, if any, or interest has become due and
payable shall be paid to the Issuer on its request or (if then held by the
Issuer) shall be discharged from such trust; and the Holder of such Secured
Note shall thereafter, as a creditor, look only to the Issuer for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Issuer as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Issuer cause to be published once, in The New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Issuer.
SECTION 9.7 Reinstatement.
If the Trustee or Paying Agent is unable to apply any United
States dollars or U.S. Government Obligations in accordance with Section 9.2 or
9.3 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Issuer's Obligations under this Indenture and the Secured
Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Section 9.2 or 9.3 hereof until such time as the Trustee or Paying
Agent is permitted to apply all such money in accordance with Section 9.2 or
9.3 hereof, as the case may be; provided, however, that, if the Issuer makes
any payment of principal of, premium, if any, interest, Special Interest, if
any, on any Secured Note following the reinstatement of its Obligations, the
Issuer shall be subrogated to the rights of the Holders of such Secured Notes
to receive such payment from the money held by the Trustee or Paying Agent.
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ARTICLE X
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 10.1 Without Consent of Holders of Secured Notes.
Notwithstanding Section 10.2 of this Indenture, the Issuer,
the Company, the Subsidiary Guarantors, if any, and the Trustee may amend or
supplement this Indenture or the Secured Notes without the consent of any
Holder of a Secured Note:
(a) to evidence the succession of another Person to the Issuer and
the Company and the assumption by such successor of the covenants and
Obligations of the Issuer under this Indenture and contained in the Secured
Notes or the Security Agreements and of the Company contained in this Indenture
and the Guarantee, or in the Security Agreements;
(b) to add to the covenants of the Issuer or the Company, for the
benefit of Holders, or to surrender any right or power conferred upon the
Issuer or the Company by this Indenture or the Security Agreements;
(c) to add any additional Events of Default;
(d) to provide for uncertificated Secured Notes in addition to or
in place of Certificated Secured Notes (provided that the uncertificated
Secured Notes are issued in registered form for purposes of Section 163(f) of
the Code, or in a manner such that the uncertificated Secured Notes are
described in Section 163(f)(2)(B) of the Code);
(e) to evidence and provide for the acceptance of appointment
under this Indenture by the successor Trustee;
(f) to add additional security for the Secured Notes to secure or
add additional security for the Guarantee and/or the Subsidiary Guarantees;
(g) to cure any ambiguity, to correct or supplement any provision
in this Indenture or the Security Agreements, which may be inconsistent with
any other provision herein or therein or to add any other provisions with
respect to matters or questions arising under this Indenture or the Security
Agreements, provided that such actions will not adversely affect the interests
of Holders in any material respect;
(h) to add or release any Subsidiary Guarantor pursuant to the
terms of this Indenture; or
(i) to comply with the requirements of the SEC to effect or
maintain the qualification of this Indenture under the Trust Indenture Act.
Upon the request of the Issuer accompanied by a Board
Resolution authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in
Section 10.7 hereof, the Trustee shall join with the Issuer in the execution of
any amended or supplemental Indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations
that may be therein
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contained, but the Trustee shall not be obligated to enter into such amended or
supplemental Indenture that affects its own rights, duties or immunities under
this Indenture or otherwise.
SECTION 10.2 With Consent of Holders of Secured Notes.
Except as provided below in this Section 10.2, the Issuer, the
Company, the Subsidiary Guarantors, if any, and the Trustee may amend or
supplement this Indenture and the Secured Notes may be amended or supplemented
with the consent of the Holders of at least a majority in aggregate principal
amount at Stated Maturity of the Secured Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for the
Secured Notes), and, subject to Sections 6.4 and 6.7 hereof, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, premium, if any, or, interest on, or Special
Interest, if any, and Additional Amounts, if any, on, the Secured Notes, except
a payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture, the Security Agreements or the
Secured Notes may be waived with the consent of the Holders of a majority in
aggregate principal amount at Stated Maturity of the then outstanding Secured
Notes (including consents obtained in connection with a tender offer or
exchange offer for the Secured Notes).
Upon the request of the Issuer accompanied by a Board
Resolution authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Secured Notes as aforesaid, and upon
receipt by the Trustee of the documents described in Section 10.7 hereof, the
Trustee shall join with the Issuer, the Company and the Subsidiary Guarantors,
if any, in the execution of such amended or supplemental Indenture unless such
amended or supplemental Indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Secured Notes under this Section 10.2 to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Issuer shall mail to the Holders of Secured Notes
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Issuer to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
amended or supplemental Indenture or waiver. Subject to Sections 6.4 and 6.7
hereof, the Holders of a majority in aggregate principal amount of the Secured
Notes then outstanding may waive compliance in a particular instance by the
Issuer with any provision of this Indenture or the Secured Notes. However,
without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Secured Notes held by a non-consenting Holder):
(a) reduce the amount of Secured Notes whose Holders must consent
to an amendment;
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(b) reduce the rate of or extend the time for payment of interest
on any Secured Note or any Issuer Loan;
(c) reduce the principal of or extend the Stated Maturity of any
Secured Note or any Issuer Loan;
(d) modify the obligations of Issuer to make mandatory redemptions
or otherwise reduce the premium payable upon the redemption of any Secured Note
or change the time at which any Secured Note may be or is required to be
redeemed as described under Article III;
(e) modify the obligations of the Company to make mandatory
repayments or change the time at which an Issuer Loan may be or is required to
be repaid under Article III;
(f) make any Secured Note payable in money other than that stated
in the Secured Note;
(g) impair the right of any Holder of the Secured Notes to receive
payment of principal of and interest on such Holder's Secured Notes on or after
the due dates therefor or to institute suit for the enforcement of any payment
on or with respect to such Holder's Secured Notes;
(h) make any change in the amendment provisions which require each
Holder's consent or in the waiver provisions;
(i) make any change in the Guarantee or any Security Agreement or
Issuer Loan Agreement that would adversely affect the Noteholders or terminate
the Lien of this Indenture or any Security Agreement on any property at any
time subject thereto or deprive the Holders of the security afforded by the
Lien of this Indenture or the Security Agreements or the Issuer of the Liens
securing the Issuer Loans;
(j) modify the Obligations of the Issuer to make offers to
purchase Secured Notes upon a Change of Control;
(k) subordinate in right of payment the Secured Notes, the
Guarantee or the Subsidiary Guarantees to any other Indebtedness;
(l) amend, supplement or otherwise modify the provisions of this
Indenture relating to the Guarantee; or
(m) make any change in Sections 6.4 or 6.7 or modify any of the
provisions of this Section 10.2 (except to increase any percentage set forth
therein or herein).
Upon the request of the Issuer accompanied by a Board
Resolution of each the Issuer and the Company authorizing the execution of any
such amended or supplemental Indenture, and upon the filing with the Trustee of
evidence satisfactory to the Trustee of the consent of the Holders of Secured
Notes as aforesaid, and upon receipt by the Trustee of the documents described
in Section 7.2 hereof, the Trustee shall join with the Issuer and the Company
in the execution of such amended or supplemental
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Indenture unless such amended or supplemental Indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Secured Notes under this Section 10.2 to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof.
SECTION 10.3 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article X, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Secured Notes theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby. After a supplemental indenture
becomes effective, the Issuer shall mail to Holders a notice briefly describing
such amendment. The failure to give such notice to all Holders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 10.4 Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Secured
Notes shall be set forth in an amended or supplemental Indenture that complies
with the Trust Indenture Act as then in effect.
SECTION 10.5 Revocation and Effect of Consents.
(a) Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Secured Note is a continuing consent by the
Holder of a Secured Note and every subsequent Holder of a Secured Note or
portion of a Secured Note that evidences the same debt as the consenting
Holder's Secured Note, even if notation of the consent is not made on any
Secured Note. However, any such Holder of a Secured Note or subsequent Holder
of a Secured Note may revoke the consent as to its Secured Note if the Trustee
receives written notice of revocation before the date the waiver, supplement or
amendment becomes effective. An amendment, supplement or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
(b) The Issuer may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to give their consent
or take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding subsection, those Persons who were Holders at such record
date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than
120 days after such record date.
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SECTION 10.6 Notation on or Exchange of Secured Notes.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Secured Note thereafter authenticated.
The Issuer in exchange for all Secured Notes may issue and the Trustee shall
authenticate new Secured Notes that reflect the amendment, supplement or
waiver.
Failure to make the appropriate notation or issue a new
Secured Note shall not affect the validity and effect of such amendment,
supplement or waiver.
SECTION 10.7 Trustee to Sign Supplemental Indentures.
The Trustee shall sign any supplemental Indenture authorized
pursuant to this Article 10 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. Neither
the Issuer nor the Company, or any Subsidiary Guarantor may sign a supplemental
Indenture until the Board of Directors of such Person approves it. In executing
any supplemental indenture, the Trustee shall be entitled to receive indemnity
reasonably satisfactory to it and to receive and (subject to Section 7.1) shall
be fully protected in relying upon, in addition to the documents required by
Section 12.4, an Officers' Certificate and an Opinion of Counsel stating that:
(a) such supplemental indenture is authorized or permitted by this
Indenture and that all conditions precedent to the execution, delivery and
performance of such supplemental indenture have been satisfied;
(b) the Issuer, the Company and the Subsidiary Guarantors, if any,
have all necessary corporate power and authority to execute and deliver the
supplemental indenture and that the execution, delivery and performance of such
supplemental indenture has been duly authorized by all necessary corporate
action of the Issuer, the Company and the Subsidiary Guarantors, if any;
(c) the execution, delivery and performance of the supplemental
indenture do not conflict with, or result in the breach of or constitute a
default under any of the terms, conditions or provisions of (i) this Indenture,
(ii) the charter documents and by-laws of the Issuer, the Company or any
Subsidiary Guarantor, or (iii) any material agreement or instrument to which
the Issuer, the Company or any Subsidiary Guarantor is subject and of which
such counsel is aware;
(d) to the knowledge of legal counsel writing such Opinion of
Counsel, the execution, delivery and performance of the supplemental indenture
do not conflict with, or result in the breach of any of the terms, conditions
or provisions of (i) any law or regulation applicable to the Issuer, the
Company or any Subsidiary Guarantor, or (ii) any material order, writ,
injunction or decree of any court or governmental instrumentality applicable to
the Issuer, the Company or any Subsidiary Guarantor;
(e) such supplemental indenture has been duly and validly executed
and delivered by the Issuer, the Company and the Subsidiary Guarantors, if any,
and this Indenture together with such supplemental indenture constitutes a
legal, valid and binding obligations of the Issuer, the Company and the
Subsidiary Guarantors, if any, enforceable against the Issuer, the Company and
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the Subsidiary Guarantors, if any, as applicable, in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general equitable principles (whether considered in a proceeding at law or in
equity); and
(f) this Indenture together with such amendment or supplement
complies with the Trust Indenture Act.
SECTION 10.8 Payment for Consent.
Neither the Issuer, the Company nor any Affiliate of the
Issuer or the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture, the Secured Notes or the Security Agreements
unless such consideration is offered to be paid to all Holders that so consent,
waive or agree to amend in the time frame set forth in solicitation documents
relating to such consent, waiver or agreement.
ARTICLE XI
COLLATERAL AND SECURITY
SECTION 11.1 Security Agreements.
The due and punctual payment of the principal of, premium, if
any, interest (including Additional Amounts, if any, and Special Interest, if
any) on, and any other amounts due in respect of, the Secured Notes when and as
the same shall be due and payable, whether on an Interest Payment Date, at
Stated Maturity, by acceleration, call for redemption, upon a Change of Control
Offer, Excess Proceeds Offer, purchase or otherwise, and interest on the
overdue principal of and interest (including Additional Amounts, if any, and
Special Interest, if any) (to the extent permitted by law), on the Secured
Notes and performance of all other obligations of the Issuer and the Company to
the Holders of the Secured Notes or the Trustee under this Indenture, the
Secured Notes, the Subsidiary Guarantees, and the Security Agreements,
according to the terms hereunder or thereunder, shall be secured as provided in
the Security Agreements, (i) by a pledge to the Collateral Agent in favor of
the Trustee for its benefit and the Holders of Secured Notes, all of the Issuer
Loans and the Issuer's interest in the Issuer Loan Agreements, together with a
collateral assignment of all Liens securing such Issuer Loans, including a
pledge in favor of the Issuer of the Company's interest in the Company Escrow
Account and the Company Escrowed Property; (ii) by a pledge to the Escrow Agent
in favor of the Trustee for its benefit and the Holder of Secured Notes, its
interest in the Issuer Escrow Account and the Escrowed Property and any other
cash of the Issuer that is required by the terms of this Indenture to be
deposited with the Trustee or the Escrow Agent; and the Company will grant a
Lien on each of its Mortgaged Rigs and/or the construction contracts and on
equipment purchased by the Company for, and its interest in, any incomplete
Mortgage Rig and all proceeds thereof, including all its policies and contracts
of insurance taken out from time to time in respect of its Mortgaged Rig,
pursuant to a Mortgage or other appropriate Security Agreement issued by the
Company in favor of the Issuer, which Issuer Loan Agreements, Mortgages and
Security
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Agreements contain covenants pursuant to which such the Company, among other
things, will be prohibited from selling, further mortgaging or transferring any
of its interest in such Mortgaged Rig (other than as permitted under this
Indenture), and upon completion of an uncompleted Mortgage Rig, the Company
will grant a Lien pursuant to a Mortgage on the Mortgaged Rig.
Each Holder, by its acceptance of a Secured Note, consents and
agrees to the terms of the Security Agreements (including, without limitation,
the provisions providing for foreclosure and release of Collateral) as the same
may be in effect or may be amended from time to time in accordance with the
terms thereof and hereof and authorizes and directs the Trustee to enter into
each of the Security Agreements and to perform its respective obligations and
exercise its respective rights thereunder in accordance therewith. The Issuer
and the Company will do or cause to be done all such acts and things as may be
necessary or proper, or as may be required by the provisions of the Security
Agreements to which it is a party, to assure and confirm to the collateral
agent and the Trustee the Liens in the Collateral contemplated hereby and by
the Security Agreements to which it is a party, as from time to time
constituted, so as to render the same available to the fullest extent permitted
by law for the security and benefit of this Indenture and of the Secured Notes
and each Issuer Loan secured thereby, as applicable, according to the intent
and purposes herein and therein expressed. The Issuer shall to the fullest
extent permitted by law take, upon request of the Trustee, any and all actions
reasonably required to cause the Security Agreements to which it is a party to
create and maintain, as security for the Obligations of the Issuer under this
Indenture and the Secured Notes, and the Security Agreements to which it is a
party, to be valid and enforceable, perfected (except as expressly provided
herein and therein), Liens in and on all the Collateral in favor of the
Trustee, escrow agent or a collateral agent for the benefit of the Trustee and
for the equal and ratable benefit of the Holders of the Secured Notes. The
Company shall to the fullest extent permitted by law, take upon request of the
Issuer and/or the Trustee, any and all actions reasonably required to cause the
Security Agreements to which it is a party for the Obligations of the Company
under each Issuer Loan and the Security Agreement related thereto, to be valid
and enforceable, perfected, except as expressly provided herein or therein,
Liens in favor of the Issuer , escrow agent or a collateral agent for the
benefit of the Issuer.
SECTION 11.2 Recording and Opinions.
(a) Each of the Issuer and the Company represents that it has
caused or will promptly cause to be executed and delivered, filed and recorded
and covenants that it will promptly cause to be executed and delivered and
filed and recorded, all instruments and documents, and represents that it has
done and will do or will cause to be done all such acts and other things, at
the Issuer's or the Company's expense, as applicable, as are necessary to
subject the applicable Collateral to valid Liens and to perfect those Liens,
all to the fullest extent permitted by law. Each of the Issuer and the Company
shall, as promptly as practicable, cause to be executed and delivered, filed
and recorded all instruments and do all acts and other things as may be
required by law to perfect, maintain and protect the Liens under the applicable
Security Agreements to which it is party (except as otherwise expressly
provided herein and therein), all to the fullest extent permitted by law.
(b) The Issuer and the Company shall furnish to the Trustee
promptly after the execution and delivery of this Indenture an Opinion of
Counsel either (i) stating that in the
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opinion of such counsel all action has been taken with respect to the
recording, registering and filing of this Indenture, financing statements or
other instruments or otherwise necessary to make effective the Liens intended
to be created by the Security Agreements and reciting the details of such
action, or (ii) stating that, in the opinion of such counsel, no such action is
necessary to make such Lien effective. Such opinion of counsel shall cover the
necessity for recordings, registrations and filings required in all relevant
jurisdictions.
(c) The Issuer and the Company shall furnish to the Trustee within
3 months after each anniversary of the Issue Date, an Opinion of Counsel, dated
as of such date, stating either that (i) in the opinion of such counsel, all
action has been taken with respect to the recording, registering, filing,
re-recording, re-registering and refiling of all supplemental indentures,
financing statements, continuation statements or other instruments of further
assurance or otherwise as is necessary to maintain the effectiveness of the
Liens intended to be created by the Security Agreements and reciting the
details of such action or (ii) in the opinion of such counsel, no such action
is necessary to maintain the effectiveness of such Liens. Such opinion of
counsel shall cover the necessity of recordings, registrations, filing,
re-recordings, re-registrations and refilings in all relevant jurisdictions.
(d) The Issuer and the Company shall otherwise comply with the
provisions of Section 314(b) and, as applicable Sections 314(c), (d) and (e) of
the Trust Indenture Act.
SECTION 11.3 Further Assurances and Security.
The Issuer and the Company will execute, acknowledge and
deliver to the Trustee, at the Issuer's and/or such Guarantor's expense, at any
time and from time to time such further assignments, transfers, assurances or
other instruments as may be reasonably required to effectuate the terms of this
Indenture and the Security Agreements, and will at any time and from time to
time do or cause to be done all such acts and things as may be necessary or
proper, or as may be reasonably required by the Trustee, to assure and confirm
to the Trustee the Liens in the Collateral contemplated hereby and by the
Security Agreements, all to the fullest extent permitted by law. The Trustee
shall have no duty to determine whether any filing or recording is necessary
hereunder or under any Collateral Document.
SECTION 11.4 Possession, Use and Release of Collateral.
(a) All of the proceeds of the Secured Notes shall be deposited in
the Issuer Escrow Account and shall be subject to a first priority Lien. All
funds deposited in the Issuer Escrow Account representing proceeds of the
Secured Notes constitute Collateral and will, at the direction of the Issuer
except during the continuance of a Default or an Event of Default and at the
direction of the Trustee during the continuance of a Default or an Event of
Default, be invested in Temporary Cash Equivalents (such cash and Temporary
Cash Equivalents, together with interest, dividends and distributions thereof,
the "Issuer Escrowed Property"), in the manner provided for in the Issuer
Escrow Agreement. No funds shall be released from the Issuer Escrow Account
except as provided herein and in the Issuer Escrow Account Agreement. The
Issuer Escrow Account and the Issuer Escrowed Property shall be pledged to, and
be under the sole dominion and control of the Trustee acting for its benefit
and the benefit of the Holders of Secured Notes.
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Pursuant to the Issuer Escrow Agreement and this Indenture,
the Issuer is required to, and the Issuer shall enter up to ten separate loan
agreements with the Company (each an "Issuer Loan Agreement"). Each Issuer Loan
Agreement will be secured by Liens pursuant to a mortgage (each a "Mortgage")
on a separate drilling rig or drillship (each a "Mortgaged Rig") or, if such
Mortgaged Rig is under construction but not yet flagged on the Issue Date,
Liens on the construction contract and equipment purchased by the Company for
such Mortgaged Rig. The purpose of each loan made under an Issuer Loan
Agreement (an "Issuer Loan") will be only as follows:
(i) Financing all or a portion of the cost of acquiring,
constructing, altering, improving or repairing the Mortgaged
Rig or improvements used or to be used in connection with such
Mortgaged Rig; or
(ii) Financing all or any part of the purchase price of
the Mortgaged Rig or improvements used or to be used in
connection with such Mortgaged Rig, which Issuer Loan is
incurred prior to or within one year after the later of the
completion of construction, alteration, improvement or repair
or the commencement of commercial operations thereof.
(b) To the extent that the Mortgaged Rig is under construction and
not yet flagged, the Company will secure the Issuer Loans with Liens on the
construction contract and the equipment purchased by the Company for such
Mortgaged Rig; provided that Liens on equipment purchased by the Company for a
Mortgaged Rig that has not yet been mortgaged do not have to be perfected until
required by the Trustee, but only after the later to occur of one year after
the Issue Date or the completion date for such Mortgaged Rig as scheduled on
the Issue Date.
Each Issuer Loan will be made in two tranches. One tranche of each Issuer
Loan (the "7-year Tranche") will bear interest at the rate equal to the
interest rate for the 7-year Secured Notes plus 2 basis points per annum and
the other tranche (the "10-year Tranche") will bear interest at the rate equal
to the interest rate for the 10-year Secured Notes plus 2 basis points per
annum. Each Issuer Loan Agreement may also provide for a commitment fee on the
undrawn portion of the Issuer Loan. The Company will be required to repay the
Issuer Loans in whole or in part if the Issuer redeems or is required to redeem
or purchase Secured Notes. In connection with any release of Issuer Escrowed
Property to fund an Issuer Loan, such release will be conditioned on the
substantially concurrent recording of a Mortgage or other security document
against the Mortgaged Rig or the construction contracts and equipment purchased
by the Company for the uncompleted Mortgaged Rig, as applicable, and the
satisfaction of certain other conditions set forth in this Indenture and Issuer
Escrow Agreement, including delivery of appropriate legal opinions and
certificates required by the Trust Indenture Act. The Issuer will not be
entitled to withdraw the Issuer Escrowed Property (other than certain minimal
amounts for the Issuer) for any purposes other than the making of Issuer Loans
or the repayment of principal (whether at maturity, upon redemption, by
declaration of acceleration or otherwise), premium, if any, and interest on the
Secured Notes. One hundred million dollars ($100,000,000) of the proceeds of
the Issuer Loan for the Mortgaged Rig Deepwater Millennium will be deposited by
the Company in the Company Escrow Account established by the Company pursuant
to the Company Escrow Agreement. The Company will not be able to withdraw such
funds (the "Company Escrowed
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Property") until the Deepwater Millennium Mortgaged Rig is completed and a
Mortgage has been placed thereon and become perfected.
(c) As security for an Issuer Loan, the Company will grant a Lien
on a Mortgaged Rig, or the construction contract and equipment purchased by the
Company (with respect to the Deepwater Millennium and Deepwater IV) and in the
case of the Deepwater Millennium the Company Escrow Account and the Company
Escrowed Property, and all proceeds of the foregoing, including all its
policies and contracts of insurance taken out from time to time in respect of
its Mortgaged Rig, pursuant to a Mortgage or other appropriate Security
Agreement issued by the Company in favor of the Issuer. These Mortgages and
Security Agreements will contain covenants pursuant to which the Company, among
other things, will be prohibited from selling, further mortgaging or
transferring any of its interest in such Mortgaged Rig (other than as permitted
under the Indenture). Upon completion and flagging of the Deepwater
Millennium22 and the Deepwater IV, the Company will be required to grant a
Lien pursuant to a Mortgage on the respective Mortgaged Rig. Contemporaneous
with the granting of the Mortgage on the Deepwater IV, the Issuer Loan secured
by the Deepwater IV will be increased in exchange for a reduction in the
outstanding amounts of the Issuer Loans secured by certain other Mortgaged Rigs
pursuant to the terms of the applicable Issuer Loan Agreement therefor.
SECTION 11.5 Certificates of the Issuer.
The Issuer and the Company will furnish to the Trustee prior
to each proposed release of Collateral pursuant to the Security Agreements all
documents required by Section 314(d) of the Trust Indenture Act. The Trustee
may, to the extent permitted by Sections 7.1 and 7.2 hereof, accept as
conclusive evidence of compliance with the foregoing provisions the appropriate
statements contained in such instruments. Any certificate or opinion required
by Section 314(d) of the Trust Indenture Act may be made by an Officer of the
Issuer or the Company, as the case may be, except in cases where Section 314(d)
of the Trust Indenture Act requires that such certificate or opinion be made by
an independent engineer, appraiser or other expert within the meaning of
Section 314(d) of the Trust Indenture Act.
SECTION 11.6 Authorization of Actions to be Taken by the Trustee
Under the Security Agreements.
The Trustee may, in its sole discretion and without the
consent of the Holders, on behalf of the Holders, take all actions it deems
necessary or appropriate in order to (a) enforce any of the terms of the
Security Agreements and (b) collect and receive any and all amounts payable in
respect of the obligations of the Issuer and the Company hereunder. The
Trustee shall have the power to institute and to maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the
collateral by any acts that may be unlawful or in violation of the Security
Agreements, or this Indenture, and such suits and proceedings as the Trustee
may deem expedient to preserve or protect its interests and the interests of
the Holders in the Collateral (including power to institute and maintain suits
or proceedings to restrain the enforcement of or compliance with any
legislative or other government enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance
with, such enactment, rule or order would impair the security interest
hereunder or be prejudicial to the interests of the Holders or of the Trustee).
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SECTION 11.7 Authorization of Receipt of Funds by the Trustee
Under the Security Agreements.
The Trustee is authorized to receive any funds for the benefit
of the Holders distributed under the Security Agreements, and to make further
distributions of such funds to the Holders according to the provisions of this
Indenture and the Security Agreements.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by, or with another provision included in
this Indenture by operation of Sections 310 to 318, inclusive, of the Trust
Indenture Act, such imposed duties or incorporated provision shall control. If
any provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that can be so modified or excluded, the latter provision shall
be deemed to apply to this Indenture as so modified or excluded, as the case
may be.
SECTION 12.2 Notices.
Any notice or communication by the Issuer, the Company, any
Subsidiary Guarantor or the Trustee to the others is duly given if in writing
and delivered in person or mailed by first class mail (registered or certified,
return receipt requested), telecopier or overnight air courier guaranteeing
next day delivery, to the others' address:
If to the Issuer, or the Company or any Subsidiary Guarantor:
c/o R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079-2982
Attention: Leighton Moss
Telephone No.: (281) 496-5000
Telecopier No.: (281) 496-0285
If to the Trustee:
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036
Attention: Corporate Trust Division
Telephone No.: (212) 852-1676
Telecopier No.: (212) 852-1626
The Issuer, the Company, any Subsidiary Guarantor or the
Trustee, by notice to the others may designate additional or different
addresses for subsequent notices or communications.
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All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; when receipt acknowledged, if telecopied; and
the next Business Day after timely delivery to the courier, if sent by
overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the Securities Register kept by the Registrar and shall be given if so sent
within the time prescribed. Any notice or communication shall also be so mailed
to any Person described in TIA Section 313(c), to the extent required by the
Trust Indenture Act. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other
Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it; a notice or communication, however, shall not be
effective unless, in the case of the Issuer, the Company or the Trustee,
actually received.
If the Issuer mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give notice by mail
to Holders, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose hereunder.
SECTION 12.3 Communication By Holders of Secured Notes With Other
Holders of Secured Notes.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Secured
Notes. The Issuer, the Company, the Trustee, the Registrar and anyone else
shall have the protection of TIA Section 312(c).
SECTION 12.4 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuer to the Trustee
to take any action under this Indenture, the Issuer, upon request, shall
furnish to the Trustee, to the extent required by this Indenture or the Trust
Indenture Act:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.5 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.5 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
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In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more such Persons as to other matters, and any such Person may certify or
give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Officer of the Issuer, the
Company or any Subsidiary Guarantor may be based, insofar as it relates to
legal matters, upon a certificate or opinion of, or representations by,
counsel, unless such Officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
the matters upon which his certificate or opinion is based are erroneous. Any
such certificate or Opinion of Counsel may be based, and may state that it is
so based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an Officer or Officers of the Issuer, the
Company or such Subsidiary Guarantor stating that the information with respect
to such factual matters is in the possession of the Issuer, the Company or such
Subsidiary Guarantor, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate of opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 12.5 Statements Required in a Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Persons making such certificate or
opinion have read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such Persons, they have
made such examination or investigation as is necessary to enable them to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Persons, such condition or covenant has been satisfied.
SECTION 12.6 Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by a specified percentage of Holders may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed
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by such specified percentage of Holders in person or by agents duly appointed
in writing; and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are received by the
Trustee and, where it is hereby expressly required, by the Issuer and the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Indenture and (subject to Sections 7.1 and 7.2) conclusive
in favor of the Trustee, the Issuer and the Company, if made in the manner
provided in this Section. Any electronic or other transmission pursuant to the
Applicable Procedures will be considered an instrument executed by the Holder
of the Global Notes held by the Depository for purposes of this Section 12.6.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient, including the execution
of such instrument or writing without more.
(c) The ownership, principal amount and serial numbers of Secured
Notes held by any Person, and the date of holding the same, shall be proved by
the Securities Register.
(d) If the Issuer shall solicit from the Holders of Secured Notes
any request, demand, authorization, direction, notice, consent, waiver or other
Act, the Issuer may, at its option, by or pursuant to Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other
Act, but the Issuer shall have no obligation to do so. Such record date shall
be the record date specified in or pursuant to such Board Resolution, which
shall be a date not earlier than the date 30 days prior to the first
solicitation is completed. If such a record date is fixed, such request,
demand, authorization, direction, notice, consent, waiver or other Act may be
given before or after such record date, but only the Holders of record at the
close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
outstanding Secured Notes have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the outstanding Secured Notes shall be computed as of
such record date; provided that no such authorization, agreement or consent by
the Holders on such record date shall be deemed effective unless it shall
become pursuant to the provisions of this Indenture not later than eleven
months after the record date.
(e) Except to the extent otherwise expressly provided in this
Indenture, any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Secured Note shall bind every future
Holder of the same Secured Note and the Holder of every Secured Note issued
upon the registration of transfer thereof or in exchange therefor or in lieu
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thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Secured Note.
(f) Without limiting the foregoing, a Holder entitled hereunder to
give or take any action with regard to any particular Secured Note may do so
with regard to all or any part of the principal amount of such Secured Note or
by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any different part of such principal amount.
SECTION 12.7 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions; provided that no such rule shall
conflict with the terms of this Indenture or the Trust Indenture Act.
SECTION 12.8 No Personal Liability of Directors, Officers,
Employees and Stockholders.
No director, officer, employee, incorporator or stockholder of
the Issuer, the Company or any Subsidiary Guarantor, as such, shall have any
liability for any obligations of the Issuer or the Company under the Secured
Notes, this Indenture, the Guarantee, the Subsidiary Guarantees or for any
claim based on, in respect of, or by reason of, such Obligations or their
creation. Each Holder by accepting a Secured Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Secured Notes.
SECTION 12.9 Governing Law.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE AND THE SECURED NOTES, WITHOUT REGARD TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.
SECTION 12.10 Agent for Service; Submission to Jurisdiction; Waiver
of Immunities.
By the execution and delivery of this Indenture or any
amendment or supplement hereto, each of the Issuer and the Company (i)
acknowledges that it has, by separate written instrument, designated and
appointed CT Corporation System (the "Process Agent") currently located at 1633
Broadway, New York, New York 10019, as its authorized agent upon which process
may be served in any suit, action or proceeding with respect to, arising out
of, or relating to, this Indenture, the Guarantees, or the Secured Notes or
brought under U.S. federal or state securities laws, may be instituted in any
U.S. federal or state court located in The City of New York, New York, and
acknowledges that the Process Agent has accepted such designation, (ii)
irrevocably submits to the jurisdiction of any such court in any such suit,
action or proceeding and irrevocably waives, to the fullest extent that it may
effectively and lawfully do so, any obligation to the laying of venue of any
such suit, action or proceeding and the defense of an inconvenient forum to the
maintenance of any such suit action or proceeding in such court, and (iii)
agrees that service of process upon the Process Agent shall be deemed in every
respect effective service of process upon the Issuer and the Company in any
such suit, action or
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proceeding. The Issuer and the Company further agree to take any and all
action, including the execution and filing of any and all such documents and
instruments as may be necessary to continue such designation and appointment of
the Process Agent in full force and effect so long as this Indenture shall be
in full force and effect; provided that the Issuer and the Company may and
shall (to the extent the Process Agent ceases to be able to be served on the
basis contemplated herein), by written notice to the Trustee, designate such
additional or alternative agents for service of process under this Section
12.10 that (i) maintains an office located in the Borough of Manhattan, The
City of New York in the State of New York, (ii) are either (a) counsel for the
Issuer or (b) a corporate service Issuer which acts as agent for service of
process for other persons in the ordinary course of its business and for other
persons in the ordinary course of its business and (iii) agrees to act as agent
for service of process in accordance with this Section 12.10. Such notice shall
identify the name of such agent for process and the address of such agent for
process in the Borough of Manhattan, The City of New York, State of New York.
Upon the request of any Holder of a Secured Note, the Trustee shall deliver
such information to such Holder. Notwithstanding the foregoing, there shall, at
all times, be at least one agent for service of process for the Issuer and the
Company appointed and acting in accordance with this Section 12.10.
To the extent that the Issuer or the Company has or hereafter
may acquire any immunity from jurisdiction of any court or from any legal
process (whether through service of notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, each of the Issuer and the Company hereby irrevocably waives
such immunity in respect of its Obligations under this Indenture, the Guarantee
and the Secured Notes, to the extent permitted by law.
SECTION 12.11 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Issuer, the Company or the Issuer's
Subsidiaries or of any other Person. Any such indenture, loan or debt agreement
may not be used to interpret this Indenture.
SECTION 12.12 Successors.
All agreements of the Issuer and the Company in this
Indenture, the Secured Notes and the Guarantor shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 12.13 Severability.
In case any provision in this Indenture or in the Secured
Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
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SECTION 12.14 Counterpart Originals.
The parties may sign any number of copies of this Indenture
and by the parties thereto in separate counterparts. Each of which when signed
shall be deemed to be an original, but all of them together represent the same
agreement.
SECTION 12.15 Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
ARTICLE XIII
GUARANTEES
SECTION 13.1 Guarantor.
(a) For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, together with any
Restricted Subsidiary which in accordance with Section 4.19 or Section 13.7
hereof any Subsidiary Guarantor is required in the future to guarantee the
Obligations of the Issuer under the Secured Notes and this Indenture, and the
Company under the Guarantee and this Indenture, upon execution of a
supplemental indenture, hereby jointly and severally and irrevocably and
unconditionally guarantees to the Trustee and to each Holder irrespective of
the validity or enforceability of this Indenture or the Secured Notes or the
Obligations of the Issuer and the Guarantor under this Indenture, that: (i) the
principal of, premium, if any, any interest, and Special Interest, if any, on
the Secured Notes (including, without limitation, any interest that accrues
after the filing of a proceeding of the type described in Sections 6.1(g) and
(h)) and any fees, expenses and other amounts owing under this Indenture will
be duly and punctually paid in full when due, whether at Maturity, by
acceleration, mandatory redemption, call for redemption, upon a Change of
Control Offer, Excess Proceeds Offer, purchase or otherwise, and interest on
the overdue principal and (to the extent permitted by law) interest, if any, on
the Secured Notes and any other amounts due in respect of the Secured Notes,
and all other Obligations of the Issuer and the Company under the Guarantee,
including the Issuer's obligations to the Holders of the Secured Notes under
this Indenture, the Secured Notes and the Subsidiary Guarantees, whether now or
hereafter existing, will be promptly paid in full or performed, all strictly in
accordance with the terms hereof and of the Secured Notes; and (ii) in case of
any extension of time of payment or renewal of any Secured Notes or any of such
other Obligations, the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at Maturity,
by acceleration, mandatory redemption, call for redemption, upon Change of
Control Offer, Excess Proceeds Offer, purchase or otherwise. If payment is not
made when due of any amount so guaranteed for whatever reason, the Company and
each Subsidiary Guarantor (collectively referred to as the "Guarantors" and
individually as a "Guarantor") shall be jointly and severally obligated to pay
the same individually whether or not such failure to pay has become an Event of
Default which could cause acceleration pursuant to Section 6.2. The Company and
each Guarantor agrees that this is a guarantee of payment and not a guarantee
of collection. An Event
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of Default under this Indenture or the Secured Notes shall constitute an Event
of Default under the Guarantee and each Subsidiary Guarantee, and shall entitle
the Holders to accelerate the Obligations of each Guarantor hereunder in the
same manner and to the same extent as the Obligations of the Issuer. The
Guarantee and each Subsidiary Guarantee is intended to be superior to or pari
passu in right of payment with all Indebtedness of the respective Guarantor and
each Guarantor's Obligations are independent of any Obligation of the Issuer or
any other Guarantor.
(b) Each Guarantor waives presentation to, demand of, payment from
and protest to the Issuer of any of the Obligations under this Indenture or the
Secured Notes and also waives notice of protest for nonpayment. Each Guarantor
waives notice of any default under the Secured Notes or the Obligations. The
Obligations of each Guarantor hereunder shall not be affected by (i) the
failure of any Holder or the Trustee to assert any claim or demand or to
enforce any right or remedy against the Issuer or any other Person under this
Indenture, the Secured Notes or any other agreement or otherwise; (ii) any
extension or renewal of any thereof; (iii) any rescission, waiver, amendment or
modification of any of the terms or provisions of this Indenture, the Secured
Notes or any other agreement; (iv) the release of any security held by any
Holder, the Trustee or the Issuer for the Obligations or any of them; (v) the
failure of any Holder, the Trustee, the Issuer, any collateral agent or any
escrow agent to exercise any right or remedy against any other guarantor of the
Obligations; or (f) any change in the ownership of any such Guarantor.
(c) The Obligations of each Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations of the Issuer or otherwise. Without
limiting the generality of the foregoing, the Obligations of each Guarantor
herein shall not be discharged or impaired or otherwise affected by the failure
of any Holder or the Trustee to assert any claim or demand or to enforce any
remedy under this Indenture, the Secured Notes or any other agreement, by any
waiver or modification of any thereof, by any default, failure or delay,
willful or otherwise, in the performance of the Obligations of the Issuer, or
by any other act or thing or omission or delay to do any other act or thing
which may or might in any manner or to any extent vary the risk of such
Guarantor or would otherwise operate as a discharge of such Guarantor as a
matter of law or equity.
(d) Each Guarantor further agrees that the Guarantee or Subsidiary
Guarantee, as the case may be, to which it is an Obligor shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of, premium, if any, on or interest (or Special
Interest, if any, and Additional Amounts, if any) on any Obligation of the
Issuer is rescinded or must otherwise be restored by any Holder or the Trustee
upon the bankruptcy or reorganization of the Issuer or otherwise.
(e) In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of the Issuer to pay the principal
of, premium, if any, on or interest (or Special Interest, if any, and
Additional Amounts, if any) on any Obligation when and as the same shall become
due,
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whether at maturity, by acceleration, by redemption or otherwise, or to perform
or comply with any other Obligation, each Guarantor hereby promises to and
will, upon receipt of written demand by the Trustee, forthwith pay, or cause to
be paid, in cash, to the Holders or the Trustee an amount equal to the sum of
(i) the unpaid amount of such Obligations, (ii) accrued and unpaid interest on
such Obligations (but only to the extent not prohibited by law) and (iii) all
other monetary Obligations of the Issuer to the Holders and the Trustee.
(f) Until such time as the Secured Notes and the other Obligations
of the Issuer guaranteed hereby have been satisfied in full, each Guarantor
hereby irrevocably waives any claim or other rights that it may now or
hereafter acquire against the Issuer or any other Guarantor that arise from the
existence, payment, performance or enforcement of such Guarantor's Obligations
under the Guarantee or its Subsidiary Guarantee, as applicable, including,
without limitation, any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in any claim or
remedy of the Holders or the Trustee against the Issuer or any other Guarantor
or any security, whether or not such claim, remedy or right arises in equity or
under contract, statute or common law, including, without limitation, the right
to take or receive from the Issuer or any other Guarantor, directly or
indirectly, in cash or other Property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, provided that to
the extent that the Company makes a payment on the Guarantee, it will be deemed
to have made a payment on the Issuer Loans then outstanding, and will otherwise
be subrogated to the Issuer's rights on the Issuer Loans, to the extent that
such Issuer Loans remain unpaid. If any amount shall be paid to such Guarantor
in violation of the preceding sentence at any time prior to the later of the
payments in full of the Secured Notes and all other amounts payable under this
Indenture, the Guarantee and each Subsidiary Guarantee upon the Maturity of the
Secured Notes, such amount shall be held in trust for the benefit of the
Holders and the Trustee and shall forthwith be paid to the Trustee to be
credited and applied to the Secured Notes and all other amounts payable under
the Guarantee and each Subsidiary Guarantee, whether matured or unmatured, in
accordance with the terms of this Indenture, or to be held as security for any
Obligations or other amounts payable under any Guarantee thereafter arising.
(g) Each Guarantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by this
Indenture and that the waiver set forth in this Section 13.1 is knowingly made
in contemplation of such benefits. Each Guarantor further agrees that, as
between it, on the one hand, and the Holders and the Trustee, on the other
hand, (x) subject to this Article XIII, the maturity of the Obligations
guaranteed hereby may be accelerated as provided in Article VI for the purposes
of the Guarantee and each Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby, and (y) in the event of any acceleration of such
Obligations guaranteed hereby as provided in Article VI, such Obligations
(whether or not due and payable) shall further then become due and payable by
the Guarantor for the purposes of each Guarantee.
(h) A Subsidiary Guarantor that makes a distribution or payment
under a Subsidiary Guarantee shall be entitled to contribution from each other
Subsidiary Guarantor in a pro rata amount based on the Adjusted Net Assets of
each such other Subsidiary Guarantor for all payments, damages and expenses
incurred by that Guarantor in discharging the Issuer's
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<PAGE> 123
obligations with respect to the Secured Notes and this Indenture or any other
Subsidiary Guarantor with respect to its Subsidiary Guarantee, so long as the
exercise of such right does not impair the rights of the Holders of the Secured
Notes under the Subsidiary Guarantees.
(i) Each Guarantor also agrees to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Section.
SECTION 13.2 Limitation on Liability.
The Obligations of each Guarantor will be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from
or payments made by or on behalf of any other Guarantor in respect of the
Obligations of such other Guarantor under the Guarantee or its Subsidiary
Guarantee, as applicable, or pursuant to its contribution obligations under
this Indenture, result in the Obligations of such Guarantor under the Guarantee
or its Subsidiary Guarantee, as applicable, not constituting a fraudulent
conveyance or fraudulent transfer under federal or state law or otherwise not
being void, voidable or unenforceable under any bankruptcy, reorganization,
receivership, insolvency, liquidation or other similar legislation or legal
principles under any applicable foreign law. Each Guarantor that makes a
payment or distribution under the Guarantee or its Subsidiary Guarantee, as
applicable, shall be entitled to a contribution from each other Guarantor in a
pro rata amount based on the Adjusted Net Assets of each Guarantor.
SECTION 13.3 Execution and Delivery of Guarantees.
To further evidence the Guarantee set forth in Section 13.1
hereof, the Company hereby agrees that notation of the Guarantee shall be
endorsed on each Secured Note authenticated and delivered by the Trustee and
executed by either manual or facsimile signature of an authorized officer of
such Guarantor. The Company hereby agrees that the Company's Guarantee set
forth in Section 13.1 hereof shall remain in full force and effect
notwithstanding any failure to endorse on each Secured Note a notation of the
Guarantee. If an Officer of the Company whose signature is on this Indenture or
a Secured Note no longer holds that office at the time the Trustee
authenticates such Secured Note or at any time thereafter, the Company's
Guarantee of such Secured Note shall be valid nevertheless. The delivery of any
Secured Note by the Trustee, after the authentication thereof hereunder, shall
constitute due delivery of the Guarantee set forth in this Indenture on behalf
of the Company.
SECTION 13.4 No Waiver.
Neither a failure nor a delay on the part of either the
Trustee or the Holders in exercising any right, power or privilege under this
Article XIII shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise of any right, power or
privilege. The rights, remedies and benefits of the Trustee and the Holders
herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article XIII at
law, in equity, by statute or otherwise.
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SECTION 13.5 Modification.
No modification, amendment or waiver of any provision of this
Article XIII, nor the consent to any departure by any Guarantor therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Trustee, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand
on any Guarantor in any case shall entitle such Guarantor to any other or
further notice or demand in the same, similar or other circumstances.
SECTION 13.6 Release of Subsidiary Guarantor.
(a) Upon the sale or other disposition (by merger or otherwise) of
a Subsidiary Guarantor (or all or substantially all of its Property and assets)
to a Person other than the Issuer, the Company or a Restricted Subsidiary and
pursuant to a transaction that is otherwise in compliance with this Indenture
(including as described in clause Section 5.1 hereof and as described in
Section 4.15 hereof), such Guarantor (unless it otherwise remains a Restricted
Subsidiary or owns a Mortgaged Rig) shall be deemed released from its
Subsidiary Guarantee and the related Obligations set forth in this Indenture;
provided that any such termination shall occur only to the extent that all
Obligations of such Subsidiary Guarantor under all of its guarantees of and
under all of its pledges of assets or other security interests which secure,
other Indebtedness of the Company or any other Restricted Subsidiary shall also
terminate or be released upon such sale or other disposition. Each Subsidiary
Guarantor that is designated as an Unrestricted Subsidiary in accordance with
this Indenture shall be released from its Subsidiary Guarantee and the related
Obligations set forth in this Indenture so long as it remains an Unrestricted
Subsidiary.
(b) Any Subsidiary Guarantee by a Restricted Subsidiary shall be
automatically and unconditionally released and discharged, as evidenced by a
supplemental indenture executed by the Issuer, the Company, and the Subsidiary
Guarantors, if any, and the Trustee, upon the release or discharge of the
guarantee which resulted in the creation of such Restricted Subsidiary's
Subsidiary Guarantee and all other guarantees of the Obligations of any Obligor
on the Secured Notes, except a discharge or release by, or as a result of,
payment under such guarantee.
SECTION 13.7 Future Guarantor; Execution of Supplemental
Indentures for Future Guarantor.
(a) The Company may not permit any Restricted Subsidiary of the
Company, directly or indirectly, to guarantee any Indebtedness of the Company
or any other Obligor ("Guaranteed Indebtedness") or to acquire a Mortgaged Rig
unless (i) such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to this Indenture providing for a Subsidiary Guarantee
of payment of the Secured Notes by such Restricted Subsidiary and (ii) such
Subsidiary Guarantor waives and will not in any manner whatsoever claim or take
the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Issuer or any other Subsidiary
Guarantor as a result of any payment by such Subsidiary Guarantor under its
Subsidiary Guarantee. If the Guaranteed Indebtedness is pari passu with the
Guarantee, then the guarantee of such Guaranteed Indebtedness shall be pari
passu with or
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<PAGE> 125
subordinated to the Subsidiary Guarantee; and if the Guaranteed Indebtedness is
subordinated to the Guarantee, then the guarantee of such Guaranteed
Indebtedness shall be subordinated to the Subsidiary Guarantee at least to the
extent that all Guaranteed Indebtedness is subordinated to the Secured Notes.
(b) Any Restricted Subsidiary Guarantor that guarantees any
Indebtedness of the Issuer or another Obligor is required pursuant to Section
13.7(a) or 4.19 hereof to become a Subsidiary Guarantor and the Issuer shall
cause each such Restricted Subsidiary to promptly execute and deliver to the
Trustee a supplemental indenture pursuant to which such Restricted Subsidiary
shall become a Subsidiary Guarantor under this Article XIII and shall guarantee
the Obligations of the Issuer under the Secured Notes and this Indenture.
Concurrently with the execution and delivery of such supplemental indenture,
the Issuer shall deliver to the Trustee an Opinion of Counsel to the effect
that such supplemental indenture has been duly authorized, executed and
delivered by such Subsidiary and that, subject to the application of
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or
transfer and other similar laws relating to creditors' rights generally and to
the principles of equity, whether considered in a proceeding at law or in
equity, the Subsidiary Guarantee of such Subsidiary Guarantor is a legal, valid
and binding obligation of such Subsidiary Guarantor, enforceable against such
Subsidiary Guarantor in accordance with its terms, and as to any such other
matters as the Trustee may reasonably request.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
RBF FINANCE CO.
By: /s/ ROBERT FULTON
---------------------------------
Name: Robert Fulton
-------------------------------
Title: VP
------------------------------
UNITED STATES TRUST COMPANY OF NEW
YORK, as Trustee
By: /s/ PETER C. GERRER
---------------------------------
Name: Peter C. Gerrer
-------------------------------
Title Vice President
------------------------------
Each of the following entities as Guarantor:
R&B FALCON CORPORATION
By: /s/ ROBERT FULTON
-------------------------------
Name: Robert Fulton
----------------------------
Title: EVP
-------------------------
<PAGE> 127
Exhibit A
(Face of Note)
[THIS GLOBAL NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
REFERRED TO ON THE REVERSE THEREOF.
UNLESS THIS SECURED NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK,
TO RBF FINANCE CO. (THE "ISSUER") OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY SECURED NOTE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT
IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.6 OF
THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS GLOBAL NOTE IS EXCHANGEABLE FOR A SECURED NOTE IN DEFINITIVE, FULLY
REGISTERED FORM, WITHOUT INTEREST COUPONS, IF (A) DTC NOTIFIES THE ISSUER THAT
IT IS UNWILLING OR UNABLE TO CONTINUE AS DEPOSITORY FOR THIS GLOBAL NOTE OR IF
AT ANY TIME DTC CEASES TO BE A "CLEARING AGENCY" REGISTERED UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND A SUCCESSOR DEPOSITORY IS NOT
APPOINTED BY THE ISSUER WITHIN 90 DAYS OF SUCH NOTICE, (B) THE ISSUER EXECUTES
AND DELIVERS TO THE TRUSTEE A NOTICE THAT THIS GLOBAL NOTE SHALL BE SO
TRANSFERABLE, REGISTRABLE, AND EXCHANGEABLE, AND SUCH TRANSFER SHALL BE SO
REGISTRABLE, OR (C) AN EVENT OF DEFAULT (AS HEREINAFTER DEFINED) HAS OCCURRED
AND IS CONTINUING WITH RESPECT TO THE SECURED NOTES.](1)
[THIS SECURED NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. ACCORDINGLY, THIS SECURED NOTE MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS,
- -----------------------
(1) These paragraphs should be included if the Secured Notes are issued in
global form.
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<PAGE> 128
EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER
REGULATION D UNDER THE SECURITIES ACT (AN "IAI")),
(2) AGREES THAT IT WILL NOT RESELL, OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A)
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) TO AN IAI
THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE WITH A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF
THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT, OR (D) TO A PERSON INVOLVED IN THE
ORGANIZATION OR OPERATION OF THE COMPANY OR AN AFFILIATE (AS DEFINED IN RULE
405 UNDER THE SECURITIES ACT) OF THE COMPANY AND, IN EACH CASE, IN ACCORDANCE
WITH THE APPLICABLE SECURITIES LAW OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER
ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.](2)
[THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT (AN "IAI") OR (C) IT IS A PERSON INVOLVED
IN THE ORGANIZATION OR OPERATION OF THE COMPANY OR AN AFFILIATE (AS DEFINED IN
RULE 405 UNDER THE SECURITIES ACT) OF THE COMPANY.
- --------------------
(2) These paragraphs (the Private Placement Legend) should be replaced upon the
exchange of Initial Secured Notes for Exchange Secured Notes in the
Exchange Offer or upon the registration of Initial Secured Notes
pursuant to the Registration Rights Agreement by the paragraphs referred to
in Footnote 3.
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<PAGE> 129
(2) AGREES THAT IT WILL NOT RESELL, OR OTHERWISE TRANSFER THIS NOTE EXCEPT TO
(A) A QIB, (B) AN IAI, OR (C) A PERSON INVOLVED IN THE ORGANIZATION OR
OPERATION OF THE COMPANY OR AN AFFILIATE (AS DEFINED IN RULE 405 UNDER THE
SECURITIES ACT) OF THE COMPANY, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER
ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING. THE INDENTURE ALSO
CONTAINS A PROVISION REQUIRING FINCO AND THE COMPANY TO EXERCISE REASONABLE
CARE TO ENSURE THAT THE SECURED NOTES ARE RESOLD OR OTHERWISE TRANSFERRED ONLY
TO PURCHASERS MEETING THE REQUIREMENTS SPECIFIED IN CLAUSE (2) ABOVE.](3)
- --------------------
(3) This should be included on all Exchange Secured Notes or upon registration
of Initial Secured Notes pursuant to the Registration Rights Agreement.
3
<PAGE> 130
_____% Secured Notes due _____
RBF FINANCE CO.
No.
CUSIP No.
$ ____________
RBF FINANCE CO. promises to pay to ______________ or
registered assigns, the principal sum of __________ United States Dollars, [or
such greater or lesser amount as may from time to time be endorsed on Schedule A
hereto](4) on [ ], ____.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Reference is hereby made to the further provisions of this
Secured Note set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place.
Unless the certificate of authorization hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Secured Note shall not be entitled to any benefit of this Indenture or be
valid or obligatory for any purpose.
- --------------------
(4) This is included on Global Notes only.
4
<PAGE> 131
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed as of the date written below.
RBF FINANCE CO.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
By:
------------------------------
Dated: Name:
-------------------------- ----------------------------
Title:
---------------------------
Certificate of Authentication:
This is one of the Secured Notes
referred to in the within-mentioned
Indenture:
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
By:
-----------------------------------------------
Authorized Signatory
5
<PAGE> 132
(Reverse of Note)
______% Secured Note due ________
Capitalized terms used herein shall have the meanings assigned
to them in this Indenture referred to below unless otherwise indicated.
1. Interest. RBF Finance Co., a Delaware corporation
(such corporation, and its successors and assigns under this Indenture
hereinafter referred to, being called the "Issuer"), promises to pay interest
on the principal amount of this Secured Note at r annum until Maturity
and shall pay Additional Amounts (as defined), if any, and Special Interest, if
any, payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Issuer will pay interest, if any, and Additional
Amounts, if any, and Special Interest, if any, semi-annually in arrears on
March 15 and September 15 of each year (each, an "Interest Payment Date"), or
if any such day is not a Business Day, on the next succeeding Business Day.
Interest on the Secured Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the Issue Date;
provided that if there is no existing Default in the payment of interest, and
if this Secured Note is authenticated between a Record Date referred to on the
face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next September 15, 1999. The Issuer shall pay interest
(including post-petition interest in any proceeding under any applicable
Federal, State or foreign bankruptcy law) on overdue installments of interest
("Defaulted Interest"), Additional Amounts, if any, and Special Interest, if
any, (without regard to any applicable grace periods) from time to time on
demand at the same rate to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Issuer will pay interest on
the Secured Notes (except Defaulted Interest), Additional Amounts, if any, and
Special Interest, if any, to the Persons who are registered Holders of Secured
Notes at the close of business on March 1 or September 1 immediately preceding
the Interest Payment Date (each, a "Record Date"), even if such Secured Notes
are canceled after such Record Date and on or before such Interest Payment
Date, except as provided in Section 2.12 of the Indenture with respect to
Defaulted Interest. The Secured Notes will be payable as to principal, premium,
interest, Additional Amounts and Special Interest at the office or agency of
the Issuer maintained for such purpose within the City and State of New York,
or, at the option of the Issuer, payment of interest and Additional Amounts and
Special Interest may be made by check mailed to the Holders at their addresses
set forth in the register of Holders, provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest, premium, if any, and Additional Amounts, if any, and Special
Interest, if any, on, all Global Notes and all other Secured Notes the Holders
of which shall have provided wire transfer instructions to the Issuer and the
Paying Agent prior to the applicable Record Date for such payment. Such payment
shall be in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts.
3. Additional Amounts. Except to the extent required by
any applicable law, regulation or governmental policy, any and all payments of,
or in respect of, any Secured Note
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<PAGE> 133
shall be made free and clear of and without deduction for or on account of any
and all present or future taxes, levies, imposts, deduction, charges or
withholdings and all liabilities with respect thereto imposed by Panama, The
Bahamas or any other jurisdiction with which the Company or any Subsidiary
Guarantor has some connection (including any jurisdiction (other than the
United States of America) from or through which payments under the Issuer
Loans, the Secured Notes, the Guarantee or the Subsidiary Guarantees (if any)
are made) or any political subdivision of or any taxing authority in any such
jurisdiction ("Panamanian Taxes," "Bahamian Taxes," or "Other Taxes,"
respectively). If the Issuer, the Company or any Subsidiary Guarantor shall be
required by law to withhold or deduct any Panamanian Taxes, Bahamian Taxes, or
Other Taxes from or in respect of any sum payable under an Issuer Loan
Agreement, the Secured Notes, the Guarantee or a Subsidiary Guarantee, the sum
payable by the Issuer, the Company or such Subsidiary Guarantor, as the case
may be, thereunder shall be increased by the amount ("Additional Amounts")
necessary so that after making all required withholdings and deductions, the
Holder or beneficial owner of a Secured Note shall receive an amount equal to
the sum that it would have received had not such withholdings and deductions
been made; provided that any such sum shall not be paid in respect of any
Panamanian Taxes, Bahamian Taxes or Other Taxes to a Holder (an "Excluded
Holder") (i) resulting from the beneficial owner of such Secured Note carrying
on business or being deemed to carry on business in or through a permanent
establishment or fixed base in the relevant taxing jurisdiction or having any
other connection with the relevant taxing jurisdiction or any political
subdivision thereof or any taxing authority therein other than the mere holding
or owning of such Secured Note, being a beneficiary of the Guarantee or any
applicable Subsidiary Guarantee, the receipt of any income or payments in
respect of such Secured Note, such Issuer Loan, the Guarantee or any applicable
Subsidiary Guarantee or the enforcement of such Secured Note, such Issuer
Loans, the Guarantee or any applicable Subsidiary Guarantee, or (ii) that would
not have been imposed but for the presentation (where presentation is required)
of such Secured Note for payment more than 180 days after the date such payment
became due and payable or was duly provided for, whichever occurs later. The
Issuer, the Company or the Subsidiary Guarantors, as applicable, will also (i)
make such withholding or deduction and (ii) remit the full amount deducted or
withheld to the relevant authority in accordance with applicable law, and, in
any such case, the Issuer will furnish to each Holder on whose behalf an amount
was so remitted, within 30 calendar days after the date the payment of any
Panamanian Taxes, Bahamian Taxes or Other Taxes is due pursuant to applicable
law, certified copies of tax receipts evidencing such payment by the Issuer,
the Company or the Subsidiary Guarantors, as applicable. The Issuer will, upon
written request of each Holder (other than an Excluded Holder), reimburse each
such holder for the amount of (i) any Panamanian Taxes, Bahamian Taxes or Other
Taxes so levied or imposed and paid by such holder as a result of payments
under or with respect to any Secured Notes, and (ii) any Panamanian Taxes,
Bahamian Taxes, or Other Taxes so levied or imposed with respect to any
reimbursement under the foregoing clause (i) so that the net amount received by
such Holder (net of payments made under or with respect to such Secured Notes,
such Issuer Loans, the Guarantee or the applicable Subsidiary Guarantees) after
such reimbursement will not be less than the net amount the Holder would have
received if Panamanian Taxes, Bahamian Taxes or Other Taxes on such
reimbursement had not been imposed.
At least 30 calendar days prior to each date on which any
payment under or with respect to the Secured Notes is due and payable, if the
Issuer, the Company or the Subsidiary Guarantors, as applicable, will be
obligated to pay Additional Amounts with respect to such payment, the Issuer,
the Company or the Subsidiary
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<PAGE> 134
Guarantors, as applicable, will deliver to the Trustee an officer's certificate
stating the fact that such Additional Amounts will be payable and the amounts
so payable and will set forth such other information necessary to enable the
Trustee to pay such Additional Amounts to Holders on the payment date.
If any Holder or beneficial owner of any Secured Note receives
a refund of the Panamanian Taxes, Bahamian Taxes or Other Taxes after the
Issuer, the Company or any Subsidiary Guarantor, as applicable, has paid any
Additional Amounts, such Holder or beneficial owner shall reimburse the Issuer,
the Company or any Subsidiary Guarantor, as applicable, for any amount of such
refund.
In addition, the Issuer, the Company or the Subsidiary
Guarantors will pay any stamp, issue, registration, documentary or other
similar taxes and duties, including interest and penalties, in respect of the
creation, issue and offering of the Secured Notes payable in the United States,
Panama, The Bahamas or any political subdivision thereof or taxing authority of
or in the foregoing. The Issuer, the Company and the Subsidiary Guarantors, as
applicable, will also pay and indemnify the Trustee and the Holders of the
Secured Notes from and against all court fees and taxes or other taxes and
duties, including interest and penalties, paid by any of them in any
jurisdiction in connection with any action permitted to be taken by the Holders
or the Trustee to create Liens on the Collateral or to enforce the Obligations
of the Company or the Subsidiary Guarantors under the Secured Notes, the
Indenture, the Guarantee, the Subsidiary Guarantees, the Issuer Loans or the
Security Agreements.
Whenever there is mentioned, in any context, the payment of
principal, premium or interest in respect of any Secured Note or the net
proceeds received on the sale or exchange of any Secured Note, such mention
shall be deemed to include the payment of Additional Amounts of Special
Interest provided for in the Indenture to the extent that, in such context,
Additional Amounts are, were or would be payable in respect thereof pursuant to
the Indenture.
4. Paying Agent and Registrar. Initially, the Trustee
under this Indenture will act as Paying Agent and Registrar. The Issuer may
change any Paying Agent or Registrar without notice to any Holder. In certain
situations, the Issuer or any of its Subsidiaries may act in any such capacity.
5. Indenture. The Issuer issued the Secured Notes under
an Indenture dated as of March 26, 1999 ("Indenture") between the Issuer, R&B
Falcon Corporation (the "Company") acting as guarantor and United States Trust
Issuer of New York, as trustee (the "Trustee," which term includes any
successor trustee under this Indenture). The terms of the Secured Notes
include those stated in this Indenture and those made part of this Indenture by
reference to the U.S. Trust Indenture Act of 1939, as amended (15 U.S. Code
Sections 77aaa-77bbbb) as in effect on the date of this Indenture. The
Secured Notes are subject to all such terms, and Holders are referred to this
Indenture and such Act for a statement of such terms. The Secured Notes are
secured obligations of the Issuer issuable in two series, one consisting of 11%
Senior Secured Notes dated 2006 (the "7-Year Secured Notes") limited to
$400,000,000 aggregate principal amount (subject to Section 2.7 of the
Indenture), and the other consisting of 11 3/8% Senior Secured Notes due 2009
(the "10-Year Secured Notes") limited to $400,000,000 in
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aggregate principal amount (subject to Section 2.7 of the Indenture). This
Secured Note is one of the Secured Notes referred to in this Indenture.
6. Optional Redemptions.
(a) The 10-year Secured Notes. Under the terms of the
Indenture, on or after March 15, 2004, the 10-Year Secured Notes will be
redeemable, at the Lender's option, in whole or in part, at any time or from
time to time, upon not less than 30 nor more than 60 days' prior notice mailed
by first-class mail to the Holders of the 10-Year Secured Notes, at the
following Redemption Prices (expressed in percentages of principal amount),
plus accrued and unpaid interest (including Special Interest, if any, and
Additional Amounts, if any) to the Redemption Date, if redeemed during the
12-month period commencing on March 15 of the years set forth below.
<TABLE>
<CAPTION>
Redemption
Period Price
------ ------------
<S> <C>
2004 . . . . . . . . . . . . . . . . . . 105.6875%
2005 . . . . . . . . . . . . . . . . . . 103.7917%
2006 . . . . . . . . . . . . . . . . . . 101.8958%
2007 and thereafter . . . . . . . . . . . 100.0000
</TABLE>
The Company shall prepay the Issuer Loans in whole or in part to provide funds
for such redemption. Any prepayments by the Company on the Issuer Loans
required to be made to provide funds for the Issuer to make this redemption
shall be made on the 10-Year Tranche of each Issuer Loan on a pro rata basis.
(b) 7-Year Secured Notes. Under the terms of the
Indenture, the 7-Year Secured Notes will be redeemable, at the Lender's option
at any time in whole or from time to time in part upon not less than 30 and not
more than 60 days' prior notice mailed by first class mail to the Holders of
the 7-Year Secured Notes, on any date prior to Maturity at a price equal to
100% of the principal amount thereof plus accrued and unpaid interest
(including Special Interest, if any, and Additional Amounts, if any) to the
Redemption Date plus the Make-Whole Premium applicable to the 7-Year Secured
Notes determined in the manner provided for in Section 3.7 of the Indenture.
The Company shall prepay the Issuer Loans in whole or in part to provide funds
for such redemption. Any prepayments by the Company on the Issuer Loans
required to be made to provide funds for the Lender to make such a redemption
shall be made on the 7-Year Tranche of the Issuer Loans on a pro rata basis.
(c) Notices of redemption will be mailed by first class
mail at least 30 days but not more than 60 days before the Redemption Date to
each Holder whose Secured Notes are to be redeemed at its registered address.
Secured Notes in denominations larger than $1,000 may be redeemed in part but
only in integral multiples of $1,000, unless all of the Secured Notes of the
applicable series held by a Holder are to be redeemed. Unless the Issuer
defaults in making such redemption payment, on and after the Redemption Date
interest (including Special Interest, if any and Additional Amounts, if any)
ceases to accrue on Secured Notes or portions thereof called for redemption.
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7. Redemption upon Loss of a Rig. If an Event of Loss
occurs at any time with respect to a Mortgaged Rig (the Mortgaged Rig suffering
such Event of Loss being the "Lost Mortgaged Rig"), the Company shall apply
funds in an amount (the "Loss Redemption Amount") equal to the principal amount
of the applicable Issuer Loan secured by the Lost Mortgaged Rig outstanding on
the date (the "Loss Date") on which such Event of Loss was deemed to have
occurred, together with all accrued and unpaid interest (including Special
Interest, if any, and Additional Amounts, if any) thereon, to the prepayment of
such Issuer Loan; if a Default shall have occurred and be continuing at the
time of receipt of the Event of Loss Proceeds with respect to such Event of
Loss, the Company will also be required to prepay other Issuer Loans on a pro
rata basis in an aggregate amount equal to the excess of the Net Event of Loss
over the Loss Redemption Amount, if any, together with all accrued and unpaid
interest (including Special Interest, if any, and Additional Amounts, if any)
thereon. Such payments on the Issuer Loan or Loans shall be made directly to
the Trustee for deposit into the Issuer Escrow Account. Such funds shall
constitute part of the Collateral pending application in accordance with the
next paragraph.
Upon the earlier to occur of (A) 30 days after the receipt of
such Event of Loss Proceeds by the Company (the "Loss Proceeds Receipt Date")
and (B) 180 days after the Loss Date, the Issuer shall redeem Secured Notes, of
both series, in whole or in part on a pro rata basis, at a Redemption Price
equal to 100% of their principal amount, plus accrued and unpaid interest
(including Additional Amounts and Special Interest, if any) to the Redemption
Date, in an aggregate principal amount equal to the Loss Redemption Amount or
the Net Event of Loss Proceeds, as the case may be. The Issuer and the Company
shall treat as Loss Excess Proceed the amount equal to (i) the excess of the
Net Event of Loss Proceeds from such Event of Loss over the funds applied
pursuant to the preceding sentence, less (ii) the amount of such excess Net
Event of Loss Proceeds (A) used to repay Senior Indebtedness of the Company or
secured Senior Indebtedness of a Subsidiary Guarantor then owning a Mortgaged
Rig, in each case, with a permanent reduction of availability in the case of
revolving credit borrowings and owing to a Person other than the Company or any
of its Subsidiaries, or (B) invested in Additional Assets (as determined in
good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a Board Resolution).
8. Redemption Upon Sale of a Mortgaged Rig. If a
Mortgaged Rig or the Capital Stock of a Subsidiary Guarantor then owning a
Mortgaged Rig is sold in compliance with the terms of the Indenture (the
Mortgaged Rig so sold or owned by the Subsidiary Guarantor whose Capital Stock
is so sold being the "Sold Mortgaged Rig"), the Company shall apply funds in an
amount (the "Sale Redemption Amount") equal to the principal amount of the
Issuer Loan secured by such Sold Mortgaged Rig on the date of such sale (the
"Sale Date"), together with all accrued and unpaid interest (including Special
Interest, if any, and Additional Amounts, if any) thereon, plus any additional
amounts required by the Issuer to redeem the Secured Notes to the extent
required by the next paragraph, to the repayment of such Issuer Loan. If a
Default shall have occurred and be continuing at the time of receipt of the
cash consideration with respect to such Sold Mortgaged Rig, the Company will
also be required to prepay other Issuer Loans on a pro rata basis in an
aggregate amount equal to the excess of such Net Available Cash attributable to
such Sold Mortgaged Rig over such Sale Redemption Amount. Such payments on the
Issuer Loan or Loans shall be allocated between the 7-year Tranche and the
10-year Tranche
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of each such Issuer Loan on a pro rata basis and shall be made directly to the
Trustee for deposit into the Issuer Escrow Account. Such funds shall constitute
part of the Collateral pending application in accordance with the next
paragraph.
Upon the earlier to occur of (A) 30 days after the receipt of such Net
Available Cash (the "Sale Proceeds Receipt Date") and (B) 60 days after the
Sale Date, the Issuer shall redeem Secured Notes of both series, in whole or in
part on a pro rata basis, in an aggregate principal amount equal to the Sale
Redemption Amount or the Net Available Cash, as the case may be, at a
Redemption Price equal to:
(x) In respect to the 10-year Secured Notes (i) if such redemption is
before March 15, 2004, the sum of the remaining scheduled payments of
interest, through March 15, 2004 (including Additional Amounts and
Special Interest) and the Redemption Price as of March 15, 2004 as
set forth in paragraph 7 above as discounted to their present values
to the Redemption Date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 50
basis points, plus accrued and unpaid interest on the Secured Notes
to the Redemption Date or (ii) if such redemption is on or after
March 15, 2004, the Redemption Price then applicable as described in
paragraph 7 above, or
(y) In respect of the 7-year Secured Notes, the sum of the remaining
scheduled payments of principal and interest (including Additional
Amounts and Special Interest, if any) thereon, as discounted to their
present values to the redemption date on a semiannual basis (assuming
a 360-day year consisting of twelve 30-day months) at the Treasury
Rate plus 50 basis points;
in each case plus accrued and unpaid interest (including Special Interest, if
any, and Additional Amounts, if any) on the Secured Notes to the Redemption
Date.
9. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, each
Holder will have the right to require the Issuer to repurchase such Holder's
Secured Notes in whole or in part (the "Change of Control Offer") at a purchase
price (the "Change of Control Purchase Price") in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest thereon,
if any, and Special Interest, if any, and Additional Amounts, if any, to the
Change of Control Payment Date on the terms described in this Indenture.
Notwithstanding the foregoing, a Change of Control shall not
be deemed to have occurred if (a) the ratings assigned to the Secured Notes by
Moody's and S&P prior to the announcement are not downgraded or placed on a
negative credit watch by either such rating agency as a result thereof and (b)
no Default has occurred and is continuing.
Within 30 days following any Change of Control, the Company
shall send, or cause to be sent, by first class mail, postage prepaid, a notice
regarding the Change of Control Offer to each Holder of Secured Notes. The
Holder of this Secured Note may elect to have this
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Secured Note or a portion hereof in an authorized denomination purchased by
completing the form entitled "Option of Holder to Require Purchase" appearing
below and tendering this Secured Note pursuant to the Change of Control Offer.
Unless the Issuer defaults in the payment of the Change of Control Payment with
respect thereto, all Secured Notes or portions thereof accepted for payment
pursuant to the Change of Control Offer will cease to accrue interest (and
Additional Amounts, if any, and Special Interest, if any) from and after the
Change of Control Purchase Date.
(b) If, as of the first day of any calendar month, the
aggregate amount of Sale Excess Proceeds and Loss Excess Proceeds exceeds 10%
of consolidated total assets of the Company, and if the excess aggregate amount
of Sale Excess Proceeds and Loss Excess Proceeds not theretofore subject to an
Excess Proceeds Offer (the "Excess Proceeds Offer Amount"), totals as least
$10.0 million, the Issuer must, not later than the fifteenth Business Day of
such month, make an offer (an "Excess Proceeds Offer") to purchase from the
Holders pursuant to and subject to the conditions contained in the Indenture on
a pro rata basis an aggregate principal amount of Secured Notes equal to such
excess aggregate amount of Sale Excess Proceeds and Loss Excess Proceeds
available on such first day of the month, at a purchase price equal to 100% of
their principal amount, plus, in each case, any accrued interest (including
Additional Amounts and Special Interest, if any) to the date of purchase. The
Company is also required, not later than the fifteenth Business Day of such
month, to make an offer to purchase 12 1/4% Senior Notes due 2006 (the "New
Senior Notes") at a purchase price equal to 100% of their principal amount,
plus any accrued interest (including "special interest") to the date of
purchase. The Excess Proceeds Offer Amount will be allocated on a pro rata
basis between the Issuer for its Excess Proceeds Offer to Holders of the
Secured Notes and the Company for its "Excess Proceeds Offer" to the Holders of
the New Senior Notes. The Company will prepay the Issuer Loans on a pro rata
basis, or make loans constituting Subordinated Obligations to the Issuer, to
permit the Issuer to purchase any Secured Notes validly tendered pursuant to an
Excess Proceeds Offer. Any amounts remaining after all Secured Notes validly
tendered are purchased shall no longer constitute Sale Excess Proceeds or Loss
Excess Proceeds.
Within 30 days of the date the excess amount of Sale Excess
Proceeds and Loss Excess Proceeds in excess of 10% of consolidated total assets
of the Company exceeds $10.0 million, the Issuer shall send, or cause to be
sent, by first class mail, postage prepaid, a notice regarding the Excess
Proceeds Offer to each Holder of Secured Notes. The Holder of this Secured
Note may elect to have this Secured Note or a portion hereof in an authorized
denomination purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below and tendering this Secured Note pursuant to the
Excess Proceeds Offer. Unless the Issuer defaults in the payment of the Excess
Proceeds Offer Purchase Price with respect thereto, all Secured Notes or
portions thereof selected for payment pursuant to the Excess Proceeds Offer
will cease to accrue interest (including Special Interest and Additional
Amounts, if any) from and after the Excess Proceeds Offer Purchase Date.
10. Denominations; Transfer and Exchange. The Secured
Notes of each series are in registered form without coupons in denominations of
$1,000 and integral multiples of $1,000. The transfer of Secured Notes may be
registered and Secured Notes may be exchanged as provided in the Indenture. The
Registrar and the Trustee may require a Holder, among other
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<PAGE> 139
things, to furnish appropriate endorsements and transfer documents (including
in certain cases, opinions of counsel) and the Issuer may require a Holder to
pay any taxes and fees required by law or permitted by the Indenture. The
Issuer need not exchange or register the transfer of any Secured Note or
portion of a Secured Note selected for redemption, except for the unredeemed
portion of any Secured Note being redeemed in part. Also, it need not exchange
or register the transfer of any Secured Notes for a period of 15 days before a
selection of Secured Notes to be redeemed or during the period between a Record
Date and the corresponding Interest Payment Date.
11. Persons Deemed Owners. The registered Holder of a
Secured Note may be treated as its owner for all purposes.
12. Amendment, Supplement and Waiver. With the consent
of the Holders of not less than a majority in aggregate principal amount of the
outstanding Secured Notes (including consents obtained in connection with a
tender offer or exchange offer for the Secured Notes), the Issuer, the Company,
the Subsidiary Guarantors, if any, and the Trustee may enter into one or more
indentures supplemental to the Indenture for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of modifying in any manner the rights of the holders; provided
that no such supplemental indenture may, among other things, without the
consent of the Holder of each outstanding Secured Noted affected thereby, (i)
reduce the amount Secured Notes whose Holders must consent to an amendment,
(ii) reduce the rate of or extend the time for payment of interest on any
Secured Note or any Issuer Loan, (iii) reduce the principal of or extend the
Stated Maturity of any Secured Note or any Issuer Loan, (iv) modify the
obligations of Issuer to make mandatory redemptions or otherwise reduce the
premium payable upon the redemption of any Secured Note or change the time at
which any Secured Note may be or is required to be redeemed as described under
the covenant described in the paragraphs 6, 7 and 8 above, (v) modify the
obligations of the Company to make mandatory repayments or change the time at
which an Issuer Loan may be or is required to be repaid under the covenant
described in the paragraphs 7 and 8 above, (vi) make any Secured Note payable
in money other than that stated in the Secured Note, (vii) impair the right of
any Holder of the Secured Notes to receive payment of principal of and interest
on such Holder's Secured Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
Holder's Secured Notes, (viii) make any change in the amendment provisions
which require each Holder's consent or in the waiver provisions, (ix) make any
change in the Guarantee or any Security Agreement or Issuer Loan Agreement that
would adversely affect the Noteholders or terminate the Lien of the Indenture
or any Security Agreement on any property at any time subject thereto or
deprive the Holders of the security afforded by the Lien of the Indenture or
the Security Agreements or the Issuer of the Liens securing the Issuer Loans.
13. Defaults and Remedies. Events of Default include in
summary form: (i) default for 30 days in the payment when due of interest on,
or Special Interest or Additional Amounts with respect to, the Secured Notes or
an Issuer Loan; (ii) default in payment when due of the principal of or
premium, if any, on any Secured Note or Issuer Loan; (iii) failure by the
Issuer to comply with Sections 3.8, 3.9, 4.8, 4.15 or 5.1 of the Indenture;
(iv) failure by the Issuer, the Company and the Subsidiary Guarantee secured
for 60 days after notice to comply
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with any of its other agreements in this Indenture or the Secured Notes or the
occurrence of an event of default under a Mortgage; (v) Indebtedness of the
Issuer or any Subsidiary is not paid when due within the applicable grace
period, if any, or is accelerated by the holders thereof and, in either case,
the aggregate principal amount of such unpaid or accelerated Indebtedness
exceeds $20,000,000 or more; (vi) failure by the Issuer or any of its
Restricted Subsidiaries to pay final judgments aggregating in excess of
$20,000,000, which judgments are not paid, discharged or stayed for a period of
60 days; (viii) certain events of bankruptcy or insolvency with respect to the
Issuer, the Company or any Significant Subsidiary; (ix) the Guarantee or any
Subsidiary Guarantee shall for any reason cease to be, or be asserted by the
Company or any Subsidiary Guarantor, as applicable, not to be, in full force as
effect (except pursuant to the release of any Subsidiary Guarantee in
accordance with this Indenture); and (x) the Liens under the Security
Agreements shall, at any time, cease to be in full force and effect for any
reason (other than by operation of the provisions of the Indenture and the
Security Agreements) other than the satisfaction in full of all obligations
under the Indenture and discharge of the Indenture, or any Lien created
thereunder shall be declared invalid or unenforceable or the Issuer, the
Company or the Subsidiary Guarantee shall assert, in any pleading in any court
of competent jurisdiction, that any such Lien is invalid or unenforceable.
Holders of the Secured Notes may not enforce this Indenture or
the Secured Notes except as provided in this Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Secured Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Secured Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal, premium, if any, or interest) if it
determines that withholding notice is not opposed to the interests of the
Holders. Subject to certain limitations, the Holders of a majority in
aggregate principal amount of the Secured Notes then outstanding by notice to
the Trustee may on behalf of the Holders of all of the Secured Notes then
outstanding waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, premium, if any, on, interest
(including Special Interest and Additional Amounts, if any) on, and, if any,
on, the Secured Notes. The Issuer is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture, and the Issuer is
required upon becoming aware of any Default or Event of Default, to deliver to
the Trustee a statement specifying such Default or Event of Default.
14. Defeasance Prior to Maturity or Redemption. The
Issuer, at its election, shall (a) be deemed to have paid and discharged its
debt on the Secured Notes and this Indenture and on Security Agreements, the
Guarantee and the Subsidiary Guarantees shall cease to be of further effect as
to all outstanding Secured Notes (except as to (i) rights of registration of
transfer, substitution and exchange of Secured Notes, (ii) the Issuer's right
of optional redemption, (iii) rights of Holders to receive payments of
principal of, premium, if any, and interest (including Special Interest and
Additional Amounts, if any) on the Secured Notes (but not the Change of Control
Purchase Price or the Excess Proceeds Offer Purchase Price) and any rights of
the Holders with respect to such amounts, (iv) the rights, obligations and
immunities of the Trustee under this Indenture, and (v) certain other specified
provisions in this Indenture) or (b) cease to be under any obligation to comply
with certain restrictive covenants that are described in this Indenture, after
the irrevocable deposit by the Issuer with the Trustee, in trust
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for the benefit of the Holders, at any time prior to the Stated Maturity of the
Secured Notes, of (i) money in an amount, (ii) U.S. Government Obligations
which through the payment of interest and principal will provide, not later
than one Business Day before the due date of payment in respect of such Secured
Notes, money in an amount, or (C) a combination thereof sufficient to pay and
discharge the principal of, premium, if any on, and interest (including
Additional Amounts and Special Interest, if any) on, such Secured Notes then
outstanding on the dates on which any such payments are due in accordance with
the terms of this Indenture and of such Secured Notes.
15. Security Agreements. As provided in the Indenture
and the Security Agreements and subject to certain limitations set forth
therein, the Obligations of the Issuer under the Indenture, and the Security
Agreements are secured by the Collateral as provided in the Security
Agreements. Each Holder, by accepting a Secured Note, agrees to be bound to
all terms and provisions of the Security Agreements, as the same may be amended
from time to time. The Liens created under the Security Agreements shall be
released upon the terms and subject to the conditions set forth in the
Indenture, and the Security Agreements.
16. Trustee Dealings with the Issuer and the Company.
Subject to certain limitations imposed by the Trust Indenture Act, the Trustee,
in its individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Issuer, the Company or its Affiliates, and
may otherwise deal with the Issuer, the Company or its Affiliates, as if it
were not the Trustee.
17. No Recourse Against Others. A director, officer,
employee, incorporator or stockholder of the Issuer, the Company or any
Subsidiary Guarantor, as such, shall not have any liability for any obligations
of the Issuer, the Company or any Subsidiary Guarantors under the Secured
Notes, this Indenture, the Subsidiary Guarantees or for any claim based on, in
respect of, or by reason of, such Obligations or their creation. Each Holder by
accepting a Secured Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Secured Notes.
18. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW
YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SECURED NOTE, WITHOUT REGARD TO
THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
19. Authentication. This Secured Note shall not be valid
until authenticated by the manual signature of the Trustee or an authenticating
agent.
20. Abbreviations. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
21. Additional Rights of Holders of Transfer Restricted
Secured Notes. In addition to the rights provided to Holders of Secured Notes
under the Indenture, Holders of Transferred Restricted Secured Notes (as
defined in the Registration Rights Agreement) shall have all the rights set
forth in the Registration Rights Agreement dated as of the date of this
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<PAGE> 142
Indenture, between the Issuer, the Company and the parties named on the
signature pages thereof (the "Registration Rights Agreement").
22. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Issuer has caused CUSIP numbers to be printed on the Secured Notes and the
Trustee may use CUSIP numbers in notices of redemption as a convenience to
Holders. No representation is made as to the accuracy of such numbers either as
printed on the Secured Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
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<PAGE> 143
The Issuer will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
RBF Finance Co.
901 Threadneedle
Houston, Texas 77079-2982
Telephone No.: (281) 496-5000
Telecopier No.: (281) 496-0285
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GUARANTEE
Subject to the limitations set forth in the Indenture, the
Company and each Subsidiary Guarantor (each hereinafter referred to as a
"Guarantor," which term includes any successor or additional Guarantors under
the Indenture) have jointly and severally, irrevocably and unconditionally
guaranteed (a) the due and punctual payment of the principal (and premium, if
any) of and interest (and Special Interest, if any and Additional Amounts, if
any), on the Secured Notes, whether at Maturity, by acceleration, call for
redemption, upon a Change of Control Offer, Excess Proceeds Offer, purchase or
otherwise, (b) the due and punctual payment of interest on the overdue
principal of and interest (and Special Interest, if any and Additional Amounts,
if any), on the Secured Notes to the extent lawful, (c) the due and punctual
performance of all other Obligations of the Issuer and the Guarantors to the
Holders under this Indenture and the Secured Notes and (d) in case of any
extension of time of payment or renewal of any Secured Notes or any of such
other Obligations, the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at Maturity,
by acceleration, call for redemption, upon a Change of Control Offer, Excess
Proceeds Offer, purchase or otherwise, provided that to the extent that the
Company makes a payment on the Guarantee, it will be deemed to have made a
payment on the Issuer Loans then outstanding, and will otherwise be subrogated
to the Issuer's rights on the Issuer Loans, to the extent that such Issuer
Loans remain unpaid. Capitalized terms used herein shall have the same meanings
assigned to them in this Indenture unless otherwise indicated.
Payment on each Secured Note is guaranteed, jointly and
severally, by the Guarantor pursuant to Article XIII of this Indenture and
reference is made to such Indenture for the precise terms of the Guarantees.
The Obligations of each Guarantor are limited to the maximum
amount as will, after giving effect to such maximum amount and all other
contingent and fixed liabilities of such Guarantor, and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the Obligations of such other Guarantor under the Guarantee or its
Subsidiary Guarantee, as applicable, or pursuant to its contribution
obligations under this Indenture, result in the Obligations of such Guarantor
under the Guarantee or its Subsidiary Guarantee, as applicable, not
constituting a fraudulent conveyance or fraudulent transfer under any
applicable Federal, State or foreign bankruptcy law or not otherwise being
void, voidable or unenforceable under any such applicable bankruptcy law. Each
Guarantor that makes a payment or distribution under the Guarantee or a
Guarantee, as applicable, shall be entitled to a contribution from each other
Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Guarantor.
Certain of the Guarantor may be released from their Subsidiary
Guarantees upon the terms and subject to the conditions provided in the
Indenture.
18
<PAGE> 145
The Guarantee or Subsidiary Guarantee shall be binding upon
each Guarantor listed below and its successors and assigns and shall inure to
the benefit of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions in the
Indenture.
[SIGNATURE PAGE FOLLOWS]
19
<PAGE> 146
R&B FALCON CORPORATION
By:
----------------------------------------
Name:
-------------------------------------
Title:
----------------------------------
20
<PAGE> 147
ASSIGNMENT FORM
To assign this Secured Note, fill in the form below: (I) or (we) assign and
transfer this Secured Note to
- --------------------------------------------------------------------------------
(Insert assignee's Social Security or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
---------------------------------------------------------
- --------------------------------------------------------------------------------
to transfer this Secured Note on the books of the Issuer or the agent appointed
by the Issuer to maintain such books. The agent appointed hereby may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date:
------------------------------------------
Your signature:
--------------------------------
(Sign exactly as your name appears on the face of this Secured Note)
Signature Guarantee:
21
<PAGE> 148
Option of Holder to Elect Purchase
If you want to elect to have this Secured Note purchased by
the Issuer pursuant to Section 3.10 or 4.8 of this Indenture, check the box
below:
[ ] Section 3.10 [ ] Section 4.8
If you want to elect to have only part of the Secured Note
purchased by the Issuer pursuant to Section 3.10 or Section 4.8 of this
Indenture, state the amount you elect to have purchased (must be an integral
multiple of $1,000): $ _____________
Your Signature:
-----------------------
(Sign exactly as your
name appears on the
Secured Note)
Signature Guarantee: Social Security or Tax
Identification No.:
------------------
22
<PAGE> 149
SCHEDULE A
CHANGES IN PRINCIPAL AMOUNT OF SECURED NOTE(5)
The following changes in the principal amount of this Global
Note have been recorded:
<TABLE>
<CAPTION>
Principal Amount of
Amount of decrease Amount of this
in increase in Global Note
Principal Principal following such Signature of
Amount of Amount of decrease authorized officer
Date of Transaction this Global Note this Global Note (or increase) of Trustee
------------------- ---------------- ---------------- ------------- ----------
<S> <C> <C> <C> <C>
</TABLE>
- -------------------
(5) This should only be included if the Secured Note is issued in global form.
23
<PAGE> 150
Exhibit B-1
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM U.S. GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(Pursuant to Section 2.6(a)(1) of this Indenture)
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036
Attention: Corporate Trust Administration
Re: 11% Senior Secured Notes due 2006 of RBF Finance Co.
11 3/8% Senior Secured Notes due 2009 of RBF Finance Co.
Reference is hereby made to this Indenture, dated as of March
26, 1999 (the "Indenture"), between RBF Finance Corp. (the "Issuer"), R&B
Falcon Corporation (the "Company"), the Persons acting as Subsidiary Guarantors
and named therein (the "Subsidiary Guarantors") and United States Trust Company
of New York, as trustee (the "Trustee"). Capitalized terms used but not
defined herein shall have the meanings given them in this Indenture.
This letter relates to U.S.$ ____ principal amount of [7-year
Secured Notes] [10-year Secured Notes] which are evidenced by one or more U.S.
Global Notes and held with the Depositary in the name of ____ (the
"Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Secured Notes to a Person who will take delivery thereof in the
form of an equal principal amount of Secured Notes of the same series evidenced
by one or more Regulation S Global Secured Notes, which amount, immediately
after such transfer, is to be held with the Depositary through Euroclear or
Cedel or both.
In connection with such request and in respect of such Secured
Notes, the Transferor hereby certifies that such transfer has been effected in
compliance with the transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with Rule 903 or Rule 904 under the United States
Securities Act of 1933, as amended (the "Securities Act"), and accordingly the
Transferor hereby further certifies that:
(1) The offer of the Secured Notes was not made to a
person in the United States and, if the 40-day
restricted period has not yet expired and the
Transferor is a dealer (as defined in Section 2(12)
of the Securities Act), or a person receiving a
selling concession, fee or other remuneration in
respect of the Secured Notes being sold
(collectively, "Dealers"), (i) neither the Transferor
or any person acting on its behalf knows that the
transferee is a U.S. person and (ii) if the
Transferor or any person acting on its behalf knows
that the transferee is a Dealer, the Transferor or
person
<PAGE> 151
acting on its behalf has sent a confirmation or other
notice to the transferee stating that the Secured
Notes may be offered or sold during the 40-day
restricted period only in accordance with the
provisions of Regulation S, pursuant to registration
under the Securities Act or pursuant to an available
exemption from the registration requirements of the
Securities Act;
(2) either:
(a) at the time the buy order was originated, the
transferee was outside the United States or
the Transferor and any person acting on its
behalf reasonably believed and believes that
the transferee was outside the United States;
or
(b) the transaction was executed in, on or
through the facilities of a designated
offshore securities market and neither the
Transferor nor any person acting on its
behalf knows that the transaction was
prearranged with a buyer in the United
States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 904(b) of
Regulation S;
(4) the transaction is not part of a plan or scheme to
evade the registration provisions of the Securities
Act; and
(5) upon completion of the transaction, the beneficial
interest being transferred as described above is to
be held with the Depositary through Euroclear or
Cedel or both.
Upon giving effect to this request to exchange a beneficial
interest in a U.S. Global Note for a beneficial interest in a Regulation S
Global Note. The resulting beneficial interest shall be subject to the
restrictions on transfer applicable to Regulation S Global Notes pursuant to
the Indenture and the Securities Act and, if such transfer occurs prior to the
end of the 40-day restricted period associated with the initial offering of
Secured Notes, the additional restrictions applicable to transfers of interest
in the Regulation S Temporary Global Note.
2
<PAGE> 152
This certificate and the statements contained herein are made
for your benefit and the benefit of the Issuer, the Company and Donaldson,
Lufkin & Jenrette Securities Corporation, (the "Initial Purchaser"), the
Initial Purchaser of such Secured Notes being transferred. We acknowledge that
you, the Issuer, the Company and the Initial Purchaser will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete. Terms used in this certificate and
not otherwise defined in this Indenture have the meanings set forth in
Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
------------------------
Name:
----------------------
Title:
---------------------
Dated:
--------------------
cc: RBF Finance Co.
Initial Purchaser
3
<PAGE> 153
Exhibit B-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL NOTE TO U.S. GLOBAL NOTE
(Pursuant to Section 2.6(a)(ii) of this Indenture)
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036
Attention: Corporate Trust Administration
Re: 11% Senior Secured Notes due 2006 of RBF Finance Co.
11 3/8% Senior Secured Notes due 2009 of RBF Finance Co.
Reference is hereby made to this Indenture dated as of March 26, 1999
(the "Indenture"), between RBF Finance Co. (the "Issuer"), R&B Falcon
Corporation (the "Company'), the Persons acting as Subsidiary Guarantors and
named therein (the "Subsidiary Guarantors") and United States Trust Company of
New York, as trustee (the "Trustee"). Capitalized terms used but not defined
herein shall have the meanings given them in this Indenture.
This letter relates to $ ___________ principal amount of
[7-year Secured Notes] [10-year Secured Notes] which are evidenced by one or
more Regulation S Global Secured Notes and held with the Depositary through
Euroclear or Cedel in the name of _________________ (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest in the Secured
Notes to a Person who will take delivery thereof in the form of an equal
principal amount of Secured Notes of the same series evidenced by one or more
U.S. Global Notes, to be held with the Depositary.
In connection with such request and in respect of such Secured
Notes, the Transferor hereby certifies that:
[CHECK ONE]
o such transfer is being effected pursuant to and in accordance with
Rule 144A under the United States Securities Act of 1933, as amended
(the "Securities Act") and, accordingly, the Transferor hereby further
certifies that the Secured Notes are being transferred to a Person
that the Transferor reasonably believes is purchasing the Secured
Notes for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such
Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A in a transaction meeting the
requirements of Rule 144A;
or
1
<PAGE> 154
[ ] such transfer is being effected pursuant to and in accordance with Rule 144
under the Securities Act;
[ ] the Surrendered Secured Notes are being transferred to Institutional
Accredited Investor pursuant to an exemption under the Securities Act other
than Rule 144A, Rule 144 or Rule 904 and the Transferor further certifies
that the Transfer complies with the transfer restrictions applicable to
beneficial interests in Global Notes and Certificated Secured Notes bearing
the Private Placement Legend and the requirements of the exemption claimed,
which certification is supported by a certificate attached hereto executed
by the Transferee in the form of Exhibit C to the Indenture, and, if the
Issuer should so request, an Opinion of Counsel provided by the Transferor
or the Transferee (a copy of which the Transferor has attached to this
certification), in form reasonably acceptable to the Issuer and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act to the effect that such Transfer is in compliance with the
Securities Act;
or
o such transfer is being effected in an offshore transaction pursuant to
and in accordance with Rule 904 under the Securities Act;
or
o such transfer is being effected pursuant to an effective registration
statement under the Securities Act;
or
o such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than those
contemplated above, and the Transferor hereby further certifies that
the Secured Notes are being transferred in compliance with the
transfer restrictions applicable to the Global Notes and in accordance
with the requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Issuer and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and such Secured Notes are being transferred in compliance with any applicable
blue sky or securities laws of any state of the United States or any other
applicable jurisdiction.
Upon giving effect to this request to exchange a beneficial
interest in Regulation S Global Notes for a beneficial interest in U.S. Global
Notes, the resulting beneficial interest shall be subject to the restrictions
on transfer applicable to U.S. Global Notes pursuant to the Indenture and the
Securities Act.
2
<PAGE> 155
This certificate and the statements contained herein are made
for your benefit and the benefit of the Issuer, the Company and Donaldson,
Lufkin & Jenrette Securities Corporations (the "Initial Purchaser"), the
Initial Purchaser of such Secured Notes being transferred. We acknowledge that
you, the Issuer, the Company and the Initial Purchaser will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete. Terms used in this certificate and
not otherwise defined in this Indenture have the meanings set forth in
Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
------------------------
Name:
----------------------
Title:
---------------------
Dated:
--------------------------
cc: RBF Finance Co.
Initial Purchaser
3
<PAGE> 156
Exhibit B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF DEFINITIVE NOTES
(Pursuant to Section 2.6(b) of this Indenture)
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036
Attention: Corporate Trust Administration
Re: 11% Senior Secured Notes due 2006 of RBF Finance Co.
11 3/8% Senior Secured Notes due 2009 of RBF Finance Co.
Reference is hereby made to this Indenture dated as of March
26, 1999 (the "Indenture"), between RBF Finance Co. (the "Issuer"), R&B Falcon
Corporation (the "Company"), the Persons acting as Subsidiary Guarantors and
named therein (the "Subsidiary Guarantors") and United States Trust Company of
New York as trustee (the "Trustee"). Capitalized terms used but not defined
herein shall have the meanings given them in this Indenture.
This relates to $_________ principal amount of [7-year Secured
Notes] [10-year Secured Notes] which are evidenced by one or more Certificated
Secured Notes in the name of ______________ (the "Transferor"). The Transferor
has requested an exchange or transfer of such Certificated Secured Note(s) in
the form of an equal principal amount of Secured Notes of the same series
evidenced by one or more Certificated Secured Notes, to be delivered to the
Transferor or, in the case of a transfer of such Secured Notes, to such Person
as the Transferor instructs the Trustee.
In connection with such request and in respect of the Secured
Notes surrendered to the Trustee herewith for exchange (the "Surrendered
Secured Notes"), the Holder of such Surrendered Secured Notes hereby certifies
that:
[CHECK ONE]
o the Surrendered Secured Notes are being acquired for the Transferor's
own account, without transfer;
or
o the Surrendered Secured Notes are being transferred to the Issuer;
or
1
<PAGE> 157
o the Surrendered Secured Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Secured Notes
are being transferred to a Person that the Transferor reasonably
believes is purchasing the Surrendered Secured Notes for its own
account, or for one or more accounts with respect to which such Person
exercises sole investment discretion, and such Person and each such
account is a "qualified institutional buyer" within the meaning of
Rule 144A, in each case in a transaction meeting the requirements of
Rule 144A;
or
o the Surrendered Secured Notes are being transferred in a transaction
permitted by Rule 144 under the Securities Act;
or
o the Surrendered Secured Notes are being transferred in an offshore
transaction pursuant to and in accordance with Rule 904 under the
Securities Act;
or
o the Surrendered Secured Notes are being transferred to Institutional
Accredited Investor pursuant to an exemption under the Securities Act
other than Rule 144A, Rule 144 or Rule 904 and the Transferor further
certifies that the Transfer complies with the transfer restrictions
applicable to beneficial interests in Global Notes and Certificated
Secured Notes bearing the Private Placement Legend and the
requirements of the exemption claimed, which certification is
supported by a certificate attached hereto executed by the Transferee
in the form of Exhibit C to the Indenture, and, if the Issuer should
so request, an Opinion of Counsel provided by the Transferor or the
Transferee (a copy of which the Transferor has attached to this
certification), in form reasonably acceptable to the Issuer and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act to the effect that such Transfer is in compliance with
the Securities Act;
or
o the Surrendered Secured Notes are being transferred pursuant to an
effective registration statement under the Securities Act;
or
o such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than those
contemplated above, and the Transferor hereby further certifies that
the Secured Notes are being transferred in compliance with the
transfer restrictions applicable to the Global Notes and in accordance
with the requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Issuer
2
<PAGE> 158
and to the Registrar, to the effect that such transfer is in
compliance with the Securities Act;
and the Surrendered Secured Notes are being transferred in compliance with any
applicable blue sky or securities laws of any state of the United States or any
other applicable jurisdiction.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Issuer, the Company and Donaldson,
Lufkin & Jenrette Securities Corporation, the "Initial Purchaser"), the Initial
Purchaser of such Secured Notes being transferred. We acknowledge that you, the
Issuer and the Initial Purchasers will rely upon our confirmations,
acknowledgments and agreements set forth herein, and we agree to notify you
promptly in writing if any of our representations or warranties herein ceases
to be accurate and complete. Terms used in this certificate and not otherwise
defined in this Indenture have the meanings set forth in Regulation S under the
Securities Act.
[Insert Name of Transferor]
By:
------------------------
Name:
----------------------
Title:
---------------------
Dated:
-------------------------
cc: RBF Finance Co.
Initial Purchaser
3
<PAGE> 159
Exhibit B-4
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM U.S. GLOBAL NOTE OR REGULATION S
PERMANENT GLOBAL NOTE
TO DEFINITIVE NOTE
(Pursuant to Section 2.6(c) of this Indenture)
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036
Attention: Corporate Trust Administration
Re: 11% Senior Secured Notes due 2006 of RBF Finance Co.
11 3/8% Senior Secured Notes due 2009 of RBF Finance Co.
Reference is hereby made to this Indenture dated as of March
26, 1999 (the "Indenture"), between RBF Finance Co.. (the "Issuer"), R&B Falcon
Corporation (the "Company"), the Persons acting as Subsidiary Guarantors and
named therein (the "Subsidiary Guarantors") and United States Trust Company of
New York, as trustee (the "Trustee"). Capitalized terms used but not defined
herein shall have the meanings given them in this Indenture.
This letter relates to $_____________ principal amount of
[7-year Secured Notes] [10-year Secured Notes] which are evidenced by a
beneficial interest in one or more U.S. Global Secured Notes or Regulation S
Permanent Global Notes in the name of __________________ (the "Transferor").
The Transferor has requested an exchange or transfer of such beneficial
interest in the form of an equal principal amount of Secured Notes of such
series evidenced by one or more Certificated Secured Notes, to be delivered to
the Transferor or, in the case of a transfer of such Secured Notes, to such
Person as the Transferor instructs the Trustee.
In connection with such request and in respect of the Secured
Notes surrendered to the Trustee herewith for exchange (the "Surrendered
Secured Notes"), the Holder of such surrendered Secured Notes hereby certifies
that:
[CHECK ONE]
o the Surrendered Secured Notes are being transferred to the beneficial
owner of such Secured Notes;
or
o the Surrendered Secured Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities
1
<PAGE> 160
Act"), and, accordingly, the Transferor hereby further certifies that
the Surrendered Secured Notes are being transferred to a Person that
the Transferor reasonably believes is purchasing the Surrendered
Secured Notes for its own account, or for one or more accounts with
respect to which such Person exercises sole investment discretion, and
such Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A, in each case in a transaction meeting
the requirements of Rule 144A;
or
o the Surrendered Secured Notes are being transferred in a transaction
permitted by Rule 144 under the Securities Act;
or
o such transfer is being effected in an offshore transaction pursuant to
and in accordance with Rule 904 under the Securities Act;
or
o the Surrendered Secured Notes are being transferred to Institutional
Accredited Investor pursuant to an exemption under the Securities Act
other than Rule 144A, Rule 144 or Rule 904 and the Transferor further
certifies that the Transfer complies with the transfer restrictions
applicable to beneficial interests in Global Notes and Certificated
Secured Notes bearing the Private Placement Legend and the
requirements of the exemption claimed, which certification is
supported by a certificate attached hereto executed by the Transferee
in the form of Exhibit C to this Indenture, and, if the Issuer should
so request, an Opinion of Counsel provided by the Transferor or the
Transferee (a copy of which the Transferor has attached to this
certification), in form reasonably acceptable to the Issuer and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act to the effect that such Transfer is in compliance with
the Securities Act;
or
o the Surrendered Secured Notes are being transferred pursuant to an
effective registration statement under the Securities Act;
or
o the Surrendered Secured Notes are being transferred pursuant to an
exemption from the registration requirements of the Securities Act
other than those contemplated above, and the Transferor hereby further
certifies that the Secured Notes are being transferred in compliance
with the transfer restrictions applicable to the Global Secured Notes
and in accordance with the requirements of the exemption claimed,
which certification is supported by an Opinion of Counsel, provided by
the transferor or the transferee (a copy of which the Transferor has
attached to this certification) in form reasonably acceptable to the
Issuer and to the Registrar, to the effect that such transfer is in
compliance with the Securities Act;
2
<PAGE> 161
and the Surrendered Secured Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Issuer, the Company and Donaldson,
Lufkin & Jenrette Securities Corporation, (the "Initial Purchaser"), the
Initial Purchaser of such Secured Notes being transferred. We acknowledge that
you, the Issuer and the Initial Purchasers will rely upon our confirmations,
acknowledgments and agreements set forth herein, and we agree to notify you
promptly in writing if any of our representations or warranties herein ceases
to be accurate and complete. Terms used in this certificate and not otherwise
defined in this Indenture have the meanings set forth in Regulation S under the
Securities Act.
[Insert Name of Transferor]
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Dated:
---------------------------
cc: RBF Finance Co.
Initial Purchaser
3
<PAGE> 162
Exhibit C
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036
Attention: Corporate Trust Administration
Reference is hereby made to this Indenture, dated as of March
26, 1999 (the "Indenture"), between RBF Finance Co., as issuer, R&B Falcon
Corporation (the "Company") and Persons acting as Subsidiary Guarantors and
named therein (the "Subsidiary Guarantors") and United States Trust Company of
New York, as trustee. Capitalized terms used but not defined herein shall have
the meanings given them in this Indenture.
In connection with our proposed purchase of $ ___________
aggregate principal amount of:
(a) o Beneficial interests, or
(b) o Certificated Secured Notes,
we confirm that:
(i) we are an entity which is an "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933, as amended (the "Securities Act"), or an
entity in which all of the equity owners are accredited investors
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act (an "Institutional Accredited Investor");
(ii) any purchase of Secured Notes by us will be for our
own account or for the account of one or more other Institutional
Accredited Investors;
(iii) in the event that we purchase any Secured Notes, we
will acquire Secured Notes having a minimum purchase price of at least
$250,000 for our own account and for each separate account for which
we are acting;
(iv) we have such knowledge and experience in financial
and business matters that we are capable of evaluating the merits and
risks of purchasing Secured Notes;
(v) we are not acquiring Secured Notes with a view to any
distribution thereof in a transaction that would violate the
Securities Act or the securities laws of any State of the United
States or any other applicable jurisdiction; provided that the
disposition of our
1
<PAGE> 163
property and the property of any accounts for which we are acting as
fiduciary shall remain at all times within our control; and
(vi) we have received a copy of the Offering Memorandum
and acknowledge that we have had access to such financial and other
information, and have been afforded the opportunity to ask such
questions of representatives of the Issuer and receive answers
thereto, as we deem necessary in connection with our decision to
purchase Secured Notes.
We understand that the Secured Notes are being offered in a
transaction not involving any public offering within the meaning of the
Securities Act and that the Secured Notes have not been registered under the
Securities Act, and we agree, on our own behalf and on behalf of each account
for which we acquire any notes, that (A) such Secured Notes may be offered,
resold, pledged or otherwise transferred only (i) to a person whom we
reasonably believe to be a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in a transaction meeting the requirements of
Rule 144A, in a transaction meeting the requirements of Rule 144 under the
Securities Act, outside the United States in a transaction meeting the
requirements of Rule 904 under the Securities Act or in accordance with another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel if the Issuer so requests), (ii) to the Issuer or
(iii) pursuant to an effective registration statement under the Securities Act,
and, in each case, in accordance with any applicable securities laws of any
State of the United States or any other applicable jurisdiction and (B) that we
will, and each subsequent Holder is required to, notify any subsequent
purchaser from it of the resale restrictions set forth in (A) above. We
understand that the registrar and transfer agent will not be required to accept
for registration of transfer any Secured Notes, except upon presentation of
evidence satisfactory to the Issuer that the foregoing restrictions on transfer
have been complied with. We further understand that the Secured Notes purchased
by us will bear a legend reflecting the substance of this paragraph.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Issuer and Donaldson, Lufkin & Jenrette
Securities Corporation, (the "Initial Purchaser"), the Initial Purchaser of
such Secured Notes being transferred. We acknowledge that you, the Issuer and
the Initial Purchaser will rely upon our confirmations, acknowledgments and
agreements set forth herein, and we agree to notify you promptly in writing if
any of our representations or warranties herein ceases to be accurate and
complete. Terms used in this certificate and not otherwise defined in this
Indenture have the meanings set forth in Regulation S under the Securities Act.
2
<PAGE> 164
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF
LAWS PRINCIPLES THEREOF.
----------------------------------------
(Name of Purchaser)
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address:
-------------------------------
3
<PAGE> 165
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
<S> <C>
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3; 7.8; 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.3
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6; 12.2
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.13; 4,23; 12.2
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4, 12.5
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2; 12.4; 12.5
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.5
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.23; 7.5; 12.4
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.12
316 (a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3; 6.8
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1
</TABLE>
- ---------------
N.A. means not applicable.
* This Cross-Reference Table is not part of this Indenture.
(1) These paragraphs should be included if the Secured Notes are issued in
global form.
4
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
as of March 26, 1999
by and among
RBF FINANCE CO.
R&B FALCON CORPORATION
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of March 26, 1999, by and among RBF Finance Co., a Delaware
corporation ("FINCO"), and R&B Falcon Corporation, a Delaware corporation (the
"COMPANY"), which will guarantee (its guarantees hereinafter, the "GUARANTEES")
the obligations of Finco under the Notes (as defined herein), and Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ" or the INITIAL PURCHASER"), who
has agreed to purchase Finco's Senior Secured Notes due 2006 and Finco's Senior
Secured Notes due 2009 (collectively, the "RESTRICTED NOTES") pursuant to the
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
March 19, 1999 (the "PURCHASE AGREEMENT"), by and among Finco, the Company and
the Initial Purchaser. In order to induce the Initial Purchaser to purchase the
Restricted Notes, Finco and the Company have agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this Agreement
is a condition to the obligations of the Initial Purchaser set forth in Section
3 of the Purchase Agreement. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to them in the Indenture, dated March
26, 1999 among Finco, the Company and United States Trust Company of New York,
as Trustee, relating to the Restricted Notes and the Exchange Notes (the
"INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
AFFILIATE: As defined in Rule 144 under the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange
Act.
CERTIFICATED SECURITIES: As defined in the Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of Restricted Notes tendered
by Holders thereof pursuant to the Exchange Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
1
<PAGE> 3
EFFECTIVENESS DEADLINE: As defined in Section 3(a) or 4(a) hereof, as
applicable.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
EXCHANGE NOTES: Finco's Senior Secured Notes due 2006 and Senior
Secured Notes due 2009, and unless the context otherwise requires, the
Guarantees thereof, to be issued pursuant to the Indenture: (i) in the Exchange
Offer or (ii) as contemplated by Section 4 hereof.
EXCHANGE OFFER: The exchange and issuance by Finco of a principal
amount of Exchange Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Restricted Notes that are tendered by such Holders in connection with such
exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchaser
proposes to sell the Restricted Notes to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act and pursuant to
Regulation S under the Act.
FILING DEADLINE: As defined in Sections 3(a) or 4(a) hereof, as
applicable.
HOLDERS: As defined in Section 2 hereof.
NOTES: The Restricted Notes and the Exchange Notes, collectively.
PROSPECTUS: The prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of Finco and the
Company relating to (a) an offering of Exchange Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) that is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
REGULATION S: Regulation S promulgated under the Act.
RULE 144: Rule 144 promulgated under the Act.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
2
<PAGE> 4
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Restricted Note, until the
earliest to occur of (a) the date on which such Restricted Note is exchanged in
the Exchange Offer for an Exchange Note which is entitled to be resold to the
public by the Holder thereof without complying with the prospectus delivery
requirements of the Act, (b) the date on which such Restricted Note has been
disposed of in accordance with a Shelf Registration Statement (and the
purchasers thereof have been issued Exchange Notes), or (c) the date on which
such Restricted Note is distributed to the public pursuant to Rule 144 under the
Act (and purchasers thereof have been issued Exchange Notes) and each Exchange
Note until the date on which such Exchange Note is disposed of by a
Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including the delivery of the Prospectus
contained therein).
TRUSTEE: The United States Trust Company of New York.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person is a beneficial owner of Transfer
Restricted Securities in the security register of the Trustee.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), Finco and the Company shall (i) cause the Exchange Offer
Registration Statement to be filed with the Commission as soon as practicable
after the Closing Date, but in no event later than 60 days after the Closing
Date (such 60th day being the "FILING DEADLINE"), (ii) use their respective best
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 150 days after the
Closing Date (such 150th day being the "EFFECTIVENESS DEADLINE"), (iii) in
connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause it
to become effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings, if any, in connection with the registration and
qualification of the Exchange Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the Exchange Notes to be offered
in exchange for the Restricted Notes that are Transfer Restricted Securities and
(ii) resales of Exchange Notes by Broker-Dealers that tendered into the Exchange
Offer Restricted Notes that such Broker-Dealer acquired for its own account as a
result of market making activities or other trading activities (other than
Restricted Notes acquired directly from the Company or any of its Affiliates) as
contemplated by Section 3(c) below.
(b) Finco and the Company shall use their respective best efforts to
cause the Exchange Offer Registration Statement to be effective continuously,
and shall keep the Exchange Offer open for a period of not less than the minimum
period required under applicable federal and state securities laws to Consummate
the Exchange Offer; provided, however, that in no event shall such period be
less than 30 days (or longer if required by applicable law). Finco and the
Company shall cause the Exchange Offer to comply with all applicable federal and
state securities laws. No securities other than the Exchange Notes and
Guarantees shall be included in the Exchange Offer Registration Statement. Finco
and the Company shall use their
3
<PAGE> 5
respective best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 30 days thereafter (such 30th day
being the "CONSUMMATION DEADLINE").
(c) Finco and the Company shall include a "Plan of Distribution"
section in the Prospectus contained in the Exchange Offer Registration Statement
and indicate therein that any Broker-Dealer who holds Transfer Restricted
Securities that were acquired for the account of such Broker-Dealer as a result
of market-making activities or other trading activities (other than Restricted
Notes acquired directly from the Company or any Affiliate of the Company), may
exchange such Transfer Restricted Securities pursuant to the Exchange Offer.
Such "Plan of Distribution" section shall also contain all other information
with respect to such sales by such Broker-Dealers that the Commission may
require in order to permit such sales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Transfer Restricted Securities held by any such Broker-Dealer, except to the
extent required by the Commission as a result of a change in policy, rules or
regulations after the date of this Agreement. See the Shearman & Sterling
no-action letter (available July 2, 1993).
Because such Broker-Dealer may be deemed to be an "underwriter"
within the meaning of the Act and must, therefore, deliver a prospectus meeting
the requirements of the Act in connection with its initial sale of any Exchange
Notes received by such Broker-Dealer in the Exchange Offer, the Company and
Finco shall permit the use of the Prospectus contained in the Exchange Offer
Registration Statement by such Broker-Dealer to satisfy such prospectus delivery
requirement. To the extent necessary to ensure that the Prospectus contained in
the Exchange Offer Registration Statement is available for sales of Exchange
Notes by Broker-Dealers, the Company and Finco agree to use their respective
best efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented, amended and current as required by and subject to the
provisions of Section 6(a) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of 180 days from
the Consummation Deadline, or such shorter period as will terminate when all
Transfer Restricted Securities covered by such Registration Statement have been
sold pursuant thereto. The Company and Finco shall provide sufficient copies of
the latest version of such Prospectus to such Broker-Dealers, promptly upon
request, and in no event later than one day after such request, at any time
during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Company and Finco have complied with the procedures
set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted
Securities shall notify the Company within 20 Business Days following the
Consummation Deadline that (A) such Holder was prohibited by law or Commission
policy from participating in the Exchange Offer or (B) such Holder may not
resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the Prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales by
such Holder or (C) such Holder is a Broker-Dealer and holds Restricted Notes
acquired directly from the Company or any of its Affiliates, then the Company
and Finco shall:
(x) cause to be filed, on or prior to 30 days after the earlier
of (i) the date on which Finco and the Company determine that the Exchange Offer
Registration Statement cannot be filed as a result of clause (a)(i) above and
(ii) the date on which the Company receives the notice specified in clause
(a)(ii) above, (such earlier date, the "FILING DEADLINE"), a shelf registration
statement pursuant to Rule 415 under the Act (which may be an amendment to the
Exchange Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")),
relating to all Transfer Restricted Securities, and
4
<PAGE> 6
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after the
Filing Deadline for the Shelf Registration Statement (such 90th day the
"EFFECTIVENESS DEADLINE").
If, after Finco and the Company have filed an Exchange Offer
Registration Statement that satisfies the requirements of Section 3(a) above,
Finco and the Company are required to file and make effective a Shelf
Registration Statement solely because the Exchange Offer is not permitted under
applicable federal law (i.e., clause (a)(i) above), then the filing of the
Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above; provided that, in such event, the Company
shall remain obligated to meet the Effectiveness Deadline set forth in clause
(y).
To the extent necessary to ensure that the Shelf Registration
Statement is available for sales of Transfer Restricted Securities by the
Holders thereof entitled to the benefit of this Section 4(a) and the other
securities required to be registered therein pursuant to Section 6(b)(ii)
hereof, the Company and Finco shall use their respective best efforts to keep
any Shelf Registration Statement required by this Section 4(a) continuously
effective, supplemented, amended and current as required by and subject to the
provisions of Sections 6(b) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of at least two
years (as extended pursuant to Section 6(c)(i)) following the Closing Date, or
such shorter period as will terminate when all Transfer Restricted Securities
covered by such Shelf Registration Statement have been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. SPECIAL INTEREST
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation Deadline
or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself declared effective (each such event referred to in clauses (i) through
(iv), a "REGISTRATION DEFAULT"), then the Company and Finco hereby jointly and
severally agree to pay to each Holder of Transfer Restricted Securities affected
thereby additional interest ("SPECIAL INTEREST") in an amount equal to $.05 per
week per $1,000 in principal amount of Transfer Restricted Securities held by
such Holder for each week or portion thereof that the Registration Default
continues for the first 90-day period immediately following the occurrence of
such Registration Default. The amount of the Special Interest shall increase by
an additional $.05 per week per $1,000 in principal amount of Transfer
Restricted Securities with respect to each subsequent 90-day period until all
5
<PAGE> 7
Registration Defaults have been cured, up to a maximum amount of special
interest of $.50 per week per $1,000 in principal amount of Transfer Restricted
Securities; provided that the Company and Finco shall in no event be required to
pay special interest for more than one Registration Default at any given time.
Notwithstanding anything to the contrary set forth herein, (1) upon filing of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (i) above, (2) upon the effectiveness of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (ii) above, (3) upon Consummation of the
Exchange Offer, in the case of (iii) above, or (4) upon the filing of a
post-effective amendment to the Registration Statement or an additional
Registration Statement that causes the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement) to again be declared
effective or made usable in the case of (iv) above, the Special Interest payable
with respect to the Transfer Restricted Securities as a result of such clause
(i), (ii), (iii) or (iv), as applicable, shall immediately cease.
All accrued Special Interest shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which Special Interest
are due cease to be Transfer Restricted Securities, all obligations of the
Company and Finco to pay Special Interest with respect to securities shall
survive until such time as such obligations with respect to such securities
shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, Finco and the Company shall (x) comply with all applicable
provisions of Section 6(c) below, (y) use their respective best efforts to
effect such exchange and to permit the resale of Exchange Notes by
Broker-Dealers that tendered in the Exchange Offer Restricted Notes that such
Broker-Dealer acquired for its own account as a result of its market making
activities or other trading activities (other than Restricted Notes acquired
directly from the Company or any of its Affiliates) being sold in accordance
with the intended method or methods of distribution thereof, and (z) comply with
all of the following provisions:
(i) If, following the date hereof there has been announced a
change in Commission policy with respect to exchange offers such as the
Exchange Offer, that in the reasonable opinion of counsel to the Company
raises a substantial question as to whether the Exchange Offer is
permitted by applicable federal law, the Company and Finco hereby agree to
seek a no-action letter or other favorable decision from the Commission
allowing the Company and Finco to Consummate an Exchange Offer for such
Transfer Restricted Securities. The Company and Finco hereby agree to
pursue the issuance of such a decision to the Commission staff level. In
connection with the foregoing, the Company and Finco hereby agree to take
all such other reasonable actions as may be requested by the Commission or
otherwise required in connection with the issuance of such decision,
including without limitation (A) participating in telephonic conferences
with the Commission, (B) delivering to the Commission staff an analysis
prepared by counsel to the Company setting forth the legal bases, if any,
upon which such counsel has concluded that such an Exchange Offer should
be permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer,
each Holder of Transfer Restricted Securities (including, without
limitation, any Holder who is a Broker Dealer) shall furnish, upon the
request of the Company, prior to the Consummation of the Exchange Offer, a
written representation to the Company and Finco (which may be contained in
the letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an Affiliate of the Company,
(B) it is not engaged in, and does not intend to engage in, and has no
arrangement or
6
<PAGE> 8
understanding with any person to participate in, a distribution of the
Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring
the Exchange Notes in its ordinary course of business. As a condition to
its participation in the Exchange Offer, each Holder using the Exchange
Offer to participate in a distribution of the Exchange Notes shall
acknowledge and agree that, if the resales are of Exchange Notes obtained
by such Holder in exchange for Restricted Notes acquired directly from the
Company or an Affiliate thereof, it (1) could not, under Commission policy
as in effect on the date of this Agreement, rely on the position of the
Commission enunciated in Morgan Stanley and Co., Inc. (available June 5,
1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling dated July
2, 1993, and similar no-action letters (including, if applicable, any
no-action letter obtained pursuant to clause (i) above), and (2) must
comply with the registration and prospectus delivery requirements of the
Act in connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective registration
statement containing the selling security holder information required by
Item 507 or 508, as applicable, of Regulation S-K.
(iii) If required by the Commission, prior to effectiveness of
the Exchange Offer Registration Statement, Finco and the Company shall
provide a supplemental letter to the Commission (A) stating that the
Company and Finco are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action
letter obtained pursuant to clause (i) above, (B) including a
representation that neither Issuer nor the Company has entered into any
arrangement or understanding with any Person to distribute the Exchange
Notes to be received in the Exchange Offer and that, to the best of
Finco's and the Company's information and belief, each Holder
participating in the Exchange Offer is acquiring the Exchange Notes in its
ordinary course of business and has no arrangement or understanding with
any Person to participate in the distribution of the Exchange Notes
received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, Finco and the Company shall (i) comply with all the
provisions of Section 6(c) below and use their respective best efforts to effect
such registration to permit the sale of the Transfer Restricted Securities being
sold in accordance with the intended method or methods of distribution thereof
(as indicated in the information furnished to the Company pursuant to Section
4(b) hereof), and pursuant thereto Finco and the Company will prepare and file
with the Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof and (ii) issue, upon the request of any
Holder or purchaser of Restricted Notes covered by any Shelf Registration
Statement contemplated by this Agreement, Exchange Notes having an aggregate
principal amount equal to the aggregate principal amount of Restricted Notes
sold pursuant to the Shelf Registration Statement and surrendered to the Company
for cancellation; the Company shall register Exchange Notes on the Shelf
Registration Statement for this purpose and issue the Exchange Notes to the
purchaser(s) of securities subject to the Shelf Registration Statement in the
names as such purchaser(s) shall designate.
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement, Finco and the Company
agree to:
(i) use their respective best efforts to keep such Registration
Statement continuously
7
<PAGE> 9
effective and provide all requisite financial statements for the period
specified in Section 3 or 4 of this Agreement, as applicable. Upon the
occurrence of any event that would cause any such Registration Statement
or the Prospectus contained therein (A) to contain an untrue statement of
material fact or omit to state any material fact necessary to make the
statements therein not misleading or (B) not to be effective and usable
for resale of Transfer Restricted Securities during the period required by
this Agreement, Finco and the Company shall file promptly an appropriate
amendment to such Registration Statement curing such defect, and, if
Commission review is required, use their respective best efforts to cause
such amendment to be declared effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may
be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may be;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act, and to comply fully with Rules 424, 430A and 462, as applicable,
under the Act in a timely manner; and comply with the provisions of the
Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set
forth in such Registration Statement or supplement to the Prospectus;
(iii) advise the Initial Purchaser promptly and, if requested by
the Initial Purchaser, confirm such advice in writing, (A) when the
Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to any applicable Registration Statement or
any post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for additional
information relating thereto, (C) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement
under the Act or of the suspension by any state securities commission of
the qualification of the Transfer Restricted Securities for offering or
sale in any jurisdiction, or the initiation of any proceeding for any of
the preceding purposes, (D) of the existence of any fact or the happening
of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Registration
Statement in order to make the statements therein not misleading, or that
requires the making of any additions to or changes in the Prospectus in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, the Company and Finco shall use their
respective best efforts to obtain the withdrawal or lifting of such order
at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have occurred,
prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
(v) furnish to the Initial Purchaser (and the Holders, if
requested) in connection with such exchange or sale, if any, before filing
with the Commission, copies of any Registration Statement or
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<PAGE> 10
any Prospectus included therein or any amendments or supplements to any
such Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment of
the Initial Purchaser in connection with such sale, if any, for a period
of at least five Business Days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which the Initial Purchaser shall reasonably
object within five Business Days after the receipt thereof. The Initial
Purchaser shall be deemed to have reasonably objected to such filing if
such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading or fails to comply with the applicable
requirements of the Act;
(vi) in case of a Shelf Registration Statement only, make
available, at reasonable times, for inspection by the Initial Purchaser
and any attorney or accountant retained by the Initial Purchaser, all
financial and other records, pertinent corporate documents of Finco and
the Company and cause Finco's and the Company's officers, directors and
employees to supply all information reasonably requested by the Initial
Purchaser, attorney or accountant in connection with such Registration
Statement or any post-effective amendment thereto subsequent to the filing
thereof and prior to its effectiveness; provided, however, that such
persons shall first agree in writing with Finco and the Company that any
information that is reasonably and in good faith designated by Finco or
the Company in writing as confidential by such persons unless (i)
disclosure of such information is required by court or administrative
order or is necessary to respond to inquiries of regulatory authorities,
(ii) disclosure of such information is required by law (including any
disclosure requirements pursuant to Federal securities laws in conjunction
with the filing of such Shelf Registration Statement or use of any
Prospectus), (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard such
information by such person or (iv) such information becomes available to
such person from a source other than Finco and the Company and its
subsidiaries and such source is not bound by confidentiality agreement;
provided, further, that the foregoing investigation shall be coordinated
on behalf of such Holders by one representative designated by and on
behalf of such Holders and any such confidential information shall be
available from such representative to such Holders so long as any Holder
agrees to be bound by such confidentiality agreement;
(vii) if requested by any Holders in connection with such
exchange or sale, promptly include in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such Holders may reasonably request to have
included therein, including, without limitation, information relating to
the "Plan of Distribution" of the Transfer Restricted Securities and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after Finco and the Company is notified
of the matters to be included in such Prospectus supplement or
post-effective amendment;
(viii) upon the request of each Holder, furnish to such Holder
in connection with such exchange or sale, without charge, at least one
copy of the Registration Statement, as first filed with the Commission,
and of each amendment thereto, including all documents incorporated by
reference therein and all exhibits (including exhibits incorporated
therein by reference);
(ix) deliver to each Holder without charge, as many copies of
the Prospectus (including each preliminary prospectus) and any amendment
or supplement thereto as such Persons reasonably may request; Finco and
the Company hereby consent to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each selling Holder
in connection with the offering and
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<PAGE> 11
the sale of the Transfer Restricted Securities covered by the Prospectus
or any amendment or supplement thereto;
(x) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such reasonable
representations and warranties and take all such other reasonable actions
in connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to the Shelf Registration
Statement contemplated by this Agreement as may be reasonably requested by
any Holder in connection with any sale or resale pursuant to the Shelf
Registration Statement. In such connection, Finco and the Company shall:
(A) upon request of any Holder, furnish (or in the case of
paragraphs (2) and (3), use their respective best efforts to cause to
be furnished) to each Holder or upon the effectiveness of the Shelf
Registration Statement, as the case may be:
(1) a certificate, dated such date, signed on behalf of
Finco and the Company by (x) the President or any Vice President
and (y) a principal financial or accounting officer of the
Company and Finco, confirming, as of the date thereof, the
matters set forth in Sections 6(x), 9(a) and 9(b) of the
Purchase Agreement and such other similar matters as such
Holders may reasonably request;
(2) an opinion, dated the date of effectiveness of the
Shelf Registration Statement, of counsel for Finco and the
Company covering matters similar to those set forth in Section
9(e) of the Purchase Agreement and such other matter as such
Holder may reasonably request, and in any event including a
statement to the effect that such counsel has participated in
conferences with officers and other representatives of Finco and
the Company, representatives of the independent public
accountants for Finco and the Company and have considered the
matters required to be stated therein and the statements
contained therein, although such counsel has not independently
verified the accuracy, completeness or fairness of such
statements; and that such counsel advises that, on the basis of
the foregoing (relying as to materiality to the extent such
counsel deems appropriate upon the statements of officers and
other representatives of Finco and the Company and without
independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that the
Shelf Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became
effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or
that the Prospectus contained in such Registration Statement as
of its date contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading. Without limiting the
foregoing, such counsel may state further that such counsel
assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the
financial statements, notes and schedules and other financial
data included in the Shelf Registration Statement contemplated
by this Agreement or the related Prospectus; and
(3) a customary comfort letter as of the date of
effectiveness of the Shelf Registration Statement from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters to underwriters in connection with underwritten
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Section 9(g) of the Purchase
Agreement; and
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<PAGE> 12
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance
with the matters covered in clause (A) above and with any customary
conditions contained in the any agreement entered into by Finco and
the Company pursuant to this clause (xi);
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may reasonably request and do any and
all other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that neither the
Company nor Finco shall be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation, other
than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to
register such Transfer Restricted Securities in such denominations and
such names as the selling Holders may request at least two Business Days
prior to such sale of Transfer Restricted Securities;
(xiii) use their respective best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xii)
above;
(xiv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration Statement
covering such Transfer Restricted Securities and provide the Trustee under
the Indenture with printed certificates for the Transfer Restricted
Securities which are in a form eligible for deposit with The Depository
Trust Company;
(xv) otherwise use their respective best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xvi) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required
by this Agreement and, in connection therewith, cooperate with the Trustee
and the Holders to effect such changes to the Indenture as may be required
for such Indenture to be so qualified in accordance with the terms of the
TIA; and execute and use best efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other forms
and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xvii) provide promptly to each Holder, upon request, each
document filed with the Commission pursuant to the requirements of Section
13 or Section 15(d) of the Exchange Act.
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<PAGE> 13
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from Finco or the Company of the existence of
any fact of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT
DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by Finco with more recently
dated Prospectuses or (ii) deliver to Finco (at Finco's expense) all copies,
other than permanent file copies, then in such Holder's possession of the
Prospectus covering such Transfer Restricted Securities that was current at the
time of receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by a number of days equal to the number of days
in the period from and including the date of delivery of the Suspension Notice
to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to Finco's and the Company's performance of
or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws; (iii) all expenses of printing (including printing certificates for the
Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses
whether for exchanges, sales, market making or otherwise), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
Finco and the Company and all reasonable fees and disbursements of counsel for
the Holders of Transfer Restricted Securities; (v) all application and filing
fees, if any, in connection with listing the Exchange Notes on a national
securities exchange or automated quotation system pursuant to the requirements
hereof; and (vi) all fees and disbursements of independent certified public
accountants of Finco and the Company (including the expenses of any special
audit and comfort letters required by or incident to such performance).
The Company will, in any event, bear its and Finco's internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), and its external
expenses (including without limitation, legal expenses, the expenses of any
annual audit and the fees and expenses of any Person, including special experts,
retained by Finco or the Company).
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchaser and the Holders of Transfer Restricted Securities who are
tendering Restricted Notes in the Exchange Offer and/or selling or reselling
Restricted Notes or Exchange Notes pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be Akin, Gump, Strauss, Hauer & Feld, L.L.P., unless
another firm shall be chosen by the Holders of a majority in principal amount of
the Transfer Restricted Securities for whose benefit such Registration Statement
is being prepared.
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SECTION 8. INDEMNIFICATION
(a) Finco and the Company agree, jointly and severally, to indemnify
and hold harmless each Holder, its directors, officers and each Person, if any,
who controls such Holder (within the meaning of Section 15 of the Act or Section
20 of the Exchange Act), from and against any and all losses, claims, damages,
liabilities, judgments, (including without limitation, any reasonable legal or
other expenses incurred in connection with investigating or defending any
matter, including any action that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto)
provided by Finco and the Company to any Holder or any prospective purchaser of
Exchange Notes or registered Restricted Notes, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by an untrue
statement or omission or alleged untrue statement or omission that is based upon
information relating to any of the Holders furnished in writing to the Company
by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally
and not jointly, to indemnify and hold harmless the Company and Finco, and their
respective directors and officers, and each person, if any, who controls (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Company or Finco to the same extent as the foregoing indemnity from the Company
and Finco set forth in section (a) above, but only with reference to information
relating to such Holder furnished in writing to the Company by such Holder
expressly for use in any Registration Statement. In no event shall any Holder,
its directors, officers or any Person who controls such Holder be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages that such Holder, its directors, officers or any Person who controls
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general
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<PAGE> 15
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) for all
indemnified parties and all such fees and expenses shall be reimbursed as they
are incurred. Such firm shall be designated in writing by a majority of the
Holders, in the case of the parties indemnified pursuant to Section 8(a), and by
the Company and Finco, in the case of parties indemnified pursuant to Section
8(b). The indemnifying party shall indemnify and hold harmless the indemnified
party from and against any and all losses, claims, damages, liabilities and
judgments by reason of any settlement of any action (i) effected with its
written consent or (ii) effected without its written consent if the settlement
is entered into more than twenty business days after the indemnifying party
shall have received a request from the indemnified party for reimbursement for
the fees and expenses of counsel (in any case where such fees and expenses are
at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company and
Finco, on the one hand, and the Holders, on the other hand, from their sale of
Transfer Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(d)(i) above
but also the relative fault of the Company and Finco, on the one hand, and of
the Holder, on the other hand, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or judgments, as
well as any other relevant equitable considerations. The relative fault of the
Company and Finco, on the one hand, and of the Holder, on the other hand, shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company and/or Finco, on
the one hand, or by the Holder, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and judgments referred to above shall
be deemed to include, subject to the limitations set forth in the second
paragraph of Section 8(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company, Finco and each Holder agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate,
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<PAGE> 16
any amount in excess of the amount by which the total received by such Holder
with respect to the sale of Transfer Restricted Securities pursuant to a
Registration Statement exceeds (i) the amount paid by such Holder for such
Transfer Restricted Securities and (ii) the amount of any damages which such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(d) are several in proportion to the respective principal amount of
Transfer Restricted Securities held by each Holder hereunder and not joint.
(e) The Company and Finco agree that the indemnity and contribution
provisions of this Section 8 shall apply to any Broker-Dealers who is deemed to
be an Affiliate of the Company or Finco to the same extent, on the same
conditions, as it applies to Holders.
SECTION 9. RULE 144A AND RULE 144
Finco and the Company agree with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in which
Finco and/or the Company (i) is not subject to Section 13 or 15(d) of the
Exchange Act, to make available, upon request of any Holder, to such Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A, subject to Section 4.6 of the Indenture, and
(ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings
required thereby in a timely manner in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144, subject to Section 2.6 of the
Indenture.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company and Finco acknowledge and agree that any
failure by the Company and/or Finco to comply with their respective obligations
under Sections 3 and 4 hereof may result in material irreparable injury to the
Initial Purchaser or the Holders for which there is no adequate remedy at law,
that it will not be possible to measure damages for such injuries precisely and
that, in the event of any such failure, the Initial Purchaser or any Holder may
obtain such relief as may be required to specifically enforce the Company's and
Finco's obligations under Sections 3 and 4 hereof. The Company and Finco further
agree to waive the defense in any action for specific performance that a remedy
at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor Finco will,
on or after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's or Finco's
securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), Finco has obtained the written consent of
Holders of all outstanding Transfer Restricted Securities and (ii) in the case
of all other provisions hereof, Finco has obtained the written consent of
Holders of a majority of the outstanding
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<PAGE> 17
principal amount of Transfer Restricted Securities (excluding Transfer
Restricted Securities held by the Company or its Affiliates). Notwithstanding
the foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose Transfer Restricted
Securities are being tendered pursuant to the Exchange Offer, and that does not
affect directly or indirectly the rights of other Holders whose Transfer
Restricted Securities are not being tendered pursuant to such Exchange Offer,
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities subject to such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between Finco and the Company, on
the one hand, and the Initial Purchaser, on the other hand, and shall have the
right to enforce such agreements directly to the extent they may deem such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to Finco:
RBF Finance Co.
901 Threadneedle
Houston, Texas 77079-2982
Fax No.: (281) 496-0285
With a copy to:
Gardere Wynne Sewell & Riggs, L.L.P.
1000 Louisiana, Suite 3400
Houston, Texas 77002-5007
Fax No.: (713) 276-5555
Attention: Frank Putman
(iii) if to the Company:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Fax No.: (281) 496-0285
Attention: General Counsel
With a copy to:
Gardere Wynne Sewell & Riggs, L.L.P.
1000 Louisiana, Suite 3400
Houston, Texas 77002-5007
Attention: Frank Putman
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage
16
<PAGE> 18
prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next
business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders; provided, that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms hereof or of the Purchase Agreement or the Indenture. If
any transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
17
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
RBF FINANCE CO.
By: /s/ STEVEN A. WEBSTER
---------------------------------
Name: Steven A. Webster
Title: President
R&B FALCON CORPORATION
By: /s/ STEVEN A. WEBSTER
---------------------------------
Name: Steven A. Webster
Title: CEO
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ CRAIG KLAASMEYER
---------------------------------
Name: Craig Klaasmeyer
Title: Senior Vice President
18
<PAGE> 20
EXHIBIT A
NOTICE OF FILING OF
A/B EXCHANGE OFFER REGISTRATION STATEMENT
To: Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Attention: Louise Guarneri (Compliance Department)
Fax: (212) 892-7272
From: RBF Finance Co.
R&B Falcon Corporation
Date: , 1999
---------
For your information only (NO ACTION REQUIRED):
Today, ______, 1999, we filed [AN A/B EXCHANGE REGISTRATION STATEMENT/A
SHELF REGISTRATION STATEMENT] with the Securities and Exchange Commission. We
currently expect this registration statement to be declared effective within __
business days of the date hereof.
19
<PAGE> 1
EXHIBIT 5.1
May 26, 1999
Board of Directors
RBF Finance Co.
Gentlemen:
We have acted as counsel to RBF Finance Co., a Delaware corporation (the
"Company"), in connection with the Company's Registration Statement on Form S-4
(the "Registration Statement") being filed with the Securities and Exchange
Commission on this date relating to the registration under the Securities Act of
1933, as amended (the "Securities Act"), of the offer by the Company (the
"Exchange Offer") of certain notes to be exchanged (the "Exchange Notes") for up
to $400 million aggregate principal amount of its 11% Senior Secured Notes Due
2006 and up to $400 million of its 11d% Senior Secured Notes Due 2009
(collectively, the "Outstanding Notes"). The Exchange Notes are to have terms
substantially identical in all material respects to the Outstanding Notes,
except that such Exchange Notes will not contain terms with respect to transfer
restrictions. The Exchange Notes are proposed to be issued in accordance with
the provisions of the Indenture, dated as of March 26, 1999, between the United
States Trust Company of New York, as Trustee (the "Indenture").
As the basis for the opinions expressed below, we have examined the
Registration Statement, the Prospectus contained therein, the Indenture, which
is filed as an exhibit to the Prospectus, and such statutes, regulations,
corporate records and documents, certificates of corporate and public officials
and other instruments as we have deemed necessary or advisable for the purposes
of this opinion. In such examination, we have assumed (i) that the signatures on
all documents that we have examined are genuine, (ii) the authenticity of all
documents submitted to us as originals, and (iii) the conformity with the
original documents of all documents submitted to us as copies.
In connection with this opinion, we have assumed that (i) the Registration
Statement, and any amendments thereto (including post-effective amendments),
will have become effective, (ii) the Indenture will have been qualified under
the Trust Indenture Act of 1939, as amended, and (iii) the Exchange Notes will
be issued and exchanged in compliance with applicable federal and state
securities laws and in the manner stated in the Registration Statement.
<PAGE> 2
Board of Directors
RBF Finance Co.
May 26, 1999
Page Two
Based upon the foregoing, subject to the qualifications hereinafter set
forth, and having regard for such legal considerations as we have deemed
relevant, we are of the opinion that the Exchange Notes proposed to be issued
pursuant to the Exchange Offer have been duly authorized for issuance and,
subject to the Registration Statement becoming effective under the Securities
Act and in compliance with any applicable state securities laws, when executed,
authenticated, issued, delivered and exchanged in accordance with the Exchange
Offer and the Indenture, will be legally issued and will constitute valid and
legally binding obligations of the Company, enforceable against the Company in
accordance with their terms.
The opinion expressed above with respect to the Exchange Notes is subject
to the qualifications (x) that the enforcement of the Exchange Notes may be
limited by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting creditors' rights generally and (ii)
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity) and (y) that a waiver of rights under any usury
laws may be unenforceable. Furthermore, we express no opinion as to the
enforceability of any provisions of the Exchange Notes that would require the
performance thereof in the presence of fraud or illegality on the part of the
holders of the Exchange Notes or the Trustee.
The opinions expressed herein are limited exclusively to the federal laws
of the United States of America, the laws of the State of Texas and the General
Corporation Law of the State of Delaware, and we are expressing no opinion as to
the effect of the laws of any other jurisdiction.
This opinion is rendered solely for the benefit of the Company and is not
to be used, circulated, copied, quoted or referred to without our prior written
consent. We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the statements made with respect to us under the
caption "Legal Matters" in the Prospectus included as part of the Registration
Statement.
Very truly yours,
/s/ WILLIAM MARK YOUNG
William Mark Young, Partner
<PAGE> 1
EXHIBIT 10.1
PURCHASE AGREEMENT
------------------------
RBF FINANCE CO.
$800,000,000 PRINCIPAL AMOUNT OF
$400,000,000 11% SENIOR SECURED NOTES DUE 2006
$400,000,000 11-3/8% SENIOR SECURED NOTES DUE 2009
UNCONDITIONALLY GUARANTEED BY
R&B FALCON CORPORATION
MARCH 19, 1999
------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE> 2
$800,000,000
$400,000,000 11%SENIOR SECURED NOTES DUE 2006
$400,000,000 11-3/8% SENIOR SECURED NOTES DUE 2009
RBF FINANCE CO.
UNCONDITIONALLY GUARANTEED BY
R&B FALCON CORPORATION
PURCHASE AGREEMENT
March 19, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
AS INITIAL PURCHASER
277 PARK AVENUE
NEW YORK, NEW YORK 10172
Dear Sirs:
RBF Finance Co., a Delaware corporation ("FINCO"), proposes to issue
and sell to Donaldson, Lufkin & Jenrette Securities Corporation (the "INITIAL
PURCHASER") an aggregate of $400,000,000 in principal amount of its 11% Senior
Secured Notes due 2006 and $400,000,000 in principal amount of its 11-3/8%
Senior Secured Notes due 2009 (collectively, the "RESTRICTED NOTES"), subject to
the terms and conditions set forth herein. The Restricted Notes are to be issued
pursuant to the provisions of an indenture (the "INDENTURE"), to be dated as of
the Closing Date (as defined below), among Finco, the Company (as defined below)
and United States Trust Company of New York, as trustee (the "TRUSTEE"). The
Restricted Notes and the Exchange Notes (as defined below), issuable in exchange
therefor, are collectively referred to herein as the "SECURED NOTES." The
Secured Notes will be guaranteed (the "GUARANTEE") by R&B Falcon Corporation, a
Delaware corporation (the "COMPANY"). Capitalized terms used but not defined
herein shall have the meanings given to such terms in the Indenture.
1. OFFERING MEMORANDUM. The Restricted Notes will be offered and sold
to the Initial Purchaser pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"Act"). Finco and the Company have prepared a preliminary offering memorandum,
dated March 15, 1999 (the "PRELIMINARY OFFERING MEMORANDUM"), and a final
offering memorandum, dated March 19, 1999 (the "OFFERING Memorandum"), relating
to the Restricted Notes and the Guarantee.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Restricted Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
1
<PAGE> 3
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. ACCORDINGLY, THIS NOTE MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS
AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1),
(2), (3) OR (7) UNDER REGULATION D UNDER THE SECURITIES ACT (AN
"IAI")),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A OR (C) TO AN AIA THAT, PRIOR TO SUCH
TRANSFER, FURNISHES THE TRUSTEE WITH A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF
THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF
SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES
LESS THAN $250,000, AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT,
AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
2
<PAGE> 4
Even after the registration of the Exchange Notes (defined below) under
the Act, the Exchange Notes, when issued, will bear a legend to the following
effect unless otherwise agreed upon by Finco and the holder thereof:
THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"),
(B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER REGULATION D UNDER THE SECURITIES ACT
(AN "IAI")) OR (C) IT IS A PERSON INVOLVED IN THE ORGANIZATION OR
OPERATION OF THE COMPANY OR AN AFFILIATE (AS DEFINED IN RULE 405 UNDER
THE SECURITIES ACT) OF THE COMPANY,
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT TO (A) A QIB, (B) AN IAI, OR (C) A PERSON INVOLVED IN THE
ORGANIZATION OR OPERATION OF THE COMPANY OR AN AFFILIATE (AS DEFINED
IN RULE 405 UNDER THE SECURITIES ACT) OF THE COMPANY,
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING. THE
INDENTURE ALSO CONTAINS A PROVISION REQUIRING FINCO AND THE COMPANY TO
EXERCISE REASONABLE CARE TO ENSURE THAT THE SECURED NOTES ARE RESOLD
OR OTHERWISE TRANSFERRED ONLY TO PURCHASERS MEETING THE REQUIREMENTS
SPECIFIED IN CLAUSE (2) ABOVE.
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, Finco agrees to issue and
sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from
Finco, the aggregate principal amount of Restricted Notes at a purchase price
equal to 100% of the principal amount thereof (the "PURCHASE Price").
3. TERMS OF OFFERING. The Initial Purchaser has advised, and represents
and warrants to, Finco that the Initial Purchaser will make offers and sales
(the "EXEMPT RESALES") of the Restricted Notes purchased hereunder on the terms
set forth in the Offering Memorandum, as amended or supplemented, solely to (i)
persons whom the Initial Purchaser reasonably believes to be "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act)
("QIBS"), and (ii) to persons
3
<PAGE> 5
permitted to purchase the Restricted Notes in offshore transactions in reliance
upon Regulation S under the Act (each a "REGULATION S PURCHASER") (QIBs and
Regulation S Purchasers being referred to herein as the "ELIGIBLE PURCHASERS").
The Initial Purchaser will offer the Restricted Notes to Eligible Purchasers
initially at a price equal to the percentage of the principal amount thereof set
forth on the cover page of the Offering Memorandum.
Holders (including subsequent transferees) of the Restricted Notes will
have the registration rights set forth in the registration rights agreement (the
"REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date, in substantially
the form of Exhibit A hereto, for so long as such Restricted Notes constitute
"TRANSFER RESTRICTED SECURITIES" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, Finco and the Company
will agree to (i) file with the Securities and Exchange Commission (the
"COMMISSION") under the circumstances set forth therein (A) a registration
statement under the Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating
to two new series of Finco's Secured Notes of like amounts having identical
terms (the "EXCHANGE NOTES") to be offered in exchange for the Restricted Notes
(such offer to exchange being referred to as the "EXCHANGE OFFER") and the
Guarantee and/or (B) a shelf registration statement pursuant to Rule 415 under
the Act (the "SHELF REGISTRATION STATEMENT" and, together with the Exchange
Offer Registration Statement, the "REGISTRATION STATEMENTS") relating to the
resale by certain holders of the Restricted Notes and (ii) to use their
reasonable best efforts to cause such Registration Statements to be declared and
remain effective and usable for the periods specified in the Registration Rights
Agreement and to consummate the Exchange Offer. The Loan Agreements, the
Security Agreements, the Escrow Agreements described in the Offering Memorandum
and the related security documents are herein referred to collectively as the
"COLLATERAL DOCUMENTS." This Agreement, the Indenture, the Restricted Notes, the
Guarantee, the Registration Rights Agreement and the Collateral Documents are
referred to herein as the "OPERATIVE DOCUMENTS."
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the Secured
Notes shall be made at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
in Houston, Texas, or such other location as may be mutually acceptable. Such
delivery and payment shall be made at 9:00 a.m. New York City time, on March 26,
1999 or at such other time or date as shall be agreed upon by the Initial
Purchaser and Finco in writing. The time and date of such delivery and the
payment for the Secured Notes are herein called the "CLOSING DATE."
(b) One or more of the Restricted Notes in definitive global form,
registered in the name of Cede & Co., as nominee of The Depository Trust Company
("DTC"), having an aggregate principal amount corresponding to the aggregate
principal amount of the Restricted Notes (collectively, the "GLOBAL NOTES"),
shall be delivered by Finco to the Initial Purchaser (or as the Initial
Purchaser direct) in each case with any transfer taxes thereon duly paid by
Finco against payment by the Initial Purchaser of the Purchase Price thereof by
wire transfer in same day funds to the order of Finco. The Global Notes shall be
made available to the Initial Purchaser for inspection not later than 9:30 a.m.,
New York City time, on the business day immediately preceding the Closing Date.
5. AGREEMENTS OF FINCO AND THE COMPANY. Each of Finco and the Company
hereby agrees with the Initial Purchaser as follows:
(a) To advise the Initial Purchaser promptly and, if requested by the
Initial
4
<PAGE> 6
Purchaser, confirm such advice in writing, (i) of the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of any Restricted Notes for offering or sale in any
jurisdiction designated by the Initial Purchaser pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose and (ii) of
the happening of any event during the period referred to in Section 5(c) below
that makes any statement of a material fact made in the Preliminary Offering
Memorandum or the Offering Memorandum untrue or that requires any additions to
or changes in the Preliminary Offering Memorandum or the Offering Memorandum in
order to make the statements therein not misleading. Finco and the Company shall
use their best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Restricted Notes under any
state securities or Blue Sky laws and, if at any time any state securities
commission or other federal or state regulatory authority shall issue an order
suspending the qualification or exemption of any Restricted Notes under any
state securities or Blue Sky laws, Finco and the Company shall use their best
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.
(b) To furnish the Initial Purchaser and those persons identified by
the Initial Purchaser to Finco as many copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments or supplements
thereto, as the Initial Purchaser may reasonably request for the time period
specified in Section 5(c). Subject to the Initial Purchaser's compliance with
their representations and warranties and agreements set forth in Section 7
hereof, Finco consents to the use of the Preliminary Offering Memorandum and the
Offering Memorandum, and any amendments and supplements thereto required
pursuant hereto, by the Initial Purchaser in connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the Initial
Purchaser an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchaser and in connection with
market-making activities of the Initial Purchaser for so long as any Restricted
Notes are outstanding, (i) not to make any amendment or supplement to the
Offering Memorandum of which the Initial Purchaser shall not previously have
been advised or to which the Initial Purchaser shall reasonably object after
being so advised and (ii) to prepare promptly upon the Initial Purchaser's
reasonable request based on the opinion of its counsel, any amendment or
supplement to the Offering Memorandum which may be necessary or advisable in
connection with such Exempt Resales or such market-making activities.
(d) If, during the period referred to in Section 5(c) above, any event
shall occur or condition shall exist as a result of which, in the opinion of
counsel to the Initial Purchaser, it becomes necessary to amend or supplement
the Offering Memorandum in order to make the statements therein, in the light of
the circumstances when such Offering Memorandum is delivered to an Eligible
Purchaser, not misleading, or if, in the opinion of counsel to the Initial
Purchaser, it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, forthwith to prepare an appropriate amendment or
supplement to such Offering Memorandum so that the statements therein, as so
amended or supplemented, will not, in the light of the circumstances when it is
so delivered, be misleading, or so that such Offering Memorandum will comply
with applicable law, and to furnish to the Initial Purchaser and such other
persons as the Initial Purchaser may designate such number of copies thereof as
the Initial Purchaser may reasonably request.
(e) Prior to the sale of all Restricted Notes pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial Purchaser and
counsel to the Initial Purchaser in
5
<PAGE> 7
connection with the registration or qualification of the Restricted Notes for
offer and sale to the Initial Purchaser and pursuant to Exempt Resales under the
securities or Blue Sky laws of such jurisdictions as the Initial Purchaser may
reasonably request and to continue such registration or qualification in effect
so long as required for Exempt Resales and to file such consents to service of
process or other documents as may be necessary in order to effect such
registration or qualification; provided, however, that neither Finco nor the
Company shall be required in connection therewith to qualify as a foreign
corporation in any jurisdiction in which it is not now so qualified or to take
any action that would subject it to general consent to service of process or
taxation other than as to matters and transactions relating to the Preliminary
Offering Memorandum, the Offering Memorandum or Exempt Resales, in any
jurisdiction in which it is not now so subject.
(f) So long as the Secured Notes are outstanding, (i) to mail and make
generally available as soon as practicable after the end of each fiscal year to
the record holders of the Secured Notes a financial report of the Company and
its subsidiaries on a consolidated basis if such report is required to be made
available pursuant to Section 4.13 of the Indenture (and a similar financial
report of all unconsolidated subsidiaries, if any), all such financial reports
to include a consolidated balance sheet, a consolidated statement of operations,
a consolidated statement of cash flows and a consolidated statement of
stockholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified by
the independent public accountants of Finco or the Company, as applicable, and
(ii) to mail or make generally available as soon as practicable after the end of
each quarterly period (except for the last quarterly period of each fiscal year)
to such holders, a consolidated balance sheet, a consolidated statement of
operations and a consolidated statement of cash flows (and similar financial
reports of all unconsolidated subsidiaries, if any) as of the end of and for
such period, and for the period from the beginning of such year to the close of
such quarterly period, together with comparable information for the
corresponding periods of the preceding year of Finco or the Company, as
applicable.
(g) So long as the Secured Notes are outstanding, to furnish upon
request to the Initial Purchaser as soon as available copies of all reports or
other communications furnished by Finco or the Company to its security holders
or furnished to or filed with the Commission or any national securities exchange
on which any class of securities of Finco or the Company is listed and such
other publicly available information concerning Finco as the Initial Purchaser
may reasonably request.
(h) So long as any of the Restricted Notes remain outstanding and
during any period in which Finco and the Company are not subject to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), to make available to any holder of Restricted Notes in connection with
any sale thereof and any prospective purchaser of such Restricted Notes from
such holder, the information ("RULE 144A INFORMATION") required by Rule
144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the obligations of Finco and the Company
under this Agreement, including: (i) the fees, disbursements and expenses of
counsel to Finco and the Company and accountants of Finco and the Company in
connection with the sale and delivery of the Restricted Notes to the Initial
Purchaser and pursuant to Exempt Resales, and all other fees and expenses in
connection with the preparation, printing, filing and distribution of the
Preliminary Offering Memorandum, the Offering Memorandum and all amendments and
supplements to any of the foregoing (including financial statements), including
the
6
<PAGE> 8
mailing and delivering of copies thereof to the Initial Purchaser and
persons designated by it in the quantities specified herein, (ii) all costs and
expenses related to the transfer and delivery of the Restricted Notes to the
Initial Purchaser and pursuant to Exempt Resales, including any transfer or
other taxes payable thereon, (iii) all costs of printing or producing this
Agreement, the other Operative Documents and any other agreements or documents
in connection with the offering, purchase, sale or delivery of the Restricted
Notes, (iv) all expenses in connection with the registration or qualification of
the Restricted Notes and the Guarantee for offer and sale under the securities
or Blue Sky laws of the several states and all costs of printing or producing
any preliminary and supplemental Blue Sky memoranda in connection therewith
(including the filing fees and fees and disbursements of counsel for the Initial
Purchaser in connection with such registration or qualification and memoranda
relating thereto), (v) the cost of printing certificates representing the
Restricted Notes and the Guarantee, (vi) all expenses and listing fees in
connection with the application for quotation of the Restricted Notes in The
PORTAL Market ("PORTAL") of the Nasdaq Stock Market, Inc. ("NASDAQ"), (vii) the
fees and expenses of the Trustee and the Trustee's counsel in connection with
the Indenture, the Secured Notes and the Guarantee, (viii) the costs and charges
of any transfer agent, registrar and/or depositary (including DTC), (ix) any
fees charged by rating agencies for the rating of the Secured Notes, (x) all
costs and expenses of the Exchange Offer and any Registration Statement, as set
forth in the Registration Rights Agreement, and (xi) and all other costs and
expenses incident to the performance of the obligations of Finco and the Company
hereunder for which provision is not otherwise made in this Section.
(j) To use its best efforts, with the cooperation of the Initial
Purchaser, to effect the inclusion of the Restricted Notes in PORTAL and to
maintain the listing of the Restricted Notes on PORTAL for so long as any
Restricted Notes are outstanding.
(k) To obtain, with the cooperation of the Initial Purchaser, the
approval of DTC for "book-entry" transfer of the Secured Notes, and to comply
with all of its agreements set forth in the representation letters of Finco and
the Company to DTC relating to the approval of the Secured Notes by DTC for
"book-entry" transfer.
(l) Except as described in the Offering Memorandum, during the period
beginning on the date hereof and continuing to and including the Closing Date,
not to offer, sell, contract to sell or otherwise transfer or dispose of any
debt securities of Finco or the Company or any warrants, rights or options to
purchase or otherwise acquire debt securities of Finco or the Company
substantially similar to the Secured Notes and the Guarantee (other than (i) the
Secured Notes and the Guarantee and (ii) commercial paper issued in the ordinary
course of business), without the prior written consent of the Initial Purchaser.
(m) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Restricted Notes to the Initial Purchaser or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Restricted Notes under the Act.
(n) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes and the
related Guarantee.
(o) To comply with all of its agreements set forth in the Registration
Rights Agreement.
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<PAGE> 9
(p) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Restricted Notes and the Guarantee.
(q) The Company shall pay to the Initial Purchaser, at the Closing, the
amount of $22.0 million as payment of commission and discounts in connection
with the purchase by the Initial Purchaser of the Restricted Notes.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF FINCO AND THE COMPANY.
As of the date hereof, each of Finco and the Company represents and warrants to,
and agrees with, the Initial Purchaser that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum do
not, and any supplement or amendment to them will not, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchaser furnished to Finco in writing by
the Initial Purchaser expressly for use therein. No stop order preventing the
use of the Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued.
(b) Each of Finco and the Company and the Company's subsidiaries has
been duly incorporated, is validly existing as a corporation or limited
liability company in good standing under the laws of its jurisdiction of
incorporation or formation and has the corporate or limited liability company
power and authority to carry on its business as described in the Preliminary
Offering Memorandum and the Offering Memorandum and to own, lease and operate
its properties, and each is duly qualified and is in good standing as a foreign
corporation or entity authorized to do business in each jurisdiction in which
the nature of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of Finco or the Company and the Company's subsidiaries,
taken as a whole (a "MATERIAL ADVERSE EFFECT"), as the case may be. Each of the
subsidiaries of the Company listed on Schedule B hereto (the "SIGNIFICANT
SUBSIDIARIES"), which Significant Subsidiaries in the aggregate directly own
substantially all of the assets held by the Company and all of its subsidiaries
on a consolidated basis and which constitute all of the Company's "significant
subsidiaries" (as such term is defined in Regulation S-X under the Act) has been
duly incorporated, is validly existing as a corporation or limited liability
company in good standing under the laws of its jurisdiction of incorporation or
formation and has the corporate or limited liability company power and authority
to carry on its business and to own, lease and operate its properties, and each
is duly qualified and is in good standing as a foreign corporation or entity
authorized to do business in each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not have a Material Adverse
Effect. Finco is a newly-formed limited purpose entity that has not conducted
business other than negotiations in connection with transactions contemplated by
this Agreement. and does not have any subsidiaries.
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<PAGE> 10
(c) All outstanding shares of capital stock of Finco and the Company
and the Company's subsidiaries have been duly authorized and validly issued and
are fully paid, non-assessable and not subject to any preemptive or similar
rights.
(d) This Agreement has been duly authorized, executed and delivered by
Finco and the Company.
(e) The Indenture has been duly authorized by Finco and the Company
and, on the Closing Date, will have been validly executed and delivered by Finco
and the Company. When the Indenture has been duly executed and delivered by
Finco and the Company, the Indenture will be a valid and binding agreement of
Finco and the Company, enforceable against Finco and the Company in accordance
with its terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act of 1939, as amended (the
"TIA" or "TRUST INDENTURE ACT"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
(f) The Restricted Notes have been duly authorized and, on the Closing
Date, will have been validly executed and delivered by Finco. When the
Restricted Notes have been issued, executed and authenticated in accordance with
the provisions of the Indenture and delivered to and paid for by the Initial
Purchaser in accordance with the terms of this Agreement, the Restricted Notes
will be entitled to the benefits of the Indenture and will be valid and binding
obligations of Finco, enforceable in accordance with their terms except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the
Restricted Notes will conform as to legal matters to the description thereof
contained in the Offering Memorandum.
(g) On the Closing Date, the Exchange Notes will have been duly
authorized by Finco. When the Exchange Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Exchange Notes will be entitled to the benefits of the Indenture
and will be the valid and binding obligations of Finco, enforceable against
Finco in accordance with their terms, except as (i) the enforceability thereof
may be limited by bankruptcy, insolvency, fraudulent transfer, or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability.
(h) The notation of the Guarantee to be endorsed on the Restricted
Notes by the Company has been duly authorized by the Company and, on the Closing
Date, will have been duly executed and delivered by the Company. When the
Restricted Notes have been issued, executed and authenticated in accordance with
the Indenture and delivered to and paid for by the Initial Purchaser in
accordance with the terms of this Agreement, the Guarantee of the Company will
be entitled to the benefits of the Indenture and will be the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of
9
<PAGE> 11
general applicability. On the Closing Date, the Guarantee will conform as to
legal matters to the description thereof contained in the Offering Memorandum.
(i) The notation of the Guarantee to be endorsed on the Exchange Notes
by the Company has been duly authorized by the Company and, when issued, will
have been duly executed and delivered by the Company. When the Exchange Notes
have been issued, executed and authenticated in accordance with the terms of the
Exchange Offer and the Indenture, the Guarantee of the Company endorsed thereon
will be entitled to the benefits of the Indenture and will be the valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability. When the Exchange Notes are issued, authenticated and delivered,
the Guarantee will continue to conform as to legal matters to the description
thereof in the Offering Memorandum.
(j) The Registration Rights Agreement has been duly authorized by Finco
and the Company and, on the Closing Date, will have been duly executed and
delivered by Finco and the Company. When the Registration Rights Agreement has
been duly executed and delivered, the Registration Rights Agreement will be a
valid and binding agreement of Finco and the Company, enforceable against Finco
and the Company in accordance with its terms except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent transfer or similar
laws affecting creditors' rights generally and (ii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles of
general applicability. On the Closing Date, the Registration Rights Agreement
will conform as to legal matters to the description thereof in the Offering
Memorandum.
(k) Neither Finco nor the Company or any of the Company's subsidiaries
is in violation of its respective charter or by-laws or in default in the
performance of any obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or instrument that
is material to Finco or the Company and the Company's subsidiaries to which
Finco or the Company or the Company's subsidiaries is a party or by which Finco,
the Company or the Company's subsidiaries, or their respective property, is
bound.
(l) Each of Finco and the Company has duly authorized the Collateral
Documents to which it is a party, and when each of Finco and the Company has
duly executed and delivered the Collateral Documents to which it is a party
(assuming due execution and delivery thereof by the Trustee, the Collateral
Agent and the Escrow Agent), each of the Collateral Documents to which such
entity is a party will be a legally valid and binding obligation of each of
Finco and the Company enforceable against each in accordance with its terms,
except as (i) bankruptcy, insolvency, fraudulent transfer, or other similar laws
affecting creditors' rights generally, and (ii) the enforceability thereof may
be limited by rights of acceleration and the availability of equitable remedies
may be limited by equitable principles of general applicability.
(m) The execution, delivery and performance of this Agreement and the
other Operative Documents by Finco and the Company, compliance by Finco and the
Company with all provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (i) require any consent,
approval, authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the
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<PAGE> 12
various states), (ii) conflict with or constitute a breach of any of the terms
or provisions of, or a default under, the charter or by-laws of Finco or the
Company or the Company's subsidiaries or any indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to Finco and
the Company and the Company's subsidiaries, taken as a whole, to which Finco or
the Company or the Company's subsidiaries is a party or by which Finco, the
Company or the Company's subsidiaries, or their respective property is bound,
(iii) violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or agency having
jurisdiction over Finco, the Company or the Company's subsidiaries or their
respective property, (iv) result in the imposition or creation of (or the
obligation to create or impose) a Lien under, any agreement or instrument to
which Finco or the Company or the Company's subsidiaries is a party or by which
Finco or the Company or their respective property is bound (other than Liens
granted under or contemplated by the Operative Documents), or (v) result in the
termination, suspension or revocation of any Authorization (as defined below) of
Finco or result in any other impairment of the rights of the holder of any such
Authorization.
(n) There are no legal or governmental proceedings pending or, to the
knowledge of the Finco, the Company or any of the Company's subsidiaries,
threatened, to which Finco, Company or the Company's subsidiaries are a party or
to which any of their respective property is subject, which, if determined
adversely against Finco, the Company or the Company's subsidiaries, would,
singly or in the aggregate, have a Material Adverse Effect.
(o) Except as disclosed in the Offering Memorandum, neither the Company
nor any of its subsidiaries has violated any foreign, federal, state or local
law or regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), any provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or any provisions of the
Foreign Corrupt Practices Act or the rules and regulations promulgated
thereunder, except for such violations which, singly or in the aggregate, would
not have a Material Adverse Effect.
(p) Except as disclosed in the Offering Memorandum, neither the Company
nor any of its subsidiaries are obligated for costs or liabilities associated
with Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a Material Adverse Effect.
(q) Each of Finco, the Company and the Company's subsidiaries has such
permits, licenses, consents, exemptions, franchises, authorizations and other
approvals (each, an "AUTHORIZATION") of, and has made all filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without limitation,
under any applicable Environmental Laws, as are necessary to own, lease, license
and operate its respective properties and to conduct its business, except where
the failure to have any such Authorization or to make any such filing or notice
would not, singly or in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each of Finco, the
Company and the Company's subsidiaries is in compliance with all the terms and
conditions thereof and with the rules and regulations of the authorities and
governing bodies having jurisdiction with respect thereto; and no event has
occurred (including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any such
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<PAGE> 13
Authorization or results or, after notice or lapse of time or both, would result
in any other impairment of the rights of the holder of any such Authorization;
except where such burden or failure to be valid and in full force and effect or
to be in compliance, the occurrence of any such event or the presence of any
such restriction would not, singly or in the aggregate, have a Material Adverse
Effect.
(r) The accountants, Arthur Andersen LLP and Ernst & Young LLP, that
have and/or as of the Closing will have certified the financial statements and
supporting schedules of the Company, one or more of the Company's subsidiaries
and/or Finco, are independent public accountants with respect to Finco and the
Company and the Company's subsidiaries, as required by the Act and the Exchange
Act. The summary and selected historical consolidated financial data of the
Company and the historical financial statements, together with related schedules
and notes, in the Preliminary Offering Memorandum and the Offering Memorandum or
incorporated therein by reference, complied as to form in all material respects
with the requirements applicable to (i) registration statements under the Act or
(ii) with respect to financial information incorporated by reference, reports
required to be filed under the Exchange Act, except that the historical
financial statements incorporated therein have not been adjusted to reflect the
previously discounted oil and gas exploration and production operations as
continuing operations for accounting purposes and that an unqualified audit
report with respect to such financial statements will not be delivered until
Closing.
(s) The historical financial statements, together with related
schedules and notes incorporated by reference in the Offering Memorandum (and
any amendment or supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of the Company
and its subsidiaries on the basis stated in the Offering Memorandum at the
respective dates or for the respective periods to which they apply, except that
the historical financial statements incorporated therein have not been adjusted
to reflect the previously discounted oil and gas exploration and production
operations as continuing operations for accounting purposes and that an
unqualified audit report with respect to such financial statements will not be
delivered until Closing; such statements and related schedules and notes have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; and the other financial and statistical information and data set forth
in the Offering Memorandum (and any amendment or supplement thereto) are, in all
material respects, accurately presented and prepared on a basis consistent with
such financial statements and the books and records of the Company.
(t) The pro forma financial statements included in the Preliminary
Offering Memorandum and the Offering Memorandum have been prepared on a basis
consistent with the historical financial statements of the Company and its
subsidiaries, as adjusted to reflect the previously discontinued oil and gas
exploration and production operations as continuing operations for accounting
purposes only, and give effect to assumptions used in the preparation thereof on
a reasonable basis and in good faith and such pro forma financial statements
comply as to form in all material respects with the requirements applicable to
pro forma financial statements included in a registration statement under the
Act. The other pro forma financial and statistical information and data included
in the Offering Memorandum are, in all material respects, accurately presented
and prepared on a basis consistent with the pro forma financial statements.
(u) Neither Finco nor the Company is and, after giving effect to the
offering and sale of the Restricted Notes and the application of the net
proceeds thereof as described in the Offering Memorandum, will be, an
"investment company," as such term is defined in the Investment Company Act of
1940, as amended.
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<PAGE> 14
(v) Except as disclosed in the Offering Memorandum and required under
the terms of the Company's $400 million senior note offering in December 1998,
there are no contracts, agreements or understandings between Finco or the
Company and any person granting such person the right to require Finco or the
Company to file a registration statement under the Act with respect to any
securities of Finco or the Company or to require Finco or the Company to include
such securities with the Secured Notes and Guarantee registered pursuant to any
Registration Statement.
(w) Neither Finco nor the Company or the Company's subsidiaries nor any
agent thereof acting on the behalf of them has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale of the
Restricted Notes to violate Regulation T (12 C.F.R. Part 220), Regulation U (12
C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors
of the Federal Reserve System.
(x) No "nationally recognized statistical rating organization" as such
term is defined for purposes of Rule 436(g)(2) under the Act (i) has imposed (or
has informed the Company that it is considering imposing) any condition
(financial or otherwise) on the Company's retaining any rating assigned to the
Company or any securities of the Company or (ii) has indicated to the Company
that it is considering (a) the downgrading, suspension, or withdrawal of, or any
review for a possible change that does not indicate the direction of the
possible change in, any rating so assigned or (b) any change in the outlook for
any rating of the Company or any securities of the Company, except in the case
of (i) and (ii) as publicly announced by such nationally recognized statistical
rating organization.
(y) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change or, to
the Company's or its subsidiaries' knowledge, any development involving a
prospective material adverse change in the condition, financial or otherwise, or
the earnings, business, management or operations of the Company and its
subsidiaries, taken as a whole, (ii) there has not been any adverse change or,
to the Company's or its subsidiaries' knowledge, any development involving a
prospective adverse change in the capital stock or in the long-term debt of
Finco or the Company or the Company's subsidiaries and (iii) neither the Company
nor its subsidiaries has incurred any material liability or obligation, direct
or contingent.
(z) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains or incorporates by reference all the
information specified in, and meeting the requirements of, Rule 144A(d)(4) under
the Act.
(aa) When the Restricted Notes and the Guarantee are issued and
delivered pursuant to this Agreement, neither the Restricted Notes nor the
Guarantee will be of the same class (within the meaning of Rule 144A under the
Act) as any security of Finco or the Company that is listed on a national
securities exchange registered under Section 6 of the Exchange Act or that is
quoted in a United States automated inter-dealer quotation system.
(bb) No form of general solicitation or general advertising (as defined
in Regulation D under the Act) was used by Finco, the Company or any of their
respective representatives
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<PAGE> 15
(other than the Initial Purchaser, as to whom Finco and the Company make no
representation) in connection with the offer and sale of the Restricted Notes
contemplated hereby, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the Restricted Notes have been issued and sold
by Finco or the Company within the six-month period immediately prior to the
date hereof.
(cc) Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA.
(dd) None of Finco, the Company nor any of their respective affiliates
or any person acting on its or their behalf (other than the Initial Purchaser,
as to whom Finco and the Company make no representation) has engaged or will
engage in any directed selling efforts within the meaning of Regulation S under
the Act ("REGULATION S") with respect to the Restricted Notes or the Guarantee.
(ee) The sale of the Restricted Notes pursuant to Regulation S is not
part of a plan or scheme to evade the registration provisions of the Act.
(ff) No registration under the Act of the Restricted Notes or the
Guarantee is required for the sale of the Restricted Notes and the Guarantee to
the Initial Purchaser as contemplated hereby or for the Exempt Resales assuming
the accuracy of the Initial Purchaser's representations and warranties and
agreements set forth in Section 7 hereof.
(gg) Each certificate signed by any officer of Finco, the Company or
the Company's subsidiaries and delivered to the Initial Purchaser or counsel for
the Initial Purchaser shall be deemed to be a representation and warranty by
Finco or Company to the Initial Purchaser as to the matters covered thereby.
(hh) The Company and its subsidiaries have good and marketable title to
all real property and to all personal property owned by them which is material
to the business of Finco and the Company, in each case free and clear of all
Liens, except such as are described in the Offering Memorandum or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries. Except as otherwise described in the Offering Memorandum or
incorporated by reference, the Company and its subsidiaries do not own any real
property or buildings with such exceptions, and any real property and buildings
held under lease by the Company or its subsidiaries are held by them under
valid, subsisting and enforceable leases that do not have such exceptions,
unless in any case such exceptions are not material and do not interfere with
the use made and proposed to be made of such property and buildings by the
Company or its subsidiaries.
(ii) All indebtedness of the Company that will be repaid with the
proceeds of Finco's loans to the Company (the "FINCO LOANS") funded with the
proceeds of the issuance and sale of the Restricted Notes was incurred, and the
indebtedness represented by the Restricted Notes and Finco Loans is being
incurred, for proper purposes and in good faith and the Company was, at the time
of the incurrence of such indebtedness that will be repaid with a portion of the
proceeds of the issuance and sale of the Restricted Notes, and each of the
Company and Finco will be on the Closing Date (after giving effect to the
application of the proceeds from the issuance of the Restricted Notes and from
Finco Loans) solvent, and
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<PAGE> 16
the Company had at the time of the incurrence of such indebtedness that will be
repaid with Finco Loans funded with proceeds of the issuance and sale of the
Restricted Notes, and each of the Company and Finco will have on the Closing
Date (after giving effect to the application of the proceeds from the offering)
sufficient capital for carrying on its business and the Company was, at the time
of the incurrence of such indebtedness that will be repaid with the proceeds of
the issuance and sale of the Restricted Notes, and each of the Company and Finco
will be on the Closing Date (after giving effect to the application of the
proceeds from the offering), able to pay its debts as they mature.
(jj) Each of Finco and the Company maintains its principal place of
business in Houston, Texas.
Each of Finco and the Company acknowledges that the Initial Purchaser
and, for purposes of the opinions to be delivered to the Initial Purchaser
pursuant to Section 9 hereof, counsel to Finco and the Company and counsel to
the Initial Purchaser will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Initial
Purchaser represents and warrants to, and agrees with, Finco and the Company:
(a) Such Initial Purchaser is either a QIB or an Accredited
Institution, in either case, with such knowledge and experience in financial and
business matters as is necessary in order to evaluate the merits and risks of an
investment in the Restricted Notes.
(b) Such Initial Purchaser (A) is not acquiring the Restricted Notes
with a view to any distribution thereof or with any present intention of
offering or selling any of the Restricted Notes in a transaction that would
violate the Act or the securities laws of any state of the United States or any
other applicable jurisdiction and (B) will be reoffering and reselling the
Restricted Notes only to QIBs in reliance on the exemption from the registration
requirements of the Act provided by Rule 144A.
(c) Such Initial Purchaser agrees that no form of general solicitation
or general advertising (within the meaning of Regulation D under the Act) has
been or will be used by the Initial Purchaser or any of its representatives in
connection with the offer and sale of the Restricted Notes pursuant hereto,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with Exempt
Resales, the Initial Purchaser will solicit offers to buy the Restricted Notes
only from, and will offer to sell the Restricted Notes only to, Eligible
Purchasers. Each Initial Purchaser further agrees that it will offer to sell the
Restricted Notes only to, and will solicit offers to buy the Restricted Notes
only from Eligible Purchasers that the Initial Purchaser reasonably believes are
QIBs that agree that (x) the Restricted Notes purchased by them may be resold,
pledged or otherwise transferred only (I) to Finco or any of its subsidiaries,
(II) to a person whom the seller reasonably believes is a QIB purchasing for its
own account or for the account of a QIB in a transaction meeting the
requirements of Rule 144A under the Act, (III) to an Accredited Institution
that, prior to such transfer, furnishes the Trustee a signed letter containing
certain representations and agreements relating to the registration of transfer
of such Restricted Note and, if such transfer is in respect of an aggregate
principal amount of Restricted Notes less than $250,000, an opinion of counsel
acceptable
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<PAGE> 17
to Finco that such transfer is in compliance with the Act, (IV) to an affiliate
of Finco or (V) pursuant to an effective registration statement and, in each
case, in accordance with the applicable securities laws of any state of the
United States or any other applicable jurisdiction and (y) they will deliver to
each person to whom such Restricted Notes or an interest therein is transferred
a notice substantially to the effect of the foregoing.
(e) Such Initial Purchaser and its affiliates or any person acting on
its or their behalf have not engaged or will not engage in any directed selling
efforts within the meaning of Regulation S with respect to the Restricted Notes
or the Guarantee.
The Initial Purchaser acknowledges that Finco and the Company and, for
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 9 hereof, counsel to Finco and the Company and counsel to the Initial
Purchaser will rely upon the accuracy and truth of the foregoing representations
and the Initial Purchaser hereby consents to such reliance.
8. INDEMNIFICATION.
(a) Finco and the Company agree, jointly and severally, to indemnify
and hold harmless the Initial Purchaser, their directors, their officers and
each person, if any, who controls the Initial Purchaser within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages, liabilities and judgments (including, without
limitation, any legal or other expenses reasonably incurred in connection with
investigating or defending any matter, including any action, that could give
rise to any such losses, claims, damages, liabilities or judgments) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Offering Memorandum (or any amendment or supplement thereto), the
Preliminary Offering Memorandum or any Rule 144A Information provided by Finco
or the Company to any holder or prospective purchaser of Restricted Notes
pursuant to Section 5(h) or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to the Initial Purchaser furnished in writing to Finco by the Initial Purchaser;
provided, however, that the foregoing indemnity agreement with respect to any
Preliminary Offering Memorandum shall not inure to the benefit of any Initial
Purchaser who failed to deliver a Final Offering Memorandum (as then amended or
supplemented, provided by Finco to the several Initial Purchaser in the
requisite quantity and on a timely basis to permit proper delivery on or prior
to the Closing Date) to the person asserting any losses, claims, damages and
liabilities and judgements caused by any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Offering Memorandum,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if such material misstatement or omission or alleged material
misstatement or omission was cured in the Final Offering Memorandum.
(b) The Initial Purchaser agree to indemnify and hold harmless Finco
and the Company, and their respective directors and officers and each person, if
any, who controls (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) Finco or the Company, to the same extent as the foregoing
indemnity from Finco and the Company to the Initial Purchaser, but only with
reference to information relating to the Initial Purchaser furnished in writing
to Finco or the Company by the Initial Purchaser expressly for use in the
Preliminary Offering Memorandum or the Offering Memorandum.
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(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), the Initial Purchaser shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Initial Purchaser). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by the Initial Purchaser, in the case of the parties indemnified
pursuant to Section 8(a), and by Finco, in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall indemnify and hold
harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty business days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits
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<PAGE> 19
received by Finco and the Company, on the one hand, and the Initial Purchaser on
the other hand from the offering of the Restricted Notes or (ii) if the
allocation provided by clause 8(d)(i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause 8(d)(i) above but also the relative fault of Finco and the
Company, on the one hand, and the Initial Purchaser, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by Finco and the
Company, on the one hand and the Initial Purchaser, on the other hand, shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Restricted Notes (after underwriting discounts and commissions, but
before deducting expenses) received by Finco, and the total discounts and
commissions received by the Initial Purchaser bear to the total price to
investors of the Restricted Notes, in each case as set forth in the table on the
cover page of the Offering Memorandum. The relative fault of Finco and the
Company, on the one hand, and the Initial Purchaser, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by Finco or the Company, on the
one hand, or the Initial Purchaser, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
Finco and the Company, on the one hand, and the Initial Purchaser, on
the other hand, agree that it would not be just and equitable if contribution
pursuant to this Section 8(d) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, the Initial
Purchaser shall not be required to contribute any amount in excess of the amount
by which the total discounts and commissions received by the Initial Purchaser
exceeds the amount of any damages which the Initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The obligations of
the Initial Purchaser to purchase the Restricted Notes under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of Finco and the Company and
the Company's subsidiaries contained in this Agreement shall be true and correct
on the Closing Date with the same force and effect as if made on and as of the
Closing Date.
(b) On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been given
of any potential or intended downgrading, suspension or withdrawal of, or of any
review (or of any potential or intended
18
<PAGE> 20
review) for a possible change that does not indicate the direction of the
possible change in, any rating of Finco or the Company or any securities of
Finco or the Company (including, without limitation, the placing of any of the
foregoing ratings on credit watch with negative or developing implications or
under review with an uncertain direction) by any "nationally recognized
statistical rating organization" as such term is defined for purposes of Rule
436(g)(2) under the Act, (ii) there shall not have occurred any change, nor
shall any notice have been given of any potential or intended change, in the
outlook for any rating of Finco or the Company or any securities of Finco or the
Company by any such rating organization and (iii) no such rating organization
shall have given notice that it has assigned (or is considering assigning) a
lower rating to the Secured Notes than that on which the Secured Notes were
marketed.
(c) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there shall not have occurred any adverse change or any
development involving a prospective change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company
and its subsidiaries, taken as a whole, (ii) there shall not have been any
material adverse change or any development involving a prospective material
adverse change in the capital stock or in the long-term debt of the Company and
(iii) neither Finco nor the Company shall have incurred any liability or
obligation, direct or contingent, the effect of which, in any such case
described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Restricted Notes on the terms and in the manner contemplated in the Offering
Memorandum.
(d) The Initial Purchaser shall have received on the Closing Date a
certificate dated the Closing Date, signed by the Chief Executive Officer and
the Secretary of both Finco and the Company, confirming the matters set forth in
Sections 6(x), 9(a) and 9(c) and stating that each of Finco and the Company has
complied with all the agreements and satisfied all of the conditions herein
contained and required to be complied with or satisfied on or prior to the
Closing Date.
(e) The Initial Purchaser shall have received on the Closing Date an
opinion (satisfactory to you and counsel for the Initial Purchaser), dated
the Closing Date, of Gardere Wynne Sewell & Riggs, L.L.P., counsel for
Finco and the Company, to the effect that:
(i) each of Finco and the Company has been duly incorporated or
formed, is validly existing as a corporation in good standing under
the laws of Delaware and has the corporate power and authority to
carry on its business as described in the Offering Memorandum and to
own, lease and operate its properties;
(ii) the Restricted Notes have been duly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchaser in
accordance with the terms of this Agreement, will be entitled to the
benefits of the Indenture and will be valid and binding obligations of
Finco, enforceable in accordance with their terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent transfer or similar laws affecting creditors' rights
generally and (y) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability;
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(iii) the Guarantee of the Company has been duly authorized and,
when the Restricted Notes are executed and authenticated in accordance
with the provisions of the Indenture and delivered to and paid for by
the Initial Purchaser in accordance with the terms of this Agreement,
the Guarantee endorsed thereon will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the Company,
enforceable in accordance with their terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent transfer or similar laws affecting creditors' rights
generally and (y) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability;
(iv) the Indenture has been duly authorized, executed and
delivered by Finco and the Company and is a valid and binding
agreement of Finco and the Company, enforceable against Finco and the
Company in accordance with its terms except as (x) the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent transfer
or similar laws affecting creditors' rights generally and (y) rights
of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(v) this Agreement has been duly authorized, executed and
delivered by Finco and the Company;
(vi) each of Finco and the Company has duly authorized the
Collateral Documents to which it is a party, and when each of Finco
and the Company has duly executed and delivered the Collateral
Documents to which it is a party (assuming due execution and delivery
thereof by the Trustee, the Collateral Agent and the Escrow Agent),
each of the Collateral Documents to which such entity is a party will
be a legally valid and binding obligation of each of Finco and the
Company enforceable against each in accordance with its terms, except
as (i) bankruptcy, insolvency, fraudulent transfer or other similar
laws affecting creditors' rights generally, and (ii) the
enforceability thereof may be limited by rights of acceleration and
the availability of equitable remedies may be limited by equitable
principles of general applicability;
(vii) the Registration Rights Agreement has been duly authorized,
executed and delivered by Finco and the Company and is a valid and
binding agreement of Finco and the Company, enforceable against Finco
and the Company in accordance with its terms, except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent transfer or similar laws affecting creditors' rights
generally, (y) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability and (z) the enforceability of the indemnification
provisions thereof may be limited by federal and state securities
laws;
(viii) the Exchange Notes have been duly authorized;
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<PAGE> 22
(ix) the statements under the captions "Risk Factors,"
"Description of the Secured Notes, " "Description of the New Senior
Notes," "Description of Certain Indebtedness," "United States Federal
Income Tax Considerations for Non-U.S. Holders," "Description of
Security for the Secured Notes," "Plan of Distribution," "Notice to
Investors in the New Senior Notes" and "Notice to Investors in the
Secured Notes," in the Offering Memorandum, insofar as such statements
constitute a summary of the legal matters, fairly present in all
material respects such legal matters;
(x) the execution, delivery and performance of this Agreement and
the other Operative Documents by Finco and the Company, and the
issuance and sale of the Restricted Notes and compliance with the
terms and provisions thereof and of the other Operative Documents will
not (i) violate its respective charter or bylaws, (ii) require any
consent, approval, authorization or other order of, or qualification
with, any court or governmental body or agency of the United States or
the States of Texas or New York (except such as may be required under
the securities or Blue Sky laws of the various states), (iii) conflict
with or constitute a breach of any of the terms or provisions of, or a
default under the indentures executed, or senior notes issued, by the
Company in connection with debt offerings by the Company of $1.1
billion in April 1998 and $400 million in December 1998 or, to such
counsel's actual knowledge, any other indenture, loan agreement,
mortgage, lease or other agreement or instrument, to which Finco or
the Company or the Significant Subsidiaries is a party or by which
Finco, the Company or the Significant Subsidiaries or their respective
property is bound, which conflict, breach or default is likely to
have, either individually or in the aggregate, a Material Adverse
Effect, or (iv) violate or conflict with any applicable law or any
rule or regulation, or to such counsel's actual knowledge, any
judgment, order or decree, in each case of any court or any
governmental body or agency of the United States or the States of
Texas or New York having jurisdiction over Finco, the Company or the
Significant Subsidiaries or their respective property;
(xi) the Company is not and, after giving effect to the offering
and sale of the Restricted Notes and the application of the net
proceeds thereof as described in the Offering Memorandum, will not be,
an "investment company" as such term is defined in the Investment
Issuer Act of 1940, as amended;
(xii) the Indenture complies as to form in all material respects
with the requirements of the TIA, and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder;
it is not necessary in connection with the offer, sale and delivery of
the Restricted Notes to the Initial Purchaser in the manner
contemplated by this Agreement or in connection with the Exempt
Resales to qualify the Indenture under the TIA;
(xiii) no registration under the Act of the Restricted Notes is
required for the sale of the Restricted Notes to the Initial Purchaser
as contemplated by this Agreement or for the Exempt Resales assuming
that (i) the Initial Purchaser is a
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QIB or a Regulation S Purchaser, (ii) the accuracy of, and compliance
with, the Initial Purchaser's representations and agreements contained
in Section 7 of this Agreement and (iii) the accuracy of the
representations of Finco and the Company set forth in Sections 5(f)
and 6(dd), (ee) and (ff) of this Agreement;
(xiv) the appropriate Security Agreements create a valid security
interest in the Finco Loan Agreements and the notes issued thereunder
(the "FINCO NOTES") in favor of the Collateral Agent for the benefit
of the Trustee and the holders of the Secured Notes and when the
Collateral Agent takes possession of the Finco Notes representing the
Finco Loans and upon the filing of financing statement designated by
such counsel with the Secretary of State of the State of Texas, the
Department of State of the State of New York and the County Register
for the County of New York, the Collateral Agent will have a perfected
security in such Finco Loan Agreements and the Finco Notes;
(xv) upon deposit of funds into the Company Escrow Account, the
Company Escrow Agent will have a perfected security interest in such
funds so long as they are held in the Company Escrow Account. Any
proceeds will remain subject to a perfected security interest so long
as they are held in the Company Escrow Account. Any investments of
Temporary Cash Equivalents with funds from the Company Escrow Account
will be subject to a perfected security interest in the manner
specified by such counsel in its opinion;
(xvi) upon deposit of funds into the Finco Escrow Account, the
Finco Escrow Agent will have a perfected security interest in such
funds so long as they are held in the Finco Escrow Account. Any
proceeds will remain subject to a perfected security interest so long
as they are held in the Finco Escrow Account. Any investments of
Temporary Cash Equivalents with funds from the Finco Escrow Account
will be subject to a perfected security interest in the manner
specified by such counsel in its opinion;
(xvii) assuming the Bahamian statutory mortgages to be recorded
on the date of closing of the offering constitute valid and perfected
statutory ship mortgages under the laws of the Commonwealth of The
Bahamas on the respective vessels covered thereby, each such mortgage
is also entitled under United States law to a foreign preferred ship
mortgage status pursuant to Title 46 United States Code Section
31301(6)(B);
(xviii) in such counsel's opinion, a court applying Texas
conflict of laws rules in a properly presented and argued case would
give effect to the express choice of law opinions contained in the
Indenture and the other Collateral Documents to the extent that such
provisions provide that the laws of the State of New York are to
govern issues under such documents; and
(xix) such counsel has participated in conferences with officers
and other representatives of the Company, representatives of the
Company's accountants, the Initial Purchaser's representatives and
counsel for the Initial
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<PAGE> 24
Purchaser, at which conferences the contents of the Offering
Memorandum and related matters were discussed and, although such
counsel is not passing upon and do not assume any responsibility for
and shall not be deemed to have independently verified the accuracy,
completeness or fairness of the statements contained in the Offering
Memorandum no facts have come to the attention of such counsel that
lead such counsel to believe that the Offering Memorandum contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
contained therein not misleading or that the Offering Memorandum on
the date thereof or on the date hereof (other than the financial
statements and notes thereto and the other financial information,
including the information referred to under the caption "Experts" as
to which such counsel does not comment) contained any untrue statement
of a material fact or omitted to state a material fact necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
The opinion of Gardere Wynne Sewell & Riggs, L.L.P. described in
Section 9(e) above shall be rendered to you at the request of Finco and the
Company and shall so state therein. In giving such opinion with respect to the
matters covered by Section 9(e)(xix), Gardere Wynne Sewell & Riggs, L.L.P. may
state that their opinion and belief are based upon their participation in the
preparation of the Offering Memorandum and any amendments or supplements thereto
and review and discussion of the contents thereof, but are without independent
check or verification except as specified.
(f) The Initial Purchaser shall have received on the Closing Date an
opinion (satisfactory to you and counsel for the Initial Purchaser), dated the
Closing Date, of Leighton E. Moss, Senior Vice President and Co-Counsel for the
Company, to the effect that:
(i) each of Finco and the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of
Delaware and has the corporate power and authority to carry on its
business as described in the Offering Memorandum and to own, lease and
operate its properties;
(ii) each of Finco and the Company is duly qualified and is in
good standing as a foreign corporation authorized to do business in
each jurisdiction in which the nature of its business or its ownership
or leasing of property requires such qualification, or application has
been made and is pending except where the failure to be so qualified
would not have a Material Adverse Effect;
(iii) R&B Falcon Holdings, Inc. ("HOLDINGS") has been duly
incorporated, is validly existing as a corporation and in good
standing under the laws of its jurisdiction of incorporation, has the
corporate authority to carry on its business and to own, lease and
operate its properties; is duly qualified and is in good standing as a
foreign corporation or entity authorized to do business in each state
of the United States in which the nature of its business or its
ownership or leasing of property requires such qualification, or
application has been made and is pending except where the failure to
be so qualified would not have a Material Adverse Effect;
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(iv) R&B Falcon Drilling (International & Deepwater) Inc.
("DEEPWATER") has been duly incorporated, is validly existing as a
corporation and in good standing under the laws of its jurisdiction of
incorporation, has the corporate and authority to carry on its
business and to own, lease and operate its properties; is duly
qualified and is in good standing as a foreign corporation or entity
authorized to do business in each state of the United States in which
the nature of its business or its ownership or leasing of property
requires such qualification, or application has been made and is
pending except where the failure to be so qualified would not have a
Material Adverse Effect;
(v) Cliffs Drilling Company ("CLIFFS") has been duly
incorporated, is validly existing as a corporation and in good
standing under the laws of its jurisdiction of incorporation, has the
corporate and authority to carry on its business and to own, lease and
operate its properties; is duly qualified and is in good standing as a
foreign corporation or entity authorized to do business in each state
of the United States in which the nature of its business or its
ownership or leasing of property requires such qualification, or
application has been made and is pending except where the failure to
be so qualified would not have a Material Adverse Effect;
(vi) R&B Falcon Drilling USA, Inc. ("DRILLING USA") has been duly
incorporated, is validly existing as a corporation and in good
standing under the laws of its jurisdiction of incorporation, has the
corporate and authority to carry on its business and to own, lease and
operate its properties; is duly qualified and is in good standing as a
foreign corporation or entity authorized to do business in each state
of the United States in which the nature of its business or its
ownership or leasing of property requires such qualification, or
application has been made and is pending except where the failure to
be so qualified would not have a Material Adverse Effect;
(vii) R&B Falcon Drilling Co. ("DRILLING CO.") has been duly
incorporated, is validly existing as a corporation and in good
standing under the laws of its jurisdiction of incorporation, has the
corporate and authority to carry on its business and to own, lease and
operate its properties; is duly qualified and is in good standing as a
foreign corporation or entity authorized to do business in each state
of the United States in which the nature of its business or its
ownership or leasing of property requires such qualification, or
application has been made and is pending except where the failure to
be so qualified would not have a Material Adverse Effect;
(viii) all the outstanding shares of capital stock of Finco, the
Company Deepwater, Holdings and Cliffs have been duly authorized and
validly issued and are fully paid, non-assessable and not subject to
any preemptive or similar rights;
(ix) each of Finco and the Company has the corporate power and
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<PAGE> 26
authority to perform its respective obligations under the Operative
Documents and the Collateral Documents;
(x) the Restricted Notes have been duly authorized, executed and
delivered by Finco;
(xi) the Guarantee of the Company has been duly authorized,
executed and delivered by the Company;
(xii) the Indenture has been duly authorized, executed and
delivered by Finco and the Company;
(xiii) this Agreement has been duly authorized, executed and
delivered by Finco and the Company;
(xiv) each of Finco and the Company has duly authorized, executed
and delivered the Collateral Documents to which it is a party;
(xv) the Registration Rights Agreement has been duly authorized,
executed and delivered by Finco and the Company;
(xvi) the execution and delivery of Exchange Notes have been duly
authorized by the Company;
(xvii) to such counsel's knowledge, (a) none of Finco, the
Company or the Significant Subsidiaries is in violation of its
respective charter or by-laws and, (b) neither Finco nor the Company
nor the Significant Subsidiaries is in default in the performance of
any obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to Finco or the Company and the
Significant Subsidiaries, taken as a whole, to which Finco or the
Company or the Significant Subsidiaries is a party or by which Finco,
the Company or the Significant Subsidiaries or their respective
property is bound which default could reasonably be expected to result
in a Material Adverse Effect;
(xviii) the execution, delivery and performance of this Agreement
and the other Operative Documents by Finco and the Company and the
issuance and sale of the Restricted Notes and compliance with the
terms and provisions thereof and of the other Operative Documents will
not (i) violate its respective charter or bylaws, (ii) require any
consent, approval, authorization or other order of, or qualification
with, any court or governmental body or agency of the United States or
the States of Texas or New York (except such as may be required under
the securities or Blue Sky laws of the various states), (iii) conflict
with or constitute a breach of any of the terms or provisions of, or a
default under the indenture executed, or senior notes issued, by the
Company in connection with debt offerings by the Company of $1.1
billion in April 1998 and $400 million in December 1998 or, to such
counsel's knowledge, any indenture,
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<PAGE> 27
loan agreement, mortgage, lease or other agreement or instrument to
which Finco, the Company or the Significant Subsidiaries is a party or
by which Finco, the Company or the Significant Subsidiaries or their
respective property is bound, which conflict, breach or default is
likely to have, either individually or in the aggregate, a Material
Adverse Effect, or (iv) violate or conflict with any applicable law or
any rule or regulation, or to such counsel's actual knowledge, any
judgment, order or decree, in each case, of any court or any
governmental body or agency having jurisdiction over Finco, the
Company or the Significant Subsidiaries or their respective property.
(xix) such counsel has no knowledge of any legal or governmental
proceedings pending or threatened to which Finco, the Company or the
Significant Subsidiaries is or could be a party or to which any of
their respective property is or could be subject, which could
reasonably be expected to result, singly or in the aggregate, in a
Material Adverse Effect.
(xx) to such counsel's knowledge, each of Finco, the Company and
the Significant Subsidiaries has such Authorizations of, and has made
all filings with and notices to, all governmental or regulatory
authorities and self-regulatory organizations and all courts and other
tribunals, including without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and
operate its respective properties and to conduct its business, except
where the failure to have any such Authorization or to make any such
filing or notice would not, singly or in the aggregate, have a
Material Adverse Effect. To such counsel's knowledge, (a) each such
Authorization is valid and in full force and effect and each of Finco,
the Company and the Significant Subsidiaries is in compliance with all
the terms and conditions thereof and with the rules and regulations of
the authorities and governing bodies having jurisdiction with respect
thereto; and (b) no event has occurred (including the receipt of any
notice from any authority or governing body) which allows or, after
notice or lapse of time or both, would allow, revocation, suspension
or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the
rights of the holder of any such Authorization; and (c) such
Authorizations contain no restrictions that are burdensome to Finco,
the Company or the Significant Subsidiaries; except where such failure
to be valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such restriction
would not, singly or in the aggregate, have a Material Adverse Effect;
(xxi) to such counsel's knowledge, neither the Company nor its
subsidiaries has violated any Environmental Law or any provisions of
ERISA, any provisions of the Foreign Corrupt Practices Act of the
rules and regulations promulgated thereunder, except for such
violations which, singly or in the aggregate, would not have a
Material Adverse Effect;
(xxi) to such counsel's knowledge, except as disclosed in the
Offering
26
<PAGE> 28
Memorandum, there are no contracts, agreements or understandings
(other than the Registration Rights Agreement) between Finco or the
Company and any person granting such person the right to require Finco
or such Company to include such securities with the Secured Notes and
Guarantee registered pursuant to any Registration Statement; and
(xxii) such counsel has participated in conferences with officers
and other representatives of the Company, representatives of the
Company's accountants, the Initial Purchaser's representatives and
counsel for the Initial Purchaser, at which conferences the contents
of the Offering Memorandum and related matters were discussed and,
although such counsel is not passing upon and do not assume any
responsibility for and shall not be deemed to have independently
verified the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum, no facts have come to the
attention of such counsel that lead such counsel to believe (a) that
the Offering Memorandum contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements contained therein not misleading
or (b) that the Offering Memorandum on the date thereof or on the date
hereof contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(g) The Initial Purchaser shall have received on the Closing Date an
opinion, dated the Closing Date, of Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
counsel for the Initial Purchaser, in form and substance reasonably satisfactory
to the Initial Purchaser.
(h) The Initial Purchaser shall have received, at the Closing Date, a
letter dated the Closing Date, as the case may be, in the form attached hereto
as Annex I, from Ernst & Young LLP, independent public accountants.
(i) The Initial Purchaser shall have received, at the Closing Date, a
letter dated the Closing Date, in the form attached hereto as Annex II, from
Arthur Andersen LLP, independent public accountants.
(j) The Initial Purchaser shall have received, at the Closing Date, an
opinion from Gardere Wynne Sewell & Riggs, L.L.P. in a form reasonably
satisfactory to the Initial Purchaser regarding filing and perfection of first
priority ship mortgages registered in the Marshall Islands.
(k) The Collateral Documents shall have been executed and delivered by
the parties thereto and the Company shall have taken all necessary steps to have
the Liens created by such Collateral Documents perfected under the laws
governing such perfection. At the time of Closing, the Initial Purchaser shall
be provided with undertakings from legal counsel and forms of their opinions,
and within thirty (30) days of the issuance of the Restricted Notes, the Company
shall provide to the Initial Purchaser, the Collateral Agent and the Trustee
opinions of counsel as to the perfection and priority of the Liens and ship
mortgages created by the Collateral Documents in forms reasonably satisfactory
to each of such persons.
(l) The Initial Purchaser shall have received a copy of the Company's
audit report for the three years ended December 31, 1998 and as of December 1998
and 1997 from Arthur Andersen LLP on or before the Closing Date and such report
shall not contain any qualification relating to
27
<PAGE> 29
the financial condition of the Company and its subsidiaries. Such audited
financial statements shall reflect historical consolidated financial results and
position of the Company identical to those contained in the Preliminary Offering
Memorandum and the Offering Memorandum and the notes thereto shall not contain
information different from that included in the Preliminary Offering Memorandum
or the Offering Memorandum.
(m) Finco shall have filed organizational documents which are in full
force and effect and in form and substance reasonably acceptable to the Initial
Purchaser.
(n) The Restricted Notes shall have been approved by Nasdaq for trading
and duly listed in PORTAL.
(o) The closing of the New Senior Notes offering (as defined in the
Offering Memorandum) shall have occurred.
(p) The Initial Purchaser shall have received a counterpart, conformed
as executed, of the Indenture which shall have been entered into by Finco, the
Company and the Trustee.
(q) Finco and the Company shall have executed the Registration Rights
Agreement and the Initial Purchaser shall have received an original copy
thereof, duly executed by Finco and the Company.
(r) Neither Finco nor the Company shall have failed at or prior to the
Closing Date to perform or comply with any of the agreements herein contained
and required to be performed or complied with by Finco or the Company, as the
case may be, at or prior to the Closing Date.
(s) The Initial Purchaser shall have received from the Company the
amount of $22.0 million as payment for the commissions and discounts in
connection with the purchase by the Initial Purchaser of the Restricted Notes.
(t) The Initial Purchaser shall have received evidence satisfactory to
it and its counsel taking all actions with respect to the Collateral Documents
and such other security documents as may be necessary or in the opinion of the
Initial Purchaser and its counsel, desirable to permit the perfection of the
liens created, or purported to be created by the Collateral Documents.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Initial Purchaser by written notice to Finco if any of the following
has occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in the Initial
Purchaser's judgment, is material and adverse and, in the Initial Purchaser's
judgment, makes it impracticable to market the Restricted Notes on the terms and
in the manner contemplated in the Offering Memorandum, (ii) the suspension or
material limitation of trading in securities or other instruments on the New
York Stock Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the
Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of Finco or the Company on any exchange
or in the over-the-counter market, (iv) the enactment, publication, decree or
other promulgation of any federal or state statute, regulation, rule or order
28
<PAGE> 30
of any court or other governmental authority which in your opinion materially
and adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of Finco and the
Company, taken as a whole, (v) the declaration of a banking moratorium by either
federal or New York State authorities or (vi) the taking of any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
11. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to Finco, to RBF Finance Co.,
901 Threadneedle, Houston, TX 77079 (telephone number: 281 496-5000) (iii) if
the Company, to R&B Falcon Corporation, 901 Threadneedle, Houston, TX 77079
(telephone number: 281-496-5000) and (ii) if to the Initial Purchaser,
Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York,
New York 10172, Attention: Syndicate Department, or in any case to such other
address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of Finco, the Company and the Company's
subsidiaries and the Initial Purchaser set forth in or made pursuant to this
Agreement shall remain operative and in full force and effect, and will survive
delivery of and payment for the Restricted Notes, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
the Initial Purchaser, the officers or directors of the Initial Purchaser, any
person controlling the Initial Purchaser, Finco, the Company, the officers or
directors of Finco or the Company, or any person controlling Finco or the
Company, (ii) acceptance of the Restricted Notes and payment for them hereunder
and (iii) termination of this Agreement.
If for any reason the Restricted Notes are not delivered by or on
behalf of Finco as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), Finco and the Company, jointly and
severally, agree to reimburse the Initial Purchaser for all out-of-pocket
expenses (including the fees and disbursements of counsel) incurred by them.
Notwithstanding any termination of this Agreement, Finco and the Company,
jointly and severally, shall be liable for all expenses which it has agreed to
pay pursuant to Section 5(i) hereof. Finco and the Company also agree, jointly
and severally, to reimburse the Initial Purchaser and their officers, directors
and each person, if any, who controls the Initial Purchaser within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act for any and all fees
and expenses (including without limitation the fees and expenses of counsel)
incurred by them in connection with enforcing their rights under this Agreement
(including without limitation its rights under Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon Finco, the Company, the
Initial Purchaser, the Initial Purchaser's directors and officers, any
controlling persons referred to herein, the directors and officers of Finco and
the Company and their respective successors and assigns, all as and to the
extent provided in this Agreement, and no other person shall acquire or have any
right under or by virtue of this Agreement. The term "successors and assigns"
shall not include a purchaser of any of the Restricted Notes from the Initial
Purchaser merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York, without regard to the conflict of law rules
thereof.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
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<PAGE> 31
Please confirm that the foregoing correctly sets forth the agreement
among Finco, the Company and the Initial Purchaser.
Very truly yours,
RBF FINANCE CO.
By: /S/ LEIGHTON MOSS
----------------------------------------
Name: Leighton Moss
Title: V.P.
R&B FALCON CORPORATION
By: /S/ STEVEN A. WEBSTER
----------------------------------------
Name:Steven A. Webster
Title: CEO
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /S/ CRAIG KLAASMEYER
----------------------------------------
Name: Craig Klassmeyer
Title: Senior Vice President
<PAGE> 32
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE> 33
SCHEDULE B
SIGNIFICANT SUBSIDIARIES
R&B Falcon Holdings Inc.
R&B Falcon Drilling (International & Deepwater) Inc.
Cliffs Drilling Company
R&B Falcon Drilling USA, Inc.
R&B Falcon Drilling Co.
R&B Falcon Exploration Co.
Double Eagle Marine, Inc.
Arcade Drilling AS
<PAGE> 1
EXHIBIT 10.2
ISSUER LOAN ESCROW AGREEMENT
This ISSUER LOAN ESCROW AGREEMENT (the "Agreement"), dated as of March
26, 1999, among United States Trust Company of New York, corporation duly
organized and existing under the laws of the State of New York and validly
existing as a banking organization under the banking laws of the State of New
York, as escrow agent (in such capacity, the "Escrow Agent"), United States
Trust Company of New York, a corporation duly organized and existing under the
laws of the State of New York and validly existing as a banking organization
under the banking laws of the State of New York, as trustee (in such capacity,
the "Trustee") under the Indenture (as defined herein), R&B Falcon Corporation,
a Delaware corporation (the "Company"), and RBF Finance Co., a Delaware
corporation (the "Issuer").
RECITALS
A. Pursuant to the Indenture, dated as of March 26, 1999 (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Indenture"), among the Issuer, the Company as Guarantor and the Trustee, the
Issuer is issuing $400,000,000 aggregate principal amount of its 11% Senior
Secured Notes due 2006 and $400,000,000 aggregate principal amount of its 113/8%
Senior Secured Notes due 2009, (collectively, the "Secured Notes").
B. The Issuer will enter into loan agreements with the Company (each an
"Issuer Loan Agreement") and will use the proceeds of the Secured Notes to make
loans (each an "Issuer Loan") pursuant to such Issuer Loan Agreements to the
Company to finance all or a portion of certain costs of acquiring, constructing,
altering, improving or repairing drilling rigs and drillships (individually, a
"Mortgaged Rig") or improvements to be used in connection with the Mortgaged
Rig, each such financing to be a separate loan secured by a Lien on the
Mortgaged Rig or if such Mortgaged Rig is under construction but not yet flagged
as of the date of this Agreement, on the construction contract and equipment
purchased for such Mortgaged Rig.
C. Each Issuer Loan for a flagged Mortgaged Rig will be secured by a
Lien on the Mortgaged Rig pursuant to a ship mortgage (a "Mortgage") and each
Issuer Loan for an uncompleted Mortgaged Rig will be secured by Liens on the
construction contract and the equipment purchased for such Mortgaged Rig
pursuant to a security agreement (each an "Issuer Security Agreement").
D. The Company has requested that the Issuer make an Issuer Loan in the
aggregate principal amount of up to $209,900,000 (the "Millennium Issuer Loan")
to finance the acquisition and construction of the Deepwater Millennium
drillship (the "Millennium Mortgaged Rig") pursuant to a Loan Agreement dated
March 26, 1999 between the Company and the Issuer (the "Millennium Issuer Loan
Agreement").
<PAGE> 2
E. As security for its obligations, among other things, under the
Millennium Issuer Loan and the Millennium Issuer Loan Agreement, the Company is
required to enter into an Issuer Security Agreement of even date herewith
granting a Lien on the construction contract therefor and the other collateral
described therein, to grant a Mortgage on the Millennium Mortgaged Rig in favor
of the Issuer as soon as the Millennium Mortgaged Rig is flagged and, prior to
the grant of such Mortgage, among other things, to deposit the Escrow Amount (as
defined herein) in a special, segregated and irrevocable account in the name of
and beneficially owned by the Company which is pledged to, and to be under the
sole dominion and control of, the Issuer (the "Escrow Account") pending the
reinvestment of such amounts in accordance with the Loan Agreement (the "Issuer
Collateral").
F. As security for its obligations, among other things, under the
Secured Notes and the Indenture, the Issuer is required to enter into a Senior
Secured Note Security and Pledge Agreement of even date herewith (the "Secured
Note Security Agreement"), with United States Trust Company of New York, as
Collateral Agent (the "Collateral Agent") and the Trustee in which the Issuer
grants Liens on and pledges the notes (each an "Issuer Note") evidencing all
Issuer Loans made thereunder in connection with the Mortgaged Rigs (including
the Millennium Issuer Loan) and collaterally assigns all Liens, including
Mortgages and the other Collateral securing such Issuer Notes (the "Secured Note
Collateral").
G. Under the terms of each of the Issuer Loan Agreements, the Company
is required to pay all payments of principal, interest, commitment fees and
other obligations on such Issuer Loans and the Issuer Loan Agreements, all funds
received pursuant to the Mortgages and the Issuer Security Agreements, whether
the proceeds of the Issuer Collateral or otherwise, consisting of cash or cash
equivalents to the Trustee for deposit in the Escrow Account.
H. The parties have entered into this Agreement in order to set forth
the conditions upon which, and the manner in which, funds will be disbursed from
the Escrow Account and released from the security interest and Liens created
hereby.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms. Terms used herein and not defined herein shall have
the meanings as defined in the Indenture. In addition to any other defined terms
used herein, the following terms shall constitute defined terms for purposes of
this Agreement and shall have the meanings set forth below:
"Applied" means that disbursed funds have been applied pursuant to
Section 3(a) or pursuant to Section 6(b)(iii).
"Available Funds" means (A) the sum of (i) all amounts deposited in the
Escrow Account from time to time and (ii) interest earned or dividends paid on
the funds in the Escrow
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<PAGE> 3
Account (including holdings of Eligible Cash Equivalents), less (B) the
aggregate disbursements previously made pursuant to this Agreement.
"Collateral" shall have the meaning given in Section 6(a) hereof.
"Default" means a "Default" as defined in Section 6 of the Loan
Agreement.
"Disbursement Request" means a notice sent by the Company, approved by
the Issuer and certified by the Trustee to the Escrow Agent requesting a
disbursement of funds from the Escrow Account, in substantially the form of
Exhibit A hereto. Each Disbursement Request shall be signed by the Chairman of
the Board, a Vice Chairman of the Board, the Chief Executive Officer, the Chief
Operating Officer, the Chief Financial Officer or any Vice President of the
Company and of the Issuer and a Responsible Officer of the Trustee.
"Eligible Cash Equivalents" means (i) U.S. Governmental Obligations
with a maturity of four years or less; (ii) commercial paper issued by any
corporation if such commercial paper has credit ratings of at least "A-1" from
S&P or at least "P-1" by Moody's; (iii) certificates of deposit, bankers'
acceptances, time deposits, Eurocurrency Deposits and similar types of
Investments routinely offered by commercial banks with final maturities of one
year or less issued by commercial banks having combined capital and surplus in
excess of $100,000,000; and (iv) shares in money market mutual or similar funds
having assets in excess of $100,000,000.
"Escrow Account" shall have the meaning given in Section 2(b).
"Escrow Account Statement" shall have the meaning given in Section
2(g).
"Escrow Agent" shall have the meaning set forth in the preamble to this
Agreement.
"Escrow Amount" shall mean $100,000,000 of the proceeds received by the
Company from the sale of the Secured Notes pursuant to the Purchase Agreement.
"Event of Default" means an "Event of Default" as defined in Section
6.1 of the Indenture.
"Issue Date" means March 26, 1999.
"Trustee" shall include any successor Trustee appointed pursuant to the
Indenture.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
3
<PAGE> 4
2. Escrow Account; Escrow Agent.
(a) Appointment of Escrow Agent. The Company and the Issuer hereby
appoint the Escrow Agent, and the Escrow Agent hereby accepts appointment, as
escrow agent, under the terms and conditions of this Agreement.
(b) Establishment of the Escrow Account. Concurrent with the execution
and delivery hereof, the Escrow Agent shall establish and maintain in the name
of the Company at United States Trust Company of New York, a special, segregated
and irrevocable escrow account designated Issuer Loan Escrow Account pledged by
R&B Falcon Corporation to RBF Finance Co. (the "Escrow Account"). All funds
accepted by the Escrow Agent pursuant to this Agreement shall be deposited in
the name of and beneficially owned by the Company and pledged to, and under the
sole dominion and control of, the Issuer, acting for its benefit and for the
benefit of the Holders of the Secured Notes and the Trustee. All such funds
shall be held in the Escrow Account until disbursed in accordance with the terms
hereof. The Escrow Account, the funds held therein and any Eligible Cash
Equivalents held by the Escrow Agent in which such funds are invested shall be
beneficially owned by the Company and pledged to and under the sole dominion and
control of the Issuer, acting for its benefit. Concurrently with the Issuer's
making the Millennium Issuer Loan, the Company shall deliver the Escrow Amount
to the Escrow Agent for deposit into the Escrow Account against the Escrow
Agent's written acknowledgement and receipt of the Initial Escrow Amount.
(c) Escrow Agent Compensation. The Company shall pay to the Escrow
Agent such compensation for services to be performed by it under this Agreement
as the Company and the Escrow Agent may agree in writing from time to time. The
Escrow Agent shall be paid any compensation owed to it directly by the Company
and shall not disburse from the Escrow Account any such amounts.
The Company shall reimburse the Escrow Agent upon request for all
reasonable expenses, disbursements, and advances incurred or made by the Escrow
Agent in implementing any of the provisions of this Agreement, including
compensation and the reasonable expenses and disbursements of its counsel. The
Escrow Agent shall be paid any such expenses owed to it directly by the Company
and shall not disburse from the Escrow Account any such amounts.
The provisions of this Section 2(c) shall survive termination of this
Agreement.
(d) Investment of Funds in the Escrow Account. Pending release thereof
in accordance with the terms of the Indenture and the Millennium Issuer Loan
Agreement, funds deposited in the Escrow Account shall be invested and
reinvested only upon the following terms and conditions:
(i) Acceptable Investments. All funds deposited or held in the
Escrow Account at any time shall be invested, at the direction of the
Company except during the continuance of a Default or an Event of
Default, and then only at the direction of the Issuer with the
certification of the Trustee, by the Escrow Agent in Eligible Cash
Equivalents which constitute Permitted Investments for the
4
<PAGE> 5
Company in accordance with the Company's or the Issuer's written
instructions, as applicable, from time to time to the Escrow Agent;
provided, however, that any such written instruction shall specify the
particular Investment to be made, shall contain the certification
referred to in Section 2(d)(ii), if required, and shall be executed by
any officer of the Company. All Eligible Cash Equivalents shall be
assigned to and held in the possession of, or, in the case of Eligible
Cash Equivalents maintained in book entry form with the Federal
Reserve Bank, transferred to a book entry account in the name of, the
Escrow Agent, as pledgee, with such guarantees as are customary,
except that Eligible Cash Equivalents maintained in book entry form
with the Federal Reserve Bank shall be transferred to a book entry
account in the name of the Escrow Agent at the Federal Reserve Bank
that includes only Eligible Cash Equivalents held by the Escrow Agent
for its customers and segregated by separate recordation in the books
and records of the Escrow Agent.
(ii) Security Interest in and Lien on Investments. No investment
of funds in the Escrow Account shall be made unless the Company has
certified to the Escrow Agent, the Issuer, the Collateral Agent and
the Trustee that, upon such investment, the Issuer will have a first
priority perfected Lien and security interest for the benefit of the
Issuer in the applicable Investment. A certificate as to a class of
investments need not be issued with respect to individual investments
in securities in that class if the certificate applicable to the class
remains accurate with respect to such individual investments, which
continued accuracy the Escrow Agent may conclusively assume. Promptly
after the Issue Date, and within 3 months after the anniversary of the
Issue Date, until the payment in full of the Millennium Issuer Loan in
accordance with the terms thereof and of the Millennium Issuer Loan
Agreement, and all other Obligations then due and owing under the
Millennium Issuer Loan, or the release of all of the funds in the
Escrow Account pursuant to the terms hereof, the Millennium Issuer
Loan Agreement, this Agreement and the other Loan Documents (as
defined in the Millennium Issuer Loan Agreement), the Company shall
provide to the Issuer, for the benefit of the Trustee, the Collateral
Agent and the Escrow Agent, an Opinion of Counsel, dated each such
date as applicable, which opinion shall meet the requirements of
Section 314(b) of the Trust Indenture Act of 1939, as amended (the
"TIA").
(iii) Interest and Dividends. All interest earned and dividends
paid on funds invested in Eligible Cash Equivalents shall be deposited
in the Escrow Account as additional Collateral beneficially owned by
the Company and pledged to the Issuer, acting for its benefit, and
shall be reinvested in accordance with the terms hereof.
(iv) Limitation on Escrow Agent's Responsibilities. The Escrow
Agent's sole responsibilities under this Section 2 shall be (A) to
retain, or cause its agent in the State of New York to retain,
possession of certificated Eligible
5
<PAGE> 6
Cash Equivalents (except, however, that the Escrow Agent may surrender
possession of any such Eligible Cash Equivalent to the issuer thereof
for the purpose of effecting assignment, crediting interest, or
reinvesting such security or reducing such security to cash) and to be
the registered or designated owner of Eligible Cash Equivalents which
are not certificated, (B) to follow the Company's or the Issuer's
written instructions. as certified by the Trustee, as applicable,
given in accordance with Section 2(d)(i), (C) to invest and reinvest
funds pursuant to this Section 2(d) and (D) to use reasonable efforts
to reduce to cash such Eligible Cash Equivalents as may be required to
fund any disbursement or payment in accordance with Section 3. In
connection with clause (i) above, the Escrow Agent will maintain, or
cause its agent in the State of New York to maintain, continuous
possession in the State of New York of certificated Eligible Cash
Equivalents and cash included in the Collateral and will cause
uncertificated Eligible Cash Equivalents to be registered in the
book-entry system of, and transferred to an account of the Escrow
Agent or a sub-agent of the Escrow Agent at, the Federal Reserve Bank
of New York. Except as provided in Section 6, the Escrow Agent shall
have no other responsibilities with respect to perfecting or
maintaining the perfection of the Issuer's Liens and security interest
in the Issuer Collateral and shall not be required to file any
instrument, document or notice in any public office at any time or
times. In connection with clause (D) above, except as set forth below,
the Escrow Agent shall not be required to reduce to cash any Eligible
Cash Equivalents to fund any disbursement or payment in accordance
with Section 3 in the absence of written instructions signed by an
officer of the Company specifying the particular investment to
liquidate unless a Default or Event of Default has occurred and is
continuing, in which case such written instructions shall be signed by
an officer of the Issuer and certified by a Trust Officer of the
Trustee. If no such written instructions are received, the Escrow
Agent shall liquidate those Eligible Cash Equivalents having the
lowest interest rate per annum, regardless of maturity, or if none
such exist, those having the nearest maturity. The Escrow Agent shall
have no duty to determine whether or not to file or record any
document or instrument in connection with this Agreement, but will
follow the instructions of the Issuer, as certified by the Trustee.
(e) Substitution of Escrow Agent. The Escrow Agent may resign by giving
not less than 30 days' prior written notice to the Company and the Issuer, with
a copy to the Trustee. Such resignation shall take effect upon the later to
occur of (i) delivery of all funds and Eligible Cash Equivalents maintained by
the Escrow Agent hereunder and copies of all books, records and other documents
in the Escrow Agent's possession relating to such funds or Eligible Cash
Equivalents or this Agreement to a successor Escrow Agent mutually approved by
the Company, the Issuer and the Trustee (which approvals shall not be
unreasonably withheld or delayed) and (ii) the Company, the Trustee and such
successor Escrow Agent entering into this Agreement or any written successor
agreement no less favorable to the interests of the Holders of the Secured
Notes, the Trustee and the Issuer than this Agreement; and the Escrow Agent
shall thereupon be discharged of all obligations under this Agreement and shall
have no further duties,
6
<PAGE> 7
obligations or responsibilities in connection herewith, except as set forth in
Section 4. If a successor Escrow Agent has not been appointed or has not
accepted such appointment within 30 days after notice of resignation is given to
the Company, the Escrow Agent may apply to a court of competent jurisdiction for
the appointment of a successor Escrow Agent.
3. Disbursements.
(a) Disbursement Request; Disbursements.
(i) The Millennium Issuer Loan Agreement provides that upon
completion of the Millennium Mortgaged Rig, the Company is required to
grant a first priority perfected Lien on the Millennium Mortgaged Rig.
Provided that no Event of Default under the Millennium Issuer Loan
Agreement has occurred and is continuing, the Company is entitled to
have the funds in the Escrow Account released upon the delivery in
form and substance satisfactory to the Issuer and the Trustee of the
following documents:
1. A Mortgage covering the Millennium Mortgaged Rig which
has been duly filed in the Republic of Panama; and
2. Opinions of Counsel that (i) the Company has duly
authorized, executed and delivered the Mortgage; (ii) the
Mortgage constitutes a legally binding obligation of the Company
enforceable against the Company in accordance with its terms
(except as (i) the enforceability thereof may be limited
bankruptcy, insolvency or other similar laws affecting creditors'
rights, generally and (ii) the enforceability thereof may be
limited by right of acceleration and the availability of
enforceable remedies may be limited by equitable principles of
general applicability, and subject to such other exceptions,
limitations or qualifications that are usual and customary for
such opinions) and (iii) the Mortgage constitutes a valid and
perfected first mortgage lien on the Millennium Mortgaged Rig.
(ii) At least two Business Days prior to any date on which the
funds are to be released from the Escrow Account upon satisfaction of
the aforementioned conditions precedent, the Issuer, the Company and
the Trustee shall submit to the Escrow Agent a completed Disbursement
Request substantially in the form of Exhibit A hereto requesting that
all funds from the Escrow Account be released. Provided that any such
Disbursement Request is not rejected by it, the Escrow Agent, two
Business Days after receipt of such Disbursement Request, shall
disburse the funds requested in such Disbursement Request by wire or
book-entry transfer of immediately available funds to the Company. The
Escrow Agent shall notify the Issuer, the Company and the Trustee as
soon as reasonably possible if any such Disbursement Request is
rejected and the reason(s) therefor.
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<PAGE> 8
(iii) If an Event of Default under the Millennium Issuer Loan
Agreement has occurred and is continuing, the Trustee shall be
entitled unilaterally to initiate withdrawals by executing a
Disbursement Request which will be substantially similar to the form
of Exhibit A but which need only to be executed by the Trustee.
(b) Conditions Precedent to Disbursement. Subject to Section 4 and any
mandatory provisions of applicable law, the Escrow Agent shall make the payments
to be made pursuant to a completed Disbursement Request if (i) the Company and
the Issuer shall have submitted, in accordance with the provisions of Section
3(a) herein, such Disbursement Request to the Escrow Agent substantially in the
form of Exhibit A with blanks appropriately filled in containing the signed
certification of the Trustee included in such form and (ii) the Escrow Agent
shall not have received any notice from the Trustee or the Issuer that as a
result of an Event of Default the Millennium Issuer Loan has been accelerated
and has become due and payable (in which event the Escrow Agent shall apply all
Available Funds as required by Section 6(b)(ii)).
(c) No Distributions. Provided that no Event of Default has occurred
and is continuing, the Company shall initiate all requests for withdrawal of
funds from the Escrow Account by executing a Disbursement Request and submitting
such request to the Issuer and the Trustee. However, the Company shall not be
entitled to direct the Escrow Agent to make distributions from the Escrow
Account except upon execution by the Issuer and certification by the Trustee on
a Disbursement Request that the applicable conditions have been satisfied, as
provided in Section 3(a). The Trustee shall not, except following an Event of
Default, be entitled unilaterally to initiate withdrawals.
(d) Deposits Irrevocable. Any deposits made into the Escrow Account
hereunder shall be irrevocable and the amount of such deposits and any
instrument or security held in the Escrow Account hereunder and all interest
thereon shall be held in trust by the Escrow Agent and applied solely as
provided herein.
4. Limitation of the Escrow Agent's Liability: Responsibilities of the
Escrow Agent. The Escrow Agent's responsibility and liability under this
Agreement shall be limited as follows: (i) the Escrow Agent does not represent,
warrant or guaranty to the Issuer, the Trustee or the Holders of the Secured
Notes from time to time the performance of the Company; (ii) the Escrow Agent
shall have no responsibility to the Company or the Issuer or the Trustee from
time to time as a consequence of performance or non-performance by the Escrow
Agent hereunder, except for any negligence or willful misconduct of the Escrow
Agent; (iii) the Company shall remain solely responsible for all aspects of the
Company's business and conduct; and (iv) the Escrow Agent is not obligated to
supervise, inspect or inform the Company or any third party of any matter
referred to above.
No implied covenants or obligations shall be inferred from this
Agreement against the Escrow Agent, nor shall the Escrow Agent be bound by the
provisions of any agreement beyond the specific terms hereof. Specifically and
without limiting the foregoing, the Escrow Agent shall in no event have any
liability in connection with its investment, reinvestment or
8
<PAGE> 9
liquidation, in good faith and in accordance with the terms hereof, of any funds
or Eligible Cash Equivalents held by it hereunder, including without limitation
any liability for any delay not resulting from negligence or willful misconduct
in such investment, reinvestment or liquidation, or for any loss of principal or
income incident to any such delay.
The Escrow Agent shall be entitled to rely upon any judicial order or
judgment, upon any written opinion of counsel or upon any certification,
instruction, notice, or other writing delivered to it by the Company or the
Issuer or the Trustee in compliance with the provisions of this Agreement
without being required to determine the authenticity or the correctness of any
fact stated therein or the propriety or validity of service thereof. The Escrow
Agent may act in reliance upon any instrument comporting with the provisions of
this Agreement or signature believed by it to be genuine and may assume that any
person purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
The Escrow Agent may act pursuant to the oral or written advice of
counsel chosen by it with respect to any matter relating to this Agreement and
(subject to clause (ii) of the first paragraph of this Section 4) shall not be
liable for any action taken or omitted in accordance with such advice.
The Escrow Agent shall not be called upon to advise any party as to
selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
In the event of any ambiguity in the provisions of this Agreement with
respect to any funds or property deposited hereunder, the Escrow Agent shall be
entitled to refuse to comply with any and all claims, demands or instructions
with respect to such funds or property, and the Escrow Agent shall not be or
become liable for its failure or refusal to comply with conflicting claims,
demands or instructions. The Escrow Agent shall be entitled to refuse to act
until either any conflicting or adverse claims or demands shall have been
finally determined by a court of competent jurisdiction or settled by agreement
between the conflicting claimants as evidenced in a writing, satisfactory to the
Escrow Agent, or the Escrow Agent shall have received security or an indemnity
satisfactory to the Escrow Agent sufficient to save the Escrow Agent harmless
from and against any and all loss, liability or expense which the Escrow Agent
may incur by reason of its acting. The Escrow Agent may in addition elect in its
sole option to commence an interpleader action or seek other judicial relief or
orders as the Escrow Agent may deem necessary.
No provision of this Agreement shall require the Escrow Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
5. Indemnity. The Company shall indemnify, hold harmless and defend the
Escrow Agent and its directors, officers, agents, employees and controlling
persons, from and against any and all claims, actions, obligations, liabilities
and expenses, including defense costs, investigative fees and costs, legal fees,
and claims for damages, arising from the Escrow Agent's
9
<PAGE> 10
performance under this Agreement, except to the extent that such liability,
expense or claim is directly attributable to the negligence or willful
misconduct of any of the foregoing persons. The provisions of this Section shall
survive any termination, satisfaction or discharge of this Agreement as well as
the resignation or removal of the Escrow Agent. The provisions of this paragraph
5 shall survive the termination of this Agreement.
6. Grant of Liens and Security Interest: Instructions to Escrow Agent.
(a) The Company hereby irrevocably grants a first priority security
interest in and Lien on, and pledges, assigns and sets over to the Issuer all of
the Company's right, title and interest in the Escrow Account, and all property
now or hereafter placed or deposited in, or delivered to the Escrow Agent for
placement or deposit in, the Escrow Account, including, without limitation, all
funds held therein, all Eligible Cash Equivalents held by (or otherwise
maintained in the name of) the Escrow Agent pursuant to Section 2, and all
proceeds thereof as well as all rights of the Company under this Agreement
(collectively, the "Collateral"), in order to secure all obligations and
indebtedness of the Company under the Millennium Issuer Loan and any other
obligation, now or hereafter arising, of every kind and nature, owed by the
Company under the Millennium Issuer Loan Agreement and related Loan Documents
(as defined therein). The Escrow Agent hereby acknowledges the Issuer's security
interest and Lien as set forth above. The Company shall take all actions
necessary on its part to insure the continuance of a first priority security
interest in and Lien on the Collateral in favor of the Issuer in order to secure
all such obligations and indebtedness.
(b) The Company, the Issuer and the Trustee hereby irrevocably instruct
the Escrow Agent to, and the Escrow Agent shall, (i) (A) at all times maintain
sole dominion and control over funds and Eligible Cash Equivalents in the Escrow
Account, acting for the benefit of the Trustee to the extent specifically
required herein, (B) maintain, or cause its agent within the State of New York
to maintain, possession of all certificated Eligible Cash Equivalents purchased
hereunder that are physically possessed by the Escrow Agent in order for the
Trustee to enjoy a continuous perfected first priority security interest therein
under the law of the State of New York (the Company hereby agreeing that in the
event any certificated Eligible Cash Equivalents are in the possession of the
Company or a third party, the Company shall use its best efforts to deliver all
such certificates to the Escrow Agent), (C) take all steps specified by the
Company pursuant to paragraph (a) above to cause the Trustee to enjoy a
continuous perfected first priority security interest and Liens under the New
York Uniform Commercial Code and any applicable law of the State of New York in
all Eligible Cash Equivalents purchased hereunder that are not certificated and
(D) maintain the Collateral free and clear of all Liens, security interests,
safekeeping or other charges, demands and claims against the Escrow Agent of any
nature now or hereafter existing in favor of anyone other than the Issuer; (ii)
promptly notify the Issuer and the Trustee if the Escrow Agent receives written
notice that any Person other than the Issuer has or claims to have a Lien on or
security interest in any portion of the Collateral and (iii) upon receipt of
written notice from the Trustee of the acceleration of the maturity of the
Millennium Issuer Loan, and direction from the Trustee to disburse all Available
Funds to the Trustee for deposit in the Senior Secured Note Escrow Account (the
"Secured Note Escrow Account") established pursuant to the Senior Secured Escrow
Agreement dated as of March 26,
10
<PAGE> 11
1999 between United States Trust Company of New York, as Escrow Agent, the
Issuer and the Trustee (the "Secured Note Escrow Agreement"), as promptly as
practicable disburse all funds held in the Escrow Account to the Trustee for
deposit in the Secured Note Escrow Account and transfer title to all Eligible
Cash Equivalents held by the Escrow Agent hereunder to the escrow agent under
the Secured Note Escrow Account Agreement. The Escrow Agent shall not have any
right to receive compensation from the Issuer or the Trustee and is without any
authority to obligate the Issuer or the Trustee or to compromise or pledge its
security interest and Lien hereunder. Accordingly, the Escrow Agent is hereby
directed to cooperate with the Issuer in the exercise of its respective rights
in the Collateral provided for herein.
(c) Upon demand, the Company will execute and deliver to the Trustee
such instruments and documents as the Issuer and the Trustee may reasonably deem
necessary or advisable to confirm or perfect the rights of the Issuer and the
Trustee under this Agreement and the Issuer's interest in the Collateral. The
Issuer and the Trustee shall be entitled to take all necessary action to
preserve and protect the security interest created hereby as a Lien and
encumbrance upon the Collateral.
(d) The Company and the Issuer each hereby appoints the Trustee as its
attorney-in-fact with full power of substitution, exercisable upon the
occurrence and during the continuance of a Default or Event of Default, to do
any act which the Company is obligated hereto to do, and the Trustee may, but
shall not be obligated to, exercise such rights as the Company might exercise
with respect to the Collateral and take any action in the Company's name to
protect the Issuer's Liens and security interest hereunder. In addition to the
rights provided under Section 6(b)(iii) hereof, upon an Event of Default as
defined in the Loan Agreement and for so long as such Event of Default
continues, the Trustee, for the benefit of the Issuer, may exercise in respect
of the Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured party
under the New York Uniform Commercial Code or other applicable law, and the
Trustee may also upon obtaining possession of the Collateral as set forth
herein, without notice to the Company except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange, broker's board or at any of the Issuer's or Trustee's offices
or elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Trustee may deem commercially reasonable. The Company acknowledges
and agrees that any such private sale may result in prices and other terms less
favorable to the seller than if such sale were a public sale. The Company agrees
that, to the extent notice of sale shall be required by law, at least ten (10)
days' notice to the Company 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 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.
7. Termination. This Agreement shall terminate automatically ten (10)
days following disbursement of all funds remaining in the Escrow Account
(including Eligible Cash Equivalents) unless sooner terminated by agreement of
the parties hereto in accordance with the
11
<PAGE> 12
terms hereof and not in violation of the Indenture or the Loan Agreement (the
Trustee may not agree to terminate this Agreement unless it has received the
consent of 100% of the Holders of all of the Secured Notes outstanding);
provided, however, that the obligations of the Company under Section 2(c) and
Section 5 (and any existing claims thereunder) shall survive termination of this
Agreement or the resignation of the Escrow Agent; provided, further, however,
that until such tenth day, the Company will cause this Agreement (or any
permitted successor agreement) to remain in effect and will cause there to be an
Escrow Agent (including any permitted successor thereto) acting hereunder (or
under any such permitted successor agreement).
8. Miscellaneous.
(a) Waiver. Any party hereto may specifically waive any breach of this
Agreement by any other party, but no such waiver shall be deemed to have been
given unless such waiver is in writing, signed by the waiving party and
specifically designating the breach waived, nor shall any such waiver constitute
a continuing waiver of similar or other breaches.
(b) Invalidity. If for any reason whatsoever any one or more of the
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effectuate, to the maximum extent possible, the parties' intent.
(c) Assignment. This Agreement is personal to the parties hereto, and
the rights and duties of any party hereunder shall not be assignable except with
the prior written consent of the other parties. Notwithstanding the foregoing,
this Agreement shall inure to and be binding upon the parties and their
successors and permitted assigns. Nothing herein shall restrict the Escrow Agent
from performing its duties through a sub-agent.
(d) Benefit. The parties hereto and their successors and permitted
assigns, but no others, shall be bound hereby and entitled to the benefits
hereof; provided, however, that the Holders of the Secured Notes and their
permitted assigns shall be entitled to the benefits hereof and to enforce this
Agreement.
(e) Time. Time is of the essence with respect to each provision of this
Agreement.
(f) Entire Agreement; Amendments. This Agreement, the Millennium Issuer
Loan Agreement, the Indenture and the Security Agreements contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede any and all prior agreements, understandings and commitments, whether
oral or written. This Agreement may be amended only in accordance with Article
7.6 of the Millennium Issuer Loan Agreement and Article X of the Indenture and
further by a writing signed by a duly authorized representative of each party
hereto.
12
<PAGE> 13
(g) Notices. All notices and other communications required or permitted
to be given or made under this Agreement shall be in writing and shall be deemed
to have been duly given and received, regardless of when and whether received,
either: (a) on the day of hand delivery; (b) three Business Days following the
day sent, when sent by United States certified mail, postage and certification
fee prepaid, return receipt requested, addressed asset forth below; (c) when
transmitted by telecopy with verbal confirmation of receipt by the telecopy
operator to the telecopy number set forth below; or (d) one business day
following the day timely delivered to a next-day air courier addressed as set
forth below:
To Escrow Agent:
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, NY 10036
Attention: Corporate Trust Administration
Telecopy: (212) 852-1626
To the Trustee:
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, NY 10036
Attention: Corporate Trust Administration
Telecopy: (212) 852-1626
To the Company:
R&B Falcon Corporation
901 Threadneedle
Houston, TX 77079-2982
Attention: Leighton E. Moss
Telecopy: (281) 496-0285
Telephone: (281) 496-5000
To the Issuer:
RBF Finance Co.
901 Threadneedle
Houston, TX 77079-2982
Attention: Leighton E. Moss
Telecopy: (281) 589-4440
Telephone: (281) 496-5000
13
<PAGE> 14
or at such other address as the specified entity most recently may have
designated in writing in accordance with this Section.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) Captions. Captions in this Agreement are for convenience only and
shall not be considered or referred to in resolving questions of interpretation
of this Agreement.
(j) Choice of Law: Waiver of Jury Trial. The existence, validity,
construction, operation and effect of any and all terms and provisions of this
Agreement shall be determined in accordance with and governed by the laws of the
State of New York, without regard to principles of conflicts of law. The parties
to this Agreement hereby agree that jurisdiction over such parties and over the
subject matter of any action or proceeding arising under this Agreement may be
exercised by a competent Court of the State of New York, or by a United States
Federal Court, sitting in The City of New York. The Company and the Issuer each
submits to the personal jurisdiction of such courts, each hereby waives personal
service of process upon it and hereby waives, to the extent permitted by
applicable law, the right to a trial by jury in any action or proceeding with
the Escrow Agent. All actions and proceedings brought by the Company or the
Issuer against the Escrow Agent relating to or arising from, directly or
indirectly, this Agreement shall be litigated only in courts within the State of
New York. The Company and the Issuer each waives any objection that it may have
to the location of the court in which the Escrow Agent has commenced a
proceeding described in this paragraph including, without limitation, any
objection to the laying of venue or based on the grounds of forum non
conveniens.
(k) Authority of the Issuer and the Company; Valid and Binding
Agreement. Each of the Issuer and the Company hereby represents and warrants
that this Agreement has been duly authorized, executed and delivered on its
behalf and constitutes the legal, valid and binding obligation of each of the
Issuer and the Company. The execution, delivery and performance of this
Agreement by the Issuer and the Company does not violate any applicable law or
regulation to which either the Issuer or the Company is subject and does not
require the consent of any governmental or other regulatory body to which either
the Issuer or the Company is subject, except for such consents and approvals as
have been obtained and are in full force and effect.
(l) Authority of the Escrow Agent and the Trustee: Valid and Binding
Agreement. Each of the Escrow Agent and the Trustee hereby represents and
warrants that this Agreement has been duly authorized, executed and delivered on
its behalf and constitutes its legal, valid and binding obligation.
(m) Agent for Service: Submission to Jurisdiction: Waiver of
Immunities. By the execution and delivery of this Agreement, each of the Issuer
and the Company (i) acknowledges that it has, by separate written instrument,
irrevocably designated and appointed [CT Corporation System, 1633 Broadway, New
York, New York 10019 ](or any successor), as its authorized agent upon which
process may be served in any suit or proceeding arising out of or relating to
this Agreement that may be instituted in any federal or state court in the State
of New
14
<PAGE> 15
York, or brought under federal or state securities laws, and acknowledges that
[CT Corporation System ] has accepted such designation, (ii) submits to the
jurisdiction of any such court in any such suit or proceeding, and (iii) agrees
that service of process upon [CT Corporation System ](or any successor) and
written notice of said service to the Issuer shall be deemed in every respect
effective service of process upon each of the Issuer and the Company in any such
suit or proceeding. The Issuer and the Company each further agrees to take any
and all action, including the execution and filing of any and all such documents
and instrument, as may be necessary to continue such destination and appointment
of [CT Corporation System ](or any successor) in full force and effect so long
as the Loan shall be outstanding.
To the extent that either the Company or the Issuer has or hereafter
may acquire any immunity from jurisdiction of any court or from any legal
process (whether through service of notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, each hereby irrevocably waives such immunity in respect of its
obligations under this Agreement, to the extent permitted by law.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties have executed and delivered this Escrow
Account Agreement as of the day first above written.
ESCROW AGENT: UNITED STATES TRUST COMPANY OF NEW YORK
as Escrow Agent
By: /s/ PETER C. GERRER
------------------------------------
Name: Peter C. Gerrer
Title: Vice President
TRUSTEE: UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
By: /s/ PETER C. GERRER
------------------------------------
Name: Peter C. Gerrer
Title: Vice President
ISSUER: RBF FINANCE CO.
By: /s/ STEVEN A. WEBSTER
------------------------------------
Name:
Title:
COMPANY: R&B FALCON CORPORATION
By: /s/ STEVEN A. WEBSTER
------------------------------------
Name:
Title:
16
<PAGE> 17
EXHIBIT A
Form of Disbursement Request
[Letterhead of the Company]
[Date]
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036
Attention: Corporate Trust Administration
Re: Disbursement Request No.
[indicate whether revised]
Ladies and Gentlemen:
We refer to the Issuer Escrow Agreement (the "Escrow Agreement"), dated
as of March 26, 1999 among you (the "Escrow Agent"), United States Trust Company
of New York, as Trustee, RBF Finance Co., a Delaware corporation (the "Issuer")
and R&B Falcon Corporation, a Delaware corporation (the "Company"). Capitalized
terms used herein shall have the meaning given in the Escrow Agreement.
This letter constitutes a Disbursement Request under the Escrow
Agreement.
The undersigned hereby notifies you that the Company has requested, and
has satisfied the conditions contained in Section 3(a) of the Escrow Loan
Agreement for the release of all of the funds and escrowed property continued
from the Escrow Account.
In connection with the requested disbursement, each of the undersigned
hereby notifies you that:
1. The Millennium Issuer Loan has not, as a result of an Event of
Default (as defined in the Millennium Issuer Loan Agreement), been accelerated
and become due and payable.
2. An opinion of counsel as required by Section 3(a) of the Escrow
Agreement is delivered herewith.
3. The Mortgage for the Millennium Mortgaged Rig as required by Section
3(a) of the Escrow Agreement has been delivered to the Issuer and the Trustee.
4. [add wire instructions].
<PAGE> 18
The Escrow Agent is entitled to rely on the foregoing in disbursing
funds relating to this Disbursement Request.
The Company: R&B Falcon Corporation
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
The Issuer: RBF Finance Co.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
The Trustee hereby certifies to the Escrow Agent that it has received
the applicable Opinion of Counsel and Mortgage Officers' Certificate described
in Section 3(a) of the Escrow Agreement and such other opinions and documents as
it requires for its consent to the release of the funds to be disbursed pursuant
to the foregoing Disbursement Request.
United States Trust Company of New York
as Trustee
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
A-2
<PAGE> 1
EXHIBIT 10.3
SENIOR SECURED NOTE ESCROW AGREEMENT
This SENIOR SECURED NOTE ESCROW AGREEMENT (the "Agreement"), dated as
of March 26, 1999, among United States Trust Company of New York, a corporation
duly organized and existing under the laws of the State of New York and validly
existing as a banking organization under the banking laws of the State of New
York, as escrow agent (in such capacity, the "Escrow Agent"), United States
Trust Company of New York, a corporation duly organized and existing under the
laws of the State of New York and validly existing as a banking organization
under the banking laws of the State of New York, as trustee (in such capacity,
the "Trustee") under the Indenture (as defined herein), and RBF Finance Co., a
Delaware corporation (the "Issuer").
RECITALS
A. Pursuant to the Indenture, dated as of March 26, 1999 (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Indenture"), among the Issuer, R&B Falcon Corporation, a Delaware corporation
(the "Company"), as Guarantor and the Trustee, the Issuer is issuing
$400,000,000 aggregate principal amount of its 11% Senior Secured Notes due 2006
and $400,000,000 aggregate principal amount of its 11 3/8% Senior Secured Notes
due 2009 (collectively, the "Secured Notes").
B. The Issuer will enter into loan agreements with the Company (each
an "Issuer Loan Agreement") and will use the proceeds of the Secured Notes to
make loans pursuant to such Issuer Loan Agreements to the Company (each an
"Issuer Loan") to finance all or a portion of certain costs of acquiring,
constructing, altering, improving or repairing drilling rigs or drillships
(individually, a "Mortgaged Rig") or improvements to be used in connection with
the Mortgaged Rig, each such Issuer Loan to be secured by a Mortgage and/or an
Issuer Security Agreement.
C. As security for its obligations, among other things, under the
Secured Notes and the Indenture, the Issuer is required to enter into a Senior
Secured Note Security and Pledge Agreement of even date herewith (the "Secured
Note Security Agreement") with United States Trust Company of New York, as
Collateral Agent (the "Collateral Agent") and the Trustee in which the Issuer is
granting Liens on the Issuer Loans, Issuer Loan Agreements and the Liens
securing such Issuer Loans (the "Secured Note Collateral").
D. As security for its obligations, among other things, under the
Secured Notes and the Indenture, the Issuer is required to deposit the Initial
Escrow Amount (as defined herein) in a special, segregated and irrevocable
account in the name of and beneficially owned by the Issuer which is pledged to,
and to be under the sole dominion and control of, the Trustee, acting for its
benefit and the equal and ratable benefit of the Holders of the Secured Notes,
(the "Issuer Escrow Account") pending the investment of such amounts in the
Issuer Loans in accordance with the Indenture and the Issuer Loan Agreements.
<PAGE> 2
E. Under the terms of the Indenture and the Secured Note Security
Agreement, the Issuer is required to pay all payments of principal, interest,
commitment fees and other obligations on such Issuer Loans and Issuer Loan
Agreements, whether proceeds of the Secured Note Collateral or otherwise,
consisting of cash or cash equivalents to the Trustee for deposit in the Escrow
Account.
F. The parties have entered into this Agreement in order to set forth
the conditions upon which, and the manner in which, funds will be disbursed from
the Escrow Account and released from the security interest and Liens created
hereby.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms. Terms used herein and not defined herein shall have
the meanings as defined in the Indenture. In addition to any other defined terms
used herein, the following terms shall constitute defined terms for purposes of
this Agreement and shall have the meanings set forth below:
"Affiliates" of any specified person means (i) any other person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified person or (ii) any other person who is a director or
officer (A) of such specified person, (B) of any subsidiary of such specified
person or (C) of any person described in clause (i) above or (iii) any person in
which such person has, directly or indirectly, a 5% or greater voting or
economic interest or the power to control. For purposes of this definition,
control of a person means the power, directly or indirectly, to direct or cause
the direction of the management or policies of such person whether through the
ownership of voting securities or by contract or otherwise and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Applied" means that disbursed funds have been applied pursuant to
Section 3(a) or pursuant to Section 6(b)(iii).
"Available Funds" means (A) the sum of (i) all amounts deposited in the
Escrow Account from time to time and (ii) interest earned or dividends paid on
the funds in the Escrow Account (including holdings of Eligible Cash
Equivalents), less (B) the aggregate disbursements previously made pursuant to
this Agreement.
"Cash Equivalents" means (i) U.S. Governmental Obligations with a
maturity of four years or less; (ii) commercial paper issued by any corporation
if such commercial paper has credit ratings of at least "A-1" from S&P or at
least "P-1" by Moody's; (iii) certificates of deposit, bankers' acceptances,
time deposits, Eurocurrency Deposits and similar types of Investments routinely
offered by commercial banks with final maturities of one year or less issued by
commercial banks having combined capital and surplus in excess of $100,000,000;
and (iv) shares in money market mutual or similar funds having assets in excess
of $100,000,000
"Collateral" shall have the meaning given in Section 6(a) hereof.
2
<PAGE> 3
"Disbursement Request" means a notice sent by the Issuer and certified
by the Trustee to the Escrow Agent requesting a disbursement of funds from the
Escrow Account, in substantially the form of Exhibit A hereto. Each Disbursement
Request shall be signed by the Chairman of the Board, a Vice Chairman of the
Board, the Chief Executive Officer, the Chief Operating Officer, the Chief
Financial Officer or any Vice President of the Issuer and a Responsible Officer
of the Trustee.
"Eligible Cash Equivalents" means (i) U.S. Governmental Obligations
with a maturity of four years of less; (ii) commercial paper issued by any
corporation if such commercial paper has credit ratings of at least "A-1" from
S&P at least "P-1" by Moody's; (iii) certificates of deposit, bankers'
acceptances, time deposits, Eurocurrency Deposits and similar types of
Investments routinely offered by commercial banks with final maturities of one
year or less issued by commercial banks having combined capital and surplus in
excess of $100,000,000; and (iv) shares in money market mutual or similar funds
having assets in excess of $100,000,000.
"Escrow Account" shall have the meaning given in Section 2(b).
"Escrow Account Statement" shall have the meaning given in Section
2(g).
"Escrow Agent" shall have the meaning set forth in the preamble to this
Agreement.
"Event of Default" means an "Event of Default" as defined in Section
6.1 of the Indenture.
"Initial Escrow Amount" shall mean $800,000,000 of the proceeds
received by the Issuer from the sale of the Secured Notes pursuant to the
Purchase Agreement.
"Interest Payment Date" means March 15 and September 15 of each year,
commencing on September 15, 1999, until the Secured Notes are paid in full.
"Issue Date" means March 26, 1999.
"Trustee" shall include any successor Trustee appointed pursuant to the
Indenture.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
2. Escrow Account; Escrow Agent.
(a) Appointment of Escrow Agent. The Issuer and the Trustee hereby
appoint the Escrow Agent, and the Escrow Agent hereby accepts appointment, as
escrow agent, under the terms and conditions of this Agreement.
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(b) Establishment of the Escrow Account. Concurrent with the execution
and delivery hereof, the Escrow Agent shall establish and maintain in the name
of the Issuer at Untied States Trust Company of New York, a special, segregated
and irrevocable escrow account designated "Senior Secured Note Escrow Account
pledged by RBF Finance Co. to United States Trust Company of New York, as
Trustee" (the "Escrow Account"). All funds accepted by the Escrow Agent pursuant
to this Agreement shall be deposited in the name of and beneficially owned by
the Issuer and pledged to, and under the sole dominion and control of, the
Trustee, acting for its benefit and the equal and ratable benefit of the Holders
of the Secured Notes. All such funds shall be held in the Escrow Account until
disbursed in accordance with the terms hereof. The Escrow Account, the funds
held therein and any Eligible Cash Equivalents held by the Escrow Agent in which
such funds are invested shall be beneficially owned by the Issuer and pledged to
and under the sole dominion and control of the Trustee, acting for its benefit
and the equal and ratable benefit of the Holders of the Secured Notes.
Concurrently with the execution and delivery hereof, the Issuer shall deliver
the Initial Escrow Amount to the Escrow Agent for deposit into the Escrow
Account against the Escrow Agent's written acknowledgement and receipt of the
Initial Escrow Amount.
c) The Issuer shall provide notice to the Collateral Agent and the
Trustee of the source of any moneys deposited to the Escrow Account other than
the Initial Escrow Amount by reference to the applicable provisions of the
Indenture and Issuer Loan Agreements and shall keep an ongoing record of the
amounts so deposited and disbursed in accordance with this Escrow Agreement. It
shall be the Issuer's responsibility to satisfy the Trustee as to the accounting
for the Escrow Account, with a view to ensuring that the amounts required to be
calculated for any disbursement are ascertainable.
(d) Escrow Agent Compensation. The Issuer shall pay to the Escrow Agent
such compensation for services to be performed by it under this Agreement as the
Issuer and the Escrow Agent may agree in writing from time to time. The Escrow
Agent shall be paid any compensation owed to it directly by the Issuer and shall
not disburse from the Escrow Account any such amounts. The Issuer shall
reimburse the Escrow Agent upon request for all reasonable expenses,
disbursements, and advances incurred or made by the Escrow Agent in implementing
any of the provisions of this Agreement, including compensation and the
reasonable expenses and disbursements of its counsel. The Escrow Agent shall be
paid any such expenses owed to it directly by the Issuer and shall not disburse
from the Escrow Account any such amounts.
The provisions of this Section 2(d) shall survive termination of this
Agreement.
(e) Investment of Funds in the Escrow Account. Pending investment
thereof in accordance with the Indenture, funds deposited in the Escrow Account
shall be invested and reinvested only upon the following terms and conditions:
(i) Acceptable Investments. All funds deposited or held in the
Escrow Account at any time shall be invested, at the direction of the
Issuer except during the continuance of a Default or an Event of
Default, and then only at the direction of the Trustee, by the Escrow
Agent in Eligible Cash Equivalents which constitute
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Permitted Investments for the Issuer in accordance with the Issuer's or
the Trustee's written instructions, as applicable, from time to time to
the Escrow Agent; provided, however, that any such written instruction
shall specify the particular Investment to be made, shall contain the
certification referred to in Section 2(e)(ii), if required, and shall
be executed by any officer of the Issuer. All Eligible Cash Equivalents
shall be assigned to and held in the possession of, or, in the case of
Eligible Cash Equivalents maintained in book entry form with the
Federal Reserve Bank, transferred to a book entry account in the name
of, the Escrow Agent, as pledgee, with such guarantees as are
customary, except that Eligible Cash Equivalents maintained in book
entry form with the Federal Reserve Bank shall be transferred to a book
entry account in the name of the Escrow Agent at the Federal Reserve
Bank that includes only Eligible Cash Equivalents held by the Escrow
Agent for its customers and segregated by separate recordation in the
books and records of the Escrow Agent.
(ii) Security Interest in and Lien on Investments. No investment
of funds in the Escrow Account shall be made unless the Issuer has
certified to the Escrow Agent and the Trustee that, upon such
investment, the Trustee will have a first priority perfected Lien and
security interest for the benefit of the Trustee and the equal and
ratable benefit of the Holders of the Secured Notes in the applicable
Investment. A certificate as to a class of investments need not be
issued with respect to individual investments in securities in that
class if the certificate applicable to the class remains accurate with
respect to such individual investments, which continued accuracy the
Escrow Agent may conclusively assume. Promptly after the Issue Date,
and within 3 months after the anniversary of the Issue Date, until the
payment in full of the Secured Notes in accordance with the terms
thereof and of the Indenture, and all other Obligations then due and
owing under the Secured Notes, the Indenture, this Agreement and the
Security Agreements (as defined in the Indenture), the Issuer shall
provide to the Trustee and the Escrow Agent, an Opinion of Counsel,
dated each such date as applicable, which opinion shall meet the
requirements of Section 314(b) of the Trust Indenture Act of 1939, as
amended (the "TIA").
(iii) Interest and Dividends. All interest earned and dividends
paid on funds invested in Eligible Cash Equivalents shall be deposited
in the Escrow Account as additional Collateral beneficially owned by
the Issuer and pledged to the Trustee, acting for its benefit and the
equal and ratable benefit of the Holders of the Secured Notes, and
shall be reinvested in accordance with the terms hereof.
(iv) Limitation on Escrow Agent's Responsibilities. The Escrow
Agent's sole responsibilities under this Section 2 shall be (A) to
retain, or cause its agent in the State of New York to retain,
possession of certificated Eligible Cash Equivalents (except, however,
that the Escrow Agent may surrender possession of any such Eligible
Cash Equivalent to the issuer thereof for the purpose of effecting
assignment, crediting interest, or reinvesting such security or
reducing such security to cash) and to be the registered or designated
owner of Eligible Cash Equivalents which are not certificated, (B) to
follow the Issuer's or
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the Trustee's written instructions, as applicable, given in accordance
with Section 2(e)(i), (C) to invest and reinvest funds pursuant to this
Section 2(e) and (D) to use reasonable efforts to reduce to cash such
Eligible Cash Equivalents as may be required to fund any disbursement
or payment in accordance with Section 3. In connection with clause (i)
above, the Escrow Agent will maintain, or cause its agent in the State
of New York to maintain, continuous possession in the State of New York
of certificated Eligible Cash Equivalents and cash included in the
Collateral and will cause uncertificated Eligible Cash Equivalents to
be registered in the book-entry system of, and transferred to an
account of the Escrow Agent or a sub-agent of the Escrow Agent at, the
Federal Reserve Bank of New York. Except as provided in Section 6, the
Escrow Agent shall have no other responsibilities with respect to
perfecting or maintaining the perfection of the Trustee's Liens and
security interest in the Secured Note Collateral and shall not be
required to file any instrument, document or notice in any public
office at any time or times. In connection with clause (D) above,
except as set forth below, the Escrow Agent shall not be required to
reduce to cash any Eligible Cash Equivalents to fund any disbursement
or payment in accordance with Section 3 in the absence of written
instructions signed by an officer of the Issuer specifying the
particular investment to liquidate unless a Default or Event of Default
has occurred and is continuing, in which case such written instructions
shall be signed by a Trust Officer of the Trustee. If no such written
instructions are received, the Escrow Agent shall liquidate those
Eligible Cash Equivalents having the lowest interest rate per annum,
regardless of maturity, or if none such exist, those having the nearest
maturity. The Escrow Agent shall have no duty to determine whether or
not to file or record any document or instrument in connection with
this Agreement, but will follow the instructions of the Trustee.
(f) Substitution of Escrow Agent. The Escrow Agent may resign by giving
not less than 30 days' prior written notice to the Issuer and the Trustee. Such
resignation shall take effect upon the later to occur of (i) delivery of all
funds and Eligible Cash Equivalents maintained by the Escrow Agent hereunder and
copies of all books, records and other documents in the Escrow Agent's
possession relating to such funds or Eligible Cash Equivalents or this Agreement
to a successor Escrow Agent mutually approved by the Issuer and the Trustee
(which approvals shall not be unreasonably withheld or delayed) and (ii) the
Issuer, the Trustee and such successor Escrow Agent entering into this Agreement
or any written successor agreement no less favorable to the interests of the
Holders of the Secured Notes and the Trustee than this Agreement; and the Escrow
Agent shall thereupon be discharged of all obligations under this Agreement and
shall have no further duties, obligations or responsibilities in connection
herewith, except as set forth in Section 4. If a successor Escrow Agent has not
been appointed or has not accepted such appointment within 30 days after notice
of resignation is given to the Issuer, the Escrow Agent may apply to a court of
competent jurisdiction for the appointment of a successor Escrow Agent.
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3. Disbursements.
(a) Disbursement Request; Disbursements.
(i) On or before the Closing Date for an Issuer Loan, as determined
by the applicable Issuer Loan Agreement, the Issuer and the Trustee
shall submit to the Escrow Agent a completed Disbursement Request
substantially in the form of Exhibit A hereto requesting funds from the
Escrow Account in the amount of the aggregate principal amount of the
advances to be made on such Issuer Loan on such Closing Date. In such
Disbursement Request, the Company shall certify that it has satisfied
the conditions set forth in Section 3.1 of the applicable Issuer Loan
Agreement which it is required to satisfy prior to the Issuer's being
requested to make such advances. The Trustee is not required to execute
the Disbursement Request unless it has determined in its sole and
absolute discretion that such preconditions have been satisfied.
Provided that any such Disbursement Request is not rejected by it, the
Escrow Agent, at least on (or if the Trustee and the Escrow Agent are
not the same entity, two Business Days after) receipt of such
Disbursement Request, shall disburse the funds requested in such
Disbursement Request by wire or book-entry transfer of immediately
available funds to the Trustee. The Escrow Agent shall notify the
Trustee as soon as reasonably possible if any such Disbursement Request
is rejected and the reason(s) therefor.
(ii) At least two Business Days prior to any date on which a
disbursement from the Escrow Account is required for a payment on the
Secured Notes, including an Interest Payment Date, a Redemption Date or
a Change of Control Payment Date, the Issuer and the Trustee shall
submit to the Escrow Agent a completed Disbursement Request
substantially in the form of Exhibit A hereto requesting funds from the
Escrow Account in an amount equal to the aggregate amount of principal,
premium, if any, and the interest (including Special Interest, if any,
and Additional Amounts, if any) owed on the Secured Notes under the
Indenture on such Interest Payment Date, Redemption Date or Change of
Control Payment Date, as the case may be, unless the Issuer has
disbursed and the Trustee has received funds from the Issuer in such
amount on or before such Interest Payment Date, Redemption Date or
Change of Control Payment Date.
(iii) If an Event of Default under the Indenture has occurred and
is continuing, the Trustee shall be entitled unilaterally to initiate
withdrawals by executing a Disbursement Request which will be
substantially similar to the form of Exhibit A but which need only to
be executed by the Trustee.
(b) Conditions Precedent to Disbursement. Subject to Section 4 and any
mandatory provisions of applicable law, the Escrow Agent shall make the payments
to be made pursuant to a completed Disbursement Request if (i) the Issuer shall
have submitted, in accordance with the provisions of Section 3(a) herein, such
Disbursement Request to the Escrow Agent substantially in the form of Exhibit A
with blanks appropriately filled in containing the signed certification of the
Trustee included in such form and (ii) the Escrow Agent shall not have received
any notice from the Trustee that as a result of an Event of Default the
Indebtedness represented by the Secured Notes has been accelerated and has
become due and payable (in which event the Escrow Agent shall apply all
Available Funds as required by Section 6(b)(iii)).
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(c) No Distributions. Provided that no Event of Default has occurred
and is continuing, the Issuer shall initiate all requests for withdrawal of
funds from the Escrow Account by executing a Disbursement Request and submitting
such request to the Trustee. However, the Issuer shall not be entitled to direct
the Escrow Agent to make distributions from the Escrow Account except upon
certification by the Trustee on a Disbursement Request that the applicable
conditions of the Indenture and the applicable Issuer Loan Agreement have been
satisfied, as provided in Section 3(a). The Trustee shall not, except following
an Event of Default, be entitled unilaterally to initiate withdrawals.
(d) Deposits Irrevocable. Any deposits made into the Escrow Account
hereunder shall be irrevocable and the amount of such deposits and any
instrument or security held in the Escrow Account hereunder and all interest
thereon shall be held in trust by the Escrow Agent and applied solely as
provided herein.
4. Limitation of the Escrow Agent's Liability: Responsibilities of the
Escrow Agent. The Escrow Agent's responsibility and liability under this
Agreement shall be limited as follows: (i) the Escrow Agent does not represent,
warrant or guaranty to the Holders of the Secured Notes from time to time the
performance of the Issuer; (ii) the Escrow Agent shall have no responsibility to
the Issuer or the Holders of the Secured Notes or the Trustee from time to time
as a consequence of performance or non-performance by the Escrow Agent
hereunder, except for any negligence or willful misconduct of the Escrow Agent;
(iii) the Issuer shall remain solely responsible for all aspects of the Issuer's
business and conduct; and (iv) the Escrow Agent is not obligated to supervise,
inspect or inform the Issuer or any third party of any matter referred to above.
No implied covenants or obligations shall be inferred from this
Agreement against the Escrow Agent, nor shall the Escrow Agent be bound by the
provisions of any agreement beyond the specific terms hereof. Specifically and
without limiting the foregoing, the Escrow Agent shall in no event have any
liability in connection with its investment, reinvestment or liquidation, in
good faith and in accordance with the terms hereof, of any funds or Eligible
Cash Equivalents held by it hereunder, including without limitation any
liability for any delay not resulting from negligence or willful misconduct in
such investment, reinvestment or liquidation, or for any loss of principal or
income incident to any such delay.
The Escrow Agent shall be entitled to rely upon any judicial order or
judgment, upon any written opinion of counsel or upon any certification,
instruction, notice, or other writing delivered to it by the Issuer or the
Trustee in compliance with the provisions of this Agreement without being
required to determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of service thereof. The Escrow Agent may
act in reliance upon any instrument comporting with the provisions of this
Agreement or signature believed by it to be genuine and may assume that any
person purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
The Escrow Agent may act pursuant to the oral or written advice of
counsel chosen by it with respect to any matter relating to this Agreement and
(subject to clause (ii) of
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the first paragraph of this Section 4) shall not be liable for any action taken
or omitted in accordance with such advice.
The Escrow Agent shall not be called upon to advise any party as to
selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
In the event of any ambiguity in the provisions of this Agreement with
respect to any funds or property deposited hereunder, the Escrow Agent shall be
entitled to refuse to comply with any and all claims, demands or instructions
with respect to such funds or property, and the Escrow Agent shall not be or
become liable for its failure or refusal to comply with conflicting claims,
demands or instructions. The Escrow Agent shall be entitled to refuse to act
until either any conflicting or adverse claims or demands shall have been
finally determined by a court of competent jurisdiction or settled by agreement
between the conflicting claimants as evidenced in a writing, satisfactory to the
Escrow Agent, or the Escrow Agent shall have received security or an indemnity
satisfactory to the Escrow Agent sufficient to save the Escrow Agent harmless
from and against any and all loss, liability or expense which the Escrow Agent
may incur by reason of its acting. The Escrow Agent may in addition elect in its
sole option to commence an interpleader action or seek other judicial relief or
orders as the Escrow Agent may deem necessary.
No provision of this Agreement shall require the Escrow Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
5. Indemnity. The Issuer shall indemnify, hold harmless and defend the
Escrow Agent and its directors, officers, agents, employees and controlling
persons, from and against any and all claims, actions, obligations, liabilities
and expenses, including defense costs, investigative fees and costs, legal fees,
and claims for damages, arising from the Escrow Agent's performance under this
Agreement, except to the extent that such liability, expense or claim is
directly attributable to the negligence or willful misconduct of any of the
foregoing persons. The provisions of this Section shall survive any termination,
satisfaction or discharge of this Agreement as well as the resignation or
removal of the Escrow Agent. The provisions of this paragraph 5 shall survive
the termination of this Agreement.
6. Grant of Liens and Security Interest: Instructions to Escrow Agent.
(a) The Issuer hereby irrevocably grants a first priority security
interest in and Lien on, and pledges, assigns and sets over to the Trustee,
acting for its benefit and the equal and ratable benefit of the Holders of the
Secured Notes, all of the Issuer's right, title and interest in the Escrow
Account, and all property now or hereafter placed or deposited in, or delivered
to the Escrow Agent for placement or deposit in, the Escrow Account, including,
without limitation, all funds held therein, all Eligible Cash Equivalents held
by (or otherwise maintained in the name of) the Escrow Agent pursuant to Section
2, and all proceeds thereof as well as all rights of the Issuer under this
Agreement (collectively, the "Collateral"), in order to secure all obligations
and indebtedness of the Issuer under the Secured Notes and any other obligation,
now or hereafter arising, of every kind and nature, owed by the Issuer, the
Company as Guarantor or the
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Subsidiary Guarantors, if any, under the Indenture, the Guarantee, the
Subsidiary Guarantees or the Security Agreements to the Holders of the Secured
Notes or to the Trustee. The Escrow Agent hereby acknowledges the Trustee's
security interest and Lien as set forth above. The Issuer shall take all actions
necessary on its part to insure the continuance of a first priority security
interest in and Lien on the Collateral in favor of the Trustee in order to
secure all such obligations and indebtedness.
(b) The Issuer and the Trustee hereby irrevocably instruct the Escrow
Agent to, and the Escrow Agent shall, (i) (A) at all times maintain sole
dominion and control over funds and Eligible Cash Equivalents in the Escrow
Account, acting for the benefit of the Trustee to the extent specifically
required herein, (B) maintain, or cause its agent within the State of New York
to maintain, possession of all certificated Eligible Cash Equivalents purchased
hereunder that are physically possessed by the Escrow Agent in order for the
Trustee to enjoy a continuous perfected first priority security interest therein
under the law of the State of New York (the Issuer hereby agreeing that in the
event any certificated Eligible Cash Equivalents are in the possession of the
Issuer or a third party, the Issuer shall use its best efforts to deliver all
such certificates to the Escrow Agent), (C) take all steps specified by the
Issuer pursuant to paragraph (a) above to cause the Trustee to enjoy a
continuous perfected first priority security interest and Liens under the New
York Uniform Commercial Code and any applicable law of the State of New York in
all Eligible Cash Equivalents purchased hereunder that are not certificated and
(D) maintain the Collateral free and clear of all Liens, security interests,
safekeeping or other charges, demands and claims against the Escrow Agent of any
nature now or hereafter existing in favor of anyone other than the Trustee; (ii)
promptly notify the Trustee if the Escrow Agent receives written notice that any
Person other than the Trustee has or claims to have a Lien on or security
interest in any portion of the Collateral and (iii) upon receipt of written
notice from the Trustee of the acceleration of the maturity of the Secured
Notes, and direction from the Trustee to disburse all Available Funds to the
Trustee, as promptly as practicable disburse all funds held in the Escrow
Account to the Trustee and transfer title to all Eligible Cash Equivalents held
by the Escrow Agent hereunder to the Trustee. The Escrow Agent shall not have
any right to receive compensation from the Trustee and is without any authority
to obligate the Trustee or to compromise or pledge its security interest and
Lien hereunder. Accordingly, the Escrow Agent is hereby directed to cooperate
with the Trustee in the exercise of its respective rights in the Collateral
provided for herein.
(c) Any money and Eligible Cash Equivalents collected by the Trustee
pursuant to Section 6(b)(iii) shall be applied as provided in Section 6.2 of the
Indenture.
(d) Upon demand, the Issuer will execute and deliver to the Trustee
such instruments and documents as the Trustee may reasonably deem necessary or
advisable to confirm or perfect the rights of the Trustee under this Agreement
and the Trustee's interest in the Collateral. The Trustee shall be entitled to
take all necessary action to preserve and protect the security interest created
hereby as a Lien and encumbrance upon the Collateral.
(e) The Issuer hereby appoints the Trustee as its attorney-in-fact with
full power of substitution, exercisable upon the occurrence and during the
continuance of a Default or Event of Default, to do any act which the Issuer is
obligated hereto to do, and the Trustee may, but shall not be obligated to,
exercise such rights as the Issuer might exercise with respect to the
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Collateral and take any action in the Issuer's name to protect the Trustee'
Liens and security interest hereunder. In addition to the rights provided under
Section 6(b)(iii) hereof, upon an Event of Default as defined in the Indenture
and for so long as such Event of Default continues, the Trustee may exercise in
respect of the Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a secured
party under the New York Uniform Commercial Code or other applicable law, and
the Trustee may also upon obtaining possession of the Collateral as set forth
herein, without notice to the Issuer except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange, broker's board or at any of the Trustee's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as the
Trustee may deem commercially reasonable. The Issuer acknowledges and agrees
that any such private sale may result in prices and other terms less favorable
to the seller than if such sale were a public sale. The Issuer agrees that, to
the extent notice of sale shall be required by law, at least ten (10) 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 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.
7. Termination. This Agreement shall terminate automatically ten (10)
days following disbursement of all funds remaining in the Escrow Account
(including Eligible Cash Equivalents) and the payment in full of the Secured
Notes and all other Obligations then due and owing under the Indenture, the
guarantees thereunder and the Secured Note Collateral Documents, unless sooner
terminated by agreement of the parties hereto (in accordance with the terms
hereof, not in violation of the Indenture; the Trustee may not agree to
terminate this Agreement unless it has received the consent of 100% of the
Holders of all of the Secured Notes outstanding); provided, however, that the
obligations of the Issuer under Section 2(d) and Section 5 (and any existing
claims thereunder) shall survive termination of this Agreement or the
resignation of the Escrow Agent; provided, further, however, that until such
tenth day, the Issuer will cause this Agreement (or any permitted successor
agreement) to remain in effect and will cause there to be an Escrow Agent
(including any permitted successor thereto) acting hereunder (or under any such
permitted successor agreement).
8. Miscellaneous.
(a) Waiver. Any party hereto may specifically waive any breach of this
Agreement by any other party, but no such waiver shall be deemed to have been
given unless such waiver is in writing, signed by the waiving party and
specifically designating the breach waived, nor shall any such waiver constitute
a continuing waiver of similar or other breaches.
(b) Invalidity. If for any reason whatsoever any one or more of the
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effectuate, to the maximum extent possible, the parties' intent.
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(c) Assignment. This Agreement is personal to the parties hereto, and
the rights and duties of any party hereunder shall not be assignable except with
the prior written consent of the other parties. Notwithstanding the foregoing,
this Agreement shall inure to and be binding upon the parties and their
successors and permitted assigns. Nothing herein shall restrict the Escrow Agent
from performing its duties through a sub-agent.
(d) Benefit. The parties hereto and their successors and permitted
assigns, but no others, shall be bound hereby and entitled to the benefits
hereof; provided, however, that the Holders of the Secured Notes and their
permitted assigns shall be entitled to the benefits hereof and to enforce this
Agreement.
(e) Time. Time is of the essence with respect to each provision of this
Agreement.
(f) Entire Agreement; Amendments. This Agreement, the Indenture and the
[Secured Note Collateral Documents] contain the entire agreement among the
parties with respect to the subject matter hereof and supersede any and all
prior agreements, understandings and commitments, whether oral or written. This
Agreement may be amended only in accordance with Article X of the Indenture and
further by a writing signed by a duly authorized representative of each party
hereto.
(g) Notices. All notices and other communications required or permitted
to be given or made under this Agreement shall be in writing and shall be deemed
to have been duly given and received, regardless of when and whether received,
either: (a) on the day of hand delivery; (b) three Business Days following the
day sent, when sent by United States certified mail, postage and certification
fee prepaid, return receipt requested, addressed asset forth below; (c) when
transmitted by telecopy with verbal confirmation of receipt by the telecopy
operator to the telecopy number set forth below; or (d) one business day
following the day timely delivered to a next-day air courier addressed as set
forth below:
To Escrow Agent:
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, NY 10036
Attention: Corporate Trust Administration
telecopy: 212-852-1626
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To the Trustee:
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, NY 10036
Attention: Corporate Trust Administration
telecopy: 212-852-1626
To the Issuer:
RBF Finance Co.
901 Threadneedle
Houston, TX 77079-2982
Attention: Leighton E. Moss
Telecopy: (281) 496-0285
Telephone: (281) 496-5000
or at such other address as the specified entity most recently may have
designated in writing in accordance with this Section.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) Captions. Captions in this Agreement are for convenience only and
shall not be considered or referred to in resolving questions of interpretation
of this Agreement.
(j) Choice of Law: Waiver of Jury Trial. The existence, validity,
construction, operation and effect of any and all terms and provisions of this
Agreement shall be determined in accordance with and governed by the laws of the
State of New York, without regard to principles of conflicts of law. The parties
to this Agreement hereby agree that jurisdiction over such parties and over the
subject matter of any action or proceeding arising under this Agreement may be
exercised by a competent Court of the State of New York, or by a United States
Federal Court, sitting in The City of New York. The Issuer hereby submits to the
personal jurisdiction of such courts, hereby waives personal service of process
upon it and hereby waives, to the extent permitted by applicable law, the right
to a trial by jury in any action or proceeding with the Escrow Agent. All
actions and proceedings brought by the Issuer against the Escrow Agent relating
to or arising from, directly or indirectly, this Agreement shall be litigated
only in courts within the State of New York. The Issuer waives any objection
that it may have to the location of the court in which the Escrow Agent has
commenced a proceeding described in this paragraph including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens.
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<PAGE> 14
(k) Authority of the Issuer; Valid and Binding Agreement. The Issuer
hereby represents and warrants that this Agreement has been duly authorized,
executed and delivered on its behalf and constitutes the legal, valid and
binding obligation of the Issuer. The execution, delivery and performance of
this Agreement by the Issuer does not violate any applicable law or regulation
to which the Issuer is subject and does not require the consent of any
governmental or other regulatory body to which the Issuer is subject, except for
such consents and approvals as have been obtained and are in full force and
effect.
(l) Authority of the Escrow Agent and the Trustee: Valid and Binding
Agreement. Each of the Escrow Agent and the Trustee hereby represents and
warrants that this Agreement has been duly authorized, executed and delivered on
its behalf and constitutes its legal, valid and binding obligation.
(m) Agent for Service: Submission to Jurisdiction: Waiver of
Immunities. By the execution and delivery of this Agreement, the Issuer (i)
acknowledges that it has, by separate written instrument, irrevocably designated
and appointed CT Corporation System, 1633 Broadway, New York, New York 10019 (or
any successor), as its authorized agent upon which process may be served in any
suit or proceeding arising out of or relating to this Agreement that may be
instituted in any federal or state court in the State of New York, or brought
under federal or state securities laws, and acknowledges that CT Corporation
System has accepted such designation, (ii) submits to the jurisdiction of any
such court in any such suit or proceeding, and (iii) agrees that service of
process upon CT Corporation System (or any successor) and written notice of said
service to the Issuer shall be deemed in every respect effective service of
process upon the Issuer in any such suit or proceeding. The Issuer further
agrees to take any and all action, including the execution and filing of any and
all such documents and instrument, as may be necessary to continue such
destination and appointment of CT Corporation System (or any successor) in full
force and effect so long as any of the Secured Notes shall be outstanding.
To the extent that the Issuer has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether through
service of notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, it hereby
irrevocably waives such immunity in respect of its obligations under this
Agreement, to the extent permitted by law.
[Signature Page Follows]
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<PAGE> 15
IN WITNESS WHEREOF, the parties have executed and delivered this Escrow
Account Agreement as of the day first above written.
ESCROW AGENT: UNITED STATES TRUST COMPANY
OF NEW YORK
as Escrow Agent
By: /S/ PETER C. GERRER
-----------------------------------
Name: Peter C. Gerrer
Title: Vice President
TRUSTEE: UNITED STATES TRUST COMPANY
OF NEW YORK
as Trustee
By: /S/ PETER C. GERRER
-----------------------------------
Name: Peter C. Gerrer
Title: Vice President
ISSUER: RBF FINANCE CO.
By: /S/ STEVEN A. WEBSTER
-----------------------------------
Name:
Title:
15
<PAGE> 16
EXHIBIT A
Form of Disbursement Request
[Letterhead of the Issuer]
[Date]
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036
Attention: Corporate Trust Administration
Re: Disbursement Request No.
[indicate whether revised]
Ladies and Gentlemen:
We refer to the Senior Secured Note Escrow Agreement (the "Escrow
Agreement"), dated as of March 26, 1999 among you (the "Escrow Agent"), United
States Trust Company of New York as Trustee, and RBF Finance Co., a Delaware
corporation (the "Issuer"). Capitalized terms used herein shall have the meaning
given in the Escrow Agreement.
This letter constitutes a Disbursement Request under the Escrow
Agreement.
The undersigned hereby notifies you that the Issuer has requested, and
has satisfied the conditions contained in Section 3.1(a) of the Indenture for,
the release of $___________ , from the Escrow Account which was deposited
therein as a result of [specify source of deposit, i.e., payment made on Issuer
Loan,] of $____________ , which amount will be invested or used as follows:
[funding of an Issuer Loan pursuant to a specified Issuer Loan
Agreement]
[e.g., payment of principal of, premium, if any, on or interest on the
Secured Notes]
In connection with the requested disbursement, the undersigned hereby
certifies to you that:
1. The Secured Notes have [not], as a result of an Event of Default
(as defined in the Indenture), been accelerated and become due and payable.
2. The conditions to funding the Issuer Loan referred to above, as set
forth in the specified Issuer Loan Agreement have been satisfied.
3. [add wire instructions].
<PAGE> 17
The Escrow Agent is entitled to rely on the foregoing in disbursing
funds relating to this Disbursement Request.
RBF FINANCE CO.
By:
-----------------------------------
Name:
----------------------------
Title:
----------------------------
The Trustee hereby certifies to the Escrow Agent that it has received
the applicable Officers' Certificate described in Section 11.5 of the Indenture
for the release of the funds to be disbursed pursuant to the foregoing
Disbursement Request.
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
By:
-----------------------------------
Name:
----------------------------
Title:
----------------------------
A-2
<PAGE> 1
EXHIBIT 10.14
SECURITY AGREEMENT
SECURITY AGREEMENT (the "Security Agreement"), dated as of March 26,
1999, from R&B FALCON CORPORATION, a Delaware corporation, and its successors
and assigns (the "Debtor") to RBF FINANCE CO., a Delaware corporation, together
with its successors and assigns (the "Secured Party").
RECITALS
WHEREAS, the Debtor is the assignee of all of the right, title and
interest of RB Deepwater Exploration III Inc., the assignee of all the right,
title and interest of Reading & Bates Drilling Co. (now known as R&B Falcon
Drilling Co., the "Buyer") in and to the Construction Contract (as defined
herein), providing for the construction of one (1) Millenium design deepwater
drillship to be known as the DEEPWATER MILLENIUM; and
WHEREAS, the Secured Party has agreed to loan to the Debtor up to
$209,900,000 to provide funds for the construction of the Vessel pursuant to
that certain Senior Secured Loan Agreement dated as of the date hereof (as
amended, modified or extended from time to time, the "Loan Agreement") between
the Debtor and the Secured Party; and
WHEREAS, the advances by Secured Party to the Debtor under the Loan
Agreement are or will be evidenced by two Promissory Notes of the Debtor dated
as of March 26, 1999 (the "Notes") in the aggregate principal amount of USD
$209,900,000 (the "Loan"); and
WHEREAS, the Debtor has agreed to grant to the Secured Party, on the
terms and conditions hereinafter set forth, as security for Debtor's obligation
to repay the Loan and other obligations under the Loan Agreement and the Notes,
a security interest in all of the Debtor's right, title and interest in and to
the Collateral, as hereinafter set forth; and
WHEREAS, the Secured Party requires, as a condition to the Loan
Agreement, that the Debtor execute and deliver this Security Agreement to the
Secured Party as security for its obligations under the Loan Agreement.
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree and covenant as follows:
<PAGE> 2
ARTICLE 1 - DEFINITIONS
Section 1.01. Certain Defined Terms. For purposes of this
Security Agreement:
(a) "Construction Contract" means that certain Contract for
Construction and Sale of a 103,000 Metric Tons Displacement
Drillship (Hull No. 1255) between Debtor as Buyer and Samsung
Heavy Industries Co., Ltd. and Samsung Corporation, each a
Korean corporation, as such may be amended, modified or
supplemented from time to time (collectively, the "Builder")
dated September 5, 1997, including without limitation (i) the
right upon valid tender by the Builder to purchase the Vessel
pursuant to such Construction Contract, and the right to take
title to the Vessel pursuant to such Construction Contract;
(ii) all claims for damages arising as a result of any failure
by the Builder to perform or observe any of the terms of such
Construction Contract, and all rights, benefits and claims
under all warranty and indemnity provisions contained therein;
and (iii) any and all rights of the Debtor to compel
performance of such Construction Contract, to the same extent
as if the Secured Party were the "Buyer" named in such
Construction Contract.
(b) "Equipment" means all items of equipment of the Debtor used in
connection with the Vessel, whether currently owned or
hereafter acquired, and whether on board the Vessel or not,
including but not limited to the items set forth on Schedule E
attached to this Security Agreement.
(c) "Permitted Liens" means the Liens on Schedule B.
(d) "Refund Guarantee" means any refund guarantee or letter of
guarantee issued pursuant to the Construction Contract by the
Builder's bank or the Export-Import Bank of Korea in favor of
the Buyer, and all rights and claims under such Refund
Guarantee.
(e) "Vessel" means one Millennium design deep water drillship to
be known as the Deepwater Millennium, which is being presently
constructed pursuant to the Construction Contract, together
with all of the boilers, engines, machinery, masts, spars,
boats, anchors, cables, chains, rigging, tackle, capstans,
outfit, tools, pumps and pumping equipment, apparel,
furniture, fittings, equipment, spare parts and all other
appurtenances to said Vessel appertaining or belonging,
whether now owned or hereafter acquired, whether on board or
not, and also any and all additions, improvements and
replacements in general effected subsequently on or to the
Vessel, or any part thereof, or appurtenance thereto.
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<PAGE> 3
Section 1.02. Terms Defined in Loan Agreement. All capitalized terms
used in this Security Agreement without definition shall have the meaning given
to such terms in the Loan Agreement.
ARTICLE 2 - SECURITY
Section 2.01. The Collateral. (a) In consideration of the Loan made
pursuant to and evidenced by the Loan Agreement and the Note, and by way of
security for payment of all amounts due or to be due thereunder and hereunder,
the Debtor does hereby sell, assign, transfer and set over unto, and grant a
Liens and security interests in favor of the Secured Party, and unto the Secured
Party's successors and assigns for benefit of the Secured Party's own proper use
and benefit, as security for the Obligations (as defined in the Loan Agreement),
now or in the future, and including but not limited to any future advances under
the Loan Agreement, all of the Debtor's right, title and interest in and to (i)
the Equipment,(ii) the Vessel, (iii) the Construction Contract, (iv) the Refund
Guarantee and (v) any proceeds and products of the foregoing, including (1)
whatever is now or hereafter received by debtor upon the sale, exchange,
collection or other disposition of any item of Collateral, (2) any property of
the type or types described below now or hereafter acquired by the debtor with
any proceeds of Collateral, (3) all of the policies and contracts of insurance
relating to the aforementioned Collateral, and (4) any payments under any
insurance or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the Collateral; provided, that so
long as there are funds held in an escrow account established pursuant to that
certain Issuer Loan Escrow Agreement dated as of March 26, 1999 (the "Company
Escrow Agreement") among United States Trust Company of New York, as Escrow
Agent and as Trustee, the Debtor and the Secured Party, the principal amount of
the Loan secured by liens on the Collateral will be reduced by an amount equal
to (x) $100,000,000 less (y) any amounts released by the Escrow Agent to the
Debtor pursuant to the terms of the Escrow Agreement.
(b) The rights and equipment referred to in this Section 2.01 are
collectively referred to herein as the "Collateral".
Section 2.02. Continued Priority of Security Interest. The Debtor
agrees that it will not, without the prior written consent of the Secured Party,
create or suffer to exist any Lien or security interest upon or in the
Collateral or any part thereof other than the lien and security interests
created hereby and Permitted Liens.
Section 2.03. Maintenance of Status of Liens; Further Assurances. The
Debtor shall take all action that may be necessary or desirable, or that the
Secured Party reasonably may request, so as at all times (a) to grant and
perfect Liens and security interests in the Collateral intended to be granted
hereby and to
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<PAGE> 4
maintain the validity, enforceability, perfection and priority of the security
interest in the Collateral (b) to protect or preserve the Liens and security
interests created by this Security Agreement; and (c) to protect, preserve,
exercise or enforce the rights of the Secured Party therein and hereunder and of
the Secured Party under the Loan Agreement, including but not limited to
(i)immediately discharging all Liens on the Collateral other than the security
interest and Liens created or permitted hereby and Permitted Liens (ii)
executing and delivering Uniform Commercial Code financing statements,
continuation statements, notices, instructions and assignments, in each case in
form and substance reasonably satisfactory to the Secured Party and not
inconsistent with the terms hereof. The Debtor will, promptly upon request by
the Secured Party, the Collateral Agent or the Trustee, (i) execute and deliver,
cause to be executed and filed, or use its best efforts to give any notices, in
all appropriate jurisdictions, (including Korea) or procure any financing
statements, assignments, pledges or other documents, all in form and substance
satisfactory to the Secured Party, the Collateral Agent and the Trustee, (ii)
mark any chattel paper constituting Collateral, and deliver any certificates,
chattel paper or instruments consisting Collateral to the Secured Party, the
Collateral Agent or the Trustee, (iii) execute and deliver or cause to be
executed and delivered all assignments, instruments and other documents, all in
form and substance satisfactory to the Secured Party and the Trustee, and (iv)
take any other actions that are necessary or, in the reasonable opinion of the
Secured Party, the Collateral Agent or the Trustee, desirable to perfect or
continue the perfection and the priority of the Secured Party's security
interest and Liens in the Collateral, to protect the Collateral against the
rights, claims, or interests of third persons other than holders of Permitted
Liens. The Debtor shall mark its books and records as may be necessary or
appropriate to evidence, protect and perfect the Liens in the Collateral and
shall cause its financial statements to reflect such Liens.
Section 2.04. Evidence of Status of Liens. The Debtor shall from time
to time upon request of the Secured Party promptly deliver to the Secured Party
such file search reports from such Uniform Commercial Code and other filing and
recording offices as may be applicable from time to time as the Secured Party
may reasonably designate in order to establish that the perfection and priority
of the Liens and security interest granted hereby are maintained.
Section 2.05. Authorized Action. The Secured Party is hereby authorized
to file one or more financing or continuation statements (including statements
of assignment and renewals thereof) or amendments thereto without the signature
of, or in the name of, the Debtor. A carbon, photographic or other reproduction
of this Security Agreement or of any financing statement filed in connection
with this Security Agreement shall be sufficient as a financing statement.
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<PAGE> 5
Section 2.06. The Debtor Remains Obligated: the Secured Party Not
Obligated. The grant by the Debtor to the Secured Party of the Liens granted
hereby shall not relieve the Debtor from the performance of any term, covenant,
condition or agreement on its part to be performed or observed, or from any
liability to any person, under or in respect of any of the Collateral,
including, but not limited to the Construction Contract, or impose any
obligation on the Secured Party to perform or observe any such term, covenant,
condition or agreement on the Debtor's part to be so performed or observed or
impose any liability on the Secured Party for any act or omission on the part of
the Debtor relating thereto.
Section 2.07. Location of Collateral. The Debtor will keep all of its
Collateral now held or subsequently acquired by it at the locations specified on
Schedule A hereto, or at locations hereafter established in compliance with
Section 2.07 hereof (except for Collateral held by the Secured Party, the
Collateral Agent or the Trustee), unless the Debtor shall have given the Secured
Party, the Collateral Agent and the Trustee prior written notice thereof and
shall have in advance executed and caused to be filed and/or delivered to the
Secured Party, the Collateral Agent and the Trustee any financing statement or
other documents required by the Trustee or the Secured Party, the Collateral
Agent in order to perfect, protect and preserve the Liens and security interest
created hereby, all in form and substance satisfactory to the Secured Party, the
Collateral Agent and the Trustee.
Section 2.08. Location of Offices; Corporation Name; Legal Structure.
The Debtor will not change the location of its Chief Executive Office or
establish any place of business other than those set forth on Schedule A
attached hereto, or voluntarily or involuntarily change its name, identity or
legal structure, including without limitation any continuance, amalgamation,
merger, consolidation or sale of substantially all of its assets, unless the
Debtor shall have given the Secured Party, the Collateral Agent and the Trustee
at least 30 days prior written notice thereof and shall have in advance executed
and caused to be filed and or delivered to the Secured Party, the Collateral
Agent and the Trustee any financing statements or other filings, pledges or
other documents required by the Secured Party and the Trustee in order to
perfect, protect and preserve the Liens and security interests created hereby,
all in form and substance satisfactory to the Trustee, the Collateral Agent and
the Secured Party.
ARTICLE 3 - REPRESENTATIONS AND COVENANTS OF THE DEBTOR
Section 3.01. Representations. The Debtor hereby represents and
warrants that:
(a) Legal Power. The execution, delivery and performance by
the Debtor of this Security Agreement are
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<PAGE> 6
within the Debtor's legal powers, have been duly authorized by all
necessary corporate action, require no action by or in respect of, or
filing with (except for any filings provided for hereunder), any
governmental authority, require no consent of any other person and do
not contravene, or constitute a default under, any provision of
applicable law or regulations or of the certificate of incorporation or
bylaws of the Debtor or of any agreement (after giving effect to the
use of proceeds of the issuance of the Secured Notes and the making of
the Issuer Loans), judgment, injunction, order, decree or other
instrument binding upon the Debtor or result in the creation or
imposition of any Lien on any asset of the Debtor (other than the Liens
created by this Security Agreement, the Company Escrow Agreement and
the Other Issuer Loan Agreements and related loan documents to which
the Debtor is a party).
(b) Title to Collateral. The Debtor is the legal and
beneficial owner of the Collateral existing on the Issue Date (the
"Existing Collateral"), free and clear of any Lien or claims of any
person except for the Liens on Schedule B attached hereto and the Liens
created by this Security Agreement.
(c) Enforceability. This Security Agreement has been duly
executed and delivered by the Debtor and constitutes a legal and
binding obligation of the Debtor, enforceable against the Debtor in
accordance with its terms, except as such enforceability may be limited
by the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally
or general principles of equity and commercial reasonableness.
(d) Perfection; Priority. Upon the execution and delivery of
the Escrow Agreement, which is being done contemporaneously with the
execution and delivery of this Security Agreement, the delivery to the
Secured Party of the Collateral and the documents listed on Schedule C
attached hereto, to the extent such Liens and security interests are
created under applicable federal and New York laws, the security
interests and Liens in the Collateral created pursuant to this Security
Agreement create a valid and perfected first priority security
interest, subject to the Liens listed on Schedule B attached hereto in
the Existing Collateral, securing the payment of the Obligations for
the benefit of the Secured Party, and enforceable as such against all
creditors of the Debtor and any Persons purporting to purchase any of
the Existing Collateral from the Debtor other than as permitted by the
Indenture; as of the date hereof, there are not other security
interests in or liens on the Existing Collateral or any portion
thereof, and no financing statement, pledge, notice of lien, assignment
or collateral or any portion thereof exists or is on file in any public
office,
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<PAGE> 7
except with respect to Liens listed on Schedule B attached
hereto.
(e) Offices. The Debtor's chief executive offices are located
at the address shown as the chief executive office in Schedule A
attached hereto ("Chief Executive Office").
(f) Business Names. The Debtor has not conducted its
businesses under any corporate, partnership or fictitious name during
the five (5) years preceding the date hereof, other than those names
set forth on Schedule D attached hereto.
(g) Construction Contract. The Construction Contract is in
full force and effect; neither the Builder (to the knowledge of the
Debtor) nor the Debtor is in material breach of any of the terms of the
Construction Contract; the Debtor has not assigned or pledged any of
its right, title or interest in or to the Construction Contract to
anyone other than as provided herein; and the security interest in and
to the Construction Contract granted hereby has been duly and validly
granted to the Secured Party hereunder and upon filing of a UCC-1
Financing Statement with the Secretary of State of Texas, such security
interest shall be a perfected, first priority security interest in the
Collateral. The Debtor will not amend, modify or supplement, or
otherwise affect or replace the Construction Contract unless the Debtor
grants a prior and perfected first priority interest and lien on such
amendment, supplement or modification or replacement in favor of
Secured Party.
Section 3.02. Payment of Indebtedness. The Debtor will pay or cause to
be paid all Obligations including all amounts due under the Loan Agreement, the
Notes and the other Loan Documents and will observe, perform and comply with the
covenants, terms and conditions herein and in the Loan Agreement, the Notes and
the other Loan Documents on its part to be observed, performed or complied with.
Section 3.03. Construction Contract. The Debtor will fully perform
under the Construction Contract in all material respects and will promptly
notify the Secured Party of any claim by any other party of any material breach
thereunder by the Debtor. The Debtor shall use its reasonable good faith efforts
to secure the acknowledgment by the Builder of this Security Agreement.
Section 3.04. Taxes; Compliance. The Debtor shall (a) pay or discharge
when due all taxes, assessments and government charges and claims and all claims
that might become a Lien on the Vessel or on any of the Equipment within thirty
(30) days of the due date thereof as and to the extent required by Section 4.6
of the Indenture; provided, that the Debtor shall in any event pay such taxes,
assessments, charges or claims not later than five days prior to the date of any
proposed sale under any judgment, writ or
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<PAGE> 8
warrant of attachment with regard to any Collateral of the Debtor entered or
filed against the Debtor as a result of the failure to make such payment, and
(b) comply in all material respects with (i) all applicable laws relating to the
Collateral and (ii) the terms and provisions of any agreements pertaining to any
Collateral.
Section 3.05. Liens. The interest of the Debtor in the Collateral will
continue to be held by the Debtor free and clear of any Liens and rights of
others (other than security interests provided for or permitted by the Loan
Agreement or this Security Agreement and other than Permitted Liens).
Section 3.06. Sale or Disposition of Collateral. Except as permitted
pursuant to the provisions of the Indenture, or with Secured Party's prior
written consent, Debtor will not sell, assign, lead, rent, lease or otherwise
dispose of or transfer any of the Collateral to or in favor of any Person other
than Secured Party.
Section 3.07. Information. In addition to such other information as
shall be specifically provided for herein, the Debtor shall furnish to the
Secured Party, the Collateral Agent and the Trustee such other information with
respect to the Collateral as the Secured Party, the Collateral Agent or the
Trustee may reasonably request from time to time.
Section 3.08. Records. The Debtor will keep and maintain at
its own cost and expense satisfactory and complete records of the
Collateral.
Section 3.09. Access. On reasonable notice to the Debtor, except at any
time during the continuation of Default or an Event of Default, the Secured
Party, the Collateral Agent and the Trustee shall at all times have full and
free access during normal business hours to all the books, correspondence and
records of the Debtor relating to the Collateral, and the Secured Party and its
representatives, the Collateral Agent and its representatives and the Trustee
and its representatives may examine the same, take extracts therefrom and make
photocopies thereof, and the Debtor agrees to render to the Collateral Agent
and/or the Trustee, at the Debtor's cost and expense, such clerical and other
assistance, at all times and in such manner as may be requested with regard
thereto. On reasonable notice to the Debtor, except at any time during the
continuation of a Default or an Event of Default, the Secured Party and its
representatives, the Collateral Agent and its representatives and the Trustee
and its representatives, shall at all times also have the right to enter, during
normal business hours, into and upon any premises where any of the Collateral is
located for the purpose of inspecting the same, observing its use or otherwise
protecting its interests therein.
Section 3.10. Delivery of Collateral. All certificates or
instruments, if any, representing or evidencing the Collateral
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<PAGE> 9
shall be delivered to and held by or on behalf of the Collateral Agent pursuant
hereto and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Debtor, the Collateral Agent and the
Trustee, and shall be accompanied by any required transfer tax stamps. Upon the
occurrence and during the continuance of an Event of Default, the Secured party
shall have the right, at any time in its discretion and without notice to the
Debtor, but subject to its compliance with the requirements of applicable law,
to transfer to or to register in the name of the Secured Party or any of its
nominees any or all of the Collateral.
ARTICLE 4 - MAINTENANCE; USE AND OPERATION; INSPECTION;
IDENTIFICATION MARKS
Section 4.01. Maintenance. The Debtor, at its sole cost and expense
(whether or not applicable insurance proceeds are adequate for the purpose),
shall (i) maintain the Equipment in the manner required by the Indenture and
(ii) keep the Equipment in compliance with all applicable laws, regulations and
orders of any governmental authority having jurisdiction with respect thereto.
Section 4.02. Use and Operation. So long as no Event of Default shall
occur and be continuing, the Debtor shall have the full use of the Equipment;
provided, however, that the Debtor covenants and agrees that it will (i) not
permit any of the Equipment to be incorporated or installed in or attached to
any building or real property in such manner as to become part of or subject to
any Liens on such building or real property or so as to preclude the removal
thereof without material injury to the Equipment (it being the intention of the
parties that the Equipment is, and shall be and remain, personal property
throughout the term of the Loan Agreement); and (ii) not use or permit the
Equipment to be used or operated in any manner contrary to any applicable law,
treaty or convention, or any rule or regulation issued thereunder.
Section 4.03. Identification Marks. The Debtor will cause each item of
Equipment owned by it to be kept numbered with the identifying number therefor
as set forth on Schedule E hereto to the extent such number has been affixed to
such item. The Debtor will not change the identifying number of any item of
Equipment except in accordance with a statement of new identifying number to be
substituted therefor, which statement previously shall have been filed with the
Secured Party.
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ARTICLE 5 - REPLACEMENT OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS
Section 5.01. Replacement of Parts.
(a) The Debtor, at its sole cost and expense, will as necessary
promptly replace all parts on the Equipment which may from time to time become
worn out, lost, destroyed, seized, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever. All parts at any time removed from the
Equipment shall remain subject to the security interest granted herein until
such time as such parts shall be replaced by parts which meet the requirements
for replacement parts specified below. All replacement parts incorporated or
installed in or attached to any of the Equipment as provided by this Section
5.01 shall, without necessity of further act, become part of such Equipment for
all purposes hereof and subject to the security interest granted herein.
(b) All replacement parts shall be free and clear of all Liens (other
than Liens created or permitted by the Loan Agreement) and shall be in as good
operating condition as, and shall have a value and utility at least equal to the
parts replaced, assuming such replaced part to be maintained in accordance with
the terms of this Security Agreement.
Section 5.02. Alterations, Modifications and Additions. The Debtor, at
its sole expense, will make such alterations and modifications in and additions
to the Equipment as may be required from time to time by any relevant
governmental authority or as may be deemed necessary from time to time by the
Debtor, whether upon the recommendation of any manufacturer or otherwise, for
the purpose of the safe operation of the Equipment (any such alteration,
modification or addition as may be so required or so deemed necessary being
herein called a "Required Modification"). In addition, the Debtor, at its sole
expense, may from time to time make such other alterations and modifications in
and additions to the Equipment as the Debtor may deem desirable in the proper
conduct of its business (any such alteration, modification or addition as may be
so deemed desirable being herein called an "Optional Modification"); provided,
however, that (i) any Required Modification shall be expeditiously completed in
a good and workmanlike manner, in compliance with all legal requirements
applicable thereto, and (ii) no Optional Modification shall diminish the value
or utility of any piece of Equipment or impair the operating condition thereof
below the value, utility and operating condition thereof immediately prior to
such Optional Modification, assuming that such piece of Equipment was then of
the value or utility and in the operating condition required to be maintained by
the terms of this Security Agreement. All parts incorporated or installed in or
attached to any piece of Equipment as a result of any alteration, modification
or addition which are not readily removable without damage to such piece of
Equipment shall, without necessity of further act, become part of such piece
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of Equipment for all purposes hereof and subject to the security
interests granted herein.
ARTICLE 6 - EVENT OF DEFAULT
Section 6.01. Event of Default. Event of Default hereunder
shall have the meaning set forth in Section 6 of the Loan
Agreement.
Section 6.02. Application of Proceeds. Any sums recovered
hereunder after an Event of Default shall have occurred and be
continuing shall be applied as follows:
First: To the payment of all reasonable expenses and charges, including
the expenses of any sale, the expenses of any retaking, reasonable attorney's
fees, court costs, and any other expenses or advances made or incurred by the
Secured Party, the Collateral Agent and the Trustee in the protection of its
rights or the pursuance of its remedies hereunder;
Second: To the payment of all Obligations under the Notes
including interest thereon to the date of such payment and, if
applicable, compensatory interest to the date of such payment; and
Third: To the payment of any surplus thereafter remaining to
the Debtor or to whomsoever may be entitled thereto.
Section 6.03. Remedies. Upon the occurrence and during the continuance
of an Event of Default, the Liens and security interests created by this
Security Agreement shall become immediately enforceable and the Secured Party
shall have the right to:
(i) Demand, sue for, collect or receive any money or property at any
time payable or receivable on account of or in exchange for, or make any
compromise or settlement deemed desirable with respect to, any of the
Collateral, but the Secured Party shall be under no obligation so to do, or the
Secured Party may extend the time of payment, arrange for payment in
installments or otherwise modify the terms of, or release any of the Collateral,
without hereby incurring responsibility to, or discharging or otherwise
affecting any liability of the Debtor. The Secured Party shall be under no duty
to protect, secure, perfect or insure the Collateral.
(ii) Require the Debtor to assemble the Collateral and all books and
records relating thereto and to make the same available to the Secured Party at
a location designated by the Secured Party.
(iii) The Secured Party and the Collateral Agent shall have the rights
and remedies with respect to the Collateral of a secured party under the New
York Uniform Commercial Code, whether or not such code is in effect in the
jurisdiction where the rights and remedies are then asserted and any other
rights granted pursuant to
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applicable law. In addition, the Secured Party is hereby granted the right to
sell or cause to be sold in New York, New York or Houston, Texas or elsewhere,
in one or more sales or parcels, at such price or prices as it may deem best and
for cash or on credit or for future delivery, without assumption of any credit
risks, all or any of the Collateral, at any broker's board or at public or
private sale, without demand of performance or notice of intention to sell, or
of time or place of sale (except ten (10) Business Days prior written notice to
the Debtor at the Debtor's address set forth in the Loan Agreement and the
Debtor waives all other notice of such sale), and the Secured Party may be the
purchaser of any or all the Collateral so sold and thereafter hold the same
absolutely free from any claim or right of whatsoever kind, including any right
or equity or redemption of the Debtor, any such demand, notice, right or equity
being hereby expressly waived and released (to the extent permitted by
applicable statute). The Debtor will pay to the Secured Party and the Collateral
Agent all expenses (including fees and disbursements of counsel) of, or
incidental to, the enforcement of any of the provisions hereof or of any of the
obligations of the Debtor, of any actual or attempted sale, or any exchange,
enforcement, collection, compromise or settlement of any of the Collateral or
receipt of the proceeds thereof and for the care or preservation of the
Collateral, including expenses of insurance; and all such expenses shall be
Obligations of the Debtor within the terms of this Security Agreement and the
Loan Agreement. All proceeds from the sale or other disposition of the
Collateral shall be held and applied by the Secured Party in the manner provided
for in Section 6.02 hereof.
(iv) Exercise all other rights under this Security Agreement, or any
other Loan Document.
(v) If an Event of Default shall have occurred and be continuing under
the Loan Agreement or the Notes, the Debtor hereby appoints the Secured Party
its true and lawful attorney-in-fact, with full power of substitution, (a) to
enforce its rights concerning the Collateral and to take any action which the
Secured Party may deem necessary or appropriate to protect and preserve the
Liens in the Collateral granted herein, (b) to ask, require, demand, receive,
compound and give acquittance for any and all monies and claims for monies due
and to become due under or arising out of the Construction Contract, (c) to
convey any item of Collateral to any purchaser thereof; (d) to pay or discharge
taxes or Liens levied or placed upon the Collateral, the legality or validity
thereof and the amounts necessary to discharge the same to be determined by the
Secured Party in its sole discretion, and such payments made by the Collateral
Agent to become the Obligations of the Debtor to the Collateral Agent, due and
payable immediately upon demand; and (e) to obtain, adjust, sell and cancel any
insurance with respect to the Collateral, and endorse any draft claim by any
insurer of the Collateral. The Collateral Agent's authority hereunder shall
include, without limitation, the authority to enforce and negotiate any checks
or instruments
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representing proceeds of Collateral in the name of the Debtor, to execute and
give receipt for any certificate of ownership or any document constituting
Collateral, to transfer title to any item of Collateral, to sign the Debtor's
name on all financing statements (to the extent permitted by applicable law) or
other documents deemed necessary to appropriate by the Collateral Agent or the
Trustee to preserve, protect or perfect the Liens in the Collateral, and to file
the same, to prepare, file and sign the Debtor's name on a proof of claim in
bankruptcy or similar document against any customer of, or person obligated upon
any Collateral, to the Debtor, and to take any other actions arising from or
incident to the powers granted to the Secured Party in this Security Agreement.
The power of attorney is coupled with an interest in the Secured party, in the
Trustee and in the Collateral Agent as agent on behalf of the Trustee and is
irrevocable by law.
Section 6.04. Power of Sale. Any sale of the Collateral made pursuant
to the terms of this Security Agreement, 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 the Debtor therein and thereto, and
shall bar the Debtor and all persons claiming by, through or under the Debtor.
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 the
application of the proceeds thereof. In case of any such sale, the Secured Party
and the Collateral Agent, if it is the purchaser, shall be entitled, for the
purpose of making settlement or payment for the property purchased, to use and
apply the Obligations of the Debtor under the Loan Agreement and the Notes in
order that there may be credited against the amount remaining due and unpaid
thereon the sums payable out of the net proceeds of such sale to the Secured
Party after allowing for the costs and expense of sale and other charges. At any
such sale, the Secured Party may bid for and purchase such property and upon
compliance with the terms of sale may hold, retain and dispose of such property
without further accountability therefor.
Section 6.05. Power of Attorney - Sale. The Secured Party is hereby
irrevocably appointed attorney-in-fact of the Debtor upon the happening and
during the continuance of any Event of Default to execute and deliver to any
purchaser aforesaid, and is hereby vested with full power and authority to make,
in the name and in behalf of the Debtor, a good conveyance of the title to the
Collateral so sold. Any person dealing with the Secured Party or its attorney
in-fact shall not be put on enquiry as to whether the power of attorney
contained herein has become exercisable. In the event of any sale of any of the
Collateral, under any power herein contained, the Debtor will, if and when
required by the Secured Party, execute such form of conveyances of the
Collateral as the Secured Party may direct or approve.
Section 6.06. Secured Party to Discharge Liens. The Debtor
authorizes and empowers the Secured Party and the Collateral Agent
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<PAGE> 14
or its appointees or any of them to appear in the name of the Debtor in any
court of any country or nation of the world where a suit is pending against any
of the Collateral because of or on account of any alleged Lien against any of
the Collateral from which the Collateral has not been released and to take such
reasonable steps towards the defense of such suit and the purchase or discharge
of such Lien. All reasonable expenditures made or incurred by them or any of
them for the purpose of such defense or purchase or discharge shall be a debt
due from the Debtor to the Secured Party and shall be secured by the Lien of
this Security Agreement in like manner and extent as if the amount and
description thereof were written herein.
Section 6.07. Liability for Deficiency. If any sale or other
disposition of Collateral by Secured Party or any other action of Secured Party
hereunder results in reduction of the Obligations, such action will not release
Debtor from its liability to Secured Party for any unpaid Obligations, including
costs, charges and expenses incurred in the liquidation of Collateral, together
with interest thereon, and the same shall be immediately due and payable to
Secured Party at Secured Party's address set forth in the Loan Agreement.
Section 6.08. Payment of Expenses. The Debtor covenants that upon the
happening and during the continuance of any Event of Default, then, upon written
demand of the Secured Party, the Debtor will pay to the Secured Party the whole
amount due and payable in respect of the Obligations of the Debtor under the
Loan Agreement and the Notes and in case the Debtor shall fail to pay the same
forthwith upon such demand, the Secured Party shall be entitled to recover
judgment for the whole amount so due and unpaid, together with such further
amounts as shall be sufficient to cover the reasonable compensation to the
Secured Party or its agents, attorneys and counsel and any necessary advances,
expenses and liabilities made or incurred by it or them hereunder. All moneys
collected by the Secured Party for the benefit of the Secured Party under this
Section 6.08 shall be applied in accordance with the provisions of Section 6.02
above.
Section 6.09. Remedies Cumulative. Each and every power and remedy
herein given to the Secured Party shall be cumulative and shall be in addition
to every other power and remedy herein given or now or hereafter existing at
law, in equity or by statute, and each and every power and remedy whether herein
given or otherwise existing may be exercised from time to time and as often and
in such order as may be deemed expedient by the Secured Party, 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. The Secured Party shall not be required or bound to enforce any
other of its rights under any other agreement or instrument securing the Loan
Agreement and the Note, prior to enforcing its rights under this Security
Agreement. No delay or omission by the Secured Party in
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<PAGE> 15
the exercise of any right or power or in the pursuance of any remedy accruing
upon any Event of Default shall impair any such right, power or remedy or be
construed to be a waiver of any such Event of Default or to be an acquiescence
therein; nor shall the acceptance by the Secured Party of any security or of any
payment of or on account of the obligations of the Debtor under the Loan
Agreement or the Note maturing after any Event of Default or of any payment on
account of any past default be construed to be a waiver of any right to exercise
any remedies due to any future Event of Default or of any past Event of Default
not completely cured thereby. No consent, waiver or approval of the Secured
Party shall be deemed to be effective unless in writing and duly signed by the
Secured Party; any waiver by the Secured Party of any of the terms of this
Security Agreement or any consent given under this Security Agreement shall only
be effective for the purpose and on the terms which it is given and shall be
without prejudice to the right to give or withhold consent in relation to future
matters.
Section 6.10. Cure of Defaults. If at any time after an Event of
Default and prior to the actual sale of any of the Collateral by the Secured
Party or prior to any enforcement or foreclosure proceedings the Debtor offers
completely to cure all Events of Default and to pay all expenses, advances and
damages to the Secured Party consequent on such Events of Default, with interest
at the interest rates set forth in Section 2.2.A.(i) of the Loan Agreement for
7-year Tranche advances then the Secured Party may (but shall not be obligated
to) accept such offer and payment and restore the Debtor to its former position,
but such action, if taken, shall not affect any subsequent Event of Default or
impair any rights consequent thereon.
Section 6.11. Discontinuance of Proceedings. In case the Secured Party
shall have proceeded to enforce any right, power or remedy under this Security
Agreement by foreclosure, entry or otherwise, and such proceedings shall have
been discontinued or abandoned for any reason or shall have been determined
adversely to the Secured Party, then and in every such case the Debtor and the
Secured Party shall be restored to their former positions and rights hereunder
with respect to the property subject or intended to be subject to this Security
Agreement, and all rights, remedies and powers of the Secured Party shall
continue as if no such proceedings had been taken.
ARTICLE 7 - MISCELLANEOUS
Section 7.01. Contracts. It is expressly agreed that anything herein
contained to the contrary notwithstanding, the Secured Party shall have no
obligation or liability under the Construction Contract other lease or contract
concerning the use or operation of the Vessel or the Equipment by reason of or
arising out of this Security Agreement nor shall the Secured Party be required
or obligated in any manner to perform or fulfill any obligations of the Debtor
under or pursuant to any contract
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<PAGE> 16
concerning the use or operation of the Vessel or the Equipment, 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 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 to hereunder at any time or times.
Section 7.02. Irrevocability. The powers and authority granted to the
Secured Party herein have been given for a valuable consideration and are hereby
declared to be irrevocable.
Section 7.03. Assignment. The Secured Party may transfer, assign or
grant a security interest on its right, title and interest in this Security
Agreement without the consent of the Debtor but the Debtor may not transfer or
assign its rights and duties under this Security Agreement without the prior
written consent of the Secured Party.
Section 7.04. Further Documents. The Debtor agrees that at any time and
from time to time, upon the written request of the Secured Party, it will
promptly and duly execute and deliver any and all such further instruments and
documents as the Secured Party may reasonably deem desirable in obtaining the
full benefits of this Security Agreement and of the rights and powers herein
granted.
Section 7.05. Notices. All notices or other communications which are
required to be made hereunder shall be made in the manner and to the addresses
for the Debtor and the Secured Party provided in Section 7.8 of the Loan
Agreement and in the manner and to the address for the Trustee and the
Collateral Agent in the Issuer's Security Agreement.
SECTION 7.06. GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF JURY TRIAL; WAIVER OF DAMAGES.
(i) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO CONFLICTS AND LAWS AND PRINCIPLES (EXCEPT TO THE
EXTENT THAT THE LAWS OF ANY OTHER JURISDICTION GOVERN THE PERFECTION AND
PRIORITY OF THE LIENS AND SECURITY INTERESTS GRANTED HEREBY). THIS SECURITY
AGREEMENT MAY NOT BE AMENDED OR CHANGED EXCEPT BY AN INSTRUMENT IN WRITING
SIGNED BY BOTH PARTIES HERETO.
(ii) THE DEBTOR AGREES THAT THE SECURED PARTY SHALL HAVE THE RIGHT, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE DEBTOR OR ITS
PROPERTY IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH TO ENABLE
TO THE SECURED PARTY, THE COLLATERAL AGENT OR THE TRUSTEE TO REALIZE ON SUCH
PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE
SECURED PARTY, THE COLLATERAL AGENT OR THE TRUSTEE. THE DEBTOR AGREES THAT IT
WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSS- CLAIMS IN ANY PROCEEDING
BROUGHT BY THE SECURED PARTY, THE
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COLLATERAL AGENT OR THE TRUSTEE TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE SECURED PARTY, THE COLLATERAL
AGENT OR THE TRUSTEE. THE DEBTOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH EITHER OF THE SECURED PARTY, THE COLLATERAL AGENT
OR THE TRUSTEE HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OR FORUM NON CONVENIENS.
(iii) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE DEBTOR AND THE
SECURED PARTY EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN
THEM IN CONNECTION WITH THIS SECURITY AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED
IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY;
(iv) THE DEBTOR AGREES THAT NONE OF THE SECURED PARTY, THE COLLATERAL
AGENT, THE TRUSTEE AND ANY HOLDER OF A SECURED NOTE SHALL HAVE ANY LIABILITY TO
THE DEBTOR WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED
BY THE DEBTOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS SECURITY
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT IS
BINDING ON THE SECURED PARTY, THE COLLATERAL AGENT, THE TRUSTEE OR SUCH
NOTEHOLDER, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR
OMISSIONS ON THE PART OF THE SECURED PARTY, THE COLLATERAL AGENT, THE TRUSTEE OR
SUCH HOLDER OF SECURED NOTE, AS THE CASE MAY BE, CONSTITUTING NEGLIGENCE OR
WILLFUL MISCONDUCT;
(v) THE DEBTOR WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY THE SECURED PARTY, THE COLLATERAL AGENT, THE TRUSTEE OR
ANY HOLDER OF A SECURED NOTE OF ITS RIGHT DURING THE CONTINUANCE OF ANY EVENT OF
DEFAULT TO REPOSSESS THE COLLATERAL WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH
OR LEVY UPON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS. THE DEBTOR
WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE COLLATERAL AGENT, THE
TRUSTEE OR ANY HOLDER OF A SECURED NOTE IN CONNECTION WITH ANY JUDICIAL PROCESS
OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH OR LEVY UPON COLLATERAL
OR OTHER SECURITY FOR THE OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER COURT
ORDER ENTERED IN FAVOR OF THE SECURED PARTY, THE COLLATERAL AGENT, THE TRUSTEE
OR ANY HOLDER OF A SECURED NOTE OR TO ENFORCE BY SPECIFIC PERFORMANCE TEMPORARY
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION THIS SECURITY AGREEMENT
OR ANY OTHER AGREEMENT OR DOCUMENT AMONG THE DEBTOR ON THE ONE HAND AND THE
SECURED PARTY, THE COLLATERAL AGENT, THE TRUSTEE AND/OR THE HOLDERS OF THE
SECURED NOTE ON THE OTHER HAND.
Section 7.07. Severability of Provisions. Any provision of this
Security Agreement that is prohibited or unenforceable in any
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jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Section 7.08. Counterparts, Effectiveness. This Security Agreement may
be executed in two or more counterparts. Each counterpart is deemed an original,
but all such counterparts taken together constitute one and the same instrument.
This Security Agreement becomes effective upon the execution hereof by Debtor
and delivery of the same to Secured Party, and it is not necessary for Secured
Party to execute any acceptance hereof or otherwise signify or express its
acceptance hereof.
Section 7.09. Loan Agreement. This Security Agreement is subject to the
terms, conditions and provisions of the Loan Agreement. To the extent a term or
provision of this Security Agreement conflicts with the Loan Agreement, the Loan
Agreement shall control with respect to the subject matter of such term or
provision.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be executed by their duly authorized officers all as of the date
noted above.
R&B FALCON CORPORATION
By: /s/ ROBERT FULTON
------------------------------------
Name: Robert Fulton
Title: EVP
RBF FINANCE CO.
By: /s/ STEVEN A. WEBSTER
------------------------------------
Name: Steven A. Webster
Title: President
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SCHEDULE A
Chief Executive Office
901 Threadneedle
Houston, Texas 77079
<PAGE> 20
SCHEDULE B
Liens
- Statutory or inchoate liens for amounts not more than 30 days
past due or that are being contested in good faith.
- Liens on owner furnished equipment for any unpaid portion
of the purchase price thereof.
2
<PAGE> 21
SCHEDULE C
Documents
Uniform Commercial Code Filings
1. Secretary of State of Texas
2. Department of State for the Secretary of State of New York
3. New York County and City Registry
3
<PAGE> 22
SCHEDULE D
Names
R&B&F Corporation
4
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SCHEDULE E
Equipment
5
<PAGE> 1
EXHIBIT 10.15
SECURITY AGREEMENT
SECURITY AGREEMENT (the "Security Agreement"), dated as of March 26,
1999, from R&B FALCON CORPORATION, a Delaware corporation, and its successors
and assigns (the "Debtor") to RBF FINANCE CO., a Delaware corporation, together
with its successors and assigns (the "Secured Party").
R E C I T A L S
WHEREAS, the Debtor is the assignee of all of the right, title and
interest of R&B Falcon Drilling Co. (the "Buyer") in and to the Construction
Contract (as defined herein), providing for the construction of one (1)
deepwater drillship to be known as the DEEPWATER IV; and
WHEREAS, the Secured Party has agreed to loan to the Debtor up to
$188,900,000 to provide funds for the construction of the Vessel pursuant to
that certain Senior Secured Loan Agreement dated as of the date hereof (as
amended, modified or extended from time to time, the "Loan Agreement") between
the Debtor and the Secured Party; and
WHEREAS, the advances by Secured Party to the Debtor under the Loan
Agreement are or will be evidenced by two Promissory Notes of the Debtor dated
as of March 26, 1999 (the "Notes") in the aggregate principal amount of USD
$188,900,000 (the "Loan"); and
WHEREAS, the Debtor has agreed to grant to the Secured Party, on the
terms and conditions hereinafter set forth, as security for Debtor's obligation
to repay the Loan and other obligations under the Loan Agreement and the Notes,
a security interest in all of the Debtor's right, title and interest in and to
the Collateral, as hereinafter set forth; and
WHEREAS, the Secured Party requires, as a condition to the Loan
Agreement, that the Debtor execute and deliver this Security Agreement to the
Secured Party as security for its obligations under the Loan Agreement.
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree and covenant as follows:
ARTICLE 1 - DEFINITIONS
Section 1.01. Certain Defined Terms. For purposes of this Security
Agreement:
<PAGE> 2
(a) "Construction Contract" means that certain Contract for
Construction and Sale of a 98,000 Metric Tons Displacement
Drillship (Hull No. 1300) between Debtor as Buyer and Samsung
Heavy Industries Co., Ltd., a Korean corporation, as such may
be amended, modified or supplemented from time to time
(collectively, the "Builder") dated October 14, 1998,
including without limitation (i) the right upon valid tender
by the Builder to purchase the Vessel pursuant to such
Construction Contract, and the right to take title to the
Vessel pursuant to such Construction Contract; (ii) all claims
for damages arising as a result of any failure by the Builder
to perform or observe any of the terms of such Construction
Contract, and all rights, benefits and claims under all
warranty and indemnity provisions contained therein; and (iii)
any and all rights of the Debtor to compel performance of such
Construction Contract, to the same extent as if the Secured
Party were the "Buyer" named in such Construction Contract.
(b) "Equipment" means all items of equipment of the Debtor used in
connection with the Vessel, whether currently owned or
hereafter acquired, and whether on board the Vessel or not,
including but not limited to the items set forth on Schedule E
attached to this Security Agreement.
(c) "Permitted Liens" means the Liens on Schedule B.
(d) "Refund Guarantee" means any refund guarantee or letter of
guarantee issued pursuant to the Construction Contract by the
Builder's bank or the Export-Import Bank of Korea in favor of
the Buyer, and all rights and claims under such Refund
Guarantee.
(e) "Vessel" means one deep water drillship to be known as the
Deepwater IV, which is being presently constructed pursuant to
the Construction Contract, together with all of the boilers,
engines, machinery, masts, spars, boats, anchors, cables,
chains, rigging, tackle, capstans, outfit, tools, pumps and
pumping equipment, apparel, furniture, fittings, equipment,
spare parts and all other appurtenances to said Vessel
appertaining or belonging, whether now owned or hereafter
acquired, whether on board or not, and also any and all
additions, improvements and replacements in general effected
subsequently on or to the Vessel, or any part thereof, or
appurtenance thereto.
Section 1.02. Terms Defined in Loan Agreement. All capitalized terms
used in this Security Agreement without definition shall have the meaning given
to such terms in the Loan Agreement.
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<PAGE> 3
ARTICLE 2 - SECURITY
Section 2.01. The Collateral. (a) In consideration of the Loan made
pursuant to and evidenced by the Loan Agreement and the Note, and by way of
security for payment of all amounts due or to be due thereunder and hereunder,
the Debtor does hereby sell, assign, transfer and set over unto, and grant a
Liens and security interests in favor of the Secured Party, and unto the Secured
Party's successors and assigns for benefit of the Secured Party's own proper use
and benefit, as security for the Obligations (as defined in the Loan Agreement),
now or in the future, and including but not limited to any future advances under
the Loan Agreement, all of the Debtor's right, title and interest in and to (i)
the Equipment,(ii) the Vessel, (iii) the Construction Contract, (iv) the Refund
Guarantee and (v) any proceeds and products of the foregoing, including (1)
whatever is now or hereafter received by debtor upon the sale, exchange,
collection or other disposition of any item of Collateral, (2) any property of
the type or types described below now or hereafter acquired by the debtor with
any proceeds of Collateral, (3) all of the policies and contracts of insurance
relating to the aforementioned Collateral, and (4) any payments under any
insurance or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the Collateral; provided, that so
long as there are funds held in an escrow account established pursuant to that
certain Issuer Loan Escrow Agreement dated as of March 26, 1999 (the "Company
Escrow Agreement") among United States Trust Company of New York, as Escrow
Agent and as Trustee, the Debtor and the Secured Party, the principal amount of
the Loan secured by liens on the Collateral will be reduced by an amount equal
to (x) $100,000,000 less (y) any amounts released by the Escrow Agent to the
Debtor pursuant to the terms of the Escrow Agreement.
(b) The rights and equipment referred to in this Section 2.01 are
collectively referred to herein as the "Collateral".
Section 2.02. Continued Priority of Security Interest. The Debtor
agrees that it will not, without the prior written consent of the Secured Party,
create or suffer to exist any Lien or security interest upon or in the
Collateral or any part thereof other than the lien and security interests
created hereby and Permitted Liens.
Section 2.03. Maintenance of Status of Liens; Further Assurances. The
Debtor shall take all action that may be necessary or desirable, or that the
Secured Party reasonably may request, so as at all times (a) to grant and
perfect Liens and security interests in the Collateral intended to be granted
hereby and to maintain the validity, enforceability, perfection and priority of
the security interest in the Collateral (b) to protect or preserve the Liens and
security interests created by this Security Agreement; and (c) to protect,
preserve, exercise or enforce the rights of the Secured Party therein and
hereunder and of the
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Secured Party under the Loan Agreement, including but not limited to
(i)immediately discharging all Liens on the Collateral other than the security
interest and Liens created or permitted hereby and Permitted Liens (ii)
executing and delivering Uniform Commercial Code financing statements,
continuation statements, notices, instructions and assignments, in each case in
form and substance reasonably satisfactory to the Secured Party and not
inconsistent with the terms hereof. The Debtor will, promptly upon request by
the Secured Party, the Collateral Agent or the Trustee, (i) execute and deliver,
cause to be executed and filed, or use its best efforts to give any notices, in
all appropriate jurisdictions, (including Korea) or procure any financing
statements, assignments, pledges or other documents, all in form and substance
satisfactory to the Secured Party, the Collateral Agent and the Trustee, (ii)
mark any chattel paper constituting Collateral, and deliver any certificates,
chattel paper or instruments consisting Collateral to the Secured Party, the
Collateral Agent or the Trustee, (iii) execute and deliver or cause to be
executed and delivered all assignments, instruments and other documents, all in
form and substance satisfactory to the Secured Party and the Trustee, and (iv)
take any other actions that are necessary or, in the reasonable opinion of the
Secured Party, the Collateral Agent or the Trustee, desirable to perfect or
continue the perfection and the priority of the Secured Party's security
interest and Liens in the Collateral, to protect the Collateral against the
rights, claims, or interests of third persons other than holders of Permitted
Liens. The Debtor shall mark its books and records as may be necessary or
appropriate to evidence, protect and perfect the Liens in the Collateral and
shall cause its financial statements to reflect such Liens.
Section 2.04. Evidence of Status of Liens. The Debtor shall from time
to time upon request of the Secured Party promptly deliver to the Secured Party
such file search reports from such Uniform Commercial Code and other filing and
recording offices as may be applicable from time to time as the Secured Party
may reasonably designate in order to establish that the perfection and priority
of the Liens and security interest granted hereby are maintained.
Section 2.05. Authorized Action. The Secured Party is hereby authorized
to file one or more financing or continuation statements (including statements
of assignment and renewals thereof) or amendments thereto without the signature
of, or in the name of, the Debtor. A carbon, photographic or other reproduction
of this Security Agreement or of any financing statement filed in connection
with this Security Agreement shall be sufficient as a financing statement.
Section 2.06. The Debtor Remains Obligated: the Secured Party Not
Obligated. The grant by the Debtor to the Secured Party of the Liens granted
hereby shall not relieve the Debtor from the performance of any term, covenant,
condition or agreement on its
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part to be performed or observed, or from any liability to any person, under or
in respect of any of the Collateral, including, but not limited to the
Construction Contract, or impose any obligation on the Secured Party to perform
or observe any such term, covenant, condition or agreement on the Debtor's part
to be so performed or observed or impose any liability on the Secured Party for
any act or omission on the part of the Debtor relating thereto.
Section 2.07. Location of Collateral. The Debtor will keep all of its
Collateral now held or subsequently acquired by it at the locations specified on
Schedule A hereto, or at locations hereafter established in compliance with
Section 2.07 hereof (except for Collateral held by the Secured Party, the
Collateral Agent or the Trustee), unless the Debtor shall have given the Secured
Party, the Collateral Agent and the Trustee prior written notice thereof and
shall have in advance executed and caused to be filed and/or delivered to the
Secured Party, the Collateral Agent and the Trustee any financing statement or
other documents required by the Trustee or the Secured Party, the Collateral
Agent in order to perfect, protect and preserve the Liens and security interest
created hereby, all in form and substance satisfactory to the Secured Party, the
Collateral Agent and the Trustee.
Section 2.08. Location of Offices; Corporation Name; Legal Structure.
The Debtor will not change the location of its Chief Executive Office or
establish any place of business other than those set forth on Schedule A
attached hereto, or voluntarily or involuntarily change its name, identity or
legal structure, including without limitation any continuance, amalgamation,
merger, consolidation or sale of substantially all of its assets, unless the
Debtor shall have given the Secured Party, the Collateral Agent and the Trustee
at least 30 days prior written notice thereof and shall have in advance executed
and caused to be filed and or delivered to the Secured Party, the Collateral
Agent and the Trustee any financing statements or other filings, pledges or
other documents required by the Secured Party and the Trustee in order to
perfect, protect and preserve the Liens and security interests created hereby,
all in form and substance satisfactory to the Trustee, the Collateral Agent and
the Secured Party.
ARTICLE 3 - REPRESENTATIONS AND COVENANTS OF THE DEBTOR
Section 3.01. Representations. The Debtor hereby represents and
warrants that:
(a) Legal Power. The execution, delivery and performance by
the Debtor of this Security Agreement are within the Debtor's legal
powers, have been duly authorized by all necessary corporate action,
require no action by or in respect of, or filing with (except for any
filings provided for hereunder), any governmental authority, require no
consent
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of any other person and do not contravene, or constitute a default
under, any provision of applicable law or regulations or of the
certificate of incorporation or bylaws of the Debtor or of any
agreement (after giving effect to the use of proceeds of the issuance
of the Secured Notes and the making of the Issuer Loans), judgment,
injunction, order, decree or other instrument binding upon the Debtor
or result in the creation or imposition of any Lien on any asset of the
Debtor (other than the Liens created by this Security Agreement, the
Company Escrow Agreement and the Other Issuer Loan Agreements and
related loan documents to which the Debtor is a party).
(b) Title to Collateral. The Debtor is the legal and
beneficial owner of the Collateral existing on the Issue Date (the
"Existing Collateral"), free and clear of any Lien or claims of any
person except for the Liens on Schedule B attached hereto and the Liens
created by this Security Agreement.
(c) Enforceability. This Security Agreement has been duly
executed and delivered by the Debtor and constitutes a legal and
binding obligation of the Debtor, enforceable against the Debtor in
accordance with its terms, except as such enforceability may be limited
by the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally
or general principles of equity and commercial reasonableness.
(d) Perfection; Priority. Upon the execution and delivery of
the Escrow Agreement, which is being done contemporaneously with the
execution and delivery of this Security Agreement, the delivery to the
Secured Party of the Collateral and the documents listed on Schedule C
attached hereto, to the extent such Liens and security interests are
created under applicable federal and New York laws, the security
interests and Liens in the Collateral created pursuant to this Security
Agreement create a valid and perfected first priority security
interest, subject to the Liens listed on Schedule B attached hereto in
the Existing Collateral, securing the payment of the Obligations for
the benefit of the Secured Party, and enforceable as such against all
creditors of the Debtor and any Persons purporting to purchase any of
the Existing Collateral from the Debtor other than as permitted by the
Indenture; as of the date hereof, there are not other security
interests in or liens on the Existing Collateral or any portion
thereof, and no financing statement, pledge, notice of lien, assignment
or collateral or any portion thereof exists or is on file in any public
office, except with respect to Liens listed on Schedule B attached
hereto.
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(e) Offices. The Debtor's chief executive offices are located
at the address shown as the chief executive office in Schedule A
attached hereto ("Chief Executive Office").
(f) Business Names. The Debtor has not conducted its
businesses under any corporate, partnership or fictitious name during
the five (5) years preceding the date hereof, other than those names
set forth on Schedule D attached hereto.
(g) Construction Contract. The Construction Contract is in
full force and effect; neither the Builder (to the knowledge of the
Debtor) nor the Debtor is in material breach of any of the terms of the
Construction Contract; the Debtor has not assigned or pledged any of
its right, title or interest in or to the Construction Contract to
anyone other than as provided herein; and the security interest in and
to the Construction Contract granted hereby has been duly and validly
granted to the Secured Party hereunder and upon filing of a UCC-1
Financing Statement with the Secretary of State of Texas, such security
interest shall be a perfected, first priority security interest in the
Collateral. The Debtor will not amend, modify or supplement, or
otherwise affect or replace the Construction Contract unless the Debtor
grants a prior and perfected first priority interest and lien on such
amendment, supplement or modification or replacement in favor of
Secured Party.
Section 3.02. Payment of Indebtedness. The Debtor will pay or cause to
be paid all Obligations including all amounts due under the Loan Agreement, the
Notes and the other Loan Documents and will observe, perform and comply with the
covenants, terms and conditions herein and in the Loan Agreement, the Notes and
the other Loan Documents on its part to be observed, performed or complied with.
Section 3.03. Construction Contract. The Debtor will fully perform
under the Construction Contract in all material respects and will promptly
notify the Secured Party of any claim by any other party of any material breach
thereunder by the Debtor. The Debtor shall use its reasonable good faith efforts
to secure the acknowledgment by the Builder of this Security Agreement.
Section 3.04. Taxes; Compliance. The Debtor shall (a) pay or discharge
when due all taxes, assessments and government charges and claims and all claims
that might become a Lien on the Vessel or on any of the Equipment within thirty
(30) days of the due date thereof as and to the extent required by Section 4.6
of the Indenture; provided, that the Debtor shall in any event pay such taxes,
assessments, charges or claims not later than five days prior to the date of any
proposed sale under any judgment, writ or warrant of attachment with regard to
any Collateral of the Debtor entered or filed against the Debtor as a result of
the failure to make such payment, and (b) comply in all material respects with
(i)
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all applicable laws relating to the Collateral and (ii) the terms and provisions
of any agreements pertaining to any Collateral.
Section 3.05. Liens. The interest of the Debtor in the Collateral will
continue to be held by the Debtor free and clear of any Liens and rights of
others (other than security interests provided for or permitted by the Loan
Agreement or this Security Agreement and other than Permitted Liens).
Section 3.06. Sale or Disposition of Collateral. Except as permitted
pursuant to the provisions of the Indenture, or with Secured Party's prior
written consent, Debtor will not sell, assign, lead, rent, lease or otherwise
dispose of or transfer any of the Collateral to or in favor of any Person other
than Secured Party.
Section 3.07. Information. In addition to such other information as
shall be specifically provided for herein, the Debtor shall furnish to the
Secured Party, the Collateral Agent and the Trustee such other information with
respect to the Collateral as the Secured Party, the Collateral Agent or the
Trustee may reasonably request from time to time.
Section 3.08. Records. The Debtor will keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral.
Section 3.09. Access. On reasonable notice to the Debtor, except at any
time during the continuation of Default or an Event of Default, the Secured
Party, the Collateral Agent and the Trustee shall at all times have full and
free access during normal business hours to all the books, correspondence and
records of the Debtor relating to the Collateral, and the Secured Party and its
representatives, the Collateral Agent and its representatives and the Trustee
and its representatives may examine the same, take extracts therefrom and make
photocopies thereof, and the Debtor agrees to render to the Collateral Agent
and/or the Trustee, at the Debtor's cost and expense, such clerical and other
assistance, at all times and in such manner as may be requested with regard
thereto. On reasonable notice to the Debtor, except at any time during the
continuation of a Default or an Event of Default, the Secured Party and its
representatives, the Collateral Agent and its representatives and the Trustee
and its representatives, shall at all times also have the right to enter, during
normal business hours, into and upon any premises where any of the Collateral is
located for the purpose of inspecting the same, observing its use or otherwise
protecting its interests therein.
Section 3.10. Delivery of Collateral. All certificates or instruments,
if any, representing or evidencing the Collateral shall be delivered to and held
by or on behalf of the Collateral Agent pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of
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transfer or assignment in blank, all in form and substance satisfactory to the
Debtor, the Collateral Agent and the Trustee, and shall be accompanied by any
required transfer tax stamps. Upon the occurrence and during the continuance of
an Event of Default, the Secured party shall have the right, at any time in its
discretion and without notice to the Debtor, but subject to its compliance with
the requirements of applicable law, to transfer to or to register in the name of
the Secured Party or any of its nominees any or all of the Collateral.
ARTICLE 4 - MAINTENANCE; USE AND OPERATION; INSPECTION;
IDENTIFICATION MARKS
Section 4.01. Maintenance. The Debtor, at its sole cost and expense
(whether or not applicable insurance proceeds are adequate for the purpose),
shall (i) maintain the Equipment in the manner required by the Indenture and
(ii) keep the Equipment in compliance with all applicable laws, regulations and
orders of any governmental authority having jurisdiction with respect thereto.
Section 4.02. Use and Operation. So long as no Event of Default shall
occur and be continuing, the Debtor shall have the full use of the Equipment;
provided, however, that the Debtor covenants and agrees that it will (i) not
permit any of the Equipment to be incorporated or installed in or attached to
any building or real property in such manner as to become part of or subject to
any Liens on such building or real property or so as to preclude the removal
thereof without material injury to the Equipment (it being the intention of the
parties that the Equipment is, and shall be and remain, personal property
throughout the term of the Loan Agreement); and (ii) not use or permit the
Equipment to be used or operated in any manner contrary to any applicable law,
treaty or convention, or any rule or regulation issued thereunder.
Section 4.03. Identification Marks. The Debtor will cause each item of
Equipment owned by it to be kept numbered with the identifying number therefor
as set forth on Schedule E hereto to the extent such number has been affixed to
such item. The Debtor will not change the identifying number of any item of
Equipment except in accordance with a statement of new identifying number to be
substituted therefor, which statement previously shall have been filed with the
Secured Party.
ARTICLE 5 - REPLACEMENT OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS
Section 5.01. Replacement of Parts.
(a) The Debtor, at its sole cost and expense, will as necessary
promptly replace all parts on the Equipment which may from time to time become
worn out, lost, destroyed, seized, damaged beyond repair or permanently rendered
unfit for use for any reason
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whatsoever. All parts at any time removed from the Equipment shall remain
subject to the security interest granted herein until such time as such parts
shall be replaced by parts which meet the requirements for replacement parts
specified below. All replacement parts incorporated or installed in or attached
to any of the Equipment as provided by this Section 5.01 shall, without
necessity of further act, become part of such Equipment for all purposes hereof
and subject to the security interest granted herein.
(b) All replacement parts shall be free and clear of all Liens (other
than Liens created or permitted by the Loan Agreement) and shall be in as good
operating condition as, and shall have a value and utility at least equal to the
parts replaced, assuming such replaced part to be maintained in accordance with
the terms of this Security Agreement.
Section 5.02. Alterations, Modifications and Additions. The Debtor, at
its sole expense, will make such alterations and modifications in and additions
to the Equipment as may be required from time to time by any relevant
governmental authority or as may be deemed necessary from time to time by the
Debtor, whether upon the recommendation of any manufacturer or otherwise, for
the purpose of the safe operation of the Equipment (any such alteration,
modification or addition as may be so required or so deemed necessary being
herein called a "Required Modification"). In addition, the Debtor, at its sole
expense, may from time to time make such other alterations and modifications in
and additions to the Equipment as the Debtor may deem desirable in the proper
conduct of its business (any such alteration, modification or addition as may be
so deemed desirable being herein called an "Optional Modification"); provided,
however, that (i) any Required Modification shall be expeditiously completed in
a good and workmanlike manner, in compliance with all legal requirements
applicable thereto, and (ii) no Optional Modification shall diminish the value
or utility of any piece of Equipment or impair the operating condition thereof
below the value, utility and operating condition thereof immediately prior to
such Optional Modification, assuming that such piece of Equipment was then of
the value or utility and in the operating condition required to be maintained by
the terms of this Security Agreement. All parts incorporated or installed in or
attached to any piece of Equipment as a result of any alteration, modification
or addition which are not readily removable without damage to such piece of
Equipment shall, without necessity of further act, become part of such piece of
Equipment for all purposes hereof and subject to the security interests granted
herein.
ARTICLE 6 - EVENT OF DEFAULT
Section 6.01. Event of Default. Event of Default hereunder shall have
the meaning set forth in Section 6 of the Loan Agreement.
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Section 6.02. Application of Proceeds. Any sums recovered hereunder
after an Event of Default shall have occurred and be continuing shall be applied
as follows:
First: To the payment of all reasonable expenses and charges, including
the expenses of any sale, the expenses of any retaking, reasonable attorney's
fees, court costs, and any other expenses or advances made or incurred by the
Secured Party, the Collateral Agent and the Trustee in the protection of its
rights or the pursuance of its remedies hereunder;
Second: To the payment of all Obligations under the Notes including
interest thereon to the date of such payment and, if applicable, compensatory
interest to the date of such payment; and
Third: To the payment of any surplus thereafter remaining to the Debtor
or to whomsoever may be entitled thereto.
Section 6.03. Remedies. Upon the occurrence and during the continuance
of an Event of Default, the Liens and security interests created by this
Security Agreement shall become immediately enforceable and the Secured Party
shall have the right to:
(i) Demand, sue for, collect or receive any money or property at any
time payable or receivable on account of or in exchange for, or make any
compromise or settlement deemed desirable with respect to, any of the
Collateral, but the Secured Party shall be under no obligation so to do, or the
Secured Party may extend the time of payment, arrange for payment in
installments or otherwise modify the terms of, or release any of the Collateral,
without hereby incurring responsibility to, or discharging or otherwise
affecting any liability of the Debtor. The Secured Party shall be under no duty
to protect, secure, perfect or insure the Collateral.
(ii) Require the Debtor to assemble the Collateral and all books and
records relating thereto and to make the same available to the Secured Party at
a location designated by the Secured Party.
(iii) The Secured Party and the Collateral Agent shall have the rights
and remedies with respect to the Collateral of a secured party under the New
York Uniform Commercial Code, whether or not such code is in effect in the
jurisdiction where the rights and remedies are then asserted and any other
rights granted pursuant to applicable law. In addition, the Secured Party is
hereby granted the right to sell or cause to be sold in New York, New York or
Houston, Texas or elsewhere, in one or more sales or parcels, at such price or
prices as it may deem best and for cash or on credit or for future delivery,
without assumption of any credit risks, all or any of the Collateral, at any
broker's board or at public or private sale, without demand of performance or
notice of intention to sell, or of time or place of sale (except ten (10)
Business Days prior written notice to the Debtor at the Debtor's address set
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forth in the Loan Agreement and the Debtor waives all other notice of such
sale), and the Secured Party may be the purchaser of any or all the Collateral
so sold and thereafter hold the same absolutely free from any claim or right of
whatsoever kind, including any right or equity or redemption of the Debtor, any
such demand, notice, right or equity being hereby expressly waived and released
(to the extent permitted by applicable statute). The Debtor will pay to the
Secured Party and the Collateral Agent all expenses (including fees and
disbursements of counsel) of, or incidental to, the enforcement of any of the
provisions hereof or of any of the obligations of the Debtor, of any actual or
attempted sale, or any exchange, enforcement, collection, compromise or
settlement of any of the Collateral or receipt of the proceeds thereof and for
the care or preservation of the Collateral, including expenses of insurance; and
all such expenses shall be Obligations of the Debtor within the terms of this
Security Agreement and the Loan Agreement. All proceeds from the sale or other
disposition of the Collateral shall be held and applied by the Secured Party in
the manner provided for in Section 6.02 hereof.
(iv) Exercise all other rights under this Security Agreement, or any
other Loan Document.
(v) If an Event of Default shall have occurred and be continuing under
the Loan Agreement or the Notes, the Debtor hereby appoints the Secured Party
its true and lawful attorney-in-fact, with full power of substitution, (a) to
enforce its rights concerning the Collateral and to take any action which the
Secured Party may deem necessary or appropriate to protect and preserve the
Liens in the Collateral granted herein, (b) to ask, require, demand, receive,
compound and give acquittance for any and all monies and claims for monies due
and to become due under or arising out of the Construction Contract, (c) to
convey any item of Collateral to any purchaser thereof; (d) to pay or discharge
taxes or Liens levied or placed upon the Collateral, the legality or validity
thereof and the amounts necessary to discharge the same to be determined by the
Secured Party in its sole discretion, and such payments made by the Collateral
Agent to become the Obligations of the Debtor to the Collateral Agent, due and
payable immediately upon demand; and (e) to obtain, adjust, sell and cancel any
insurance with respect to the Collateral, and endorse any draft claim by any
insurer of the Collateral. The Collateral Agent's authority hereunder shall
include, without limitation, the authority to enforce and negotiate any checks
or instruments representing proceeds of Collateral in the name of the Debtor, to
execute and give receipt for any certificate of ownership or any document
constituting Collateral, to transfer title to any item of Collateral, to sign
the Debtor's name on all financing statements (to the extent permitted by
applicable law) or other documents deemed necessary to appropriate by the
Collateral Agent or the Trustee to preserve, protect or perfect the Liens in the
Collateral, and to file the same, to prepare, file and sign the Debtor's name on
a proof of claim in bankruptcy or similar document
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against any customer of, or person obligated upon any Collateral, to the Debtor,
and to take any other actions arising from or incident to the powers granted to
the Secured Party in this Security Agreement. The power of attorney is coupled
with an interest in the Secured party, in the Trustee and in the Collateral
Agent as agent on behalf of the Trustee and is irrevocable by law.
Section 6.04. Power of Sale. Any sale of the Collateral made pursuant
to the terms of this Security Agreement, 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 the Debtor therein and thereto, and
shall bar the Debtor and all persons claiming by, through or under the Debtor.
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 the
application of the proceeds thereof. In case of any such sale, the Secured Party
and the Collateral Agent, if it is the purchaser, shall be entitled, for the
purpose of making settlement or payment for the property purchased, to use and
apply the Obligations of the Debtor under the Loan Agreement and the Notes in
order that there may be credited against the amount remaining due and unpaid
thereon the sums payable out of the net proceeds of such sale to the Secured
Party after allowing for the costs and expense of sale and other charges. At any
such sale, the Secured Party may bid for and purchase such property and upon
compliance with the terms of sale may hold, retain and dispose of such property
without further accountability therefor.
Section 6.05. Power of Attorney - Sale. The Secured Party is hereby
irrevocably appointed attorney-in-fact of the Debtor upon the happening and
during the continuance of any Event of Default to execute and deliver to any
purchaser aforesaid, and is hereby vested with full power and authority to make,
in the name and in behalf of the Debtor, a good conveyance of the title to the
Collateral so sold. Any person dealing with the Secured Party or its attorney
in-fact shall not be put on enquiry as to whether the power of attorney
contained herein has become exercisable. In the event of any sale of any of the
Collateral, under any power herein contained, the Debtor will, if and when
required by the Secured Party, execute such form of conveyances of the
Collateral as the Secured Party may direct or approve.
Section 6.06. Secured Party to Discharge Liens. The Debtor authorizes
and empowers the Secured Party and the Collateral Agent or its appointees or any
of them to appear in the name of the Debtor in any court of any country or
nation of the world where a suit is pending against any of the Collateral
because of or on account of any alleged Lien against any of the Collateral from
which the Collateral has not been released and to take such reasonable steps
towards the defense of such suit and the purchase or discharge of such Lien. All
reasonable expenditures made or incurred by them or any of them for the purpose
of such defense or purchase or discharge shall be a debt due from the Debtor to
the
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Secured Party and shall be secured by the Lien of this Security Agreement in
like manner and extent as if the amount and description thereof were written
herein.
Section 6.07. Liability for Deficiency. If any sale or other
disposition of Collateral by Secured Party or any other action of Secured Party
hereunder results in reduction of the Obligations, such action will not release
Debtor from its liability to Secured Party for any unpaid Obligations, including
costs, charges and expenses incurred in the liquidation of Collateral, together
with interest thereon, and the same shall be immediately due and payable to
Secured Party at Secured Party's address set forth in the Loan Agreement.
Section 6.08. Payment of Expenses. The Debtor covenants that upon the
happening and during the continuance of any Event of Default, then, upon written
demand of the Secured Party, the Debtor will pay to the Secured Party the whole
amount due and payable in respect of the Obligations of the Debtor under the
Loan Agreement and the Notes and in case the Debtor shall fail to pay the same
forthwith upon such demand, the Secured Party shall be entitled to recover
judgment for the whole amount so due and unpaid, together with such further
amounts as shall be sufficient to cover the reasonable compensation to the
Secured Party or its agents, attorneys and counsel and any necessary advances,
expenses and liabilities made or incurred by it or them hereunder. All moneys
collected by the Secured Party for the benefit of the Secured Party under this
Section 6.08 shall be applied in accordance with the provisions of Section 6.02
above.
Section 6.09. Remedies Cumulative. Each and every power and remedy
herein given to the Secured Party shall be cumulative and shall be in addition
to every other power and remedy herein given or now or hereafter existing at
law, in equity or by statute, and each and every power and remedy whether herein
given or otherwise existing may be exercised from time to time and as often and
in such order as may be deemed expedient by the Secured Party, 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. The Secured Party shall not be required or bound to enforce any
other of its rights under any other agreement or instrument securing the Loan
Agreement and the Note, prior to enforcing its rights under this Security
Agreement. No delay or omission by the Secured Party in the exercise of any
right or power or in the pursuance of any remedy accruing upon any Event of
Default shall impair any such right, power or remedy or be construed to be a
waiver of any such Event of Default or to be an acquiescence therein; nor shall
the acceptance by the Secured Party of any security or of any payment of or on
account of the obligations of the Debtor under the Loan Agreement or the Note
maturing after any Event of Default or of any payment on account of any past
default be construed to be a waiver of any right to exercise any remedies due to
any future Event of
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Default or of any past Event of Default not completely cured thereby. No
consent, waiver or approval of the Secured Party shall be deemed to be effective
unless in writing and duly signed by the Secured Party; any waiver by the
Secured Party of any of the terms of this Security Agreement or any consent
given under this Security Agreement shall only be effective for the purpose and
on the terms which it is given and shall be without prejudice to the right to
give or withhold consent in relation to future matters.
Section 6.10. Cure of Defaults. If at any time after an Event of
Default and prior to the actual sale of any of the Collateral by the Secured
Party or prior to any enforcement or foreclosure proceedings the Debtor offers
completely to cure all Events of Default and to pay all expenses, advances and
damages to the Secured Party consequent on such Events of Default, with interest
at the interest rates set forth in Section 2.2.A.(i) of the Loan Agreement for
7-year Tranche advances then the Secured Party may (but shall not be obligated
to) accept such offer and payment and restore the Debtor to its former position,
but such action, if taken, shall not affect any subsequent Event of Default or
impair any rights consequent thereon.
Section 6.11. Discontinuance of Proceedings. In case the Secured Party
shall have proceeded to enforce any right, power or remedy under this Security
Agreement by foreclosure, entry or otherwise, and such proceedings shall have
been discontinued or abandoned for any reason or shall have been determined
adversely to the Secured Party, then and in every such case the Debtor and the
Secured Party shall be restored to their former positions and rights hereunder
with respect to the property subject or intended to be subject to this Security
Agreement, and all rights, remedies and powers of the Secured Party shall
continue as if no such proceedings had been taken.
ARTICLE 7 - MISCELLANEOUS
Section 7.01. Contracts. It is expressly agreed that anything herein
contained to the contrary notwithstanding, the Secured Party shall have no
obligation or liability under the Construction Contract other lease or contract
concerning the use or operation of the Vessel or the Equipment by reason of or
arising out of this Security Agreement nor shall the Secured Party be required
or obligated in any manner to perform or fulfill any obligations of the Debtor
under or pursuant to any contract concerning the use or operation of the Vessel
or the Equipment, 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 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 to hereunder at any time
or times.
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Section 7.02. Irrevocability. The powers and authority granted to the
Secured Party herein have been given for a valuable consideration and are hereby
declared to be irrevocable.
Section 7.03. Assignment. The Secured Party may transfer, assign or
grant a security interest on its right, title and interest in this Security
Agreement without the consent of the Debtor but the Debtor may not transfer or
assign its rights and duties under this Security Agreement without the prior
written consent of the Secured Party.
Section 7.04. Further Documents. The Debtor agrees that at any time and
from time to time, upon the written request of the Secured Party, it will
promptly and duly execute and deliver any and all such further instruments and
documents as the Secured Party may reasonably deem desirable in obtaining the
full benefits of this Security Agreement and of the rights and powers herein
granted.
Section 7.05. Notices. All notices or other communications which are
required to be made hereunder shall be made in the manner and to the addresses
for the Debtor and the Secured Party provided in Section 7.8 of the Loan
Agreement and in the manner and to the address for the Trustee and the
Collateral Agent in the Issuer's Security Agreement.
SECTION 7.06. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; WAIVER OF DAMAGES.
(i) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO CONFLICTS AND LAWS AND PRINCIPLES (EXCEPT TO THE
EXTENT THAT THE LAWS OF ANY OTHER JURISDICTION GOVERN THE PERFECTION AND
PRIORITY OF THE LIENS AND SECURITY INTERESTS GRANTED HEREBY). THIS SECURITY
AGREEMENT MAY NOT BE AMENDED OR CHANGED EXCEPT BY AN INSTRUMENT IN WRITING
SIGNED BY BOTH PARTIES HERETO.
(ii) THE DEBTOR AGREES THAT THE SECURED PARTY SHALL HAVE THE RIGHT, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE DEBTOR OR ITS
PROPERTY IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH TO ENABLE
TO THE SECURED PARTY, THE COLLATERAL AGENT OR THE TRUSTEE TO REALIZE ON SUCH
PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE
SECURED PARTY, THE COLLATERAL AGENT OR THE TRUSTEE. THE DEBTOR AGREES THAT IT
WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS IN ANY PROCEEDING
BROUGHT BY THE SECURED PARTY, THE COLLATERAL AGENT OR THE TRUSTEE TO REALIZE ON
SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
SECURED PARTY, THE COLLATERAL AGENT OR THE TRUSTEE. THE DEBTOR WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH EITHER OF THE
SECURED PARTY, THE COLLATERAL AGENT OR THE TRUSTEE HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS PARAGRAPH INCLUDING,
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WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OR FORUM NON CONVENIENS.
(iii) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE DEBTOR AND THE
SECURED PARTY EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN
THEM IN CONNECTION WITH THIS SECURITY AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED
IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY;
(iv) THE DEBTOR AGREES THAT NONE OF THE SECURED PARTY, THE COLLATERAL
AGENT, THE TRUSTEE AND ANY HOLDER OF A SECURED NOTE SHALL HAVE ANY LIABILITY TO
THE DEBTOR WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED
BY THE DEBTOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS SECURITY
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT IS
BINDING ON THE SECURED PARTY, THE COLLATERAL AGENT, THE TRUSTEE OR SUCH
NOTEHOLDER, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR
OMISSIONS ON THE PART OF THE SECURED PARTY, THE COLLATERAL AGENT, THE TRUSTEE OR
SUCH HOLDER OF SECURED NOTE, AS THE CASE MAY BE, CONSTITUTING NEGLIGENCE OR
WILLFUL MISCONDUCT;
(v) THE DEBTOR WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY THE SECURED PARTY, THE COLLATERAL AGENT, THE TRUSTEE OR
ANY HOLDER OF A SECURED NOTE OF ITS RIGHT DURING THE CONTINUANCE OF ANY EVENT OF
DEFAULT TO REPOSSESS THE COLLATERAL WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH
OR LEVY UPON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS. THE DEBTOR
WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE COLLATERAL AGENT, THE
TRUSTEE OR ANY HOLDER OF A SECURED NOTE IN CONNECTION WITH ANY JUDICIAL PROCESS
OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH OR LEVY UPON COLLATERAL
OR OTHER SECURITY FOR THE OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER COURT
ORDER ENTERED IN FAVOR OF THE SECURED PARTY, THE COLLATERAL AGENT, THE TRUSTEE
OR ANY HOLDER OF A SECURED NOTE OR TO ENFORCE BY SPECIFIC PERFORMANCE TEMPORARY
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION THIS SECURITY AGREEMENT
OR ANY OTHER AGREEMENT OR DOCUMENT AMONG THE DEBTOR ON THE ONE HAND AND THE
SECURED PARTY, THE COLLATERAL AGENT, THE TRUSTEE AND/OR THE HOLDERS OF THE
SECURED NOTE ON THE OTHER HAND.
Section 7.07. Severability of Provisions. Any provision of this
Security 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 or
affecting the validity or enforceability of such provision in any other
jurisdiction.
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Section 7.08. Counterparts, Effectiveness. This Security Agreement may
be executed in two or more counterparts. Each counterpart is deemed an original,
but all such counterparts taken together constitute one and the same instrument.
This Security Agreement becomes effective upon the execution hereof by Debtor
and delivery of the same to Secured Party, and it is not necessary for Secured
Party to execute any acceptance hereof or otherwise signify or express its
acceptance hereof.
Section 7.09. Loan Agreement. This Security Agreement is subject to the
terms, conditions and provisions of the Loan Agreement. To the extent a term or
provision of this Security Agreement conflicts with the Loan Agreement, the Loan
Agreement shall control with respect to the subject matter of such term or
provision.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be executed by their duly authorized officers all as of the date
noted above.
R&B FALCON CORPORATION
By: /s/ ROBERT FULTON
----------------------------------
Name: Robert Fulton
Title: EVP
RBF FINANCE CO.
By: /s/ STEVEN A. WEBSTER
----------------------------------
Name: Steven A. Webster
Title: President
18
<PAGE> 19
SCHEDULE A
Chief Executive Office
901 Threadneedle
Houston, Texas 77079
<PAGE> 20
SCHEDULE B
Liens
- Statutory or inchoate liens for amounts not more than 30 days
past due or that are being contested in good faith.
- Liens on owner furnished equipment for any unpaid portion of
the purchase price thereof.
2
<PAGE> 21
SCHEDULE C
Documents
Uniform Commercial Code Filings
1. Secretary of State of Texas
2. Department of State for the Secretary of State of New York
3. New York County and City Registry
3
<PAGE> 22
SCHEDULE D
Names
R&B&F Corporation
4
<PAGE> 23
SCHEDULE E
Equipment
5
<PAGE> 1
EXHIBIT 10.16
SENIOR SECURED NOTE SECURITY AND PLEDGE AGREEMENT
THIS SENIOR SECURED NOTE SECURITY AND PLEDGE AGREEMENT (the
"Agreement") is made and entered into as of March 26, 1999 by RBF Finance Co., a
Delaware corporation (the "Issuer"), in favor of United States Trust Company of
New York, a corporation duly organized and existing under the laws of the State
of New York and validly existing as a banking organization under the banking
laws of the State of New York, as trustee (in such capacity, the "Trustee")
under the Indenture (as defined herein), for the holders of the Secured Notes
(as hereinafter defined) and United States Trust Company of New York, a
corporation duly organized and existing under the laws of the State of New York
and validly existing as a banking organization under the banking laws of the
State of New York, as collateral agent (in such capacity, the "Collateral
Agent").
WITNESSETH:
WHEREAS, the Issuer, as issuer, the Trustee, and R&B Falcon
Corporation, as guarantor (the "Company"), have entered into an indenture dated
as of March 26, 1999 (as amended, amended and restated, supplemented or
otherwise modified from time to time, the "Indenture") pursuant to which the
Company is issuing $400,000,000 in aggregate principal amount of its 11% Senior
Secured Notes due 2006 and $400,000,000 in aggregate principal amount of its
11 3/8% Senior Secured Notes due 2009 (collectively, the "Secured Notes"); and
WHEREAS, the Issuer will enter into loan agreements with the Company
(each an "Issuer Loan Agreement") and will use the proceeds of the Secured Notes
to make loans (each an "Issuer Loan") pursuant to such Issuer Loan Agreements to
the Company to finance all or a portion of certain costs of acquiring,
constructing, altering, improving or repairing drilling rigs and drillships
(individually, a "Mortgaged Rig") or improvements to be used in connection with
the Mortgaged Rig, each such financing to be a separate loan secured by a Lien
on the Mortgaged Rig or if such Mortgaged Rig is under construction but not yet
flagged as of the date of this Agreement, on the construction contract and
equipment purchased for such Mortgaged Rig; and
WHEREAS, each Issuer Loan for a flagged Mortgaged Rig will be secured
by a Lien on the Mortgaged Rig pursuant to a ship mortgage (a "Mortgage") and
each Issuer Loan for an uncompleted Mortgaged Rig will be secured by Liens on
the construction contract and the equipment purchased for such Mortgaged Rig
pursuant to a security agreement (each an "Issuer Security Agreement"); and
WHEREAS, the Company has requested that the Issuer make an Issuer Loan
in the aggregate principal amount of up to $209,900,000 (the "Millennium Issuer
Loan") to finance the acquisition and construction of the Deepwater Millennium
drillship (the "Millennium Mortgaged Rig") pursuant to a Loan Agreement dated
March 26, 1999 between the Company and the Issuer (the "Millennium Issuer Loan
Agreement"); and
<PAGE> 2
WHEREAS, as security for its obligations, among other things, under the
Millennium Issuer Loan and the Millennium Issuer Loan Agreement, the Company is
required to enter into an Issuer Security Agreement of even date herewith
granting a Lien on the construction contract therefor and the other collateral
described therein, to grant a Mortgage on the Millennium Mortgaged Rig in favor
of the Issuer as soon as the Millennium Mortgaged Rig is flagged and, prior to
the grant of such Mortgage, among other things, to enter into an Issuer Loan
Escrow Agreement and to deposit the Escrow Amount (as defined therein) in a
special, segregated and irrevocable account in the name of and beneficially
owned by the Company which is pledged to, and to be under the sole dominion and
control of, the Issuer (the "Company Escrow Account") established pursuant to
that certain Issuer Loan Escrow Agreement among the Company, the Issuer, United
States Trust Company of New York as Escrow Agent and the Trustee (the "Issuer
Escrow Agreement")
WHEREAS, to secure its obligations under the Indenture and the Secured
Notes and the Security Agreements (as defined in the Indenture) to which it is a
party (together with the Company's obligations under the Indenture and the
Guarantee contained, the "Obligations"), the Issuer has agreed (i) to grant to
the Collateral Agent for the benefit of the Trustee and the equal and ratable
benefit of the Holders of the Secured Notes, Liens and security interests in and
to the Issuer Loans, the Issuer Loan Agreements, the related Mortgages and
Issuer Security Agreements and the other Collateral (as defined herein) and (ii)
to execute and deliver this Agreement in order to secure the payment and
performance by the Issuer and the Company of the Obligations.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and in order to induce
the Holders of the Secured Notes to purchase the Secured Notes the Issuer hereby
agrees with the Collateral Agent and with the Trustee for its benefit and the
equal and ratable benefit of the Holders of the Secured Notes as follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein and not otherwise
defined herein shall have the meaning given to such terms in the Indenture. In
addition to any other defined terms used herein, the following terms shall
constitute defined terms for the purposes of this Agreement:
"Default" means a "Default" as defined in Section 1.1 of the
Indenture.
"Event of Default" means an "Event of Default" as defined in Section
6.1 of the Indenture.
"Permitted Liens" means Liens allowed in the second paragraph of
Section 4.10 of the Indenture and listed on Schedule B attached hereto.
SECTION 2. CREATION OF SECURITY INTEREST. The Issuer hereby grants to
the Collateral Agent for the benefit of the Trustee, and for the equal and
ratable benefit of the Holders of the Secured Notes, Liens and a continuing
security interest in and to the collateral described in Section 3 hereof (the
"Collateral") in order to secure the payment and performance of all Obligations.
2
<PAGE> 3
SECTION 3. COLLATERAL. The Collateral is:
(a) Issuer Loans. All Loans made by the Issuer to the Company,
whether made on the Issue Date or thereafter, pursuant to the provisions of the
Issuer Loan Agreements listed on Schedule A attached hereto (as such may be
amended, modified or supplemented from time to time), together with all
agreements, documents, notes, collateral documents and instruments relating to
such Issuer Loan Agreements and all contract rights, instruments, general
intangibles and other obligations or other receivables of any kind relating to
such Issuer Loan Agreements, including the Mortgages, the Issuer Security
Agreements and Company Escrow Agreement and any related collateral documents
which grant such Liens and all proceeds of such Issuer Loans, including, without
limitation, all interest and principal and commission fee payments, and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Issuer Loans;
(b) Issuer Escrow Account. The Issuer Escrow Account and all funds
contained therein and all Investments made by the Escrow Agent (as defined in
the Issuer Escrow Agreement) therewith (whether or not constituting Temporary
Cash Equivalents) and all proceeds thereof; and
(c) After-acquired Collateral and Proceeds. All items described in
this Section 3, whether now owned or hereafter at any time acquired by the
Issuer and wherever located, and all replacements, additions, accessions,
substitutions, repairs, proceeds and products relating thereto or therefrom, and
all documents, ledger sheets, files, books and records of the Issuer relating
thereto. Proceeds hereunder include (i) whatever is now or hereafter received by
the Issuer upon the sale, exchange, collection or other disposition of any item
of Collateral; (ii) any property of the type or types described in subsections
(a) or (b) now or hereafter acquired by the Issuer with any proceeds of
Collateral hereunder; and (iii) any payments under any insurance or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.
SECTION 4. DELIVERY OF COLLATERAL. All Issuer Notes and all
certificates or instruments representing or evidencing the Collateral shall be
delivered to and held by or on behalf of the Collateral Agent pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent, and shall be accompanied by any
required transfer tax stamps. Upon the occurrence and during the continuance of
an Event of Default, the Collateral Agent shall have the right, at any time in
its discretion and without notice to the Company, but subject to its compliance
with the requirements of applicable law, to transfer to or to register in the
name of the Collateral Agent or any of its nominees any or all of the
Collateral. In addition, upon the occurrence and during the continuance of an
Event of Default, but subject to its compliance with the requirements of
applicable law, the Collateral Agent shall have the right at any time to
exchange certificates or instruments representing or evidencing Issuer Notes for
certificates or instruments of smaller or larger denominations.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Issuer hereby represents
and warrants to the Collateral Agent and Trustee that:
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<PAGE> 4
(a) Legal Power. The execution, delivery and performance by the
Issuer of this Agreement are within the Issuer's legal powers, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or filing with (except for any filings provided for hereunder), any
governmental authority, require no consent of any other Person and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or bylaws of the Issuer or of
any agreement (after giving effect to the use of proceeds of the issuance of the
Secured Notes), judgment, injunction, order, decree or other instrument binding
upon the Issuer or result in the creation or imposition of any Lien on any asset
of the Issuer (other than the Liens created by this Agreement, the Issuer Escrow
Account Agreement and the other Security Agreements).
(b) Title to Collateral. The Issuer is the legal, record and
beneficial owner of the Issuer Loans existing on the Issue Date (the "Existing
Collateral"). free and clear of any Lien or claims of any person except for the
Liens listed on Schedule B attached hereto and the Liens created by this
Agreement, the Issuer Escrow Account Agreement and any of the other Security
Agreements.
(c) Enforceability. This Agreement has been duly executed and
delivered by the Issuer and constitutes a legal, valid and binding obligation of
the Issuer , enforceable against the Issuer in accordance with its terms, except
as such enforceability may be limited by the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally or general principles of equity and
commercial reasonableness.
(d) Perfection; Priority. Upon the execution and delivery of the
Issuer Escrow Account Agreement, which is being done contemporaneously with the
execution and delivery of this Agreement, the delivery to the Collateral Agent
of the Issuer Notes evidencing the Loans properly endorsed in blank and the
filing of the UCC-1 financing statements and other documents relating to the
Collateral and the documents listed on Schedule C attached hereto, to the extent
such security interests are created under federal or applicable state laws, the
security interests in the Collateral created pursuant to this Agreement and the
Issuer Escrow Account Agreement are valid and perfected first priority security
interests, securing the payment of the Obligations for the benefit of the
Trustee and the Holders of the Secured Notes, and enforceable as such against
all creditors of the Company and any Persons purporting to purchase any of the
Collateral from the Issuer other than as permitted by the Indenture; as of the
date hereof (and after giving effect to the use of proceeds of the issuance of
the Secured Notes), there are no other security interests in or Liens on the
Collateral or any portion thereof, and no financing statement, pledge, notice of
Lien, assignment or collateral assignment, mortgage or deed of trust covering
the Collateral or any portion thereof ("Lien Notice") exists or is on file in
any public office, except with respect to Liens listed on Schedule B attached
hereto, the Liens created by this Agreement and the other Security Agreements.
(e) Offices. The Issuer's chief executive office is located at the
address shown as the chief executive office in Schedule D attached hereto
("Chief Executive Office"), and the Issuer has no places of business other than
those set forth in such Schedule F, except as permitted hereafter by Section
6(c) hereof.
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<PAGE> 5
(f) Business Names. The Issuer has not conducted its businesses
under any corporate, partnership or fictitious name during the five (5) years
preceding the date hereof.
(g) No Consents. No consent of any other person and no consent,
authorization, approval, or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required either (i) for the
granting of the Liens by the Issuer on the Collateral pursuant to this Agreement
or for the execution, delivery or performance of this Agreement by the Issuer
(except for filings listed on Schedule D attached hereto, the filings and/or
other actions necessary to maintain the perfection of the Liens on the Loans and
perfect Liens on after-acquired Collateral or the proceeds of the Collateral) or
(ii) for the exercise by the Collateral Agent of the remedies in respect of the
Collateral pursuant to this Agreement, except, in each case, as may be required
in connection with any such disposition by laws affecting the offering and sale
of the Issuer Loans constituting Collateral or the collateral securing such
Issuer Loans.
(h) Accurate Information. As of the date hereof, all information
set forth herein relating to the Collateral is accurate and complete in all
respects.
SECTION 6. COVENANTS.
(a) Lien Notices. The Issuer will defend its interest in the
Collateral against all claims and demands of all persons at any time claiming
the same or any interest therein, and the Issuer will not permit any Lien
Notices with respect to the Collateral or any portion thereof to exist or be on
file in any public office for more than 30 days after the Issuer shall have
notice thereof, except with respect to Permitted Liens. The Issuer will advise
the Collateral Agent and the Trustee promptly, in reasonable detail, at the
addresses as specified in Section 17(a) of this Agreement, of any Lien (other
than Permitted Liens) on, or claim asserted against, any of the Collateral.
(b) Location of Collateral. The Issuer will keep all of its
Collateral now held or subsequently acquired by it at the locations specified on
Schedule F hereto, or at locations hereafter established in compliance with
Section 6(c) hereof (except for Collateral held by the Collateral Agent, the
Trustee or the Escrow Agent), unless the Issuer shall have given the Collateral
Agent and the Trustee prior written notice thereof and shall have in advance
executed and caused to be filed and/or delivered to the Collateral Agent and the
Trustee any financing statements or other documents required by the Collateral
Agent or the Trustee in order to perfect, protect and preserve the Liens and
security interest created hereby, all in form and substance satisfactory to the
Collateral Agent and the Trustee.
(c) Location of Offices; Corporation Name; Legal Structure. The
Issuer will not change the location of its Chief Executive Office or establish
any place of business other than those set forth on Schedule E attached hereto,
or voluntarily or involuntarily change its name, identity or legal structure,
including without limitation any continuance, amalgamation, merger,
consolidation or sale of substantially all of its assets, unless the Issuer
shall have given the Collateral Agent and the
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<PAGE> 6
Trustee at least 30 days prior written notice thereof and shall have in advance
executed and caused to be filed and or delivered to the Collateral Agent and the
Trustee any financing statements or other Security Agreements required by the
Collateral Agent and the Trustee in order to perfect, protect and preserve the
Liens and security interest created hereby, all in form and substance
satisfactory to the Collateral Agent and the Trustee.
(d) Additional Collateral; Further Assurances. The Issuer agrees
that immediately upon becoming the beneficial owner of any additional Issuer
Loan Agreements and Issuer Notes constituting Collateral, additional Issuer
Loans constituting Collateral, or Temporary Cash Equivalents constituting
Collateral or other Collateral, it will pledge and deliver to the Collateral
Agent for the benefit of the Trustee and the equal and ratable benefit of the
Holders of the Secured Notes, the certificates, instruments and documents
representing such Issuer Loan Agreements and Issuer Notes, Issuer Loans and
Temporary Cash Equivalents. (as well as duly executed instruments of transfer or
assignment in blank), and grant to the Collateral Agent for the benefit of the
Trustee and the equal and ratable benefit of the Holders of the Secured Notes
pursuant to appropriate and necessary Security Agreements, a continuing first
priority security interest in and Liens on such Issuer Loan Agreements and
Issuer Notes, Issuer Loans and Temporary Cash Equivalents and other Collateral,
all in form and substance satisfactory to the Trustee. The Issuer shall also
promptly (and in any event within five (5) Business Days after receipt thereof),
subject to its compliance with the requirements of applicable law, deliver to
the Collateral Agent any other documents of title, promissory notes,
certificates or instruments representing Collateral which it holds. The Issuer
further agrees that it will promptly (and in any event within 5 Business Days
after such acquisition) deliver to the Collateral Agent and the Trustee an
amendment, duly executed by the Issuer, in substantially the form of Schedule G
hereto (an "Additional Collateral Amendment"), with respect to the additional
Collateral that is to be pledged pursuant to this Agreement. The Issuer hereby
authorizes the Collateral Agent and the Trustee to attach each Additional
Collateral Amendment to this Agreement and agrees that any notes, instruments or
other forms of Investment listed on any Additional Collateral Amendment
delivered to the Collateral Agent or the Trustee shall for all purposes
hereunder be considered Collateral. The Issuer will promptly (i) execute and
deliver, cause to be executed and filed, or use its best efforts to give any
notices, in all appropriate jurisdictions (including foreign jurisdictions) or
procure any financing statements, assignments, pledges or other documents, (ii)
mark any chattel paper constituting Collateral and deliver any certificates,
chattel paper or instruments constituting Collateral to the Collateral Agent or
the Trustee, (iii) execute and deliver or cause to be executed and delivered all
assignments, instruments and other documents, and (iv) take any other actions,
in each such case as necessary or, in the reasonable opinion of the Collateral
Agent or the Trustee, desirable to perfect or continue the perfection and the
priority of the Trustee's security interest and Liens in the Collateral, to
protect the Collateral against the rights, claims, or interests of third Persons
other than holders of Permitted Liens or to effect the purposes of this
Agreement. The Issuer also hereby authorizes the Collateral Agent to file any
financing or continuation statements with respect to the Collateral without the
signature of the Issuer to the extent permitted by applicable law.
(e) Disposition of Collateral. The Issuer will not sell, transfer,
assign, pledge, collaterally assign, exchange or otherwise dispose of, or grant
any option or warrant with respect to, any of the Collateral except as permitted
by the Indenture. If the proceeds of any sale of any Collateral are notes,
instruments, documents of title, standby letters of credit or chattel paper,
such proceeds shall be promptly delivered to the Collateral Agent to be held as
Collateral hereunder. If the Collateral, or any part thereof, is sold,
transferred, assigned, exchanged, or
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<PAGE> 7
otherwise disposed of in violation of these provisions, the security interest
and Liens of the Collateral Agent shall continue in such Collateral or part
thereof notwithstanding such sale, transfer, assignment, exchange or other
disposition, and the Issuer will hold the proceeds thereof in an separate
account for its benefit and the Holders of the Secured Notes and the benefit of
the Trustee and the Holders of the Secured Notes and transfer such proceeds to
the Collateral Agent or the Trustee in kind to be held as Collateral hereunder.
(f) Restrictive Agreements. The Issuer agrees that, except for
existing agreements set forth on Schedule H attached hereto, it will not (i)
enter into any agreement or understanding that purports to or may restrict or
inhibit the Collateral Agent's or the Trustee's rights or remedies hereunder,
including, without limitation, the Collateral Agent's or the Trustee's right to
sell or otherwise dispose of the Collateral or amend or modify in any manner
materially adverse to the Trustee the Issuer Loan Agreements or (ii) fail to pay
or discharge any tax, assessment or levy of any nature not later than five days
prior to the date of any proposed sale under any judgment, writ or warrant of
attachment with regard to the Collateral.
(g) Rights of Collateral Agent and Trustee. Upon the occurrence and
during the continuance of an Event of Default, the Collateral Agent and the
Trustee shall have the right at any time to make any payments and do any other
acts as the Collateral Agent or the Trustee may deem necessary to protect the
Liens and security interest of the Collateral Agent in the Collateral,
including, without limitation, the rights to pay, purchase, contest or
compromise any Lien which, in the judgment of the Collateral Agent or the
Trustee, appears to be prior to or superior to the Liens and security interest
granted hereunder, and challenge any action or proceeding purporting to affect
its Liens and security interest in the Collateral. The Issuer hereby agrees to
reimburse the Collateral Agent and the Trustee for all payments made and
expenses incurred under this Agreement including reasonable fees, expenses and
disbursements of attorneys and paralegals acting for the Collateral Agent or the
Trustee, including any of the foregoing payments under or acts taken to perfect
or protect its Liens and security interest in the Collateral, which amounts
shall be secured under this Agreement, and agrees that it shall be bound by any
payment made or act taken by the Collateral Agent or the Trustee hereunder.
Neither the Collateral Agent nor the Trustee shall have any obligation to make
any of the foregoing payments or perform any of the foregoing acts.
(h) Records. The Issuer will keep and maintain, or cause the
Company to keep and maintain, at its own cost and expense satisfactory and
complete records of the Collateral.
(i) Access. On reasonable notice to the Issuer, except at any time
during the continuation of a Default or an Event of Default, both the Collateral
Agent and the Trustee shall at all times have full and free access during normal
business hours to all the books. correspondence and records of the Issuer
relating to the Collateral, and the Collateral Agent and its representatives and
the Trustee and its representatives, may examine the same, take extracts
therefrom and make photocopies thereof, and the Issuer agrees to render to each
of the Collateral Agent and the Trustee, at the Issuer's cost and expense, such
clerical and other assistance, at all times and in such manner as may be
requested with regard thereto. On reasonable notice to the Issuer, except at any
time during the continuation of a Default or an Event of Default, the Collateral
Agent and its representatives and the Trustee and its representatives shall at
all times also have the right to enter, during normal business hours, into and
upon any premises where any
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of the Collateral is located for the purpose of inspecting the same, observing
its use or otherwise protecting its interests therein.
(j) Taxes. The Issuer shall, and shall cause the Company to, pay
all taxes, assessments and government charges and all claims as and to the
extent required by Section 4.6 of the Indenture; provided that the Issuer shall
in any event pay such taxes, assessments or levies not later than five days
prior to the date of any proposed sale under any judgment, writ or warrant of
attachment with regard to any Collateral of the Issuer entered or filed against
the Issuer as a result of the failure to make such payment.
(k) Issuer Loans. The Issuer covenants with the Collateral Agent
and the Trustee to properly endorse (using the form of endorsement attached as
Exhibit I) and deliver the notes evidencing the Issuer Loans to the Collateral
Agent contemporaneously with the execution of this Agreement. Furthermore, the
Issuer covenants with the Collateral Agent and the Trustee to observe and
perform all the obligations imposed upon it under the Issuer Loan Agreements and
the documents securing such Issuer Loans and, except as permitted by this
Agreement, such Mortgages or other security documents securing such Issuer Loans
or the Indenture, not to do or permit to be done anything to impair the security
thereof; not to execute any other assignment of its interest in the Issuer Loans
except as may be otherwise agreed to in writing by the Collateral Agent and the
Trustee and except as provided herein; except as permitted by the Indenture, not
to alter, modify or change the terms of the Issuer Loans and the documents
evidencing and securing such Issuer Loans without the prior written consent of
the Trustee, or, except as permitted by the Indenture or the security documents
creating such security (the conditions for release of Liens of the Security
Agreements (as defined in the Indenture) being likewise applicable to such
security documents), cancel or terminate any of the Loans or any of the security
for such Issuer Loans or accept a surrender thereof so as to effect directly or
indirectly, proximately or remotely, a cancellation or termination or diminution
of the obligations of the parties thereunder; and to execute and deliver, at the
request of Collateral Agent or the Trustee, all such further assurances,
acknowledgments, and certificates for the purposes hereof as Collateral Agent or
the Trustee shall from time to time reasonably require.
SECTION 7. VOTING RIGHTS; ISSUER LOAN PAYMENTS; ETC.
(a) So long as no Event of Default shall have occurred and be
continuing, the Issuer shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Issuer Loans and Issuer Loan
Agreements constituting Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement, the Indenture or any other
Security Agreement; provided that the Issuer shall not exercise or shall refrain
from exercising any such right if such action would be inconsistent with or
violate any provisions of this Agreement, the Indenture or any other Security
Agreements.
(b) All payments made from time to time on, or with respect to
Temporary Cash Equivalents constituting Collateral and Issuer Loans made by the
Issuer from the proceeds of the Secured Notes and any other Loans or advances
made by the Issuer to the Company and constituting Collateral, whether interest,
principal, dividends, distributions or otherwise, shall be delivered to the
Trustee for deposit in the Issuer Escrow Account.
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(c) Upon the occurrence and during the continuance of an Event of
Default, (i) all rights of the Issuer to exercise the voting and other
consensual rights that it would otherwise be entitled to exercise pursuant to
Section 7(a) shall cease, and all such rights shall thereupon become vested in
the Collateral Agent on behalf of, or if necessary, directly in, the Trustee
which shall thereupon have the sole right to exercise such voting and other
consensual rights.
(d) Upon the occurrence and during the continuance of an Event of
Default, the Issuer shall execute and deliver (or cause to be executed and
delivered) to the Collateral Agent or the Trustee all such proxies, powers or
attorney and other instruments as the Collateral Agent or the Trustee may
reasonably request for the purpose of enabling the Collateral Agent or the
Trustee to exercise or cause the exercise of the voting and other rights that it
is entitled to exercise pursuant to Section 7(c) above.
(e) All interest and principal payments, all distributions and all
other payments that are received by the Issuer contrary to the provisions of
this Section 7 shall be received in trust for the Collateral Agent for the
benefit of the Trustee and the equal and ratable benefit of the Holders of the
Secured Notes, shall be segregated from the other property or funds of the
Issuer and be forthwith delivered to the Collateral Agent or the Trustee as
Collateral in the same form as so received (with any necessary endorsements or
other instruments of transfer or assignment in blank), and all such payments
shall be deposited in the Issuer Escrow Account.
(f) So long as no Event of Default shall have occurred and be
continuing, neither the Collateral Agent nor the Trustee shall be under any
obligation to collect, attempt to collect, protect or enforce the Collateral,
which the Issuer agrees and undertakes to do at the Issuer's expense; provided
that the Collateral Agent and the Trustee shall cooperate with the Issuer and
take all such action as the Issuer may reasonably request to permit the Issuer
to collect, protect or enforce the Collateral. All reasonable expenses
(including, without limitation, attorneys' fees and legal expenses) actually
incurred or paid by the Collateral Agent or the Trustee in connection with or
incident to any such collection or attempt to collect, protect or enforce the
Collateral shall be borne by the Issuer or reimbursed by the Issuer to the
Collateral Agent and the Trustee upon demand.
SECTION 8. POWER OF ATTORNEY. In addition to all of the powers granted
to the Trustee pursuant to Article VI of the Indenture, the Issuer hereby
appoints and constitutes the Collateral Agent and the Trustee, whether acting
separately or jointly, as the Issuer's attorneys-in-fact to exercise all of the
following powers upon and at any time after the occurrence and during the
continuance of an Event of Default: (i) collection of proceeds of any
Collateral; (ii) conveyance of any item of Collateral to any purchaser thereof;
(iii) giving of any notices or recording of the security interest and the Liens
under Section 6(d) hereof; (iv) making of any payments or taking any acts under
Section 9 hereof and (v) paying or discharging taxes or Liens levied or placed
upon the Collateral, the legality or validity thereof and the amounts necessary
to discharge the same to be determined by the Collateral Agent in its sole
discretion, and such payments made by the Collateral Agent to become the
Obligations of the Issuer to the Collateral Agent, due and payable immediately
upon demand. The Collateral Agent's authority hereunder shall include, without
limitation, the authority to endorse and negotiate any checks or instruments
representing proceeds of Collateral in the name of the Issuer, to execute and
give
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receipt for any certificate of ownership or any document constituting
Collateral, to transfer title to any item of Collateral, to sign the Issuer's
name on all financing statements (to the extent permitted by applicable law) or
any other Security Agreements or other documents deemed necessary or appropriate
by the Collateral Agent to preserve, protect or perfect the Liens in the
Collateral and to file the same, to prepare, file and sign the Issuer's name on
any notice of Lien, and to prepare, file and sign the Issuer's name on a proof
of claim in bankruptcy or similar document against any person obligated upon any
Collateral to, the Issuer, and to take any other actions arising from or
incident to the powers granted to the Collateral Agent in this Agreement. This
power of attorney is coupled with an interest in the Trustee and the Collateral
Agent as agent on behalf of the Trustee and is irrevocable by the Issuer.
SECTION 9. COLLATERAL AGENT OR TRUSTEE MAY PERFORM. If the Issuer fails
to perform any covenant or agreement contained herein, the Collateral Agent or
the Trustee may, but shall not be obligated to, itself perform, or cause
performance of, such covenant or agreement, and the reasonable expenses of the
Collateral Agent or the Trustee incurred in connection therewith shall be
payable by the Issuer under Section 17(p) hereof.
SECTION 10. NO ASSUMPTION OF DUTIES; REASONABLE CARE. The rights and
powers granted to the Collateral Agent or the Trustee hereunder are being
granted in order to preserve and protect the Collateral Agent's Liens and
security interest in and to the Collateral granted hereby and shall not be
interpreted to, and shall not, impose any duties on the Collateral Agent or the
Trustee in connection therewith. Each of the Collateral Agent and the Trustee
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Collateral Agent or the Trustee
accords similar property in similar situations, it being understood that neither
the Collateral Agent nor the Trustee shall have any responsibility for (i)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Collateral Agent or the Trustee has or is deemed to have knowledge of such
matters, (ii) taking any necessary steps to preserve rights against any parties
with respect to any Collateral, or (iii) inquiring into or verifying that the
Company has complied or will comply with its duty to furnish additional items of
Collateral to the Collateral Agent or the Trustee pursuant to Section 6(d)
hereof. Absent knowledge to the contrary, the Collateral Agent and the Trustee
may assume that the items of Collateral actually delivered to it are all items
required to be so delivered and may assume that no other such items need be so
delivered.
SECTION 11. SUBSEQUENT CHANGES AFFECTING COLLATERAL. The Issuer
represents to the Collateral Agent and the Trustee and the Holders of the
Secured Notes that the Issuer has made its own arrangements for keeping informed
of changes or potential changes affecting the Collateral (including, but not
limited to, payments of principal, premiums and/or interest, reorganization,
restructuring or other exchanges, tender offers and voting rights), and the
Issuer agrees that the Collateral Agent and the Trustee and the Holders of the
Secured Notes shall have no responsibility or liability for informing the Issuer
of any such changes or partial changes or for taking any action or omitting to
take any action with respect thereof. Except as not prohibited by the Indenture,
the Issuer covenants that it will not, without the prior written consent of the
Trustee, vote to enable, or take any other action to permit, anyone to sell or
otherwise dispose of, or grant any option with respect to, any of the Collateral
or create or permit
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to exist any Lien upon or with respect to any of the Collateral, except for
Permitted Liens and the Liens granted under this Agreement and the other
Security Agreements. The Issuer will defend the right, title and interest of the
Collateral Agent and the Trustee and the Holders of the Secured Notes in and to
the Collateral against the claims and demands of all persons.
SECTION 12. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence and during the continuance of an Event of
Default, the Collateral Agent may, subject to the provisions of the Indenture,
this Agreement, and the Collateral Agent's and the Trustee's compliance with any
requirements of law (including, without limitation, the applicable Uniform
Commercial Code or laws of foreign jurisdictions) applicable to the action to be
taken, without notice to or demand upon the Issuer except as required by the
Indenture, the Issuer Escrow Agreement, this Agreement or applicable law, do any
one or more of the following:
(i) exercise any or all of the rights and remedies provided
for by the applicable Uniform Commercial Code or laws of foreign jurisdictions
specifically including, without limitation, the right to recover the reasonable
fees and expenses incurred by the Collateral Agent or the Trustee in the
enforcement of this Agreement or in connection with the Company's redemption of
the Collateral, including reasonable fees, expenses and disbursements of
attorneys, paralegals and agents;
(ii) at its option, transfer or register, and the Issuer
shall register or cause to be registered upon request therefor by the Collateral
Agent or the Trustee, the Collateral or any part thereof on the books of the
Company or the Persons in whom any Investments constituting Collateral are made,
into the name of the Trustee's nominee(s);
(iii) personally, or by agents or attorneys, immediately
retake possession of the Collateral. or any part thereof, from the Issuer or any
other Person who then has possession of any part thereof with or without notice
or process of law, and for that purpose may enter upon the Issuer's premises
where any of the Collateral is located and remove the same and use in connection
with such removal any and all services, supplies, aids and other facilities of
the Issuer;
(iv) sell, assign or otherwise liquidate, or direct the
Issuer to sell, assign or otherwise liquidated, any or all of the Collateral or
any part thereof, and take possession of the proceeds of any such sale or
liquidation;
(v) require the Issuer to assemble the Collateral or any part
thereof and make it available at one or more places as the Collateral Agent or
the Trustee may designate and to deliver possession of the Collateral or any
part thereof to the Collateral Agent or the Trustee;
(vi) use, in connection with any assembly, use or disposition
of the Collateral, any intellectual property, intangibles or other technical
knowledge or process used or utilized from time to time by the Company;
(vii) sell or cause the same to be sold at any broker's board
or at public or private sale, in one or more sales or lots, at such price or
prices as the Collateral Agent may
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deem best, for cash or on credit or for future delivery, without assumption of
any credit; and the purchaser of any or all Collateral so sold shall thereafter
hold the same absolutely, free from any claim, encumbrance or right of any kind
whatsoever;
(viii) enforce one or more remedies hereunder, successively
or concurrently, and such action shall not operate to estop or prevent the
Collateral Agent from pursuing any other or further remedy which it may have,
and any repossession or retaking or sale of the Collateral pursuant to the terms
hereof shall not operate to release the Issuer until full and final payment of
any deficiency has been made in cash;
(ix) in connection with any public or private sale under the
applicable Uniform Commercial Code or other applicable legislation, the
Collateral Agent shall give the Issuer at least ten (10) Business Days' prior
written notice of the time and place of any public sale of its Collateral or of
the time after which any private sale or other intended disposition thereof may
be made, which shall be deemed to be reasonable notice of such sale or other
disposition. Such notice may be given to the Issuer in accordance with the
provisions of Section 17(a) hereof;
(x) proceed by an action or actions at law or in equity to
recover the Obligations or to foreclose this Agreement and sell the Collateral,
or any portion thereof, pursuant to a judgment or decree of a court or courts of
competent jurisdiction;
(xi) exercise any other rights and remedies provided by
applicable law and the other Security Agreements; and
(xii) if the Collateral Agent recovers possession of all or
any part of the Collateral pursuant to a writ of possession or other judicial
process, whether prejudgment or otherwise, the Collateral Agent may thereafter
retain, sell or otherwise dispose of such Collateral in accordance with this
Agreement or the applicable Uniform Commercial Code or other applicable
legislation, and following such retention, sale or other disposition, the
Collateral Agent may voluntarily dismiss without prejudice the judicial action
in which such writ of possession or other judicial process was issued. The
Issuer hereby consents to the voluntary dismissal by the Collateral Agent of
such judicial action, and the Company further consents to the exoneration of any
bond that the Collateral Agent files in such action.
(b) In view of the fact that federal, state and foreign securities
laws may impose certain restrictions on the method by which a sale of the
Collateral may be effected after an Event of Default, the Issuer agrees that
upon the occurrence and during the continuance of an Event of Default, the
Collateral Agent may cause, from time to time, the sale of all or any part of
the Collateral by means of a private placement, restricting the prospective
purchasers to those who will represent and agree that they are purchasing for
investment only and not for distribution. In so doing, the Collateral Agent may
solicit, or may cause an investment manager to solicit, offers to buy the
Collateral, or any part of it, for cash, from a limited number of investors who
might be interested in purchasing the Collateral. The Issuer acknowledges and
agrees that any such private sale may result in prices and terms less favorable
than if such sale were a public sale and, notwithstanding such circumstances,
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner. The Collateral Agent
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shall be under no obligation to delay a sale of any of the Collateral for the
period of time necessary to permit the Issuer to cause an issuer or obligor to
register such securities for public sale under the Securities Act, or under
applicable state or foreign securities laws, even if the Issuer could cause the
such issuer or obligor, as the case may be, to do so.
(c) The Issuer further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Collateral pursuant to this Section 12 valid and
binding and in compliance with any and all other applicable requirements of
applicable law. The Issuer further agrees that a breach of any of the covenants
contained in this Section 12 will cause irreparable injury to the Trustee and
the Holders of the Secured Notes, that the Trustee and the Holders of the
Secured Notes have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 12 shall be
specifically enforceable against the Issuer, and the Issuer hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no Event of Default has occurred and is
continuing.
(d) Any cash held by the Collateral Agent as Collateral and all cash
proceeds received by the Trustee in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral shall be applied by the
Collateral Agent:
First, to the payment of the costs and expenses of such sale,
including, without limitation, reasonable expenses of the Collateral
Agent and its agents including the fees and expenses of its counsel,
and all expenses, liabilities and advances made or incurred by the
Collateral Agent in connection therewith or pursuant to Section 17(p)
hereof;
Next, to the Trustee, for the payment in full of all amounts due
under Section 7.7 of the Indenture;
Next, to the Trustee, for distribution to the Holders of the
Secured Notes for the payment in full of the remaining Obligations; and
Finally, after payment in full of all of the Obligations, to the
payment to the Issuer, or its successors or assigns, or to whomsoever
may be lawfully entitled to receive the same as a court of competent
jurisdiction may direct.
(e) If any sale or other disposition of Collateral by the Collateral
Agent or any other action of the Collateral Agent or the Trustee hereunder
results in reduction of the Obligations, such action will not release the Issuer
from its liability for any unpaid Obligations, including costs, charges and
expenses incurred in the liquidation of Collateral, together with interest
thereon, and the same shall be immediately due and payable to the Collateral
Agent, the Trustee and the Holders of the Secured Notes as provided for in the
Indenture.
(f) The Collateral Agent may enforce its rights hereunder without
prior judicial process or judicial hearing, and to the extent permitted by law
the Issuer expressly waives any and all legal rights which might otherwise
require the Collateral Agent to enforce its right by judicial process.
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(g) The existence and/or exercise of any or all of the rights and
remedies given to the Collateral Agent or the Trustee under this Section 12
shall be subject in all cases to compliance with any mandatory requirements of
applicable law, particularly the laws of jurisdictions other than the United
States.
SECTION 13. IRREVOCABLE AUTHORIZATION AND INSTRUCTIONS TO THE
APPLICABLE OBLIGOR. The Issuer hereby authorizes and instructs the applicable
obligor or issuer to comply with any instructions received by such obligor or
issuer, as the case may be, from the Collateral Agent or the Trustee that (i)
states than an Event of Default has occurred and is continuing and (ii) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from the Issuer, and the Issuer agrees that the applicable
issuers and obligors shall be fully protected in so complying.
SECTION 14. ISSUER ESCROW ACCOUNT. All money received by the Issuer and
required to be deposited in the Issuer Escrow Account shall be promptly and
without commingling remitted to the Collateral Agent or the Trustee for deposit
therein. Amounts held in the Issuer Escrow Account shall be applied or disposed
of only in a manner not prohibited by the Indenture.
SECTION 15. SECURITY INTEREST ABSOLUTE. All rights of the Collateral
Agent, the Trustee and the Holders of the Secured Notes and the Liens or
security interests hereunder, and all obligations of the Issuer hereunder, shall
be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Indenture, the
Guarantee, any of the Security Agreements, any Subsidiary Guarantee or any other
agreement or instrument relating thereto;
(b) any change in the time, manner or place of 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 any departure from the Indenture or any of the Security
Agreements;
(c) any exchange, surrender, release or non-perfection of any Liens
on any other collateral, or any release or amendment or waiver of or consent to
departure from the Guarantee, or any other Subsidiary Guarantee, for all or any
of the Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Issuer in respect of the
Obligations or of this Agreement.
SECTION 16. WAIVERS.
(a) Except as may be required under the provisions of the Indenture
and to the fullest extent permitted under applicable law, neither the Collateral
Agent nor the Trustee shall be under any duty whatsoever to make or give any
presentment, notice of dishonor, protest, demand for performance, notice of
non-performance, notice of intent to accelerate, notice of acceleration, or
other notice or demand in connection with any Collateral or the Obligations, or
to take any steps reasonably necessary to preserve any rights against any
Obligor or other Person. The Issuer waives to the fullest extent permitted under
applicable law
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any right of marshalling in respect of any and all Collateral, and waives to the
fullest extent permitted under applicable law any right to require the Trustee
or the applicable Trustee to proceed against any Obligor or other Person,
exhaust any Collateral or enforce any other remedy which the Collateral Agent or
the Trustee now has or may hereafter have against any Obligor or other Person.
(b) The Issuer waives to the fullest extent permitted under
applicable law (i) any and all notices of acceptance, creation, modification,
rearrangement, renewal or extension for any period of any instrument executed by
any obligor in connection with the Obligations and (ii) any defense of any
Obligor by reason of disability, lack of authorization, cessation of the
liability of any Obligor or for any other reason. The Issuer authorizes the
Collateral Agent to the fullest extent permitted under applicable law, 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, from
time to time to (w) take and hold other Property, other than the Collateral, as
security for the Obligations, and exchange, enforce, waive and release any or
all of the Collateral, (x) after the occurrence and during the continuance of an
Event of Default and the acceleration of the Secured Notes, apply the Collateral
in the manner permitted by this Agreement or the Indenture and (y) after the
occurrence and during the continuance of an Event of Default renew, extend for
any period, accelerate, amend or modify, supplement, enforce, compromise,
settle, waive or release the obligations of any obligor on, or any instrument or
agreement of such other Person with respect to any or all of, the Collateral.
SECTION 17. MISCELLANEOUS PROVISIONS.
(a) Notices. All notices, approvals, consents or other
communications required or desired to be given hereunder shall be in the form
and manner, and delivered to the Issuer at its address as set forth in Section
12.2 of the Indenture to the Trustee at its address as set forth in Section 12.2
of the Indenture, and to the Collateral Agent at United States Trust Company of
New York, New York, New York.
(b) Sales of Collateral. No sales of Collateral may be made in
contravention of the terms of the Indenture and the cash proceeds of the sale of
any Collateral shall be promptly and without commingling remitted to the
Collateral Agent or the Trustee for deposit in the Issuer Escrow Account.
(c) No Adverse Interpretation of Other Agreements. This Agreement
may not be used to interpret another pledge, security or debt agreement of the
Issuer, the Company or any Affiliate or Subsidiary of the Company. No such
pledge, security or debt agreement may be used to interpret this Agreement.
(d) Severability. The provisions of this Agreement are severable,
and if any clause or provision shall be held invalid, illegal or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
(e) Headings. The headings in this Agreement have been inserted for
convenience of reference only, are not to be considered a part hereof and shall
in no way modify or restrict any of the terms or provisions hereof.
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(f) Counterpart Originals. This Agreement may be signed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall together constitute one and the same agreement.
(g) Benefits of Security Agreement. Nothing in this Agreement,
express or implied, shall give to any person, other than the parties hereto and
their successors hereunder and the Holders of the Secured Notes and the Company,
any benefit or any legal or equitable right, remedy or claim under this
Agreement.
(h) Amendments, Waivers and Consents. Any amendment or waiver of any
provision of this Agreement and any consent to any departure by the Issuer from
any provision of this Agreement shall be effective only if made or given in
compliance with all of the terms and provisions of the Indenture and neither the
Collateral Agent nor the Trustee nor any Holder of any Secured Note shall be
deemed, by any act, delay, indulgence, omission or otherwise, to have waived any
right or remedy hereunder or to have acquiesced in any Default or Event of
Default or in any breach of any of the terms and conditions hereof. Failure of
the Collateral Agent or the Trustee to exercise, or delay in exercising, any
right, power or privilege hereunder shall not operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Collateral Agent, the Trustee or any
Holder of a Secured Note of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy that the Collateral
Agent, the Trustee or any such Holder would otherwise have on any future
occasion. The right and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
(i) Interpretation of Security Agreement. All terms not defined
herein or in the Indenture shall have the meaning set forth in the Uniform
Commercial Code of the State of New York, except where the context otherwise
requires. To the extent a term or provision of this Agreement conflicts with the
Indenture, the Indenture shall control with respect to the subject matter of
such term or provision. Acceptance of or acquiescence in a course of performance
rendered under this Agreement shall not be relevant in determining the meaning
of this Agreement even though the accepting or acquiescing party had knowledge
of the nature of the performance and opportunity for objection.
(j) Continuing Security Interest; Transfer of Collateral. This
Agreement shall create a continuing Lien and security interest in the Collateral
and shall (i) unless otherwise provided in the Indenture or this Agreement
remain in full force and effect until payment in full of (A) the Secured Notes
under the terms of the Indenture, (B) all Obligations then due and owing under
the Indenture, the Guarantee and the Security Agreements; provided, however,
that after receipt from the Issuer by the Collateral Agent of a request for a
release of any Collateral permitted under the Indenture upon the sale, transfer,
assignment, exchange or other disposition of such Collateral not prohibited by
the Indenture and upon receipt by the Collateral Agent of all proceeds of such
sale, transfer, assignment, exchange or other disposition required to be
remitted to the Collateral Agent or the Trustee or the Collateral constituting
the proceeds of such sale, transfer, assignment, exchange or other disposition
being made subject to a Lien and security interest in favor of the Collateral
Agent for the benefit of the Trustee and the equal and ratable
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benefit of the Holders of the Secured Notes, which Lien has the same priority as
had the Lien on the Collateral being sold, assigned or otherwise disposed of,
such Collateral shall be released from the Lien and security interest created
hereunder and no longer constitute Collateral. Upon the payment in full of (A)
the Secured Notes under the terms of the Indenture and (B) all Obligations then
due and owing under the Indenture, the Guarantee and the Security Agreements,
the Issuer shall be entitled to the return, upon its request and at its expense,
of such of the Collateral pledged by it as shall not have been sold or otherwise
applied pursuant to the terms hereof. This Agreement shall be binding upon the
Issuer, its successors and assigns, and inure, together with the rights and
remedies of the Trustee hereunder, to the benefit of the Collateral Agent, the
Trustee, and the Holders of the Secured Notes and their respective successors,
transferees and assigns.
(k) Reinstatement. This Agreement shall continue to be effective or
be reinstated, as the case may be, if at any time any amount received by the
Collateral Agent, the Trustee or any Holder of a Secured Note in respect of the
Obligations is rescinded or must otherwise be restored or returned by the
Collateral Agent, the Trustee or any Holder of a Security Note upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization or the Issuer
or upon the appointment of any receiver, intervenor, conservator, trustee or
similar official for the Issuer or upon the appointment of any receiver,
intervenor, conservator, trustee or similar official for the Issuer or any
substantial part of its assets, or otherwise, all as though such payments had
not been made.
(l) Survival of Provisions. All representations, warranties and
covenants of the Issuer contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the full and final
payment and performance by the Issuer of the Obligations.
(m) Authority of Collateral Agent and Trustee. Both the Collateral
Agent and Trustee shall have and be entitled to exercise all powers hereunder
that are specifically granted to the Collateral Agent and the Trustee by the
terms hereof, together with such powers as are reasonably incident thereto. The
Collateral Agent and the Trustee may perform any of their respective duties
hereunder or in connection with the Collateral by or through agents or employees
and shall be entitled to retain counsel and to act in reliance upon the advice
of counsel concerning all such matters. None of the Collateral Agent, any
director, officer, any attorney or agent of the Collateral Agent, the Trustee,
any director, officer, employee, attorney or agent of the Trustee or the Holders
of the Secured Notes shall be liable to the Issuer for any action taken or
omitted to be taken by it or them hereunder, except for its or their own
negligence or willful misconduct, nor shall the Collateral Agent or the Trustee
be responsible for the validity, effectiveness or sufficiency hereof or of any
document or security furnished pursuant hereto. The Collateral Agent and its
directors, officers, employees, attorneys and agents, and the Trustee and its
directors, officers, employees, attorneys and agents shall be entitled to rely
on any communication, instrument or document believed by it or them to be
genuine and correct and to have been signed or sent by the proper person or
persons. Neither the Collateral Agent nor the Trustee shall be required to, and
shall not, expend or risk any of its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder.
The Issuer acknowledges that the rights and responsibilities of the
Trustee under this Agreement with respect to any action taken by the Collateral
Agent and the Trustee or the
17
<PAGE> 18
exercise or non-exercise by the Collateral Agent and/or the Trustee of any
option, right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as among the Collateral Agent,
the Trustee and the Holders of the Secured Notes, be governed by the Indenture
and by such other applicable agreements with respect thereto as may exist from
time to time among them, but, as among the Collateral Agent, the Trustee and the
Issuer, the Collateral Agent and the Trustee shall be conclusively presumed to
be acting as agent for the Holders of the Secured Notes with full and valid
authority so to act or refrain from acting, and the Issuer shall not be
obligated or entitled to make any inquiry respecting such authority.
In any case in which the Collateral Agent shall be required or
permitted to make any determination as to the extent to which the security
interest or Liens under this Agreement secures any obligations, the Collateral
Agent is authorized, without any direction from, or requirement for consent of
or authorization by, the Trustee, to institute proceedings in a court of
competent jurisdiction for the obtaining of any authoritative determination of
such matter. If the Collateral Agent institutes any such proceeding, it shall
give prompt written notice thereof to the Trustee and shall afford each of them
the opportunity to participate in such proceeding.
(n) Limitation by Law. All rights, remedies and powers provided
herein may be exercised only to the extent that they will not render this
Agreement not entitled to be recorded, registered or filed under provisions of
any applicable law.
(o) Release; Termination of Security Agreement.
(i) Subject to the provisions of Section 17(k) hereof, this
Agreement shall terminate upon payment in full of (A) the Secured Notes under
the terms of the Indenture and (B) all Obligations then due and owing under the
Indenture, the Guarantee, and the Security Agreements, except that the
provisions of Section 17(p) hereof shall survive.
(ii) The Issuer agrees that it will not sell or dispose of any
of the Collateral in violation of the Indenture; provided, however, that if the
Issuer shall sell or otherwise dispose of any of the Collateral in accordance
with the terms of the Indenture, the Collateral Agent shall, and the Trustee
shall cause, at the request of the Issuer, release or cause to be released the
Collateral subject to such sale or disposition free and clear of the Liens and
security interest under this Agreement.
(iii) Upon any termination of this Agreement or release of any
Collateral as permitted by the Indenture, the Collateral Agent and the Trustee
will, at the expense of the Issuer, execute and deliver to the Company such
documents and take such other actions as the Issuer shall reasonably request to
evidence the termination of this Agreement or the release of such Collateral, as
the case may be. Any such action taken by the Collateral Agent or the Trustee
shall be without warranty by or recourse to the Collateral Agent or the Trustee,
except as to the absence of any prior assignments by the Collateral Agent or the
Trustee of its interests in the Collateral, and shall be at the expense of the
Issuer. The Collateral Agent and the Trustee may conclusively rely on any
certificate delivered to it by the Issuer stating that the execution of such
documents and release of the Collateral is in accordance with and permitted by
the terms of this Agreement and the Indenture.
18
<PAGE> 19
(p) Payment of Fees and Expenses and Indemnity. The Issuer will upon
demand pay to the Collateral Agent and the Trustee, without duplication, the
amount of any and all reasonable fees and expenses, including, without
duplication, the reasonable fees and disbursements of its counsel and of any
experts and agents, that the Collateral Agent and the Trustee may incur in
connection with (i) administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Collateral Agent and the Trustee hereunder or (iv) the
failure by the Issuer to perform or observe any of the provisions hereof. The
Issuer shall be liable for and shall reimburse and indemnify both the Trustee
and the Collateral Agent and hold both the Trustee and the Collateral Agent
harmless from and against any and all claims, losses, liabilities, costs,
damages or expenses (including reasonable attorneys' fees and expenses)
(collectively, "Losses") arising from or in connection with or related to this
Agreement or being the Trustee or the Collateral Agent hereunder (including but
not limited to Losses incurred by the Trustee and Collateral Agent in connection
with its successful defense, in whole or in part, of any claim of negligence or
willful misconduct on its part), provided, however, that nothing contained
herein shall require the Trustee or the Collateral Agent to be indemnified for
Losses caused by their respective negligence or willful misconduct.
(q) Final Expression. This Agreement, together with the Indenture,
the Security Agreements and any other agreement executed in connection herewith
or therewith, is intended by the parties as a final expression of this Agreement
and is intended as a complete and exclusive statement of the terms and
conditions hereof.
(r) Issuer Remain Liable. Anything herein to the contrary
notwithstanding, (a) the Issuer shall remain liable under any contracts and
agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Collateral Agent
or the Trustee of any of the rights hereunder shall not release the Company from
any of its duties or obligations under the contracts and agreements included in
the Collateral and (c) the Collateral Agent and the Trustee shall not have any
obligation or liability under any contracts and agreements included in the
Collateral by reason of this Agreement, nor shall the Collateral Agent or the
Trustee be obligated to perform any of the obligations or duties of the Issuer
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
(s) Indenture. This Agreement is subject to the terms, conditions
and provisions of the Indenture. Where there is a conflict between the
provisions of this Agreement and the Indenture, the provisions of the Indenture
shall prevail.
(t) Rights of Holders. No Holder of a Secured Note shall have any
independent rights hereunder other than those rights granted to individual
Holders pursuant to Section 6.7 of the Indenture, provided that nothing in this
subsection (t) shall limit any rights granted to the Trustee under the Secured
Notes, the Indenture or the Security Agreements.
(u) No Personal Liability of Directors, Officers, Employees and
Stockholders. No past, present or future director, officer, employee,
incorporator or stockholder of the Issuer or of any subsidiary of the Issuer, as
such, shall have any liability for any obligations of the Issuer
19
<PAGE> 20
under this Agreement or for any claim based on, in respect of, or by reason of,
such obligations or their creation.
(v) GOVERNING LAW; WAIVER OF JURY TRIAL; WAIVER OF DAMAGES.
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER
THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE
ISSUER, THE COLLATERAL AGENT, THE TRUSTEE AND THE HOLDERS OF THE SECURED NOTES
IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY
OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED
TO THE CONFLICTS OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK.
(ii) THE ISSUER AGREES THAT THE COLLATERAL AGENT SHALL, IN ITS
CAPACITY AS COLLATERAL AGENT OR IN THE NAME AND ON BEHALF OF THE TRUSTEE AND ANY
HOLDERS OF SECURED NOTES, AND THE TRUSTEE SHALL, IN ITS CAPACITY AS TRUSTEE OR
IN THE NAME AND ON BEHALF OF ANY HOLDERS OF SECURED NOTES, HAVE THE RIGHT, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE ISSUER OR ITS
PROPERTY IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH TO ENABLE
THE TRUSTEE TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT OR THE TRUSTEE. THE ISSUER AGREES
THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY
PROCEEDING BROUGHT BY THE COLLATERAL AGENT OR THE TRUSTEE TO REALIZE ON SUCH
PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
COLLATERAL AGENT OR THE TRUSTEE. THE ISSUER WAIVES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT IN WHICH THE TRUSTEE HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS.
(iii) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE ISSUER,
THE COLLATERAL AGENT AND THE TRUSTEE EACH WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT.
INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL
WITHOUT A JURY.
(iv) THE ISSUER AGREES THAT NONE OF THE COLLATERAL AGENT, THE
TRUSTEE, AND ANY HOLDER OF A SECURED NOTE SHALL HAVE ANY LIABILITY TO THE ISSUER
(WHETHER SOUNDING IN TORT, CONTRACT OR
20
<PAGE> 21
OTHERWISE) FOR LOSSES SUFFERED BY THE ISSUER IN CONNECTION WITH, ARISING OUT OF,
OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP
ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE
JUDGMENT OF A COURT THAT IS BINDING ON THE COLLATERAL AGENT, THE TRUSTEE OR SUCH
NOTEHOLDER, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR
OMISSIONS ON THE PART OF THE COLLATERAL AGENT, THE TRUSTEE OR SUCH HOLDER OF A
SECURED NOTE, AS THE CASE MAY BE, CONSTITUTING NEGLIGENCE OR WILLFUL MISCONDUCT.
(v) THE ISSUER WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY
KIND PRIOR TO THE EXERCISE BY THE TRUSTEE OR ANY HOLDER OF A SECURED NOTE OF ITS
RIGHTS DURING THE CONTINUANCE OF AN EVENT OF DEFAULT TO REPOSSESS THE COLLATERAL
WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL OR OTHER
SECURITY FOR THE OBLIGATIONS. THE ISSUER WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF THE COLLATERAL AGENT, THE TRUSTEE OR ANY HOLDER OF A
SECURED NOTE IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN
POSSESSION OF, REPLEVY, ATTACH OR LEVY UPON COLLATERAL OR OTHER SECURITY FOR THE
OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
THE COLLATERAL AGENT, THE TRUSTEE OR ANY HOLDER OF A SECURED NOTE OR TO ENFORCE
BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT
INJUNCTION THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT AMONG THE ISSUER ON
THE ONE HAND AND THE COLLATERAL AGENT, THE TRUSTEE AND/OR THE HOLDERS OF THE
SECURED NOTES ON THE OTHER HAND.
(w) Appointment of Collateral Agent. The Trustee hereby appoints the
Collateral Agent, and the Collateral Agent accepts appointment, as collateral
agent under the terms of this Agreement. The Collateral Agent may resign at any
time by giving written notice thereof to the Trustee and may be removed at any
time with or without cause by the Trustee. Prior to the effectiveness of any
such resignation or removal, the Trustee shall have the right to appoint a
successor Collateral Agent which shall be a commercial bank or trust company
organized or chartered under the laws of the United States of America or any
state thereof having combined capital and surplus of at least $50,000,000. If no
successor Collateral Agent shall have been so appointed by the Trustee and shall
have accepted such appointment within 30 days after the retiring Collateral
Agent's giving of notice of resignation or the Trustee's removal of the retiring
Collateral Agent, then the retiring Collateral Agent shall, prior to the
effectiveness of its resignation or removal, on behalf of the Trustee and the
Holders of the Secured Notes, appoint a successor Collateral Agent, which shall
be a commercial bank or trust company organized under the laws of the United
States of America or any State thereof having a combined capital and surplus of
at least $50,000,000. Upon the acceptance of any appointment as Collateral Agent
hereunder by a successor Collateral Agent, such successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent, and the retiring Collateral Agent
shall be discharged from its duties and
21
<PAGE> 22
obligations under this Agreement. After any retiring Collateral Agent's
resignation or removal hereunder as Collateral Agent, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Collateral Agent under this Agreement. Any corporation
into which the Collateral Agent may be merged, or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Collateral Agent shall be a party, shall be Collateral Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of the parties hereto.
(x) Agent for Service: Submission to Jurisdiction: Waiver of
Immunities. By the execution and delivery of this Agreement, each of the Issuer
and the Company (i) acknowledges that it has, by separate written instrument,
irrevocably designated and appointed CT Corporation System, 1633 Broadway, New
York, New York 10019 (or any successor), as its authorized agent upon which
process may be served in any suit or proceeding arising out of or relating to
this Agreement that may be instituted in any federal or state court in the State
of New York, or brought under federal or state securities laws, and acknowledges
that CT Corporation System has accepted such designation, (ii) submits to the
jurisdiction of any such court in any such suit or proceeding, and (iii) agrees
that service of process upon CT Corporation System (or any successor) and
written notice of said service to the Issuer shall be deemed in every respect
effective service of process upon each of the Issuer and the Company in any such
suit or proceeding. The Issuer and the Company each further agrees to take any
and all action, including the execution and filing of any and all such documents
and instrument, as may be necessary to continue such destination and appointment
of CT Corporation System (or any successor) in full force and effect so long as
the Loan shall be outstanding.
To the extent that either the Company or the Issuer has or hereafter
may acquire any immunity from jurisdiction of any court or from any legal
process (whether through service of notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, each hereby irrevocably waives such immunity in respect of its
obligations under this Agreement, to the extent permitted by law.
[SIGNATURE PAGE FOLLOWS]
22
<PAGE> 23
IN WITNESS WHEREOF, the Issuer has caused this Agreement to be duly
executed and delivered as of the day and year first above written.
RBF FINANCE CO.
By: /S/ STEVEN A. WEBSTER
---------------------------
Name:
Title:
By its acceptance hereof, as of the day and year first above written,
the Collateral Agent and the Trustee agree to be bound by the provisions hereof.
UNITED STATES TRUST COMPANY OF NEW YORK,
as Collateral Agent and Trustee
By: /S/ PETER C. GERRER
---------------------------
Name: Peter C. Gerrer
Title: Vice President
23
<PAGE> 24
SCHEDULE A to
Secured Note
Security and Pledge
Agreement (Section
3(a))
ISSUER LOANS AND ISSUER LOAN AGREEMENTS
<PAGE> 25
SCHEDULE B to
Secured Note
Security and Pledge
Agreement (Section
5(b))
LIENS ON COLLATERAL
<PAGE> 26
SCHEDULE C to
Secured Note
Security and Pledge
Agreement (Section
5(c))
FILINGS
<PAGE> 27
SCHEDULE D to
Secured Note
Security and Pledge
Agreement (Section
5(e))
CHIEF EXECUTIVE OFFICES
<PAGE> 28
SCHEDULE F to
Secured Note
Security and Pledge
Agreement (Section
6(b))
LOCATION OF COLLATERAL
<PAGE> 29
SCHEDULE G to
Secured Note
Security and Pledge
Agreement (Section
6(d))
FORM OF ADDITIONAL COLLATERAL AMENDMENT
This Additional Collateral Amendment, dated _____________, is delivered
pursuant to Section 6(d) of the Security Agreement referred to below. The
undersigned hereby pledges to the Collateral Agent for the benefit of the
Trustee and the equal and ratable benefit of the Holders of the Secured Notes,
and grants to the Collateral Agent for the benefit to the Trustee and the equal
and ratable benefit of the Holders of the Secured Notes, continuing Liens and
security interest in all of its rights, title and interest in the Collateral
listed below.
The undersigned hereby agrees that this Additional Collateral Amendment
may be attached to the Secured Note Security and Pledge Agreement, dated as of
March __, 1999, between the undersigned and United States Trust Company of New
York, as Collateral Agent and as Trustee (the "Security Agreement"); capitalized
terms used herein and not otherwise defined herein shall have the meanings given
to such terms in the Security Agreement; and the Collateral listed on this
Additional Collateral Amendment shall be deemed to be part of the Collateral,
and shall become part of the Collateral and shall secure all Obligations.
RBF Finance Co.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE> 30
LOANS:
<TABLE>
<CAPTION>
Description Name of Restricted Original
Item of Subsidiary Principal
Number Indebtedness (Obligor) Date Amount
<S> <C> <C> <C> <C>
- ----------- --------------------- ------------------------ --------- -------------------
- ----------- --------------------- ------------------------ --------- -------------------
- ----------- --------------------- ------------------------ --------- -------------------
- ----------- --------------------- ------------------------ --------- -------------------
- ----------- --------------------- ------------------------ --------- -------------------
- ----------- --------------------- ------------------------ --------- -------------------
</TABLE>
<PAGE> 31
OTHER COLLATERAL:
<TABLE>
<CAPTION>
Description of
Qualified Investment
or other Collateral Evidenced By Obligor Date
<S> <C> <C> <C>
- ------------------------ ------------------------- ------------------------- -------------------
- ------------------------ ------------------------- ------------------------- -------------------
- ------------------------ ------------------------- ------------------------- -------------------
- ------------------------ ------------------------- ------------------------- -------------------
- ------------------------ ------------------------- ------------------------- -------------------
- ------------------------ ------------------------- ------------------------- -------------------
</TABLE>
<PAGE> 32
SCHEDULE H to
Secured Note
Security and Pledge
Agreement (Section
6(f))
RESTRICTIVE AGREEMENTS
None
<PAGE> 33
SCHEDULE I to
Secured Note
Security and Pledge
Agreement (Section
6(k))
FORM OF ENDORSEMENT
Reference is made to the foregoing Promissory Note (the "Note") made by
R&B Falcon Corporation and payable to RBF Finance Co.
This Note is payable to the order of ___________________________.
R& B Falcon Corporation
By:
--------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.17
FIRST PREFERRED SHIP MORTGAGE
FIRST PREFERRED SHIP MORTGAGE, made the 26th day of March, 1999 by R&B
FALCON CORPORATION, a corporation organized and existing under the laws of the
State of Delaware with offices at 901 Threadneedle, Houston, Texas 77079,
qualifying as a Foreign Maritime Entity into the Marshall Islands (the
"Shipowner") and RBF FINANCE CO., a corporation organized and existing under the
laws of the State of Delaware with offices at 901 Threadneedle, Houston, Texas
77079 (the "Mortgagee");
WHEREAS:
A. The Shipowner is the sole-owner of 100% of the following Marshall
Islands flag vessel:
Name Off. No.
------------ --------
PEREGRINE IV 1326
which vessel has been duly documented in the name of the Shipowner in accordance
with the laws of the Republic of the Marshall Islands.
B. Pursuant to the Loan Agreement dated as of March 26, 1999 (the "Loan
Agreement") among the Shipowner and the Mortgagee, the Mortgagee has agreed to
loan up to USD 166,000,000.00 (the "Loan") to the Borrower.
C. The Borrower has delivered to the Mortgagee its Promissory Notes
(collectively, the "Note") dated the date hereof to evidence the Loan. A copy of
the form of the Loan Agreement and the Note are attached hereto as Exhibit A.
D. In order to secure the payment of all amounts due under the Loan
Agreement and the Note (including the principal of and interest thereon)
according to their terms, and the payment of all other such sums that may
hereinafter be secured by this Mortgage in accordance with the terms hereof, and
to secure the performance and observance of and compliance with all the
agreements, covenants and conditions of this Mortgage, the Shipowner has duly
authorized the execution and delivery of this First Preferred Ship Mortgage.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, and in order to secure the payment of all amounts due
under the Loan Agreement and the Note (including the principal of and interest
thereon) according to the terms of this Mortgage, the Loan Agreement and the
Note, and the payment of
<PAGE> 2
all other sums that may hereafter be secured by this Mortgage in accordance with
the terms hereof (all such principal, interest, and other sums being hereinafter
called the "Indebtedness hereby secured") and to secure the performance and
observance of and compliance with all of the agreements, covenants and
conditions of this Mortgage, the Loan Agreement and the Note, the Shipowner has
granted, conveyed, mortgaged, pledged, confirmed, assigned, transferred and set
over and by these presents does grant, convey, mortgage, pledge, confirm,
assign, transfer and set over, unto the Mortgagee, and its successors and
assigns the whole of the above mentioned vessel, including, without being
limited to, all of the boilers, engines, machinery, masts, spars, boats,
anchors, cables, chains, rigging, tackle, capstans, outfit, tools, pumps and
pumping equipment, apparel, furniture, fittings, equipment, spare parts, and all
other appurtenances (including without limitation drilling masts, rotary tables,
substructures, draw work, engines, pumps, blowout prevention equipment, drill
pipe and drill bits) thereunto appertaining or belonging, whether now owned or
hereafter acquired, and also any and all additions, improvements, renewals and
replacements hereafter made in or to such vessel or any part thereof, including
all items and appurtenances aforesaid (such together with all of the foregoing,
being herein called the "Vessel").
TO HAVE AND TO HOLD all and singular the above mortgaged and described
property unto the Mortgagee and its successors and assigns, to its and to its
successors' and assigns' own use, benefit and behoof forever.
PROVIDED, and these presents are upon the condition, that, if the
Shipowner or its successors or assigns shall pay or cause to be paid the
Indebtedness hereby secured as and when the same shall become due and payable in
accordance with the Note, the Loan Agreement and this Mortgage, and all other
such sums as may hereafter become secured by this Mortgage in accordance with
the terms hereof, and the Shipowner shall duly perform, observe and comply with
or cause to be performed, observed, or complied with all the covenants, terms
and conditions of this Mortgage, the Loan Agreement and the Note expressed or
implied, to be performed, then this Mortgage and the estate and rights hereunder
shall cease, determine and be void, otherwise to remain in full force and
effect.
The Shipowner for itself, its successors and assigns, hereby covenants,
declares and agrees with the Mortgagee and its successors and assigns that the
Vessel is to be held subject to the further covenants, conditions, terms and
uses hereinafter set forth.
2
<PAGE> 3
ARTICLE I
Representations and Covenants of the Shipowner.
Section 1. (a) The Shipowner will pay the Indebtedness hereby secured
and will observe, perform and comply with the covenants, terms and conditions
herein and in the Loan Agreement and the Note on its part to be observed,
performed or complied with.
(b) The obligation of the Indebtedness hereby secured is an obligation
in Dollars of the United States of America and the term "USD" when used herein
shall mean such Dollars. Notwithstanding fluctuations in the value or rate of
Dollars in terms of gold, or any other currency, all payments hereunder or
otherwise in respect of the Indebtedness hereby secured shall be payable in
terms of Dollars when due, and if not paid when due, in terms of Dollars when
paid, whether such payment is made before or after the due date.
(c) If a payment falls due on a day which banks in Houston, Texas and
New York, New York are not open for business ("holiday"), such payment is due on
the next following business day unless it would fall in a new calendar month, in
which event it shall be the preceding business day.
Section 2. The Shipowner is a corporation duly incorporated and
existing under the laws of the State of Delaware. The Shipowner has full power
and authority to own and mortgage the Vessel; all action necessary and required
by law for the execution and delivery of this Mortgage has been duly and
effectively taken; and the Indebtedness hereby secured is and will be the valid
and enforceable obligation of the Shipowner in accordance with its terms.
Section 3. The Shipowner lawfully owns and is lawfully possessed of the
Vessel free from any lien or encumbrance whatsoever other than for current
operating expenses incurred in the ordinary course of business (payment for
which is not overdue) and for liens covered (in excess of approved deductibles)
by insurance (collectively, the "Permitted Liens") or any commitment to make the
Vessel available to any governmental authority for charter, or sale or use, and
will warrant and defend the title and possession thereto and to every part
thereof for the benefit of the Mortgagee against the claims and demands of all
persons whomsoever.
Section 4. The Shipowner will cause this Mortgage to be duly recorded
with the Office of the Maritime Administrator, Republic of the Marshall Islands,
in accordance with the provisions of Sections 66 and 70 of the Maritime Act 1990
of the Republic of the Marshall Islands, and will otherwise comply with and
satisfy all of the provisions of the Maritime Act 1990 as amended in order
3
<PAGE> 4
to establish and maintain this Mortgage as a first preferred mortgage lien
thereunder upon the Vessel and upon all renewals, replacements and improvements
made in or to the same for the amount of the Indebtedness hereby secured.
Section 5. The Shipowner will not cause or permit the Vessel to be
operated in any manner contrary to law, and the Shipowner will not engage in any
unlawful trade or 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 registration or
enrollment of the Vessel under the laws and regulations of the the Republic of
the Marshall Islands and will at all times keep the Vessel duly documented
thereunder.
Section 6. The Shipowner will pay and discharge when due and payable,
from time to time, all taxes, assessments, governmental charges, fines and
penalties lawfully imposed on the Vessel or any income therefrom; provided that
the Shipowner shall not be required to pay any such tax, assessment or charge if
the validity or amount thereof is concurrently contested in good faith by
appropriate proceedings and if the Shipowner shall have set aside on its books
reserves in accordance with generally accepted accounting principles in the
United States deemed by it adequate with respect to such tax, assessment or
charge; and provided further, however, that the Shipowner will pay or cause to
be paid all such taxes, assessments or charges forthwith upon the commencement
of proceedings to foreclose any lien which is attached as security therefor.
Section 7. Neither the Shipowner, any charterer, 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 any
lien whatsoever other than the lien of this Mortgage and Permitted Liens.
Section 8. The Shipowner will place, and at all times and places will
retain, a properly certified copy of this Mortgage on board the Vessel with her
papers and will cause each such certified copy to be exhibited to any and all
persons having business therewith which might give rise to any lien thereon
other than Permitted Liens, and to any representative of the Mortgagee; and will
place and keep prominently displayed in the chart room and in the Master's cabin
of the Vessel a framed printed notice in plain type reading as follows:
"NOTICE OF MORTGAGE
This Vessel is covered by a First Preferred Ship Mortgage in
favor of RBF Finance Co., under authority of Chapter 3 of the Maritime
Act 1990 of the Republic of the Marshall Islands. Under the terms of
said Mortgage,
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neither the owner, any charterer, the Master of this Vessel nor any
other person has any right, power or authority to create, incur or
permit to be imposed upon this Vessel any other lien whatsoever except
Permitted Liens (as defined in the Mortgage), a copy of which is
available on board for inspection upon the request of any party having
business with the Vessel."
Section 9. Except for the lien of this Mortgage and Permitted Liens,
the Shipowner will not suffer to be continued any lien, encumbrance or charge on
the Vessel, and in due course and in any event within thirty (30) days after the
same becomes due and payable will pay or cause to be discharged or make adequate
provision for the satisfaction or discharge of all such claims or demands, or
will cause the Vessel to be released or discharged from any such lien,
encumbrance or charge therefor.
Section 10. If a libel or complaint is filed against the Vessel or the
Vessel is otherwise attached, levied upon or taken into custody by virtue of any
legal proceeding in any court, the Shipowner will promptly notify the Mortgagee
thereof by telex or telefax confirmed by letter, at its address, as specified in
this Mortgage, and within fifteen (15) days will cause the Vessel to be released
and all liens thereon other than this Mortgage and Permitted Liens to be
discharged and will promptly notify the Mortgagee thereof in the manner
aforesaid. The Shipowner will notify the Mortgagee within forty-eight (48) hours
after it has become known to the Shipowner of any average or salvage incurred by
the Vessel.
Section 11. (a) The Shipowner will at all times and without cost or
expense to the Mortgagee upgrade, maintain and preserve, or cause to be
upgraded, maintained and preserved, the Vessel and all its equipment, outfit and
appurtenances, tight, staunch, strong, in good condition, working order and
repair and in all respects seaworthy and fit for its intended service, and will
keep the Vessel, or cause it to be kept, in such condition as will entitle it to
the highest classification and rating for vessels of the same age and type in
Bureau Veritas or other classification society which is a member of the
International Association of Classification Societies and approved by the
Mortgagee, and will at the time of execution of this Mortgage, and annually
thereafter on the anniversary of the date of execution hereof will furnish to
the Mortgagee a certificate by such classification society that such
classification is maintained. The Vessel shall, and the Shipowner covenants that
it will, at all times comply with all applicable laws, treaties and conventions
to which the Republic of the Marshall Islands is a party, and rules and
regulations issued thereunder, and shall have on board as and when required
thereby valid certificates showing compliance therewith. The Shipowner will not
make, or permit to be made, any substantial change in the structure, type or
speed of the Vessel or change in its rig, without first receiving the written
approval thereof by the Mortgagee.
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(b) The Shipowner agrees, following request by the Mortgagee, to give
the Mortgagee at least ten (10) days notice of actual date and place of any
survey of the Vessel in order that the Mortgagee may have representatives
present if desired. The Shipowner agrees that at the Mortgagee's request it will
satisfy the Mortgagee that the expense of such survey or work to be done thereat
is within the Shipowner's financial ability and will not result in a claim or
lien against the Vessel in violation of the provisions of this Mortgage.
Section 12. (a) The Shipowner will at all reasonable times afford the
Mortgagee or its authorized representatives full and complete access to the
Vessel for the purpose of inspecting the Vessel and its cargo and papers and, at
the request of the Mortgagee, the Shipowner will deliver for inspection copies
of any and all contracts and documents relating to the Vessel, whether on board
or not.
(b) The Shipowner hereby appoints the Mortgagee attorney-in-fact of the
Shipowner, whether or not an event of default shall have occurred or is
continuing, to appear before governmental bodies, classification societies and
insurers and to demand and receive to the same extent that the Shipowner itself
might, all information and certificates respecting (i) the corporate status of
the Shipowner under the laws of its jurisdiction of incorporation or any other
jurisdiction in which it may have qualified to do business, (ii) the status of
the Vessel under the laws and regulations of its country of registration and its
compliance with the requirements thereof, and (iii) the state of the records of
the Vessel or of the Shipowner in respect of the Vessel in any classification
society with which the Vessel may be classed or of any company, association or
club by whom the Vessel or the Shipowner in respect of the Vessel may be
insured; and the Shipowner hereby agrees that the Mortgagee may execute its
powers as attorney-in-fact as aforesaid through its agents, representatives and
attorneys. This power of attorney is coupled with an interest and shall be
irrevocable as long as any indebtedness from the Shipowner to the Mortgagee
remains outstanding.
Section 13. The Shipowner will not transfer or change the flag or port
of documentation of the Vessel without the prior written consent of the
Mortgagee, and any such written consent to any one transfer or change of flag or
port of documentation shall not be construed to be a waiver of this provision
with respect to any subsequent proposed transfer or change of flag or port of
documentation.
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Section 14. The Shipowner will not sell, mortgage, demise charter for a
period longer than six (6) months, transfer or change the management of the
Vessel without the prior written consent of the Mortgagee, and any such written
consent to any one sale, mortgage, demise charter or transfer shall not be
construed to be a waiver of this provision with respect to any subsequent
proposed sale, mortgage, demise charter or transfer. Any such sale, mortgage,
demise charter or transfer of the Vessel shall be subject to the provisions of
this Mortgage and the lien hereof.
Section 15. (a) The Shipowner will cause to be carried and maintained
on or in respect of the Vessel without expense to the Mortgagee, all risk
equivalent Hull and Machinery and Protection and Indemnity insurance with
responsible and reputable insurance companies, underwriters, associations, clubs
or funds reasonably acceptable to the Mortgagee in an amount not less than the
greater of (X) 110% of the amount of the outstanding Indebtedness hereby secured
or (Y) the fair market value of the Vessel's hull and machinery, the "agreed
value"), war risk and protection and indemnity and insurances in such amounts
(with such deductibles or franchises), against such risks (including but not
limited to, loss of or damage to hull or machinery; protection and indemnity;
war risks in the event the Vessel is located outside United States territorial
waters; or waters above the outer Continental Shelf of the United States;
pollution risks) in such form (including, without limitation, the form of the
loss payable clause) and in U.S. currency as the Mortgagee shall from time to
time reasonably require or approve and as provided hereafter; and providing for
deductibles no greater than USD 1,000,000.00 per occurrence. The Shipowner shall
maintain liability insurance including crew liability, cargo liability,
pollution liability, contractual liability and removal of wreck insurance in
amounts similar to that maintained by owners of similar vessels and reasonably
acceptable to the Mortgagee or, without expense to the Mortgagee, have the
Vessel fully entered in a responsible and reputable Protection and Indemnity
Association or club in good standing and reasonably acceptable to the Mortgagee.
The Shipowner will cause such association or club to issue to the Mortgagee a
Letter of Undertaking or certificate or cover note, noting the Mortgagee's
interest in such insurance in a form reasonably satisfactory to the Mortgagee.
The Shipowner will furnish the Mortgagee from time to time on request and in any
event at least annually a detailed report (including a list showing the insured
value of the Vessel) signed by a firm of marine insurance brokers reasonably
acceptable to the Mortgagee with respect to the insurance carried and maintained
on the Vessel, together with its report as to the compliance of such insurance
with the requirements of this Section 15. The Shipowner agrees that, unless the
insurances by its terms provide that they cannot cease without the Mortgagee
being informed and having the right to continue the insurances by paying any
premiums not paid by the Shipowner, receipts showing payment of premiums for
required insurance paid shall be in the hands of the Mortgagee at least two (2)
days before the risk in question commences.
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(b) The Shipowner shall, at its own expense, furnish to the Mortgagee a
breach of warranty endorsement, including Additional Perils Pollution, providing
coverage for the Mortgagee in an amount equal to at least 110% of the amount of
the Indebtedness hereby secured. Such mortgagee's breach of warranty endorsement
insurance shall be maintained in the broadest form available in the American or
British markets for vessels of the same type as the Vessel through underwriters
reasonably acceptable to the Mortgagee. The Vessel shall not undertake any
construction operations, carry any cargoes or proceed in an area then excluded
by trading warranties under its marine or war risk policies (including
protection and indemnity) without obtaining all necessary additional coverage,
reasonably satisfactory in form and substance to the Mortgagee; and evidence of
which additional insurance shall be furnished to the Mortgagee.
(c) The Shipowner will cause the relevant insurance brokers to agree
to, and the Shipowner hereby covenants and agrees that it will, advise the
Mortgagee of any expiration, termination, nonrenewal, alteration or cancellation
of any policy, any default in the payment of any premium and of any other act or
omission on the part of the Shipowner of which it has knowledge and which might
invalidate or render unenforceable, in whole or in part, any insurance on the
Vessel. To the extent obtainable from underwriters or brokers, all policies
required hereby shall provide for not less than thirty (30) days prior written
notice (ten (10) days with respect to non-payment of premiums and seven (7) days
with respect to war risks) to be received by the Mortgagee of the termination or
cancellation of the insurance evidenced thereby. All policies of insurance
maintained pursuant to this Article I, Section 15 shall contain provisions
waiving underwriters' rights of subrogation thereunder against any assured named
in such policy and any assignee of said assured.
(d) Unless the Mortgagee shall otherwise agree, all insurance (other
than any Protection and Indemnity Association or Club) must name the Mortgagee
as an additional insured but without liability for premiums, club calls,
assessments, warranties or representations, and all amounts of whatsoever nature
payable under any insurance must be payable to the Mortgagee for distribution
first to itself and thereafter to the Shipowner or others as interest may
appear. Nevertheless, unless an Event of Default shall have occurred and is
continuing (i) amounts payable under any insurance on the Vessel with respect to
protection and indemnity risks may be paid directly to the Shipowner to
reimburse it for any loss, damage or expense incurred by it and covered by such
insurance or to the person to whom any liability covered by such insurance has
been incurred; provided, however, if the Mortgagee shall give notice that the
Shipowner is in default hereunder, all
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such payments shall be made to the Mortgagee (with the exception of payments
made under employers liability, workman's compensation and similar insurances)
until the Indebtedness hereby secured has been fully discharged, and (ii) unless
an Event of Default has occurred or is continuing amounts payable under any
insurance with respect to the Vessel involving any damage to the Vessel not
constituting an actual or constructive total loss, the underwriters may pay
direct for the repair, salvage or other charges involved or, if the Shipowner
shall have first fully repaired the damage or paid all of the salvage or other
charges, may pay the Shipowner as reimbursement therefor; provided, however,
that if such amounts (including any franchise or deductible) are greater than
USD 1,000,000.00 the underwriters shall not make such payment without first
obtaining the written consent thereto of the Mortgagee.
(e) All amounts paid to the Mortgagee in respect of any insurance on
the Vessel shall be disposed of as follows:
(i) any amount which might have been paid at the time, in
accordance with the provisions of paragraph (d) above, directly to the
Shipowner or others shall be paid by the Mortgagee to, or as directed
by, the Shipowner;
(ii) all amounts paid to the Mortgagee in respect of an actual
or constructive or arranged total loss or requisition shall be applied
by the Mortgagee to the payment of the Indebtedness hereby secured in
full;
(iii) so long as no Event of Default shall have occurred and
be continuing all other amounts paid to the Mortgagee in respect of any
insurance on the Vessel shall be applied to the making of needed
repairs or other work on the Vessel, or to the payment of other claims
incurred by the Shipowner relating to the Vessel, or may be paid to the
Shipowner or whosoever may be entitled thereto;
(iv) all other amounts paid to the Mortgagee in respect of any
insurance on the Vessel may, in the Mortgagee's sole discretion, be
held and applied to the prepayment of the Indebtedness hereby secured.
(f) In the event that any claim or lien is asserted against the Vessel
for loss, damage or expense which is covered by insurance required hereunder and
it is necessary for the Shipowner to obtain a bond or supply other security to
prevent arrest of the Vessel or to release the Vessel from arrest on account of
such claim or lien, the Mortgagee, on request of the Shipowner, may, in the sole
discretion of the Mortgagee, assign to any person, firm or corporation executing
a surety or guarantee bond or other agreement to save or release the Vessel from
such arrest, all right, title and interest of the Mortgagee in and to said
insurance covering
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said loss, damage or expense, as collateral security to indemnify against
liability under said bond or other agreement.
(g) The Shipowner shall deliver to the Mortgagee certified copies or
originals whenever so requested by the Mortgagee in writing, of all certificates
of entry, cover notes, binders, evidences of insurance and policies for the
purpose of inspection or safekeeping, or, alternatively, satisfactory letters of
undertaking from the broker holding the same.
(h) The Shipowner agrees that it will not execute or permit or
willingly allow to be done any act by which any insurance may be suspended,
impaired or canceled, and that it will not permit or allow the Vessel to
undertake any construction operations or run any risk or transport any cargo
which may not be permitted by the policies in force, without having previously
insured the Vessel by additional coverage to extend to such construction
operations, risks or cargoes.
(i) In case any underwriter proposes to pay less on any claim of total
loss (whether actual, constructive or compromised) than the amount thereof, the
Shipowner shall forthwith inform the Mortgagee and the consent of the Mortgagee
shall be required for any compromise thereof; and the Shipowner shall not agree
to any adjustment or compromise of any such loss except for the highest amount
reasonably obtainable thereon.
(j) The Shipowner will comply with and satisfy all of the provisions of
any applicable law, convention, regulation, proclamation or order concerning
financial responsibility for liabilities imposed on the Shipowner or the Vessel
with respect to pollution by any state or nation or political subdivision
thereof and will maintain all certificates or other evidence of financial
responsibility as may be required by any such law, convention, regulation,
proclamation or order with respect to the trade which the Vessel are from time
to time engaged in and the cargo carried by it or the construction projects
conducted by it.
(k) Any provision of this Section 15 to the contrary notwithstanding,
all aspects of the insurances on the Vessel (including risks covered, policy
terms, deductibles, forms of loss payable clauses, and underwriters or clubs)
shall at all times be fully satisfactory to and approved by the Mortgagee,
acting in its sole discretion. The Shipowner shall cause any insurance broker
arranging the insurances required by this Mortgage (who shall be approved by the
Mortgagee) to issue its letter of undertaking to the Mortgagee with respect to
such insurance matters as the Mortgagee shall request in accordance with usual
commercial practice.
Section 16. The Shipowner will reimburse the Mortgagee promptly, for
any and all expenditures which the Mortgagee may from
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time to time make, lay out or expend in providing such protection in respect of
insurance, discharge or purchase of liens, taxes, dues, assessments,
governmental charges, fines and penalties lawfully imposed, repairs, attorney's
fees, necessary translation fees for documents made in a language other than
English, and other matters as the Shipowner is obligated herein to provide, but
fails to provide. Such obligation of the Shipowner to reimburse the Mortgagee
shall be an additional indebtedness due from the Shipowner, secured by this
Mortgage, and shall be payable by the Shipowner on demand. The Mortgagee, though
privileged to do so, shall be under no obligation to the Shipowner to make any
such expenditures, nor shall the making thereof relieve the Shipowner of any
default in that respect.
Section 17. The Shipowner will fully perform any and all charter
parties or contracts of affreightment which are, or may be, entered into with
respect to the Vessel.
Section 18. The Shipowner further covenants and agrees with the
Mortgagee that, so long as any part of the Indebtedness hereby secured remains
unpaid, there shall be no change in the ownership of the Vessel, without the
prior written consent of the Mortgagee.
Section 19. (a) In the event of an actual or constructive or arranged
total loss or seizure or forfeiture or requisition or other taking, or any sale,
exchange, or other disposition of the Vessel by the Shipowner, whether or not
with the consent of the Mortgagee, then and in each such case the Shipowner
shall forthwith on demand prepay the Indebtedness hereby secured pursuant to
Section 2.3 of the Loan Agreement.
(b) This Mortgage shall extend to and constitute a lien upon, and the
Shipowner hereby grants the Mortgagee a security interest in, all proceeds
resulting from any of the events mentioned in subsection (a) above as security
for the Indebtedness hereby secured.
(c) The Shipowner hereby irrevocably authorizes the Mortgagee to file
and record financing statements under the Uniform Commercial Code in any
jurisdiction where the same may be in force or under any legislation having
similar effect for the purpose of perfecting or continuing the perfection of the
security interests granted by the Shipowner to the Mortgagee herein without
obtaining the signature of the Shipowner thereto. The Shipowner hereby
irrevocably authorizes the Mortgagee to execute any such financing statement or
similar document in the name of the Shipowner.
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ARTICLE II
Events of Default and Remedies.
Section 1. In case any one or more of the following events, herein
termed "Events of Default", shall have occurred and be continuing:
(a) any payment in respect of the Indebtedness hereby secured
has not been received by the Mortgagee when due after giving effect to
any applicable grace periods; or
(b) any Event of Default has occurred under the Loan
Agreement;
(c) the statements in Sections 2 and 3 of Article I shall
prove to be untrue in a material way; or
(d) a default shall have occurred in the due and punctual
observance and performance of any of the provisions of Sections 4, 5,
6, 9, 10, 11, 13, 14, 15, 16, 18 or 19 of Article I hereof; or
(e) a default by the Shipowner in the observance or
performance of any other agreement under this Mortgage shall have
occurred and shall remain unremedied for thirty (30) days after written
notice thereof shall have been given to the Shipowner by the Mortgagee;
or
(f) the Shipowner or any other obligor of any part of the
Indebtedness hereby secured: (i) is dissolved or its legal status is
lost or canceled by reason of any valid, judicial, extra-judicial, or
administrative proceeding shall have occurred, or (ii) dies or is
adjudicated a bankrupt, or (iii) shall admit in writing its inability
to pay its debts as they fall due, or (iv) shall make a general
assignment for the benefit of its creditors; or a receiver of the
property or business of the Shipowner or any obligor on or guarantor of
any part of the Indebtedness hereby secured is appointed by a court of
competent jurisdiction;
then, and in each and every such case, the Mortgagee shall have the
right to:
(1) Declare all the then unpaid Indebtedness hereby secured to
be due and payable immediately, and upon such declaration the same,
including interest to date of declaration, shall become and be
immediately due and payable (provided no declaration shall be required
if an event of default shall have occurred under subsection (f)
hereof);
(2) Exercise all of the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of the laws of the
Republic of the Marshall Islands or of any other jurisdiction where the
Vessel may be found;
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(3) Bring suit at law, in equity or in admiralty, as it may be
advised, to recover judgment for the Indebtedness hereby secured, and
collect the same out of any and all property of the Shipowner whether
covered by this Mortgage or otherwise;
(4) Take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process and without being
responsible for loss or damage, and the Shipowner or other person in
possession forthwith upon demand of the Mortgagee shall surrender to
the Mortgagee possession of the Vessel and the Mortgagee may, without
being responsible for loss or damage, hold, lay up, lease, charter,
operate or otherwise use the Vessel for such time and upon such terms
as it may deem to be for its best advantage, and demand, collect and
retain all hire, freights, earnings, issues, revenues, income, profits,
return premiums, salvage awards or recoveries, recoveries in general
average, 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, accounting only for the net profits, if any, arising from
such use of the Vessel and charging upon all receipts from the use of
the Vessel or from the sale thereof by court proceedings or pursuant to
Subsection (5) next following, all costs, expenses, charges, damages or
losses by reason of such use; and if at any time the Mortgagee shall
avail itself of the right herein given it to take the Vessel, the
Mortgagee shall have the right to dock the Vessel, for a reasonable
time at any dock, pier or other premises of the Shipowner without
charge, or to dock it at any other place at the cost and expense of the
Shipowner;
(5) Take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process, and if it seems
desirable to the Mortgagee and without being responsible for loss or
damage, sell the Vessel, at any place and at such time as the Mortgagee
may specify and in such manner as the Mortgagee may deem advisable,
free from any claim by the Shipowner in admiralty, in equity, at law or
by statute, at public or private sale, by sealed bids or otherwise, by
mailing, by air or otherwise, notice of such sale, whether public or
private, addressed to the Shipowner at its last known address, fourteen
(14) days prior to the date fixed for entering into the contract of
sale and by first publishing notice of any such public sale for ten
consecutive days, in a daily newspaper of general circulation published
in the City of Houston, State of Texas or if the place of sale should
not be in Houston, Texas then by publication of a similar notice at or
near the place of sale; 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; the sale may be held at
such place and
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at such time as the Mortgagee by notice may have specified, or may be
adjourned by the 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 the 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 the Mortgagee may deem
to be for its best advantage, and the Mortgagee may become the
purchaser at any judicial sale.
Section 2. Any 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 the Shipowner therein and thereto, and shall bar the Shipowner, its
successors and assigns, and all persons claiming by, through or under it. 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 the
application of the proceeds thereof. In case of any such sale, the Mortgagee, if
it is the purchaser, shall be entitled for the purpose of making settlement or
payment for the property purchased to use and apply the Indebtedness hereby
secured in order that there may be credited against the amount remaining due and
unpaid thereon the sums payable out of the net proceeds of such sale to the
Mortgagee after allowing for the costs and expense of sale and other charges;
and thereupon such purchaser shall be credited, on account of such purchase
price, with the net proceeds that shall have been so credited upon the
Indebtedness hereby secured. At any such judicial sale, the Mortgagee may bid
for and purchase such property and upon compliance with the terms of sale may
hold, retain and dispose of such property without further accountability
therefor.
Section 3. The Mortgagee is hereby appointed attorney in-fact of the
Shipowner, upon the happening of any Event of Default, to execute and deliver to
any purchaser aforesaid, and is hereby vested with full power and authority to
make, in the name and in behalf of the Shipowner, a good conveyance of the title
to the Vessel so sold. In the event of any sale of the Vessel, under any power
herein contained, the Shipowner will, if and when required by the Mortgagee,
execute such form of conveyance of the Vessel as the Mortgagee may direct or
approve.
Section 4. The Mortgagee is hereby appointed attorney in-fact of the
Shipowner upon the happening of any Event of Default, in the name of the
Shipowner to demand, collect, receive, compromise and sue for, so far as may be
permitted by law, all freight, 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,
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and all other sums due or to become due at the time of the happening of any
Event of Default 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 the Shipowner acquittances, receipts, releases or other discharges for the
same, whether under seal or otherwise, and to endorse and accept in the name of
the Shipowner all checks, notes, drafts, warrants, agreements and other
instruments in writing with respect to the foregoing.
Section 5. Whenever any right to enter and take possession of the
Vessel accrues to the Mortgagee, it may require the Shipowner to deliver, and
the Shipowner shall on demand, at its own cost and expense, deliver to the
Mortgagee the Vessel to a location designated by the Mortgagee as demanded. If
the Mortgagee shall be entitled to take any legal proceedings to enforce any
right under this Mortgage, the Mortgagee shall be entitled as a matter of right
to the appointment of a receiver of the Vessel and of the freights, hire,
earnings, issues, revenues, income and profits due or to become due and arising
from the operation thereof.
Section 6. The Shipowner authorizes and empowers the Mortgagee or its
appointees or any of them to appear in the name of the Shipowner, its successors
and 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 and to take such
proceedings as to them or any of them may seem proper towards the defense of
such suit and the purchase or discharge of such lien, and all expenditures made
or incurred by them or any of them for the purpose of such defense or purchase
or discharge shall be a debt due from the Shipowner, its successors and assigns,
to the Mortgagee, and shall be secured by the lien of this Mortgage in like
manner and extent as if the amount and description thereof were written herein.
Section 7. The Shipowner covenants that upon the happening of any Event
of Default, then, upon written demand of the Mortgagee, the Shipowner will pay
to the Mortgagee the whole amount due and payable in respect of the Indebtedness
hereby secured; and in case the Shipowner shall fail to pay the same forthwith
upon such demand, the Mortgagee shall be entitled to recover judgment for the
whole amount so due and unpaid, together with such further amounts as shall be
sufficient to cover the reasonable compensation to the Mortgagee's agents,
attorneys and counsel and any necessary advances, expenses and liabilities made
or incurred by it hereunder. All moneys collected by the Mortgagee under this
Article II, Section 7 shall be applied by the Mortgagee in accordance with the
provisions of Section 11 of this Article II.
Section 8. Each and every power and remedy herein given to the
Mortgagee shall be cumulative and shall be in addition to every
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other power and remedy herein given 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 otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by the 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 delay or omission by the Mortgagee in the exercise
of any right or power or in the pursuance of any remedy accruing upon any
default as above defined shall impair any such right, power or remedy or be
construed to be a waiver of any such Event of Default or to be an acquiescence
therein; nor shall the acceptance by the Mortgagee of any security or of any
payment of or on account of the Indebtedness hereby secured maturing after any
Event of Default or of any payment on account of any past default be construed
to be a waiver of any right to take advantage of any future Event of Default or
of any past Event of Default not completely cured thereby. No consent, waiver or
approval of the Mortgagee shall be deemed to be effective unless in writing and
duly signed by authorized signatories of the Mortgagee.
Section 9. If at any time after an Event of Default and prior to the
actual sale of the Vessel by the Mortgagee or prior to any enforcement or
foreclosure proceedings the Shipowner offers completely to cure all Events of
Default and to pay all expenses, advances and damages to the Mortgagee
consequent on such Events of Default, with interest with respect to the
Shipowner's obligations as provided herein or in the Loan Agreement as set forth
therein, then the Mortgagee may accept such offer and payment and restore the
Shipowner to its former position, but such action, if taken, shall not affect
any subsequent event of default or impair any rights consequent thereon.
Section 10. In case the Mortgagee shall have proceeded to enforce any
right, power or remedy under this Mortgage by foreclosure, entry or otherwise,
and such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Mortgagee, then and in every such
case the Shipowner and the Mortgagee shall 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 the Mortgagee
shall continue as if no such proceedings had been taken.
Section 11. The proceeds of any sale of the Vessel and the net earnings
of any charter operation or other use of the Vessel and any and all other moneys
received by the Mortgagee pursuant to or under the terms of this Mortgage or in
any proceedings hereunder, the application of which has not elsewhere herein
been specifically provided for, shall be applied as follows:
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First: To the payment of all expenses and charges, including
the expenses of any sale, the expenses of any retaking, attorney's
fees, court costs, and any other expenses or advances made or incurred
by the Mortgagee in the protection of its rights or the pursuance of
its remedies hereunder;
Second: To the payment of the Indebtedness hereby secured,
whether due or not, including interest thereon to the date of such
payment; and
Third: To the payment of any surplus thereafter remaining to
the Shipowner or to whomsoever may be entitled thereto.
Section 12. Until one or more Events of Default shall happen, the
Shipowner (a) shall be suffered and permitted to retain actual possession and
use of the Vessel and (b) shall have the right, from time to time, in its
discretion, and without application to the Mortgagee, and without obtaining a
release thereof by the Mortgagee, to dispose of, free from the lien hereof, any
boilers, engines, machinery, masts, spars, sails, rigging, boats, anchors,
chains, tackle, apparel, furniture, fittings or equipment or any other
appurtenances of the Vessel that are no longer useful, necessary, profitable or
advantageous in the operation of the Vessel, first or simultaneously replacing
the same by new boilers, engines, machinery, masts, spars, sails, rigging,
boats, anchors, chains, tackle, apparel, furniture, fittings, equipment, or
other appurtenances of substantially equal value to the Shipowner, which shall
forthwith become subject to the lien of this Mortgage as a preferred mortgage
thereon.
Section 13. (a) If any provision of this Mortgage should be
deemed invalid or shall be deemed to affect adversely the preferred status of
this Mortgage under any applicable law, such provision shall cease to be a part
of this Mortgage without affecting the remaining provisions, which shall remain
in full force and effect.
(b) In the event that the Note, the Loan Agreement or this Mortgage or
any of the documents or instruments which may from time to time be delivered
hereunder or thereunder or any provision hereof or thereof shall be deemed
invalidated by present or future law of any nation or by decision of any court,
or if any third party shall fail or refuse to recognize any of the powers
granted to the Mortgagee hereunder when it is sought to exercise them, this
shall not affect the validity or enforceability of all or any other parts of the
Note, the Loan Agreement or the Mortgage or such documents or instruments and,
in any such case, the Shipowner covenants and agrees that, on demand, it will
execute and deliver such other and further agreements, documents and instruments
and do such things as the Mortgagee in its sole discretion may deem to be
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<PAGE> 18
necessary to carry out the true intent of this Mortgage, the Loan Agreement and
the Note.
(c) Anything herein to the contrary notwithstanding, it is intended
that nothing herein shall waive the preferred status of this Mortgage and that,
if any provision or portion thereof herein shall be construed to waive the
preferred status of this Mortgage, then such provision to such extent shall be
void and of no effect.
Section 14. In the event of any legal proceedings, the Shipowner
accepts for itself and subsequent owners of the Vessel, irrespective of domicile
or residence the nonexclusive jurisdiction of the courts of the State of New
York and the United States District Court of the Southern District Court of New
York as venue with notice provided in the manner established for residents of
the venue served on the Shipowner or on the Shipowner's manager or managing
owner or the Vessel's master.
ARTICLE III
Sundry Provisions
Section 1. All of the covenants, promises, stipulations and agreements
of the Shipowner in this Mortgage contained shall bind the Shipowner and its
successors and assigns and shall inure to the benefit of the Mortgagee and its
respective successors and assigns. In the event of any assignment or transfer of
this Mortgage, the term "Mortgagee", as used in this Mortgage, shall be deemed
to mean any such assignee or transferee.
Section 2. Wherever and whenever herein any right, power or authority
is granted or given to the Mortgagee, such right, power or authority may be
exercised in all cases by the Mortgagee or such agent or agents as it may
appoint, and the act or acts of such agent or agents when taken shall constitute
the act of the Mortgagee hereunder.
Section 3. This Mortgage may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
Section 4. Any notice or other communication to be given pursuant
hereto shall be in the manner provided in Section 7.8 of the Loan Agreement and
addressed:
If to the Shipowner to:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: Steven Webster
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If to the Mortgagee to:
RBF Finance Co.
901 Threadneedle
Houston, Texas 77079
Attention: Leighton Moss
or at such other address as either party may notify to the other in writing.
Section 5. The maximum principal amount that may be
outstanding under this Mortgage is One Hundred Sixty-Six Millin United States
Dollars (USD 166,000,000.00) and for the purpose of recording this Mortgage, the
total amount of this First Preferred Ship Mortgage is One Hundred Sixty-Six
Millin United States Dollars (USD 166,000,000.00), and interest, expenses and
performance of mortgage covenants. The maturity date is March 15, 2009. The
discharge amount is the same as the total amount.
IN WITNESS WHEREOF, the Shipowner has caused this First
Preferred Ship Mortgage to be duly executed the day and year first above
written.
R&B FALCON CORPORATION
By: /s/ JOHN BOATWRIGHT
--------------------------------
Name: John Boatwright
Title: Attorney-in-Fact
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 26th day of March, 1999, before me personally appeared John
Boatwright, to me known, who, being by me duly sworn, did depose and say that he
resides at 1000 Louisiana, Houston, Texas 77002; that he is the Attorney-in-Fact
of R&B Falcon Corporation, the corporation described in the foregoing
instrument; that he signed his name thereto by order of the Board of Directors
of said corporation and that the foregoing instrument is the act and deed of the
corporation.
/s/ THOMAS J. HAWLEY
---------------------------------
Notary Public
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<PAGE> 1
EXHIBIT 10.18
FIRST PREFERRED SHIP MORTGAGE
FIRST PREFERRED SHIP MORTGAGE, made the 26th day of March, 1999 by R&B
FALCON CORPORATION, a corporation organized and existing under the laws of the
State of Delaware with offices at 901 Threadneedle, Houston, Texas 77079,
qualifying as a Foreign Maritime Entity into the Marshall Islands(the
"Shipowner") and RBF FINANCE CO., a corporation organized and existing under the
laws of the State of Delaware with offices at 901 Threadneedle, Houston, Texas
77079 (the "Mortgagee");
WHEREAS:
A. The Shipowner is the sole-owner of 100% of the following Marshall
Islands flag vessel:
<TABLE>
<CAPTION>
Name Off. No.
- ---- --------
<S> <C>
PEREGRINE VII 1327
</TABLE>
which vessel has been duly documented in the name of the Shipowner in accordance
with the laws of the Republic of the Marshall Islands.
B. Pursuant to the Loan Agreement dated as of March 26, 1999 (the "Loan
Agreement") among the Shipowner and the Mortgagee, the Mortgagee has agreed to
loan up to USD 225,600,000.00 (the "Loan") to the Borrower.
C. The Borrower has delivered to the Mortgagee its Promissory Notes
(collectively, the "Note") dated the date hereof to evidence the Loan. A copy of
the form of the Loan Agreement and the Note are attached hereto as Exhibit A.
D. In order to secure the payment of all amounts due under the Loan
Agreement and the Note (including the principal of and interest thereon)
according to their terms, and the payment of all other such sums that may
hereinafter be secured by this Mortgage in accordance with the terms hereof, and
to secure the performance and observance of and compliance with all the
agreements, covenants and conditions of this Mortgage, the Shipowner has duly
authorized the execution and delivery of this First Preferred Ship Mortgage.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, and in order to secure the payment of all amounts due
under the Loan Agreement and the Note (including the principal of and interest
thereon) according to the terms of this Mortgage, the Loan Agreement and the
Note, and the payment of
<PAGE> 2
all other sums that may hereafter be secured by this Mortgage in accordance with
the terms hereof (all such principal, interest, and other sums being hereinafter
called the "Indebtedness hereby secured") and to secure the performance and
observance of and compliance with all of the agreements, covenants and
conditions of this Mortgage, the Loan Agreement and the Note, the Shipowner has
granted, conveyed, mortgaged, pledged, confirmed, assigned, transferred and set
over and by these presents does grant, convey, mortgage, pledge, confirm,
assign, transfer and set over, unto the Mortgagee, and its successors and
assigns the whole of the above mentioned vessel, including, without being
limited to, all of the boilers, engines, machinery, masts, spars, boats,
anchors, cables, chains, rigging, tackle, capstans, outfit, tools, pumps and
pumping equipment, apparel, furniture, fittings, equipment, spare parts, and all
other appurtenances (including without limitation drilling masts, rotary tables,
substructures, draw work, engines, pumps, blowout prevention equipment, drill
pipe and drill bits) thereunto appertaining or belonging, whether now owned or
hereafter acquired, and also any and all additions, improvements, renewals and
replacements hereafter made in or to such vessel or any part thereof, including
all items and appurtenances aforesaid (such together with all of the foregoing,
being herein called the "Vessel").
TO HAVE AND TO HOLD all and singular the above mortgaged and described
property unto the Mortgagee and its successors and assigns, to its and to its
successors' and assigns' own use, benefit and behoof forever.
PROVIDED, and these presents are upon the condition, that, if the
Shipowner or its successors or assigns shall pay or cause to be paid the
Indebtedness hereby secured as and when the same shall become due and payable in
accordance with the Note, the Loan Agreement and this Mortgage, and all other
such sums as may hereafter become secured by this Mortgage in accordance with
the terms hereof, and the Shipowner shall duly perform, observe and comply with
or cause to be performed, observed, or complied with all the covenants, terms
and conditions of this Mortgage, the Loan Agreement and the Note expressed or
implied, to be performed, then this Mortgage and the estate and rights hereunder
shall cease, determine and be void, otherwise to remain in full force and
effect.
The Shipowner for itself, its successors and assigns, hereby covenants,
declares and agrees with the Mortgagee and its successors and assigns that the
Vessel is to be held subject to the further covenants, conditions, terms and
uses hereinafter set forth.
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<PAGE> 3
ARTICLE I
Representations and Covenants of the Shipowner.
Section 1. (a) The Shipowner will pay the Indebtedness hereby secured
and will observe, perform and comply with the covenants, terms and conditions
herein and in the Loan Agreement and the Note on its part to be observed,
performed or complied with.
(b) The obligation of the Indebtedness hereby secured is an obligation
in Dollars of the United States of America and the term "USD" when used herein
shall mean such Dollars. Notwithstanding fluctuations in the value or rate of
Dollars in terms of gold, or any other currency, all payments hereunder or
otherwise in respect of the Indebtedness hereby secured shall be payable in
terms of Dollars when due, and if not paid when due, in terms of Dollars when
paid, whether such payment is made before or after the due date.
(c) If a payment falls due on a day which banks in Houston, Texas and
New York, New York are not open for business ("holiday"), such payment is due on
the next following business day unless it would fall in a new calendar month, in
which event it shall be the preceding business day.
Section 2. The Shipowner is a corporation duly incorporated and
existing under the laws of the State of Delaware. The Shipowner has full power
and authority to own and mortgage the Vessel; all action necessary and required
by law for the execution and delivery of this Mortgage has been duly and
effectively taken; and the Indebtedness hereby secured is and will be the valid
and enforceable obligation of the Shipowner in accordance with its terms.
Section 3. The Shipowner lawfully owns and is lawfully possessed of the
Vessel free from any lien or encumbrance whatsoever other than for current
operating expenses incurred in the ordinary course of business (payment for
which is not overdue) and for liens covered (in excess of approved deductibles)
by insurance (collectively, the "Permitted Liens") or any commitment to make the
Vessel available to any governmental authority for charter, or sale or use, and
will warrant and defend the title and possession thereto and to every part
thereof for the benefit of the Mortgagee against the claims and demands of all
persons whomsoever.
Section 4. The Shipowner will cause this Mortgage to be duly recorded
with the Office of the Maritime Administrator, Republic of the Marshall Islands,
in accordance with the provisions of Sections 66 and 70 of the Maritime Act 1990
of the Republic of the Marshall Islands, and will otherwise comply with and
satisfy all of the provisions of the Maritime Act 1990 as amended in order
3
<PAGE> 4
to establish and maintain this Mortgage as a first preferred mortgage lien
thereunder upon the Vessel and upon all renewals, replacements and improvements
made in or to the same for the amount of the Indebtedness hereby secured.
Section 5. The Shipowner will not cause or permit the Vessel to be
operated in any manner contrary to law, and the Shipowner will not engage in any
unlawful trade or 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 registration or
enrollment of the Vessel under the laws and regulations of the the Republic of
the Marshall Islands and will at all times keep the Vessel duly documented
thereunder.
Section 6. The Shipowner will pay and discharge when due and payable,
from time to time, all taxes, assessments, governmental charges, fines and
penalties lawfully imposed on the Vessel or any income therefrom; provided that
the Shipowner shall not be required to pay any such tax, assessment or charge if
the validity or amount thereof is concurrently contested in good faith by
appropriate proceedings and if the Shipowner shall have set aside on its books
reserves in accordance with generally accepted accounting principles in the
United States deemed by it adequate with respect to such tax, assessment or
charge; and provided further, however, that the Shipowner will pay or cause to
be paid all such taxes, assessments or charges forthwith upon the commencement
of proceedings to foreclose any lien which is attached as security therefor.
Section 7. Neither the Shipowner, any charterer, 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 any
lien whatsoever other than the lien of this Mortgage and Permitted Liens.
Section 8. The Shipowner will place, and at all times and places will
retain, a properly certified copy of this Mortgage on board the Vessel with her
papers and will cause each such certified copy to be exhibited to any and all
persons having business therewith which might give rise to any lien thereon
other than Permitted Liens, and to any representative of the Mortgagee; and will
place and keep prominently displayed in the chart room and in the Master's cabin
of the Vessel a framed printed notice in plain type reading as follows:
"NOTICE OF MORTGAGE
This Vessel is covered by a First Preferred Ship Mortgage in
favor of RBF Finance Co., under authority of Chapter 3 of the Maritime
Act 1990 of the Republic of the Marshall Islands. Under the terms of
said Mortgage,
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<PAGE> 5
neither the owner, any charterer, the Master of this Vessel nor any
other person has any right, power or authority to create, incur or
permit to be imposed upon this Vessel any other lien whatsoever except
Permitted Liens (as defined in the Mortgage), a copy of which is
available on board for inspection upon the request of any party having
business with the Vessel."
Section 9. Except for the lien of this Mortgage and Permitted Liens,
the Shipowner will not suffer to be continued any lien, encumbrance or charge on
the Vessel, and in due course and in any event within thirty (30) days after the
same becomes due and payable will pay or cause to be discharged or make adequate
provision for the satisfaction or discharge of all such claims or demands, or
will cause the Vessel to be released or discharged from any such lien,
encumbrance or charge therefor.
Section 10. If a libel or complaint is filed against the Vessel or the
Vessel is otherwise attached, levied upon or taken into custody by virtue of any
legal proceeding in any court, the Shipowner will promptly notify the Mortgagee
thereof by telex or telefax confirmed by letter, at its address, as specified in
this Mortgage, and within fifteen (15) days will cause the Vessel to be released
and all liens thereon other than this Mortgage and Permitted Liens to be
discharged and will promptly notify the Mortgagee thereof in the manner
aforesaid. The Shipowner will notify the Mortgagee within forty-eight (48) hours
after it has become known to the Shipowner of any average or salvage incurred by
the Vessel.
Section 11. (a) The Shipowner will at all times and without cost or
expense to the Mortgagee upgrade, maintain and preserve, or cause to be
upgraded, maintained and preserved, the Vessel and all its equipment, outfit and
appurtenances, tight, staunch, strong, in good condition, working order and
repair and in all respects seaworthy and fit for its intended service, and will
keep the Vessel, or cause it to be kept, in such condition as will entitle it to
the highest classification and rating for vessels of the same age and type in
Bureau Veritas or other classification society which is a member of the
International Association of Classification Societies and approved by the
Mortgagee, and will at the time of execution of this Mortgage, and annually
thereafter on the anniversary of the date of execution hereof will furnish to
the Mortgagee a certificate by such classification society that such
classification is maintained. The Vessel shall, and the Shipowner covenants that
it will, at all times comply with all applicable laws, treaties and conventions
to which the Republic of the Marshall Islands is a party, and rules and
regulations issued thereunder, and shall have on board as and when required
thereby valid certificates showing compliance therewith. The Shipowner will not
make, or permit to be made, any substantial change in the structure, type or
speed of the Vessel or change in its rig, without first receiving the written
approval thereof by the Mortgagee.
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<PAGE> 6
(b) The Shipowner agrees, following request by the Mortgagee, to give
the Mortgagee at least ten (10) days notice of actual date and place of any
survey of the Vessel in order that the Mortgagee may have representatives
present if desired. The Shipowner agrees that at the Mortgagee's request it will
satisfy the Mortgagee that the expense of such survey or work to be done thereat
is within the Shipowner's financial ability and will not result in a claim or
lien against the Vessel in violation of the provisions of this Mortgage.
Section 12. (a) The Shipowner will at all reasonable times afford the
Mortgagee or its authorized representatives full and complete access to the
Vessel for the purpose of inspecting the Vessel and its cargo and papers and, at
the request of the Mortgagee, the Shipowner will deliver for inspection copies
of any and all contracts and documents relating to the Vessel, whether on board
or not.
(b) The Shipowner hereby appoints the Mortgagee attorney-in-fact of the
Shipowner, whether or not an event of default shall have occurred or is
continuing, to appear before governmental bodies, classification societies and
insurers and to demand and receive to the same extent that the Shipowner itself
might, all information and certificates respecting (i) the corporate status of
the Shipowner under the laws of its jurisdiction of incorporation or any other
jurisdiction in which it may have qualified to do business, (ii) the status of
the Vessel under the laws and regulations of its country of registration and its
compliance with the requirements thereof, and (iii) the state of the records of
the Vessel or of the Shipowner in respect of the Vessel in any classification
society with which the Vessel may be classed or of any company, association or
club by whom the Vessel or the Shipowner in respect of the Vessel may be
insured; and the Shipowner hereby agrees that the Mortgagee may execute its
powers as attorney-in-fact as aforesaid through its agents, representatives and
attorneys. This power of attorney is coupled with an interest and shall be
irrevocable as long as any indebtedness from the Shipowner to the Mortgagee
remains outstanding.
Section 13. The Shipowner will not transfer or change the flag or port
of documentation of the Vessel without the prior written consent of the
Mortgagee, and any such written consent to any one transfer or change of flag or
port of documentation shall not be construed to be a waiver of this provision
with respect to any subsequent proposed transfer or change of flag or port of
documentation.
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<PAGE> 7
Section 14. The Shipowner will not sell, mortgage, demise charter for a
period longer than six (6) months, transfer or change the management of the
Vessel without the prior written consent of the Mortgagee, and any such written
consent to any one sale, mortgage, demise charter or transfer shall not be
construed to be a waiver of this provision with respect to any subsequent
proposed sale, mortgage, demise charter or transfer. Any such sale, mortgage,
demise charter or transfer of the Vessel shall be subject to the provisions of
this Mortgage and the lien hereof.
Section 15. (a) The Shipowner will cause to be carried and maintained
on or in respect of the Vessel without expense to the Mortgagee, all risk
equivalent Hull and Machinery and Protection and Indemnity insurance with
responsible and reputable insurance companies, underwriters, associations, clubs
or funds reasonably acceptable to the Mortgagee in an amount not less than the
greater of (X) 110% of the amount of the outstanding Indebtedness hereby secured
or (Y) the fair market value of the Vessel's hull and machinery, the "agreed
value"), war risk and protection and indemnity and insurances in such amounts
(with such deductibles or franchises), against such risks (including but not
limited to, loss of or damage to hull or machinery; protection and indemnity;
war risks in the event the Vessel is located outside United States territorial
waters; or waters above the outer Continental Shelf of the United States;
pollution risks) in such form (including, without limitation, the form of the
loss payable clause) and in U.S. currency as the Mortgagee shall from time to
time reasonably require or approve and as provided hereafter; and providing for
deductibles no greater than USD 1,000,000.00 per occurrence. The Shipowner shall
maintain liability insurance including crew liability, cargo liability,
pollution liability, contractual liability and removal of wreck insurance in
amounts similar to that maintained by owners of similar vessels and reasonably
acceptable to the Mortgagee or, without expense to the Mortgagee, have the
Vessel fully entered in a responsible and reputable Protection and Indemnity
Association or club in good standing and reasonably acceptable to the Mortgagee.
The Shipowner will cause such association or club to issue to the Mortgagee a
Letter of Undertaking or certificate or cover note, noting the Mortgagee's
interest in such insurance in a form reasonably satisfactory to the Mortgagee.
The Shipowner will furnish the Mortgagee from time to time on request and in any
event at least annually a detailed report (including a list showing the insured
value of the Vessel) signed by a firm of marine insurance brokers reasonably
acceptable to the Mortgagee with respect to the insurance carried and maintained
on the Vessel, together with its report as to the compliance of such insurance
with the requirements of this Section 15. The Shipowner agrees that, unless the
insurances by its terms provide that they cannot cease without the Mortgagee
being informed and having the right to continue the insurances by paying any
premiums not paid by the Shipowner, receipts showing payment of premiums for
required insurance paid shall be in the hands of the Mortgagee at least two (2)
days before the risk in question commences.
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<PAGE> 8
(b) The Shipowner shall, at its own expense, furnish to the Mortgagee a
breach of warranty endorsement, including Additional Perils Pollution, providing
coverage for the Mortgagee in an amount equal to at least 110% of the amount of
the Indebtedness hereby secured. Such mortgagee's breach of warranty endorsement
insurance shall be maintained in the broadest form available in the American or
British markets for vessels of the same type as the Vessel through underwriters
reasonably acceptable to the Mortgagee. The Vessel shall not undertake any
construction operations, carry any cargoes or proceed in an area then excluded
by trading warranties under its marine or war risk policies (including
protection and indemnity) without obtaining all necessary additional coverage,
reasonably satisfactory in form and substance to the Mortgagee; and evidence of
which additional insurance shall be furnished to the Mortgagee.
(c) The Shipowner will cause the relevant insurance brokers to agree
to, and the Shipowner hereby covenants and agrees that it will, advise the
Mortgagee of any expiration, termination, nonrenewal, alteration or cancellation
of any policy, any default in the payment of any premium and of any other act or
omission on the part of the Shipowner of which it has knowledge and which might
invalidate or render unenforceable, in whole or in part, any insurance on the
Vessel. To the extent obtainable from underwriters or brokers, all policies
required hereby shall provide for not less than thirty (30) days prior written
notice (ten (10) days with respect to non-payment of premiums and seven (7) days
with respect to war risks) to be received by the Mortgagee of the termination or
cancellation of the insurance evidenced thereby. All policies of insurance
maintained pursuant to this Article I, Section 15 shall contain provisions
waiving underwriters' rights of subrogation thereunder against any assured named
in such policy and any assignee of said assured.
(d) Unless the Mortgagee shall otherwise agree, all insurance (other
than any Protection and Indemnity Association or Club) must name the Mortgagee
as an additional insured but without liability for premiums, club calls,
assessments, warranties or representations, and all amounts of whatsoever nature
payable under any insurance must be payable to the Mortgagee for distribution
first to itself and thereafter to the Shipowner or others as interest may
appear. Nevertheless, unless an Event of Default shall have occurred and is
continuing (i) amounts payable under any insurance on the Vessel with respect to
protection and indemnity risks may be paid directly to the Shipowner to
reimburse it for any loss, damage or expense incurred by it and covered by such
insurance or to the person to whom any liability covered by such insurance has
been incurred; provided, however, if the Mortgagee shall give notice that the
Shipowner is in default hereunder, all
8
<PAGE> 9
such payments shall be made to the Mortgagee (with the exception of payments
made under employers liability, workman's compensation and similar insurances)
until the Indebtedness hereby secured has been fully discharged, and (ii) unless
an Event of Default has occurred or is continuing amounts payable under any
insurance with respect to the Vessel involving any damage to the Vessel not
constituting an actual or constructive total loss, the underwriters may pay
direct for the repair, salvage or other charges involved or, if the Shipowner
shall have first fully repaired the damage or paid all of the salvage or other
charges, may pay the Shipowner as reimbursement therefor; provided, however,
that if such amounts (including any franchise or deductible) are greater than
USD 1,000,000.00 the underwriters shall not make such payment without first
obtaining the written consent thereto of the Mortgagee.
(e) All amounts paid to the Mortgagee in respect of any insurance on
the Vessel shall be disposed of as follows:
(i) any amount which might have been paid at the time, in
accordance with the provisions of paragraph (d) above, directly to the
Shipowner or others shall be paid by the Mortgagee to, or as directed
by, the Shipowner;
(ii) all amounts paid to the Mortgagee in respect of an actual
or constructive or arranged total loss or requisition shall be applied
by the Mortgagee to the payment of the Indebtedness hereby secured in
full;
(iii) so long as no Event of Default shall have occurred and
be continuing all other amounts paid to the Mortgagee in respect of any
insurance on the Vessel shall be applied to the making of needed
repairs or other work on the Vessel, or to the payment of other claims
incurred by the Shipowner relating to the Vessel, or may be paid to the
Shipowner or whosoever may be entitled thereto;
(iv) all other amounts paid to the Mortgagee in respect of any
insurance on the Vessel may, in the Mortgagee's sole discretion, be
held and applied to the prepayment of the Indebtedness hereby secured.
(f) In the event that any claim or lien is asserted against the Vessel
for loss, damage or expense which is covered by insurance required hereunder and
it is necessary for the Shipowner to obtain a bond or supply other security to
prevent arrest of the Vessel or to release the Vessel from arrest on account of
such claim or lien, the Mortgagee, on request of the Shipowner, may, in the sole
discretion of the Mortgagee, assign to any person, firm or corporation executing
a surety or guarantee bond or other agreement to save or release the Vessel from
such arrest, all right, title and interest of the Mortgagee in and to said
insurance covering
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<PAGE> 10
said loss, damage or expense, as collateral security to indemnify against
liability under said bond or other agreement.
(g) The Shipowner shall deliver to the Mortgagee certified copies or
originals whenever so requested by the Mortgagee in writing, of all certificates
of entry, cover notes, binders, evidences of insurance and policies for the
purpose of inspection or safekeeping, or, alternatively, satisfactory letters of
undertaking from the broker holding the same.
(h) The Shipowner agrees that it will not execute or permit or
willingly allow to be done any act by which any insurance may be suspended,
impaired or canceled, and that it will not permit or allow the Vessel to
undertake any construction operations or run any risk or transport any cargo
which may not be permitted by the policies in force, without having previously
insured the Vessel by additional coverage to extend to such construction
operations, risks or cargoes.
(i) In case any underwriter proposes to pay less on any claim of total
loss (whether actual, constructive or compromised)than the amount thereof, the
Shipowner shall forthwith inform the Mortgagee and the consent of the Mortgagee
shall be required for any compromise thereof; and the Shipowner shall not agree
to any adjustment or compromise of any such loss except for the highest amount
reasonably obtainable thereon.
(j) The Shipowner will comply with and satisfy all of the provisions of
any applicable law, convention, regulation, proclamation or order concerning
financial responsibility for liabilities imposed on the Shipowner or the Vessel
with respect to pollution by any state or nation or political subdivision
thereof and will maintain all certificates or other evidence of financial
responsibility as may be required by any such law, convention, regulation,
proclamation or order with respect to the trade which the Vessel are from time
to time engaged in and the cargo carried by it or the construction projects
conducted by it.
(k) Any provision of this Section 15 to the contrary notwithstanding,
all aspects of the insurances on the Vessel (including risks covered, policy
terms, deductibles, forms of loss payable clauses, and underwriters or clubs)
shall at all times be fully satisfactory to and approved by the Mortgagee,
acting in its sole discretion. The Shipowner shall cause any insurance broker
arranging the insurances required by this Mortgage (who shall be approved by the
Mortgagee) to issue its letter of undertaking to the Mortgagee with respect to
such insurance matters as the Mortgagee shall request in accordance with usual
commercial practice.
Section 16. The Shipowner will reimburse the Mortgagee promptly, for
any and all expenditures which the Mortgagee may from
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time to time make, lay out or expend in providing such protection in respect of
insurance, discharge or purchase of liens, taxes, dues, assessments,
governmental charges, fines and penalties lawfully imposed, repairs, attorney's
fees, necessary translation fees for documents made in a language other than
English, and other matters as the Shipowner is obligated herein to provide, but
fails to provide. Such obligation of the Shipowner to reimburse the Mortgagee
shall be an additional indebtedness due from the Shipowner, secured by this
Mortgage, and shall be payable by the Shipowner on demand. The Mortgagee, though
privileged to do so, shall be under no obligation to the Shipowner to make any
such expenditures, nor shall the making thereof relieve the Shipowner of any
default in that respect.
Section 17. The Shipowner will fully perform any and all charter
parties or contracts of affreightment which are, or may be, entered into with
respect to the Vessel.
Section 18. The Shipowner further covenants and agrees with the
Mortgagee that, so long as any part of the Indebtedness hereby secured remains
unpaid, there shall be no change in the ownership of the Vessel, without the
prior written consent of the Mortgagee.
Section 19. (a) In the event of an actual or constructive or arranged
total loss or seizure or forfeiture or requisition or other taking, or any sale,
exchange, or other disposition of the Vessel by the Shipowner, whether or not
with the consent of the Mortgagee, then and in each such case the Shipowner
shall forthwith on demand prepay the Indebtedness hereby secured pursuant to
Section 2.3 of the Loan Agreement.
(b) This Mortgage shall extend to and constitute a lien upon, and the
Shipowner hereby grants the Mortgagee a security interest in, all proceeds
resulting from any of the events mentioned in subsection (a) above as security
for the Indebtedness hereby secured.
(c) The Shipowner hereby irrevocably authorizes the Mortgagee to file
and record financing statements under the Uniform Commercial Code in any
jurisdiction where the same may be in force or under any legislation having
similar effect for the purpose of perfecting or continuing the perfection of the
security interests granted by the Shipowner to the Mortgagee herein without
obtaining the signature of the Shipowner thereto. The Shipowner hereby
irrevocably authorizes the Mortgagee to execute any such financing statement or
similar document in the name of the Shipowner.
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ARTICLE II
Events of Default and Remedies.
Section 1. In case any one or more of the following events, herein
termed "Events of Default", shall have occurred and be continuing:
(a) any payment in respect of the Indebtedness hereby secured
has not been received by the Mortgagee when due after giving effect to
any applicable grace periods; or
(b) any Event of Default has occurred under the Loan
Agreement;
(c) the statements in Sections 2 and 3 of Article I shall
prove to be untrue in a material way; or
(d) a default shall have occurred in the due and punctual
observance and performance of any of the provisions of Sections 4, 5,
6, 9, 10, 11, 13, 14, 15, 16, 18 or 19 of Article I hereof; or
(e) a default by the Shipowner in the observance or
performance of any other agreement under this Mortgage shall have
occurred and shall remain unremedied for thirty (30) days after written
notice thereof shall have been given to the Shipowner by the Mortgagee;
or
(f) the Shipowner or any other obligor of any part of the
Indebtedness hereby secured: (i) is dissolved or its legal status is
lost or canceled by reason of any valid, judicial, extra-judicial, or
administrative proceeding shall have occurred, or (ii) dies or is
adjudicated a bankrupt, or (iii) shall admit in writing its inability
to pay its debts as they fall due, or (iv) shall make a general
assignment for the benefit of its creditors; or a receiver of the
property or business of the Shipowner or any obligor on or guarantor of
any part of the Indebtedness hereby secured is appointed by a court of
competent jurisdiction;
then, and in each and every such case, the Mortgagee shall have the
right to:
(1) Declare all the then unpaid Indebtedness hereby secured to
be due and payable immediately, and upon such declaration the same,
including interest to date of declaration, shall become and be
immediately due and payable (provided no declaration shall be required
if an event of default shall have occurred under subsection (f)
hereof);
(2) Exercise all of the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of the laws of the
Republic of the Marshall Islands or of any other jurisdiction where the
Vessel may be found;
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(3) Bring suit at law, in equity or in admiralty, as it may be
advised, to recover judgment for the Indebtedness hereby secured, and
collect the same out of any and all property of the Shipowner whether
covered by this Mortgage or otherwise;
(4) Take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process and without being
responsible for loss or damage, and the Shipowner or other person in
possession forthwith upon demand of the Mortgagee shall surrender to
the Mortgagee possession of the Vessel and the Mortgagee may, without
being responsible for loss or damage, hold, lay up, lease, charter,
operate or otherwise use the Vessel for such time and upon such terms
as it may deem to be for its best advantage, and demand, collect and
retain all hire, freights, earnings, issues, revenues, income, profits,
return premiums, salvage awards or recoveries, recoveries in general
average, 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, accounting only for the net profits, if any, arising from
such use of the Vessel and charging upon all receipts from the use of
the Vessel or from the sale thereof by court proceedings or pursuant to
Subsection (5) next following, all costs, expenses, charges, damages or
losses by reason of such use; and if at any time the Mortgagee shall
avail itself of the right herein given it to take the Vessel, the
Mortgagee shall have the right to dock the Vessel, for a reasonable
time at any dock, pier or other premises of the Shipowner without
charge, or to dock it at any other place at the cost and expense of the
Shipowner;
(5) Take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process, and if it seems
desirable to the Mortgagee and without being responsible for loss or
damage, sell the Vessel, at any place and at such time as the Mortgagee
may specify and in such manner as the Mortgagee may deem advisable,
free from any claim by the Shipowner in admiralty, in equity, at law or
by statute, at public or private sale, by sealed bids or otherwise, by
mailing, by air or otherwise, notice of such sale, whether public or
private, addressed to the Shipowner at its last known address, fourteen
(14) days prior to the date fixed for entering into the contract of
sale and by first publishing notice of any such public sale for ten
consecutive days, in a daily newspaper of general circulation published
in the City of Houston, State of Texas or if the place of sale should
not be in Houston, Texas then by publication of a similar notice at or
near the place of sale; 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; the sale may be held at
such place and
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at such time as the Mortgagee by notice may have specified, or may be
adjourned by the 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 the 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 the Mortgagee may deem
to be for its best advantage, and the Mortgagee may become the
purchaser at any judicial sale.
Section 2. Any 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 the Shipowner therein and thereto, and shall bar the Shipowner, its
successors and assigns, and all persons claiming by, through or under it. 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 the
application of the proceeds thereof. In case of any such sale, the Mortgagee, if
it is the purchaser, shall be entitled for the purpose of making settlement or
payment for the property purchased to use and apply the Indebtedness hereby
secured in order that there may be credited against the amount remaining due and
unpaid thereon the sums payable out of the net proceeds of such sale to the
Mortgagee after allowing for the costs and expense of sale and other charges;
and thereupon such purchaser shall be credited, on account of such purchase
price, with the net proceeds that shall have been so credited upon the
Indebtedness hereby secured. At any such judicial sale, the Mortgagee may bid
for and purchase such property and upon compliance with the terms of sale may
hold, retain and dispose of such property without further accountability
therefor.
Section 3. The Mortgagee is hereby appointed attorney in-fact of the
Shipowner, upon the happening of any Event of Default, to execute and deliver to
any purchaser aforesaid, and is hereby vested with full power and authority to
make, in the name and in behalf of the Shipowner, a good conveyance of the title
to the Vessel so sold. In the event of any sale of the Vessel, under any power
herein contained, the Shipowner will, if and when required by the Mortgagee,
execute such form of conveyance of the Vessel as the Mortgagee may direct or
approve.
Section 4. The Mortgagee is hereby appointed attorney in-fact of the
Shipowner upon the happening of any Event of Default, in the name of the
Shipowner to demand, collect, receive, compromise and sue for, so far as may be
permitted by law, all freight, 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,
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and all other sums due or to become due at the time of the happening of any
Event of Default 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 the Shipowner acquittances, receipts, releases or other discharges for the
same, whether under seal or otherwise, and to endorse and accept in the name of
the Shipowner all checks, notes, drafts, warrants, agreements and other
instruments in writing with respect to the foregoing.
Section 5. Whenever any right to enter and take possession of the
Vessel accrues to the Mortgagee, it may require the Shipowner to deliver, and
the Shipowner shall on demand, at its own cost and expense, deliver to the
Mortgagee the Vessel to a location designated by the Mortgagee as demanded. If
the Mortgagee shall be entitled to take any legal proceedings to enforce any
right under this Mortgage, the Mortgagee shall be entitled as a matter of right
to the appointment of a receiver of the Vessel and of the freights, hire,
earnings, issues, revenues, income and profits due or to become due and arising
from the operation thereof.
Section 6. The Shipowner authorizes and empowers the Mortgagee or its
appointees or any of them to appear in the name of the Shipowner, its successors
and 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 and to take such
proceedings as to them or any of them may seem proper towards the defense of
such suit and the purchase or discharge of such lien, and all expenditures made
or incurred by them or any of them for the purpose of such defense or purchase
or discharge shall be a debt due from the Shipowner, its successors and assigns,
to the Mortgagee, and shall be secured by the lien of this Mortgage in like
manner and extent as if the amount and description thereof were written herein.
Section 7. The Shipowner covenants that upon the happening of any Event
of Default, then, upon written demand of the Mortgagee, the Shipowner will pay
to the Mortgagee the whole amount due and payable in respect of the Indebtedness
hereby secured; and in case the Shipowner shall fail to pay the same forthwith
upon such demand, the Mortgagee shall be entitled to recover judgment for the
whole amount so due and unpaid, together with such further amounts as shall be
sufficient to cover the reasonable compensation to the Mortgagee's agents,
attorneys and counsel and any necessary advances, expenses and liabilities made
or incurred by it hereunder. All moneys collected by the Mortgagee under this
Article II, Section 7 shall be applied by the Mortgagee in accordance with the
provisions of Section 11 of this Article II.
Section 8. Each and every power and remedy herein given to the
Mortgagee shall be cumulative and shall be in addition to every
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other power and remedy herein given 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 otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by the 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 delay or omission by the Mortgagee in the exercise
of any right or power or in the pursuance of any remedy accruing upon any
default as above defined shall impair any such right, power or remedy or be
construed to be a waiver of any such Event of Default or to be an acquiescence
therein; nor shall the acceptance by the Mortgagee of any security or of any
payment of or on account of the Indebtedness hereby secured maturing after any
Event of Default or of any payment on account of any past default be construed
to be a waiver of any right to take advantage of any future Event of Default or
of any past Event of Default not completely cured thereby. No consent, waiver or
approval of the Mortgagee shall be deemed to be effective unless in writing and
duly signed by authorized signatories of the Mortgagee.
Section 9. If at any time after an Event of Default and prior to the
actual sale of the Vessel by the Mortgagee or prior to any enforcement or
foreclosure proceedings the Shipowner offers completely to cure all Events of
Default and to pay all expenses, advances and damages to the Mortgagee
consequent on such Events of Default, with interest with respect to the
Shipowner's obligations as provided herein or in the Loan Agreement as set forth
therein, then the Mortgagee may accept such offer and payment and restore the
Shipowner to its former position, but such action, if taken, shall not affect
any subsequent event of default or impair any rights consequent thereon.
Section 10. In case the Mortgagee shall have proceeded to enforce any
right, power or remedy under this Mortgage by foreclosure, entry or otherwise,
and such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Mortgagee, then and in every such
case the Shipowner and the Mortgagee shall 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 the Mortgagee
shall continue as if no such proceedings had been taken.
Section 11. The proceeds of any sale of the Vessel and the net earnings
of any charter operation or other use of the Vessel and any and all other moneys
received by the Mortgagee pursuant to or under the terms of this Mortgage or in
any proceedings hereunder, the application of which has not elsewhere herein
been specifically provided for, shall be applied as follows:
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First: To the payment of all expenses and charges,
including the expenses of any sale, the expenses of any
retaking, attorney's fees, court costs, and any other expenses
or advances made or incurred by the Mortgagee in the
protection of its rights or the pursuance of its remedies
hereunder;
Second: To the payment of the Indebtedness hereby
secured, whether due or not, including interest thereon to the
date of such payment; and
Third: To the payment of any surplus thereafter
remaining to the Shipowner or to whomsoever may be entitled
thereto.
Section 12. Until one or more Events of Default shall happen, the
Shipowner (a) shall be suffered and permitted to retain actual possession and
use of the Vessel and (b) shall have the right, from time to time, in its
discretion, and without application to the Mortgagee, and without obtaining a
release thereof by the Mortgagee, to dispose of, free from the lien hereof, any
boilers, engines, machinery, masts, spars, sails, rigging, boats, anchors,
chains, tackle, apparel, furniture, fittings or equipment or any other
appurtenances of the Vessel that are no longer useful, necessary, profitable or
advantageous in the operation of the Vessel, first or simultaneously replacing
the same by new boilers, engines, machinery, masts, spars, sails, rigging,
boats, anchors, chains, tackle, apparel, furniture, fittings, equipment, or
other appurtenances of substantially equal value to the Shipowner, which shall
forthwith become subject to the lien of this Mortgage as a preferred mortgage
thereon.
Section 13. (a) If any provision of this Mortgage should be deemed
invalid or shall be deemed to affect adversely the preferred status of this
Mortgage under any applicable law, such provision shall cease to be a part of
this Mortgage without affecting the remaining provisions, which shall remain in
full force and effect.
(b) In the event that the Note, the Loan Agreement or this Mortgage or
any of the documents or instruments which may from time to time be delivered
hereunder or thereunder or any provision hereof or thereof shall be deemed
invalidated by present or future law of any nation or by decision of any court,
or if any third party shall fail or refuse to recognize any of the powers
granted to the Mortgagee hereunder when it is sought to exercise them, this
shall not affect the validity or enforceability of all or any other parts of the
Note, the Loan Agreement or the Mortgage or such documents or instruments and,
in any such case, the Shipowner covenants and agrees that, on demand, it will
execute and deliver such other and further agreements, documents and instruments
and do such things as the Mortgagee in its sole discretion may deem to be
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necessary to carry out the true intent of this Mortgage, the Loan Agreement and
the Note.
(c) Anything herein to the contrary notwithstanding, it is intended
that nothing herein shall waive the preferred status of this Mortgage and that,
if any provision or portion thereof herein shall be construed to waive the
preferred status of this Mortgage, then such provision to such extent shall be
void and of no effect.
Section 14. In the event of any legal proceedings, the Shipowner
accepts for itself and subsequent owners of the Vessel, irrespective of domicile
or residence the nonexclusive jurisdiction of the courts of the State of New
York and the United States District Court of the Southern District Court of New
York as venue with notice provided in the manner established for residents of
the venue served on the Shipowner or on the Shipowner's manager or managing
owner or the Vessel's master.
ARTICLE III
Sundry Provisions
Section 1. All of the covenants, promises, stipulations and agreements
of the Shipowner in this Mortgage contained shall bind the Shipowner and its
successors and assigns and shall inure to the benefit of the Mortgagee and its
respective successors and assigns. In the event of any assignment or transfer of
this Mortgage, the term "Mortgagee", as used in this Mortgage, shall be deemed
to mean any such assignee or transferee.
Section 2. Wherever and whenever herein any right, power or authority
is granted or given to the Mortgagee, such right, power or authority may be
exercised in all cases by the Mortgagee or such agent or agents as it may
appoint, and the act or acts of such agent or agents when taken shall constitute
the act of the Mortgagee hereunder.
Section 3. This Mortgage may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
Section 4. Any notice or other communication to be given pursuant
hereto shall be in the manner provided in Section 7.8 of the Loan Agreement and
addressed:
If to the Shipowner to:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: Steven Webster
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If to the Mortgagee to:
RBF Finance Co.
901 Threadneedle
Houston, Texas 77079
Attention: Leighton Moss
or at such other address as either party may notify to the other in writing.
Section 5. The maximum principal amount that may be
outstanding under this Mortgage is Two Hundred Twenty-Five Million Six Hundred
Thousand United States Dollars (USD 225,600,000.00) and for the purpose of
recording this Mortgage, the total amount of this First Preferred Ship Mortgage
is Two Hundred Twenty-Five Million Six Hundred Thousand United States Dollars
(USD 225,600,000.00), and interest, expenses and performance of mortgage
covenants. The maturity date is March 15, 2009. The discharge amount is the same
as the total amount.
IN WITNESS WHEREOF, the Shipowner has caused this First
Preferred Ship Mortgage to be duly executed the day and year first above
written.
R&B FALCON CORPORATION
By: /s/ JOHN BOATWRIGHT
------------------------------------
Name: John Boatwright
Title: Attorney-in-Fact
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STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 26th day of March, 1999, before me personally appeared John
Boatwright, to me known, who, being by me duly sworn, did depose and say that he
resides at 1000 Louisiana, Houston, Texas 77002; that he is the Attorney-in-Fact
of R&B Falcon Corporation, the corporation described in the foregoing
instrument; that he signed his name thereto by order of the Board of Directors
of said corporation and that the foregoing instrument is the act and deed of the
corporation.
/s/ THOMAS J. HAWLEY
-----------------------------------
Notary Public
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<PAGE> 1
EXHIBIT 10.19
FIRST PREFERRED SHIP MORTGAGE
FIRST PREFERRED SHIP MORTGAGE, made the 26th day of March, 1999 by R&B
FALCON CORPORATION, a corporation organized and existing under the laws of the
State of Delaware with offices at 901 Threadneedle, Houston, Texas 77079,
qualifying as a Foreign Maritime Entity into the Marshall Islands(the
"Shipowner") and RBF FINANCE CO., a corporation organized and existing under the
laws of the State of Delaware with offices at 901 Threadneedle, Houston, Texas
77079 (the "Mortgagee");
WHEREAS:
A. The Shipowner is the sole-owner of 100% of the following Marshall
Islands flag vessel:
Name Off. No.
---- --------
FALCON 100 1328
which vessel has been duly documented in the name of the Shipowner in accordance
with the laws of the Republic of the Marshall Islands.
B. Pursuant to the Loan Agreement dated as of March 26, 1999 (the "Loan
Agreement") among the Shipowner and the Mortgagee, the Mortgagee has agreed to
loan up to USD 105,300,000.00 (the "Loan") to the Borrower.
C. The Borrower has delivered to the Mortgagee its Promissory Notes
(collectively, the "Note") dated the date hereof to evidence the Loan. A copy of
the form of the Loan Agreement and the Note are attached hereto as Exhibit A.
D. In order to secure the payment of all amounts due under the Loan
Agreement and the Note (including the principal of and interest thereon)
according to their terms, and the payment of all other such sums that may
hereinafter be secured by this Mortgage in accordance with the terms hereof, and
to secure the performance and observance of and compliance with all the
agreements, covenants and conditions of this Mortgage, the Shipowner has duly
authorized the execution and delivery of this First Preferred Ship Mortgage.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, and in order to secure the payment of all amounts due
under the Loan Agreement and the Note (including the principal of and interest
thereon) according to the terms of this Mortgage, the Loan Agreement and the
Note, and the payment of
<PAGE> 2
all other sums that may hereafter be secured by this Mortgage in accordance with
the terms hereof (all such principal, interest, and other sums being hereinafter
called the "Indebtedness hereby secured") and to secure the performance and
observance of and compliance with all of the agreements, covenants and
conditions of this Mortgage, the Loan Agreement and the Note, the Shipowner has
granted, conveyed, mortgaged, pledged, confirmed, assigned, transferred and set
over and by these presents does grant, convey, mortgage, pledge, confirm,
assign, transfer and set over, unto the Mortgagee, and its successors and
assigns the whole of the above mentioned vessel, including, without being
limited to, all of the boilers, engines, machinery, masts, spars, boats,
anchors, cables, chains, rigging, tackle, capstans, outfit, tools, pumps and
pumping equipment, apparel, furniture, fittings, equipment, spare parts, and all
other appurtenances (including without limitation drilling masts, rotary tables,
substructures, draw work, engines, pumps, blowout prevention equipment, drill
pipe and drill bits) thereunto appertaining or belonging, whether now owned or
hereafter acquired, and also any and all additions, improvements, renewals and
replacements hereafter made in or to such vessel or any part thereof, including
all items and appurtenances aforesaid (such together with all of the foregoing,
being herein called the "Vessel").
TO HAVE AND TO HOLD all and singular the above mortgaged and described
property unto the Mortgagee and its successors and assigns, to its and to its
successors' and assigns' own use, benefit and behoof forever.
PROVIDED, and these presents are upon the condition, that, if the
Shipowner or its successors or assigns shall pay or cause to be paid the
Indebtedness hereby secured as and when the same shall become due and payable in
accordance with the Note, the Loan Agreement and this Mortgage, and all other
such sums as may hereafter become secured by this Mortgage in accordance with
the terms hereof, and the Shipowner shall duly perform, observe and comply with
or cause to be performed, observed, or complied with all the covenants, terms
and conditions of this Mortgage, the Loan Agreement and the Note expressed or
implied, to be performed, then this Mortgage and the estate and rights hereunder
shall cease, determine and be void, otherwise to remain in full force and
effect.
The Shipowner for itself, its successors and assigns, hereby covenants,
declares and agrees with the Mortgagee and its successors and assigns that the
Vessel is to be held subject to the further covenants, conditions, terms and
uses hereinafter set forth.
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ARTICLE I
Representations and Covenants of the Shipowner.
Section 1. (a) The Shipowner will pay the Indebtedness hereby secured
and will observe, perform and comply with the covenants, terms and conditions
herein and in the Loan Agreement and the Note on its part to be observed,
performed or complied with.
(b) The obligation of the Indebtedness hereby secured is an obligation
in Dollars of the United States of America and the term "USD" when used herein
shall mean such Dollars. Notwithstanding fluctuations in the value or rate of
Dollars in terms of gold, or any other currency, all payments hereunder or
otherwise in respect of the Indebtedness hereby secured shall be payable in
terms of Dollars when due, and if not paid when due, in terms of Dollars when
paid, whether such payment is made before or after the due date.
(c) If a payment falls due on a day which banks in Houston, Texas and
New York, New York are not open for business ("holiday"), such payment is due on
the next following business day unless it would fall in a new calendar month, in
which event it shall be the preceding business day.
Section 2. The Shipowner is a corporation duly incorporated and
existing under the laws of the State of Delaware. The Shipowner has full power
and authority to own and mortgage the Vessel; all action necessary and required
by law for the execution and delivery of this Mortgage has been duly and
effectively taken; and the Indebtedness hereby secured is and will be the valid
and enforceable obligation of the Shipowner in accordance with its terms.
Section 3. The Shipowner lawfully owns and is lawfully possessed of the
Vessel free from any lien or encumbrance whatsoever other than for current
operating expenses incurred in the ordinary course of business (payment for
which is not overdue) and for liens covered (in excess of approved deductibles)
by insurance (collectively, the "Permitted Liens") or any commitment to make the
Vessel available to any governmental authority for charter, or sale or use, and
will warrant and defend the title and possession thereto and to every part
thereof for the benefit of the Mortgagee against the claims and demands of all
persons whomsoever.
Section 4. The Shipowner will cause this Mortgage to be duly recorded
with the Office of the Maritime Administrator, Republic of the Marshall Islands,
in accordance with the provisions of Sections 66 and 70 of the Maritime Act 1990
of the Republic of the Marshall Islands, and will otherwise comply with and
satisfy all of the provisions of the Maritime Act 1990 as amended in order
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to establish and maintain this Mortgage as a first preferred mortgage lien
thereunder upon the Vessel and upon all renewals, replacements and improvements
made in or to the same for the amount of the Indebtedness hereby secured.
Section 5. The Shipowner will not cause or permit the Vessel to be
operated in any manner contrary to law, and the Shipowner will not engage in any
unlawful trade or 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 registration or
enrollment of the Vessel under the laws and regulations of the the Republic of
the Marshall Islands and will at all times keep the Vessel duly documented
thereunder.
Section 6. The Shipowner will pay and discharge when due and payable,
from time to time, all taxes, assessments, governmental charges, fines and
penalties lawfully imposed on the Vessel or any income therefrom; provided that
the Shipowner shall not be required to pay any such tax, assessment or charge if
the validity or amount thereof is concurrently contested in good faith by
appropriate proceedings and if the Shipowner shall have set aside on its books
reserves in accordance with generally accepted accounting principles in the
United States deemed by it adequate with respect to such tax, assessment or
charge; and provided further, however, that the Shipowner will pay or cause to
be paid all such taxes, assessments or charges forthwith upon the commencement
of proceedings to foreclose any lien which is attached as security therefor.
Section 7. Neither the Shipowner, any charterer, 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 any
lien whatsoever other than the lien of this Mortgage and Permitted Liens.
Section 8. The Shipowner will place, and at all times and places will
retain, a properly certified copy of this Mortgage on board the Vessel with her
papers and will cause each such certified copy to be exhibited to any and all
persons having business therewith which might give rise to any lien thereon
other than Permitted Liens, and to any representative of the Mortgagee; and will
place and keep prominently displayed in the chart room and in the Master's cabin
of the Vessel a framed printed notice in plain type reading as follows:
"NOTICE OF MORTGAGE
This Vessel is covered by a First Preferred Ship Mortgage in
favor of RBF Finance Co., under authority of Chapter 3 of the Maritime
Act 1990 of the Republic of the Marshall Islands. Under the terms of
said Mortgage,
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neither the owner, any charterer, the Master of this Vessel nor any
other person has any right, power or authority to create, incur or
permit to be imposed upon this Vessel any other lien whatsoever except
Permitted Liens (as defined in the Mortgage), a copy of which is
available on board for inspection upon the request of any party having
business with the Vessel."
Section 9. Except for the lien of this Mortgage and Permitted Liens,
the Shipowner will not suffer to be continued any lien, encumbrance or charge on
the Vessel, and in due course and in any event within thirty (30) days after the
same becomes due and payable will pay or cause to be discharged or make adequate
provision for the satisfaction or discharge of all such claims or demands, or
will cause the Vessel to be released or discharged from any such lien,
encumbrance or charge therefor.
Section 10. If a libel or complaint is filed against the Vessel or the
Vessel is otherwise attached, levied upon or taken into custody by virtue of any
legal proceeding in any court, the Shipowner will promptly notify the Mortgagee
thereof by telex or telefax confirmed by letter, at its address, as specified in
this Mortgage, and within fifteen (15) days will cause the Vessel to be released
and all liens thereon other than this Mortgage and Permitted Liens to be
discharged and will promptly notify the Mortgagee thereof in the manner
aforesaid. The Shipowner will notify the Mortgagee within forty-eight (48) hours
after it has become known to the Shipowner of any average or salvage incurred by
the Vessel.
Section 11. (a) The Shipowner will at all times and without cost or
expense to the Mortgagee upgrade, maintain and preserve, or cause to be
upgraded, maintained and preserved, the Vessel and all its equipment, outfit and
appurtenances, tight, staunch, strong, in good condition, working order and
repair and in all respects seaworthy and fit for its intended service, and will
keep the Vessel, or cause it to be kept, in such condition as will entitle it to
the highest classification and rating for vessels of the same age and type in
Bureau Veritas or other classification society which is a member of the
International Association of Classification Societies and approved by the
Mortgagee, and will at the time of execution of this Mortgage, and annually
thereafter on the anniversary of the date of execution hereof will furnish to
the Mortgagee a certificate by such classification society that such
classification is maintained. The Vessel shall, and the Shipowner covenants that
it will, at all times comply with all applicable laws, treaties and conventions
to which the Republic of the Marshall Islands is a party, and rules and
regulations issued thereunder, and shall have on board as and when required
thereby valid certificates showing compliance therewith. The Shipowner will not
make, or permit to be made, any substantial change in the structure, type or
speed of the Vessel or change in its rig, without first receiving the written
approval thereof by the Mortgagee.
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(b) The Shipowner agrees, following request by the Mortgagee, to give
the Mortgagee at least ten (10) days notice of actual date and place of any
survey of the Vessel in order that the Mortgagee may have representatives
present if desired. The Shipowner agrees that at the Mortgagee's request it will
satisfy the Mortgagee that the expense of such survey or work to be done thereat
is within the Shipowner's financial ability and will not result in a claim or
lien against the Vessel in violation of the provisions of this Mortgage.
Section 12. (a) The Shipowner will at all reasonable times afford the
Mortgagee or its authorized representatives full and complete access to the
Vessel for the purpose of inspecting the Vessel and its cargo and papers and, at
the request of the Mortgagee, the Shipowner will deliver for inspection copies
of any and all contracts and documents relating to the Vessel, whether on board
or not.
(b) The Shipowner hereby appoints the Mortgagee attorney-in-fact of the
Shipowner, whether or not an event of default shall have occurred or is
continuing, to appear before governmental bodies, classification societies and
insurers and to demand and receive to the same extent that the Shipowner itself
might, all information and certificates respecting (i) the corporate status of
the Shipowner under the laws of its jurisdiction of incorporation or any other
jurisdiction in which it may have qualified to do business, (ii) the status of
the Vessel under the laws and regulations of its country of registration and its
compliance with the requirements thereof, and (iii) the state of the records of
the Vessel or of the Shipowner in respect of the Vessel in any classification
society with which the Vessel may be classed or of any company, association or
club by whom the Vessel or the Shipowner in respect of the Vessel may be
insured; and the Shipowner hereby agrees that the Mortgagee may execute its
powers as attorney-in-fact as aforesaid through its agents, representatives and
attorneys. This power of attorney is coupled with an interest and shall be
irrevocable as long as any indebtedness from the Shipowner to the Mortgagee
remains outstanding.
Section 13. The Shipowner will not transfer or change the flag or port
of documentation of the Vessel without the prior written consent of the
Mortgagee, and any such written consent to any one transfer or change of flag or
port of documentation shall not be construed to be a waiver of this provision
with respect to any subsequent proposed transfer or change of flag or port of
documentation.
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Section 14. The Shipowner will not sell, mortgage, demise charter for a
period longer than six (6) months, transfer or change the management of the
Vessel without the prior written consent of the Mortgagee, and any such written
consent to any one sale, mortgage, demise charter or transfer shall not be
construed to be a waiver of this provision with respect to any subsequent
proposed sale, mortgage, demise charter or transfer. Any such sale, mortgage,
demise charter or transfer of the Vessel shall be subject to the provisions of
this Mortgage and the lien hereof.
Section 15. (a) The Shipowner will cause to be carried and maintained
on or in respect of the Vessel without expense to the Mortgagee, all risk
equivalent Hull and Machinery and Protection and Indemnity insurance with
responsible and reputable insurance companies, underwriters, associations, clubs
or funds reasonably acceptable to the Mortgagee in an amount not less than the
greater of (X) 110% of the amount of the outstanding Indebtedness hereby secured
or (Y) the fair market value of the Vessel's hull and machinery, the "agreed
value"), war risk and protection and indemnity and insurances in such amounts
(with such deductibles or franchises), against such risks (including but not
limited to, loss of or damage to hull or machinery; protection and indemnity;
war risks in the event the Vessel is located outside United States territorial
waters; or waters above the outer Continental Shelf of the United States;
pollution risks) in such form (including, without limitation, the form of the
loss payable clause) and in U.S. currency as the Mortgagee shall from time to
time reasonably require or approve and as provided hereafter; and providing for
deductibles no greater than USD 1,000,000.00 per occurrence. The Shipowner shall
maintain liability insurance including crew liability, cargo liability,
pollution liability, contractual liability and removal of wreck insurance in
amounts similar to that maintained by owners of similar vessels and reasonably
acceptable to the Mortgagee or, without expense to the Mortgagee, have the
Vessel fully entered in a responsible and reputable Protection and Indemnity
Association or club in good standing and reasonably acceptable to the Mortgagee.
The Shipowner will cause such association or club to issue to the Mortgagee a
Letter of Undertaking or certificate or cover note, noting the Mortgagee's
interest in such insurance in a form reasonably satisfactory to the Mortgagee.
The Shipowner will furnish the Mortgagee from time to time on request and in any
event at least annually a detailed report (including a list showing the insured
value of the Vessel) signed by a firm of marine insurance brokers reasonably
acceptable to the Mortgagee with respect to the insurance carried and maintained
on the Vessel, together with its report as to the compliance of such insurance
with the requirements of this Section 15. The Shipowner agrees that, unless the
insurances by its terms provide that they cannot cease without the Mortgagee
being informed and having the right to continue the insurances by paying any
premiums not paid by the Shipowner, receipts showing payment of premiums for
required insurance paid shall be in the hands of the Mortgagee at least two (2)
days before the risk in question commences.
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(b) The Shipowner shall, at its own expense, furnish to the Mortgagee a
breach of warranty endorsement, including Additional Perils Pollution, providing
coverage for the Mortgagee in an amount equal to at least 110% of the amount of
the Indebtedness hereby secured. Such mortgagee's breach of warranty endorsement
insurance shall be maintained in the broadest form available in the American or
British markets for vessels of the same type as the Vessel through underwriters
reasonably acceptable to the Mortgagee. The Vessel shall not undertake any
construction operations, carry any cargoes or proceed in an area then excluded
by trading warranties under its marine or war risk policies (including
protection and indemnity) without obtaining all necessary additional coverage,
reasonably satisfactory in form and substance to the Mortgagee; and evidence of
which additional insurance shall be furnished to the Mortgagee.
(c) The Shipowner will cause the relevant insurance brokers to agree
to, and the Shipowner hereby covenants and agrees that it will, advise the
Mortgagee of any expiration, termination, nonrenewal, alteration or cancellation
of any policy, any default in the payment of any premium and of any other act or
omission on the part of the Shipowner of which it has knowledge and which might
invalidate or render unenforceable, in whole or in part, any insurance on the
Vessel. To the extent obtainable from underwriters or brokers, all policies
required hereby shall provide for not less than thirty (30) days prior written
notice (ten (10) days with respect to non-payment of premiums and seven (7) days
with respect to war risks) to be received by the Mortgagee of the termination or
cancellation of the insurance evidenced thereby. All policies of insurance
maintained pursuant to this Article I, Section 15 shall contain provisions
waiving underwriters' rights of subrogation thereunder against any assured named
in such policy and any assignee of said assured.
(d) Unless the Mortgagee shall otherwise agree, all insurance (other
than any Protection and Indemnity Association or Club) must name the Mortgagee
as an additional insured but without liability for premiums, club calls,
assessments, warranties or representations, and all amounts of whatsoever nature
payable under any insurance must be payable to the Mortgagee for distribution
first to itself and thereafter to the Shipowner or others as interest may
appear. Nevertheless, unless an Event of Default shall have occurred and is
continuing (i) amounts payable under any insurance on the Vessel with respect to
protection and indemnity risks may be paid directly to the Shipowner to
reimburse it for any loss, damage or expense incurred by it and covered by such
insurance or to the person to whom any liability covered by such insurance has
been incurred; provided, however, if the Mortgagee shall give notice that the
Shipowner is in default hereunder, all
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such payments shall be made to the Mortgagee (with the exception of payments
made under employers liability, workman's compensation and similar insurances)
until the Indebtedness hereby secured has been fully discharged, and (ii) unless
an Event of Default has occurred or is continuing amounts payable under any
insurance with respect to the Vessel involving any damage to the Vessel not
constituting an actual or constructive total loss, the underwriters may pay
direct for the repair, salvage or other charges involved or, if the Shipowner
shall have first fully repaired the damage or paid all of the salvage or other
charges, may pay the Shipowner as reimbursement therefor; provided, however,
that if such amounts (including any franchise or deductible) are greater than
USD 1,000,000.00 the underwriters shall not make such payment without first
obtaining the written consent thereto of the Mortgagee.
(e) All amounts paid to the Mortgagee in respect of any insurance on
the Vessel shall be disposed of as follows:
(i) any amount which might have been paid at the time, in
accordance with the provisions of paragraph (d) above, directly to the
Shipowner or others shall be paid by the Mortgagee to, or as directed
by, the Shipowner;
(ii) all amounts paid to the Mortgagee in respect of an actual
or constructive or arranged total loss or requisition shall be applied
by the Mortgagee to the payment of the Indebtedness hereby secured in
full;
(iii) so long as no Event of Default shall have occurred and
be continuing all other amounts paid to the Mortgagee in respect of any
insurance on the Vessel shall be applied to the making of needed
repairs or other work on the Vessel, or to the payment of other claims
incurred by the Shipowner relating to the Vessel, or may be paid to the
Shipowner or whosoever may be entitled thereto;
(iv) all other amounts paid to the Mortgagee in respect of any
insurance on the Vessel may, in the Mortgagee's sole discretion, be
held and applied to the prepayment of the Indebtedness hereby secured.
(f) In the event that any claim or lien is asserted against the Vessel
for loss, damage or expense which is covered by insurance required hereunder and
it is necessary for the Shipowner to obtain a bond or supply other security to
prevent arrest of the Vessel or to release the Vessel from arrest on account of
such claim or lien, the Mortgagee, on request of the Shipowner, may, in the sole
discretion of the Mortgagee, assign to any person, firm or corporation executing
a surety or guarantee bond or other agreement to save or release the Vessel from
such arrest, all right, title and interest of the Mortgagee in and to said
insurance covering
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said loss, damage or expense, as collateral security to indemnify against
liability under said bond or other agreement.
(g) The Shipowner shall deliver to the Mortgagee certified copies or
originals whenever so requested by the Mortgagee in writing, of all certificates
of entry, cover notes, binders, evidences of insurance and policies for the
purpose of inspection or safekeeping, or, alternatively, satisfactory letters of
undertaking from the broker holding the same.
(h) The Shipowner agrees that it will not execute or permit or
willingly allow to be done any act by which any insurance may be suspended,
impaired or canceled, and that it will not permit or allow the Vessel to
undertake any construction operations or run any risk or transport any cargo
which may not be permitted by the policies in force, without having previously
insured the Vessel by additional coverage to extend to such construction
operations, risks or cargoes.
(i) In case any underwriter proposes to pay less on any claim of total
loss (whether actual, constructive or compromised)than the amount thereof, the
Shipowner shall forthwith inform the Mortgagee and the consent of the Mortgagee
shall be required for any compromise thereof; and the Shipowner shall not agree
to any adjustment or compromise of any such loss except for the highest amount
reasonably obtainable thereon.
(j) The Shipowner will comply with and satisfy all of the provisions of
any applicable law, convention, regulation, proclamation or order concerning
financial responsibility for liabilities imposed on the Shipowner or the Vessel
with respect to pollution by any state or nation or political subdivision
thereof and will maintain all certificates or other evidence of financial
responsibility as may be required by any such law, convention, regulation,
proclamation or order with respect to the trade which the Vessel are from time
to time engaged in and the cargo carried by it or the construction projects
conducted by it.
(k) Any provision of this Section 15 to the contrary notwithstanding,
all aspects of the insurances on the Vessel (including risks covered, policy
terms, deductibles, forms of loss payable clauses, and underwriters or clubs)
shall at all times be fully satisfactory to and approved by the Mortgagee,
acting in its sole discretion. The Shipowner shall cause any insurance broker
arranging the insurances required by this Mortgage (who shall be approved by the
Mortgagee) to issue its letter of undertaking to the Mortgagee with respect to
such insurance matters as the Mortgagee shall request in accordance with usual
commercial practice.
Section 16. The Shipowner will reimburse the Mortgagee promptly, for
any and all expenditures which the Mortgagee may from
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time to time make, lay out or expend in providing such protection in respect of
insurance, discharge or purchase of liens, taxes, dues, assessments,
governmental charges, fines and penalties lawfully imposed, repairs, attorney's
fees, necessary translation fees for documents made in a language other than
English, and other matters as the Shipowner is obligated herein to provide, but
fails to provide. Such obligation of the Shipowner to reimburse the Mortgagee
shall be an additional indebtedness due from the Shipowner, secured by this
Mortgage, and shall be payable by the Shipowner on demand. The Mortgagee, though
privileged to do so, shall be under no obligation to the Shipowner to make any
such expenditures, nor shall the making thereof relieve the Shipowner of any
default in that respect.
Section 17. The Shipowner will fully perform any and all charter
parties or contracts of affreightment which are, or may be, entered into with
respect to the Vessel.
Section 18. The Shipowner further covenants and agrees with the
Mortgagee that, so long as any part of the Indebtedness hereby secured remains
unpaid, there shall be no change in the ownership of the Vessel, without the
prior written consent of the Mortgagee.
Section 19. (a) In the event of an actual or constructive or arranged
total loss or seizure or forfeiture or requisition or other taking, or any sale,
exchange, or other disposition of the Vessel by the Shipowner, whether or not
with the consent of the Mortgagee, then and in each such case the Shipowner
shall forthwith on demand prepay the Indebtedness hereby secured pursuant to
Section 2.3 of the Loan Agreement.
(b) This Mortgage shall extend to and constitute a lien upon, and the
Shipowner hereby grants the Mortgagee a security interest in, all proceeds
resulting from any of the events mentioned in subsection (a) above as security
for the Indebtedness hereby secured.
(c) The Shipowner hereby irrevocably authorizes the Mortgagee to file
and record financing statements under the Uniform Commercial Code in any
jurisdiction where the same may be in force or under any legislation having
similar effect for the purpose of perfecting or continuing the perfection of the
security interests granted by the Shipowner to the Mortgagee herein without
obtaining the signature of the Shipowner thereto. The Shipowner hereby
irrevocably authorizes the Mortgagee to execute any such financing statement or
similar document in the name of the Shipowner.
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ARTICLE II
Events of Default and Remedies.
Section 1. In case any one or more of the following events, herein
termed "Events of Default", shall have occurred and be continuing:
(a) any payment in respect of the Indebtedness hereby secured
has not been received by the Mortgagee when due after giving effect to
any applicable grace periods; or
(b) any Event of Default has occurred under the Loan
Agreement;
(c) the statements in Sections 2 and 3 of Article I shall
prove to be untrue in a material way; or
(d) a default shall have occurred in the due and punctual
observance and performance of any of the provisions of Sections 4, 5,
6, 9, 10, 11, 13, 14, 15, 16, 18 or 19 of Article I hereof; or
(e) a default by the Shipowner in the observance or
performance of any other agreement under this Mortgage shall have
occurred and shall remain unremedied for thirty (30) days after written
notice thereof shall have been given to the Shipowner by the Mortgagee;
or
(f) the Shipowner or any other obligor of any part of the
Indebtedness hereby secured: (i) is dissolved or its legal status is
lost or canceled by reason of any valid, judicial, extra-judicial, or
administrative proceeding shall have occurred, or (ii) dies or is
adjudicated a bankrupt, or (iii) shall admit in writing its inability
to pay its debts as they fall due, or (iv) shall make a general
assignment for the benefit of its creditors; or a receiver of the
property or business of the Shipowner or any obligor on or guarantor of
any part of the Indebtedness hereby secured is appointed by a court of
competent jurisdiction;
then, and in each and every such case, the Mortgagee shall
have the right to:
(1) Declare all the then unpaid Indebtedness hereby secured to
be due and payable immediately, and upon such declaration the same,
including interest to date of declaration, shall become and be
immediately due and payable (provided no declaration shall be required
if an event of default shall have occurred under subsection (f)
hereof);
(2) Exercise all of the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of the laws of the
Republic of the Marshall Islands or of any other jurisdiction where the
Vessel may be found;
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(3) Bring suit at law, in equity or in admiralty, as it may be
advised, to recover judgment for the Indebtedness hereby secured, and
collect the same out of any and all property of the Shipowner whether
covered by this Mortgage or otherwise;
(4) Take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process and without being
responsible for loss or damage, and the Shipowner or other person in
possession forthwith upon demand of the Mortgagee shall surrender to
the Mortgagee possession of the Vessel and the Mortgagee may, without
being responsible for loss or damage, hold, lay up, lease, charter,
operate or otherwise use the Vessel for such time and upon such terms
as it may deem to be for its best advantage, and demand, collect and
retain all hire, freights, earnings, issues, revenues, income, profits,
return premiums, salvage awards or recoveries, recoveries in general
average, 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, accounting only for the net profits, if any, arising from
such use of the Vessel and charging upon all receipts from the use of
the Vessel or from the sale thereof by court proceedings or pursuant to
Subsection (5) next following, all costs, expenses, charges, damages or
losses by reason of such use; and if at any time the Mortgagee shall
avail itself of the right herein given it to take the Vessel, the
Mortgagee shall have the right to dock the Vessel, for a reasonable
time at any dock, pier or other premises of the Shipowner without
charge, or to dock it at any other place at the cost and expense of the
Shipowner;
(5) Take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process, and if it seems
desirable to the Mortgagee and without being responsible for loss or
damage, sell the Vessel, at any place and at such time as the Mortgagee
may specify and in such manner as the Mortgagee may deem advisable,
free from any claim by the Shipowner in admiralty, in equity, at law or
by statute, at public or private sale, by sealed bids or otherwise, by
mailing, by air or otherwise, notice of such sale, whether public or
private, addressed to the Shipowner at its last known address, fourteen
(14) days prior to the date fixed for entering into the contract of
sale and by first publishing notice of any such public sale for ten
consecutive days, in a daily newspaper of general circulation published
in the City of Houston, State of Texas or if the place of sale should
not be in Houston, Texas then by publication of a similar notice at or
near the place of sale; 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; the sale may be held at
such place and
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at such time as the Mortgagee by notice may have specified, or may be
adjourned by the 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 the 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 the Mortgagee may deem
to be for its best advantage, and the Mortgagee may become the
purchaser at any judicial sale.
Section 2. Any 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 the Shipowner therein and thereto, and shall bar the Shipowner, its
successors and assigns, and all persons claiming by, through or under it. 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 the
application of the proceeds thereof. In case of any such sale, the Mortgagee, if
it is the purchaser, shall be entitled for the purpose of making settlement or
payment for the property purchased to use and apply the Indebtedness hereby
secured in order that there may be credited against the amount remaining due and
unpaid thereon the sums payable out of the net proceeds of such sale to the
Mortgagee after allowing for the costs and expense of sale and other charges;
and thereupon such purchaser shall be credited, on account of such purchase
price, with the net proceeds that shall have been so credited upon the
Indebtedness hereby secured. At any such judicial sale, the Mortgagee may bid
for and purchase such property and upon compliance with the terms of sale may
hold, retain and dispose of such property without further accountability
therefor.
Section 3. The Mortgagee is hereby appointed attorney in-fact of the
Shipowner, upon the happening of any Event of Default, to execute and deliver to
any purchaser aforesaid, and is hereby vested with full power and authority to
make, in the name and in behalf of the Shipowner, a good conveyance of the title
to the Vessel so sold. In the event of any sale of the Vessel, under any power
herein contained, the Shipowner will, if and when required by the Mortgagee,
execute such form of conveyance of the Vessel as the Mortgagee may direct or
approve.
Section 4. The Mortgagee is hereby appointed attorney in-fact of the
Shipowner upon the happening of any Event of Default, in the name of the
Shipowner to demand, collect, receive, compromise and sue for, so far as may be
permitted by law, all freight, 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,
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and all other sums due or to become due at the time of the happening of any
Event of Default 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 the Shipowner acquittances, receipts, releases or other discharges for the
same, whether under seal or otherwise, and to endorse and accept in the name of
the Shipowner all checks, notes, drafts, warrants, agreements and other
instruments in writing with respect to the foregoing.
Section 5. Whenever any right to enter and take possession of the
Vessel accrues to the Mortgagee, it may require the Shipowner to deliver, and
the Shipowner shall on demand, at its own cost and expense, deliver to the
Mortgagee the Vessel to a location designated by the Mortgagee as demanded. If
the Mortgagee shall be entitled to take any legal proceedings to enforce any
right under this Mortgage, the Mortgagee shall be entitled as a matter of right
to the appointment of a receiver of the Vessel and of the freights, hire,
earnings, issues, revenues, income and profits due or to become due and arising
from the operation thereof.
Section 6. The Shipowner authorizes and empowers the Mortgagee or its
appointees or any of them to appear in the name of the Shipowner, its successors
and 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 and to take such
proceedings as to them or any of them may seem proper towards the defense of
such suit and the purchase or discharge of such lien, and all expenditures made
or incurred by them or any of them for the purpose of such defense or purchase
or discharge shall be a debt due from the Shipowner, its successors and assigns,
to the Mortgagee, and shall be secured by the lien of this Mortgage in like
manner and extent as if the amount and description thereof were written herein.
Section 7. The Shipowner covenants that upon the happening of any Event
of Default, then, upon written demand of the Mortgagee, the Shipowner will pay
to the Mortgagee the whole amount due and payable in respect of the Indebtedness
hereby secured; and in case the Shipowner shall fail to pay the same forthwith
upon such demand, the Mortgagee shall be entitled to recover judgment for the
whole amount so due and unpaid, together with such further amounts as shall be
sufficient to cover the reasonable compensation to the Mortgagee's agents,
attorneys and counsel and any necessary advances, expenses and liabilities made
or incurred by it hereunder. All moneys collected by the Mortgagee under this
Article II, Section 7 shall be applied by the Mortgagee in accordance with the
provisions of Section 11 of this Article II.
Section 8. Each and every power and remedy herein given to the
Mortgagee shall be cumulative and shall be in addition to every
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other power and remedy herein given 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 otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by the 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 delay or omission by the Mortgagee in the exercise
of any right or power or in the pursuance of any remedy accruing upon any
default as above defined shall impair any such right, power or remedy or be
construed to be a waiver of any such Event of Default or to be an acquiescence
therein; nor shall the acceptance by the Mortgagee of any security or of any
payment of or on account of the Indebtedness hereby secured maturing after any
Event of Default or of any payment on account of any past default be construed
to be a waiver of any right to take advantage of any future Event of Default or
of any past Event of Default not completely cured thereby. No consent, waiver or
approval of the Mortgagee shall be deemed to be effective unless in writing and
duly signed by authorized signatories of the Mortgagee.
Section 9. If at any time after an Event of Default and prior to the
actual sale of the Vessel by the Mortgagee or prior to any enforcement or
foreclosure proceedings the Shipowner offers completely to cure all Events of
Default and to pay all expenses, advances and damages to the Mortgagee
consequent on such Events of Default, with interest with respect to the
Shipowner's obligations as provided herein or in the Loan Agreement as set forth
therein, then the Mortgagee may accept such offer and payment and restore the
Shipowner to its former position, but such action, if taken, shall not affect
any subsequent event of default or impair any rights consequent thereon.
Section 10. In case the Mortgagee shall have proceeded to enforce any
right, power or remedy under this Mortgage by foreclosure, entry or otherwise,
and such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Mortgagee, then and in every such
case the Shipowner and the Mortgagee shall 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 the Mortgagee
shall continue as if no such proceedings had been taken.
Section 11. The proceeds of any sale of the Vessel and the net earnings
of any charter operation or other use of the Vessel and any and all other moneys
received by the Mortgagee pursuant to or under the terms of this Mortgage or in
any proceedings hereunder, the application of which has not elsewhere herein
been specifically provided for, shall be applied as follows:
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First: To the payment of all expenses and charges,
including the expenses of any sale, the expenses of any
retaking, attorney's fees, court costs, and any other expenses
or advances made or incurred by the Mortgagee in the
protection of its rights or the pursuance of its remedies
hereunder;
Second: To the payment of the Indebtedness hereby
secured, whether due or not, including interest thereon to the
date of such payment; and
Third: To the payment of any surplus thereafter
remaining to the Shipowner or to whomsoever may be entitled
thereto.
Section 12. Until one or more Events of Default shall happen, the
Shipowner (a) shall be suffered and permitted to retain actual possession and
use of the Vessel and (b) shall have the right, from time to time, in its
discretion, and without application to the Mortgagee, and without obtaining a
release thereof by the Mortgagee, to dispose of, free from the lien hereof, any
boilers, engines, machinery, masts, spars, sails, rigging, boats, anchors,
chains, tackle, apparel, furniture, fittings or equipment or any other
appurtenances of the Vessel that are no longer useful, necessary, profitable or
advantageous in the operation of the Vessel, first or simultaneously replacing
the same by new boilers, engines, machinery, masts, spars, sails, rigging,
boats, anchors, chains, tackle, apparel, furniture, fittings, equipment, or
other appurtenances of substantially equal value to the Shipowner, which shall
forthwith become subject to the lien of this Mortgage as a preferred mortgage
thereon.
Section 13. (a) If any provision of this Mortgage should be deemed
invalid or shall be deemed to affect adversely the preferred status of this
Mortgage under any applicable law, such provision shall cease to be a part of
this Mortgage without affecting the remaining provisions, which shall remain in
full force and effect.
(b) In the event that the Note, the Loan Agreement or this Mortgage or
any of the documents or instruments which may from time to time be delivered
hereunder or thereunder or any provision hereof or thereof shall be deemed
invalidated by present or future law of any nation or by decision of any court,
or if any third party shall fail or refuse to recognize any of the powers
granted to the Mortgagee hereunder when it is sought to exercise them, this
shall not affect the validity or enforceability of all or any other parts of the
Note, the Loan Agreement or the Mortgage or such documents or instruments and,
in any such case, the Shipowner covenants and agrees that, on demand, it will
execute and deliver such other and further agreements, documents and instruments
and do such things as the Mortgagee in its sole discretion may deem to be
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necessary to carry out the true intent of this Mortgage, the Loan Agreement and
the Note.
(c) Anything herein to the contrary notwithstanding, it is intended
that nothing herein shall waive the preferred status of this Mortgage and that,
if any provision or portion thereof herein shall be construed to waive the
preferred status of this Mortgage, then such provision to such extent shall be
void and of no effect.
Section 14. In the event of any legal proceedings, the Shipowner
accepts for itself and subsequent owners of the Vessel, irrespective of domicile
or residence the nonexclusive jurisdiction of the courts of the State of New
York and the United States District Court of the Southern District Court of New
York as venue with notice provided in the manner established for residents of
the venue served on the Shipowner or on the Shipowner's manager or managing
owner or the Vessel's master.
ARTICLE III
Sundry Provisions
Section 1. All of the covenants, promises, stipulations and agreements
of the Shipowner in this Mortgage contained shall bind the Shipowner and its
successors and assigns and shall inure to the benefit of the Mortgagee and its
respective successors and assigns. In the event of any assignment or transfer of
this Mortgage, the term "Mortgagee", as used in this Mortgage, shall be deemed
to mean any such assignee or transferee.
Section 2. Wherever and whenever herein any right, power or authority
is granted or given to the Mortgagee, such right, power or authority may be
exercised in all cases by the Mortgagee or such agent or agents as it may
appoint, and the act or acts of such agent or agents when taken shall constitute
the act of the Mortgagee hereunder.
Section 3. This Mortgage may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
Section 4. Any notice or other communication to be given pursuant
hereto shall be in the manner provided in Section 7.8 of the Loan Agreement and
addressed:
If to the Shipowner to:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: Steven Webster
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If to the Mortgagee to:
RBF Finance Co.
901 Threadneedle
Houston, Texas 77079
Attention: Leighton Moss
or at such other address as either party may notify to the other in
writing.
Section 5. The maximum principal amount that may be outstanding under
this Mortgage is One Hundred Five Million Three Hundred Thousand United States
Dollars (USD 105,300,000.00) and for the purpose of recording this Mortgage, the
total amount of this First Preferred Ship Mortgage is One Hundred Five Million
Three Hundred Thousand United States Dollars (USD 105,300,000.00), and interest,
expenses and performance of mortgage covenants. The maturity date is March 15,
2009. The discharge amount is the same as the total amount.
IN WITNESS WHEREOF, the Shipowner has caused this First Preferred Ship
Mortgage to be duly executed the day and year first above written.
R&B FALCON CORPORATION
By: /s/ JOHN BOATWRIGHT
--------------------------------------
Name: John Boatwright
Title: Attorney-in-Fact
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 26th day of March, 1999, before me personally appeared John
Boatwright, to me known, who, being by me duly sworn, did depose and say that he
resides at 1000 Louisiana, Houston, Texas 77002; that he is the Attorney-in-Fact
of R&B Falcon Corporation, the corporation described in the foregoing
instrument; that he signed his name thereto by order of the Board of Directors
of said corporation and that the foregoing instrument is the act and deed of the
corporation.
/s/ THOMAS J. HAWLEY
------------------------------------------
Notary Public
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<PAGE> 1
EXHIBIT 10.20
DEED OF COVENANTS
THIS DEED OF COVENANTS is made the 21st day of April, A.D. 1999 by and
between R&B Falcon Corporation, a corporation organized under the laws of the
State of Delaware, United States of America, with its business address at 901
Threadneedle, Houston, Texas 77079 (the "Owner") and RBF Finance Co., a
corporation organized under the laws of the State of Delaware, with its business
address at 901 Threadneedle, Houston, Texas 77079 (the "Mortgagee").
This instrument, as supplemented or amended, is hereinafter referred to
as "this Deed".
WHEREAS:
1. The Owner is the sole legal, unencumbered and registered owner of
Sixty-four Sixty-fourth shares in the following diving support vessel (the
"Vessel"):
<TABLE>
<CAPTION>
NAME OFFICIAL NO.
---- ------------
<S> <C>
PEREGRINE I 731983
</TABLE>
which Vessel is registered in the Owner's name in the Ships Registry of the
Commonwealth of The Bahamas at the Port of Nassau with the Official Number
indicated above and having been built by Rauma Repola, Finland.
2. By the Loan Agreement, dated as of March 26, 1999 (the "Loan
Agreement"), among the Owner as borrower and the Mortgagee as lender, the
Mortgagee has agreed to make a Loan to the Owner up to an aggregate amount of
USD 16,000,000 (the "Loan"). The obligations of the Owner under the Loan
Agreement are evidenced by the two Promissory Notes of the Owner (collectively,
the "Note") in the form attached as Exhibit A to the Loan Agreement (such
obligations under the Loan Agreement and the Note referred to herein as the
"Obligations"). Capitalized terms used herein but not otherwise defined shall
have the meaning given them in the Loan Agreement.
3. This Deed is collateral to the Bahamian Statutory Mortgage (the
"Mortgage") of even date herewith on the Owner's Vessel given by the Owner to
the Mortgagee to secure to the Mortgagee the due and punctual payment and the
due and punctual observance (a) by the Owner pursuant to and of all the terms,
covenants and conditions contained in the Loan Agreement, the Note and the other
Loan Documents to which it is a party and (b) by the Owner pursuant to and of
all the terms, covenants and conditions contained in this Deed.
<PAGE> 2
NOW, THEREFORE, THIS DEED WITNESSETH:
Part I - General
1. General Definitions
1.1 In this Deed:
(a) any term defined in the Loan Agreement and not otherwise
defined herein means what it means therein;
(b) "Permitted Liens" means:
(i) liens for current operating expenses incurred in the
ordinary course of business (payment for which is not
overdue); and
(ii) liens covered (in excess of approved deductibles) by
insurance.
(c) "Related Security" means any security now or from time to
time hereafter held or to be held by the Mortgagee in respect of or in
connection with some or all of the obligations of the Owner under the
Loan Agreement or some or all of the obligations of a person under a
guarantee of some or all of the obligations of the Owner under the Loan
Agreement;
(d) "Related Security Document or Security Document" means any
document creating, evidencing or regulating the terms of any Related
Security;
(e) "Requisition Compensation" means the sums of money or
other compensation from time to time payable or paid by any person in
connection with or by reason of requisition for title or other
compulsory acquisition of the Vessel otherwise than requisition for
hire;
(f) "the Vessel" means the Vessel and includes its boilers,
engines, machinery, masts, spars, rigging, boats, anchors, chains,
cranes, tackle, apparel, furniture, fittings and all computer and other
equipment and all other appurtenances (including without limitation
drilling masts, rotary tables, substructures, draw work, engines,
pumps, blowout prevention equipment, drill pipe and drill bits)
belonging or appertaining to the Vessel (whether owned at the date of
this Deed or acquired later and whether or not on board) and all
additions, replacements and improvements thereto;
(g) "arrest" (as a noun) includes any arrest, detention,
distraint, restraint, impounding or filing of a libel and "arrest" as a
verb shall be construed accordingly;
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<PAGE> 3
(h) "encumbrance" means any mortgage, charge, pledge, lien or
other encumbrance;
(i) "law" means any law, order, statutory instrument,
regulation, decree, directive or instrument of equivalent effect;
(j) "requisition for title" (as a verb) includes, in relation
to an asset, compulsorily acquire, expropriate, nationalize, seize,
capture, forfeit, condemn as prize or otherwise act so as to divest the
owner thereof of title thereto and noun forms of the verb shall be
construed accordingly;
(k) the singular includes the plural and vice versa so far as
the context permits;
(l) any reference to a subsection is (unless otherwise stated)
to the designated subsection of the Section in which the reference
appears; and Section headings are for ease of reference and are not
(nor to be construed so as to be) restrictive of or otherwise intended
to affect the meanings of the Sections to which they refer;
(m) in the Mortgage (i) references to "interest" mean interest
covenanted to be paid as part of the Obligations in accordance with
Section 2.1 hereof and references to "principal" mean all other sums of
money for the time being comprised in the Obligations and (ii) the
expression "all sums for the time being owing to the Mortgagee" means
the whole of the Obligations;
(n) This Deed shall be read together with the Loan Agreement
but in case of any conflict between the two instruments the provisions
of the Loan Agreement shall prevail.
2. Security
2.1 The Owner confirms that it has undertaken and hereby undertakes to
pay to the Mortgagee all of the Obligations according to the Loan Agreement and
the Note and the Owner undertakes at all times to observe, perform and comply
with all the terms, covenants and conditions of each Security Document to which
it is a party on its part to be observed, performed and complied with.
2.2 The Owner hereby assigns and agrees to assign to the Mortgagee all
of its right, title and interest in and to any Requisition Compensation to which
it may be or at any time become entitled and will upon the request of the
Mortgagee from time to time give notice to any person by whom any such
Requisition Compensation may be payable requesting such person to pay any such
Requisition Compensation directly to the Mortgagee or as the Mortgagee may from
time to time direct.
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<PAGE> 4
2.3 The security created by the Mortgage and this Deed and by the
terms, covenants and conditions hereof shall be held by the Mortgagee as a
continuing security for (i) the due and punctual payment by the Owner to the
Mortgagee of the Obligations and (ii) the due and punctual performance and
observance by the Owner in favor of the Mortgagee of all the terms, covenants
and conditions of each Security Document to which it is a party, provided that
if at any time (a) the Owner has paid to the Mortgagee the Obligations in full
and (b) the Owner is under no further actual or contingent liability towards the
Mortgagee under any Security Document to which it is party and has otherwise
performed and observed each of the terms, covenants and conditions on its part
to be performed and observed under each such Security Document the Mortgagee
will, at the request and cost of the Owner, discharge the security created by
the Mortgage and this Deed.
2.4 All payments to be made by the Owner hereunder or under any
Security Document shall be made without set-off or counterclaim and free and
clear of and without deduction or withholding for or on account of any present
or future taxes of any nature now or hereafter imposed, levied, collected or
assessed by any taxing or governmental authority whatsoever unless the Owner is
compelled by law to deduct such taxes. In that event all such taxes shall be
borne by the Owner, or if under the provisions of any applicable law this
stipulation cannot be applied, then the Owner shall increase the payment to the
Mortgagee so that the net amounts paid to the Mortgagee shall be equal to the
full amounts which the Mortgagee would have received had payment not been made
subject to such deduction or withholding.
3. Representations and Warranties
3.1 The Owner represents and warrants to the Mortgagee that:
(a) the Owner is duly organized and validly existing under the
laws of the State of Delaware, United States of America and has power
and has obtained all necessary consents for the execution and
performance of this Deed and each Security Document to which it is a
party;
(b) it is the sole, lawful and beneficial owner of all
Sixty-four Sixty-fourth shares in the Vessel free and clear of all
encumbrances except Permitted Liens or any commitment to make the
Vessel available to any governmental authority for charter, or sale or
use, and the Vessel is duly registered as a Bahamian Ship at the Port
of Nassau;
(c) the Vessel is not (i) under arrest or (ii) in the
possession of any person (other than its master and crew);
(d) the Vessel is not, save as has been disclosed by the Owner
to the Mortgagee in writing, subject to, or contracted to perform
under, any charter;
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<PAGE> 5
(e) it has not assigned or otherwise created any encumbrance
over its or any part of its right, title and interest in and to
Earnings of the Vessel or any Requisition Compensation except Permitted
Liens;
(f) the Vessel is insured on the date hereof in compliance
with the requirements of Section 5 hereof;
(g) the Vessel is classified as a [drilling rig] [drillship]
diving support vessel with [the American Bureau of Shipping] (or to
such other classification or with such other classification society as
the Mortgagee may have approved in writing);
(h) except for registration of the Mortgage pursuant to
Section 33 of the Merchant Shipping Act, Chapter 246 of the Bahamas,
all consents, licenses and approvals of, declarations to or
registrations with courts or government agencies required to make the
Mortgage and this Deed its valid and binding obligations or to enable
the Owner lawfully to enter into and perform the obligations undertaken
by it in the same have been obtained or made and are in full force and
effect;
(i) except for registration of the Mortgage pursuant to
Section 33 of the Merchant Shipping Act, Chapter 246 of the Bahamas, it
is not necessary to ensure the legality, validity, enforceability or
admissibility in evidence of the Mortgage or this Deed in any
jurisdiction in which the Owner is incorporated, owns assets or carries
on business that such document be filed, recorded, registered or
enrolled with any court or government agency of or in that
jurisdiction;
(j) neither its entry into nor the performance by it of the
obligations undertaken by it in the Mortgage and this Deed (a) give
rise to, cause to crystallize or oblige any person to create any
encumbrance other than one in favor of the Mortgagee, (b) vest in any
person any right to require premature payment or repayment of any
indebtedness of it or to terminate or withdraw the Vessel from service
under any charter party to which it is a party or (c) is or will
necessarily result in any breach of or default under its memorandum and
articles of association (or documents of equivalent effect) , any
provision of law or any agreement to which it is party or by which it
may be bound; and
(k) the obligations undertaken by it in the Mortgage and this
Deed are its legal, valid and binding obligations, enforceable against
the Owner in accordance with their terms, subject, as to enforcement,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
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<PAGE> 6
Part II - Insurance
4. Insurance Definitions
4.1 In this Deed:
(a) "Insurers" means the underwriters or insurance companies
with whom any Insurance is effected and any protection and indemnity or
war risks association in which the Vessel may at any time be entered;
(b) "Insurances" means all policies and contracts of insurance
(which expression includes all entries in a protection and indemnity or
war risks association) which are now or may hereafter be taken out or
effected in respect of the Vessel or its increased value or its
earnings or profits, and all the benefits thereof including all claims
thereunder and returns of premium;
(c) "required insurance amount" means the amounts of insurance
coverage described in Section 5 hereof;
(d) "total loss" includes (1) any actual or constructive or
arranged or agreed or compromised total loss (2) any requisitioning for
title and (3) the capture, seizure, arrest, detention, or confiscation
of the Vessel by any government, or by persons purporting to act on
behalf of any government, unless the Vessel be released and restored to
the Owner from such capture, seizure, detention or confiscation within
one month after the date thereof;
(e) "war risks" includes the risk of mines and all risks
excluded from the standard form of English marine policy by the free of
capture and seizure clause.
5. Obligatory Insurances
5.1 The Owner covenants that:
(a) The Owner will cause to be carried and maintained on or in
respect of the Vessel without expense to the Mortgagee, all risk
equivalent Hull and Machinery and Protection and Indemnity insurance
with responsible and reputable insurance companies, underwriters,
associations, clubs or funds reasonably acceptable to the Mortgagee in
an amount not less than the greater of (X) 110% of the amount of the
outstanding Indebtedness hereby secured or (Y) the fair market value of
the Vessel's hull and machinery (the "agreed value"), war risk and
protection and indemnity and insurances in such amounts (with such
deductibles or franchises), against such risks (including but not
limited to, loss of or damage to hull or machinery; protection and
indemnity; war risks in the event the Vessel is located outside United
States territorial waters or waters above the outer Continental Shelf
of the United States; pollution risks); in such form (including,
without limitation, the form of the
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<PAGE> 7
loss payable clause) and in U.S. currency as the Mortgagee shall from
time to time reasonably require or approve and as provided hereafter;
and providing for deductibles no greater than USD 1,000,000.00 per
occurrence. The Owner shall maintain liability insurance including crew
liability, cargo liability, pollution liability, contractual liability
and removal of wreck insurance in amounts similar to that maintained by
owners of similar vessels and reasonably acceptable to the Mortgagee
or, without expense to the Mortgagee, have the Vessel fully entered in
a responsible and reputable Protection and Indemnity Association or
club in good standing and reasonably acceptable to the Mortgagee. The
Owner will cause such association or club to issue to the Mortgagee a
Letter of Undertaking or certificate or cover note, noting the
Mortgagee's interest in such insurance in a form reasonably
satisfactory to the Mortgagee. The Owner will furnish the Mortgagee
from time to time on request and in any event at least annually a
detailed report (including a list showing the insured value of the
Vessel) signed by a firm of marine insurance brokers reasonably
acceptable to the Mortgagee with respect to the insurance carried and
maintained on the Vessel, together with its report as to the compliance
of such insurance with the requirements of this Section 5. The Owner
agrees that, unless the insurances by its terms provide that they
cannot cease without the Mortgagee being informed and having the right
to continue the insurances by paying any premiums not paid by the
Owner, receipts showing payment of premiums for required insurance paid
shall be in the hands of the Mortgagee at least two (2) days before the
risk in question commences.
(b) The Owner shall, at its own expense, furnish to the
Mortgagee a breach of warranty endorsement, including Additional Perils
Pollution, providing coverage for the Mortgage in an amount equal to at
least 110% of the amount of the Indebtedness hereby secured. Such
mortgagee's breach of warranty endorsement insurance shall be
maintained in the broadest form available in the American or British
markets for vessels of the same type as the Vessel through underwriters
reasonably acceptable to the Mortgagee. The Vessel shall not undertake
any construction operations, carry any cargoes or proceed in an area
then excluded by trading warranties under its marine or war risk
policies (including protection and indemnity) without obtaining all
necessary additional coverage, reasonably satisfactory in form and
substance to the Mortgagee; and evidence of which additional insurance
shall be furnished to the Mortgagee.
(c) The Owner will cause the relevant insurance brokers to
agree to, and the Owner hereby covenants and agrees that it will,
advise the Mortgagee of any expiration, termination, nonrenewal,
alteration or cancellation of any policy, any default in the payment of
any premium and of any other act or omission on the part of the Owner
of which it has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Vessel. To the
extent obtainable from underwriters or brokers, all policies required
hereby shall provide for not less than thirty (30) days prior written
notice (ten (10) days with respect to non-payment of premiums and seven
(7) days with respect to war risks) to be received by the Mortgagee of
the termination or cancellation of the insurance evidenced thereby. All
policies of insurance maintained pursuant to this Part II, Section 5
shall contain
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<PAGE> 8
provisions waiving underwriters' rights of subrogation thereunder
against any assured named in such policy and any assignee of said
assured.
(d) Unless the Mortgagee shall otherwise agree, all insurance
(other than any Protection and Indemnity Association or Club) must name
the Mortgagee as an additional insured but without liability for
premiums, club calls, assessments, warranties or representations, and
all amounts of whatsoever nature payable under any insurance must be
payable to the Mortgagee for distribution first to itself and
thereafter to the Owner or others as interest may appear. Nevertheless,
unless an Event of Default shall have occurred and is continuing (i)
amounts payable under any insurance on the Vessel with respect to
protection and indemnity risks may be paid directly to the Owner to
reimburse it for any loss, damage or expense incurred by it and covered
by such insurance or to the person to whom any liability covered by
such insurance has been incurred; provided, however, if the Mortgagee
shall give notice that the Owner is in default hereunder, all such
payments shall be made to the Mortgagee (with the exception of payments
made under employers liability, workman's compensation and similar
insurances) until the Indebtedness hereby secured has been fully
discharged, and (ii) unless an Event of Default has occurred or is
continuing amounts payable under any insurance with respect to the
Vessel involving any damage to the Vessel not constituting an actual or
constructive total loss, the underwriters may pay direct for the
repair, salvage or other charges involved or, if the Owner shall have
first fully repaired the damage or paid all of the salvage or other
charges, may pay the Owner as reimbursement therefor; provided,
however, that if such amounts (including any franchise or deductible)
are greater than USD 1,000,000.00 the underwriters shall not make such
payment without first obtaining the written consent thereto of the
Mortgagee.
(e) All amounts paid to the Mortgagee in respect of any
insurance on the Vessel shall be disposed of as follows:
(i) any amount which might have been paid at the
time, in accordance with the provisions of paragraph (d)
above, directly to the Owner or others shall be paid by the
Mortgagee to, or as directed by, the Owner;
(ii) all amounts paid to the Mortgagee in respect of
an actual or constructive or arranged total loss or
requisition shall be applied by the Mortgagee to the payment
of the Indebtedness hereby secured in full;
(iii) so long as no Event of Default shall have
occurred and be continuing all other amounts paid to the
Mortgagee in respect of any insurance on the Vessel shall be
applied to the making of needed repairs or other work on the
Vessel, or to the payment of other claims incurred by the
Owner relating to the Vessel, or may be paid to the Owner or
whosoever may be entitled thereto;
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<PAGE> 9
(iv) all other amounts paid to the Mortgagee in
respect of any insurance on the Vessel may, in the Mortgagee's
sole discretion, be held and applied to the prepayment of the
indebtedness hereby secured.
(f) In the event that any claim or lien is asserted against
the Vessel for loss, damage or expense which is covered by insurance
required hereunder and it is necessary for the Owner to obtain a bond
or supply other security to prevent arrest of the Vessel or to release
the Vessel from arrest on account of such claim or lien, the Mortgagee,
on request of the Owner, may, in the sole discretion of the Mortgagee,
assign to any person, firm or corporation executing a surety or
guarantee bond or other agreement to save or release the Vessel from
such arrest, all right, title and interest of the Mortgagee in and to
said insurance covering said loss, damage or expense, as collateral
security to indemnify against liability under said bond or other
agreement.
(g) The Owner shall deliver to the Mortgagee certified copies
or originals whenever so requested by the Mortgagee in writing, of all
certificates of entry, cover notes, binders, evidences of insurance and
policies for the purpose of inspection or safekeeping, or,
alternatively, satisfactory letters of undertaking from the broker
holding the same.
(h) The Owner agrees that it will not execute or permit or
willingly allow to be done any act by which any insurance may be
suspended, impaired or canceled, and that it will not permit or allow
the Vessel to undertake any construction operations or run any risk or
transport any cargo which may not be permitted by the policies in
force, without having previously insured the Vessel by additional
coverage to extend to such construction operations, risks or cargoes.
(i) In case any underwriter proposes to pay less on any claim
of total loss (whether actual, constructive or compromised) than the
amount thereof, the Owner shall forthwith inform the Mortgagee and the
consent of the Mortgagee shall be required for any compromise thereof;
and the Shipowner shall not agree to any adjustment or compromise of
any such loss except for the highest amount reasonably obtainable
thereon.
(j) The Owner will comply with and satisfy all of the
provisions of any applicable law, convention, regulation, proclamation
or order concerning financial responsibility for liabilities imposed on
the Owner or the Vessel with respect to pollution by any state or
nation or political subdivision thereof and will maintain all
certificates or other evidence of financial responsibility as may be
required by any such law, convention, regulation, proclamation or order
with respect to the trade which the Vessel is from time to time engaged
in and the cargo carried by it or the construction projects conducted
by it.
(k) Any provision of this Section 15 to the contrary notwithstanding,
all aspects of the insurances on the Vessel (including risks covered, policy
terms, deductibles, forms of loss payable clauses, and underwriters or clubs)
shall at all times be fully satisfactory to and approved by the
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<PAGE> 10
Mortgagee, acting in its sole discretion. The Owner shall cause any insurance
broker arranging the insurances required by this Mortgage (who shall be approved
by the Mortgagee) to issue its letter of undertaking to the Mortgagee with
respect to such insurance matters as the Mortgagee shall request in accordance
with usual commercial practice.
Part III - Mortgage Covenants
6. Operation and Use
6.1 The Owner will:
(a) maintain the registration of the Vessel under the Bahamian
flag and not cause or permit to be done any act or omission whereby its
registration as such would or might be defeated or imperilled;
(b) not cause or permit the Vessel to be operated in any
manner contrary to the laws, regulations, treaties and conventions (and
all rules and regulations issued thereunder) from time to time
applicable to its operation or to the maintenance of its flag;
(c) maintain and preserve the Vessel in good working order and
repair in accordance with good commercial maintenance practices
employed in the offshore construction industry, ordinary wear and tear
excepted, and in any event in such condition as will entitle it to the
classification as a [drilling rig] drillship] or to the equivalent
classification in any other classification society of like standing
approved by the Mortgagee in writing and so as to comply with all
regulations and requirements (statutory or otherwise) from time to time
applicable to vessels registered as Bahamian ships and applicable to
vessels trading in any jurisdiction to which the Vessel may, subject to
the provision of this Deed, trade from time to time , and will annually
furnish to the Mortgagee a certificate by such classification society
that such classification is maintained;
(d) submit the Vessel regularly to such periodical or other
surveys as the classification society in which it is entered may
require and at the request of the Mortgagee provide the Mortgagee with
copies of all survey reports issued in connection therewith;
(e) not make, or permit to be made, any change in the physical
characteristics of the Vessel, which would, in the reasonable judgment
of the Mortgagee, materially interfere with the suitability of the
Vessel for normal commercial offshore construction operations without
first receiving the written approval thereof by the Mortgagee, which
approval shall not be unreasonably withheld;
(f) not knowingly cause or permit the Vessel to trade with, or
within the territorial waters of any country where the Insurances of
the Vessel would be jeopardized or imperilled;
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<PAGE> 11
(g) until one or more Events of Default shall happen, have the
right, from time to time in its discretion and without application to
the Mortgagee, and without obtaining a release thereof by the
Mortgagee, to dispose of, free from the lien of this Deed and the
Mortgage, any boilers, engines, machinery, masts, spars, sails,
rigging, boats, anchors, chains, tackle, apparel, furniture, fittings,
pumps, racking, housing, spare parts and supporting inventory, vehicles
or living quarters or any other appurtenances of the Vessel that are no
longer useful, necessary, profitable or advantageous in the operation
of the Vessel, first or simultaneously replacing the same by boilers,
engines, machinery, masts, spars, sails, rigging, boats, anchors,
chains, tackle, apparel, furniture, fittings, pumps, racking, housing,
spare parts and supporting inventory, vehicles or living quarters or
other appurtenance with those of substantially equal value to the
Owner, which shall forthwith become subject to the lien of this Deed;
and
(h) not, without the prior written consent of the Mortgagee
(and subject to such conditions as the Mortgagee may impose) enter into
any agreement or arrangement whereby the Earnings from the Vessel may
be shared with any other person.
7. Maintenance of Security
7.1 The Owner will:
(a) do everything necessary under all applicable laws for the
purpose of perfecting and maintaining the Mortgage as a valid Mortgage,
carry on board the Vessel a certified copy of the Mortgage and this
Deed and place and maintain in a conspicuous space a framed printed
notice setting forth that the Vessel is mortgaged by the Owner to the
Mortgagee;
(b) not without the prior written consent of the Mortgagee (a)
assign or otherwise create or concur in the creation of or permit to
exist any encumbrance other than Permitted Liens on the Requisition
Compensation, and/or the Earnings, (b) except as permitted in Section
7.1(g) hereof, sell, transfer, abandon, (save in stress of weather) or
otherwise dispose of the Vessel or any share therein;
(c) not (nor authorize or permit the master or any charterer
of the Vessel or any other person to) create, incur or permit to be
placed or imposed upon the Vessel any encumbrance whatsoever other than
the Mortgage and Permitted Liens and any other Mortgage in favor of the
Mortgagee;
(d) do all such acts and execute all such documents as may be
reasonably required by the Mortgagee to ensure the payment to the
Mortgagee of any Requisition Compensation and any other moneys payable
to the Owner in respect of any compulsory requisition for use of the
Vessel by or on behalf of any government or other authority;
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<PAGE> 12
(e) pay and discharge all dues, taxes, assessments,
governmental charges, fines and penalties lawfully imposed on the
Vessel; provided that the Mortgagee shall not be required to pay any
such dues, taxes, assessments, charges, fines or penalties if the
validity or amount thereof is concurrently contested in good faith by
appropriate proceedings and if the Mortgagee shall have set aside on
its books reserves in accordance with generally accepted accounting
principles in the United States deemed by it adequate with respect to
such tax, assessment or charge; and provided further, however, that the
Mortgagee will pay or cause to be paid all such dues, taxes,
assessments, charges, fines or penalties forthwith upon the
commencement of proceedings to foreclose any lien which is attached as
security therefor; and not cause or permit the Vessel to be employed in
any manner which will or may render it liable to confiscation,
forfeiture, seizure, condemnation as prize or destruction;
(f) take all steps necessary to prevent a threatened arrest of
the Vessel by the provision of bail, security or otherwise;
(g) forthwith notify the Mortgagee by telefax (confirmed by
letter) of the levy of any distress on the Vessel or its arrest,
detention, seizure, condemnation as prize, compulsory acquisition or
requisition for title or use and (save in the case of compulsory
acquisition or requisition for title or use) obtain its release within
thirty days by posting bond, posting alternative security or other
means.
8. Provision of Information
8.1 The Owner will:
(a) upon the execution hereof and annually thereafter upon the
anniversary date of the execution hereof, provide the Mortgagee with
copies of the classification certificates of the Vessel and of all
damage or survey reports on the Vessel and upon request by the
Mortgagee provide the Mortgagee with written authority from the Owner
addressed to the relevant classification society to inspect the class
records and request copies of the classification certificates of the
Vessel and all periodic damage or survey reports on the Vessel;
(b) ensure that the Mortgagee, its surveyors or other persons
appointed by it will be permitted on reasonable notice to inspect the
Vessel and its logs and furnish the Mortgagee from time to time, on
request, with certified copies of the logs;
(c) promptly furnish the Mortgagee with full information of
any casualty or other accident or damage to the Vessel involving an
amount in excess of USD 250,000; and
(d) notify the Mortgagee of any requirement or recommendation
made by any insurers or classification society or by any competent
authority which is not complied with
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within any time limit specified by such society or authority, or if no
such time limit is specified, as soon as may reasonably be practicable.
9. Further Assurance
9.1 The Owner will from time to time at the written request of the
Mortgagee do all such things and execute all such documents as the Mortgagee may
reasonably consider necessary or desirable for giving full effect to any
Security Document or for securing the rights of the Mortgagee thereunder.
10. Costs and Expenses
10.1 The Owner will reimburse the Mortgagee promptly, with interest at
a rate per annum equal to the rate provided in Section 2.2D of the Loan
Agreement, computed on the basis of a year of 365 days, or when applicable, 366
days, for any and all reasonable expenditures which the Mortgagee may, after any
required notice to the Owner has been given pursuant to the terms of the Loan
Agreement, from time to time make as provided herein, lay out or expend in
providing such protection in respect of insurance, discharge or purchase of
liens, taxes, dues, assessments, governmental charges, fines and penalties
lawfully imposed, repairs, attorneys' fees and expenses and other matters as the
Owner is obligated herein to provide, but fails to provide within the time
required. Such obligation of the Owner to reimburse the Mortgagee shall be an
additional indebtedness due from the Owner, secured by this Deed and the
Mortgage, and shall be payable by the Owner on demand. The Mortgagee, though
privileged to do so, shall be under no obligation to make any such expenditures,
nor shall the making thereof relieve the Owner of any default in that respect.
10.2 The Mortgagee (and each and every receiver, attorney, manager or
other agent appointed by the Mortgagee hereunder) shall, without prejudice to
the other rights and powers of the Mortgagee hereunder be entitled (but not
bound) at any time and as often as may be necessary to take any such action as
any of them may in their discretion think fit for the purpose of protecting the
security created by this Deed and the other Security Documents.
11. Duration of Covenants
11.1 Any covenants, terms or conditions herein contained which are not
expressly limited in point of time shall be construed as having effect from the
date hereof and until the Owner shall be under no further actual or contingent
liability under any Security Document to which it is party.
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<PAGE> 14
Part IV - Default and Remedies
12. Events of Default
12.1 The security hereby constituted shall become enforceable if any
event of default specified in Section 6 of the Loan Agreement shall occur and be
continuing.
13. Enforcement of Security
13.1 If the security hereby constituted shall become enforceable as
herein provided, time shall be considered as of the essence of this contract,
and the Mortgagee shall be entitled to put into force and exercise all the
powers and remedies possessed by it according to law as mortgagee and chargee of
the Vessel, and in particular:
(a) to take possession of the Vessel;
(b) to recover and collect all freights, passage moneys,
remuneration for salvage or towage services, hire moneys and all other
income or earnings then due or to become due to the Owner in respect of
the Vessel and to give a good accounting therefor on behalf of the
Owner;
(c) to require that all policies, contracts, certificates of
entry and other records relating to Insurances (including details of
and correspondence concerning outstanding claims) be delivered
forthwith to such adjusters and/or brokers and/or other insurers as the
Mortgagee may nominate; however, the Owner makes no representation or
warranty as to the continuing effectiveness of such policies;
(d) to collect, recover, compromise and give a good discharge
for all claims then outstanding or thereafter arising under any policy
or contract of insurance relating to the Vessel and to take over or
institute all such proceedings in connection therewith as the Mortgagee
in its absolute discretion thinks fit and to permit the brokers through
whom collection or recovery is effected to charge and retain the usual
brokerage therefor;
(e) to discharge, compound, release or compromise claims in
respect of the Vessel which have given or may give rise to any charge
or lien on the Vessel having priority over the Mortgage or which are or
may be enforceable by proceedings against the Vessel;
(f) to sell the Vessel or any share therein, with or without
the benefit of any charterparty or other engagement, by public auction
or private contract, at any place in the world, with or without
advertisement, for cash or on Loan and otherwise and upon such terms as
the Mortgagee in its absolute discretion may determine so long as in
accordance with applicable laws, with power to postpone any such sale
and without being answerable for any loss occasioned by such sale or
resulting from postponement thereof, and at any such public sale to
purchase the Vessel and to set off the purchase price against the
Obligations;
(g) to manage the Vessel (and, for such purpose to appoint
and/or remove any manager of the Vessel) and to insure the Vessel on
such terms and with such insurers and
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<PAGE> 15
against such risks as the Mortgagee may in its absolute discretion
think fit, and to maintain and repair the Vessel and to hold, lay up,
lease, contract, operate or otherwise use the Vessel in such manner and
for such period as the Mortgagee in its absolute discretion deems
expedient, accounting only for the net proceeds (if any) of such use,
and for the purposes aforesaid to do all acts and things incidental or
conducive thereto in all respects as if the Mortgagee were the owner of
the Vessel without being responsible for any loss thereby incurred;
provided, however, at such time as the Mortgagee enters upon and takes
possession of the Vessel, the Owner shall not be held responsible by
the Mortgagee for any damage to third parties resulting from or after
the Mortgagee's possession of the Vessel; and
(h) to recover from the Owner on demand all reasonable
expenses, payments and disbursements incurred by the Mortgagee in or
about or incidental to the exercise by it of any of the powers
aforesaid not otherwise reimbursed or recovered hereunder.
13.2 Upon any sale of the Vessel or any share therein by the Mortgagee
pursuant to this Section 13 the purchaser shall not be bound to see or enquire
whether the Mortgagee's power of sale has arisen in the manner herein provided,
the sale shall be deemed to be within the power of the Mortgagee and the receipt
of the Mortgagee for the purchase money shall effectively discharge the
purchaser who shall not be concerned with the manner of application of the
proceeds of sale or be in any way answerable therefor.
14. Application of Moneys in Default
14.1 All moneys received by the Mortgagee under or by virtue of the
Mortgage and this Deed after the security hereby constituted has become
enforceable as aforesaid shall be applied:
(a) first, in or towards payment of any costs, fees and
expenses of the Mortgagee, its agents or attorneys hereunder and to
provide adequate indemnity against liens claiming priority over or in
equality with the lien of this Deed and the Mortgage;
(b) second, in or towards payment of the Obligations pursuant
to Section 2.3 of the Loan Agreement, whether due or not, including
interest thereon to the date of such payment;
(c) third, to the Owner or to whomsoever may be entitled
thereto.
15. Substitute Performance
15.1 If at any time the Owner fails to do any act which it is obliged
to do hereunder or to make any payment which it is obliged to make hereunder
(other than a payment to the Mortgagee) the Mortgagee may, after any required
notice to the Owner has been given pursuant to the terms of the Loan Agreement,
(but shall not be bound to) do such act or procure its doing or make such
payment itself for the purpose of maintaining its security under the Mortgage
and this Deed and
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<PAGE> 16
under all other Security Documents. The Owner will pay to the Mortgagee on
demand the amount of any payment made and/or reasonable costs and expenses
incurred by the Mortgagee in doing any act pursuant to this Section together
with interest thereon at a rate per annum equal to the rate provided in Section
2.2D of the Loan Agreement, computed on the basis of a year of 365 days or, when
applicable, 366 days, from the date such cost or expense was incurred until the
date of reimbursement in full. The exercise by the Mortgagee of its rights under
this Section shall not affect the operation of Section 13 hereof.
16. Receiver
16.1 At any time and from time to time after the security hereby
constituted has become enforceable as aforesaid, the Mortgagee may appoint by
writing any person to be a receiver of the Vessel and of all or part of any
other property assigned or charged to the Mortgage hereby or by any other
Security Document and may from time to time by writing remove any receiver so
appointed and appoint another in his place.
16.2 A receiver appointed as aforesaid shall be the agent of the Owner
(who shall be solely responsible for his acts and defaults and remunerations)
and shall have power on behalf of and at the cost of the Owner to do or omit to
do anything which the Owner could do or omit to do by this Deed and generally
shall have power to exercise all or any of the powers conferred on the Mortgagee
by law and by each Security Document (subject to the proviso in Section 19
hereof).
16.3 The Owner irrevocably appoints any receiver appointed as aforesaid
its attorney for and in its name and on its behalf and as its act and deed to
execute, seal and deliver and otherwise perfect any assurance, agreement,
instrument or act which may be required or may be deemed proper for any of the
purposes hereof.
16.4 The net proceeds of sale and all other moneys received by any
receiver shall be applied by him (subject to the claims of all secured and
unsecured lenders (if any) ranking in priority to the security created by the
relevant Security Document):
(a) first, in payment of remuneration of such receiver at such
rate as may be specified in the instrument of appointment and of all
reasonable costs, charges and expenses of and incidental to the
appointment of such receiver and the exercise of all or any of the
powers aforesaid; and
(b) second, any balance remaining in the hands of such
receiver to be applied according to Section 14 hereof.
17. Extension of the Mortgagee's Powers
17.1 Each and every power and remedy conferred on the Mortgagee by the
Security Documents shall be cumulative and in addition to every other power and
remedy thereby specifically
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conferred or now or hereinafter existing at law, in equity, in admiralty or by
statute. Each and every such power and remedy may be exercised from time to time
and as often and in such order as may be deemed expedient by the Mortgagee. 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 delay or omission by the Mortgagee in the exercise
of any right or power or in the pursuit or any remedy shall impair any such
right, power or remedy or be construed to be a waiver of any default on the part
of the Owner or to be an acquiescence therein.
17.2 The Mortgagee may from time to time and at any time,
unconditionally or on such terms and conditions as may seem expedient, waive any
of the covenants, conditions and obligations on the part of the Owner contained
herein or any breach thereof by the Owner. Every such waiver by the Mortgagee
shall be deemed to have been made without prejudice to its rights and powers as
mortgagee and chargee of the Vessel which shall at all times thereafter remain
exercisable whenever the Mortgagee shall think fit and as if such waiver had not
been made.
17.3 The Owner hereby agrees that its obligations hereunder or under
the Mortgage or any other Security Document shall not be in any way discharged
or impaired by any forbearance, whether as to payment, time, performance or
otherwise, or other indulgence being given to the Owner relating to all or any
of the obligations secured hereby or by the Mortgage or by any other Security
Document, or by any act, thing, omission or means whatever (other than payment
in full of the Obligations), which but for this provision might constitute a
legal or equitable discharge or defense of the Owner.
Part V - Mortgage Conditions
18. Continuing Security
18.1 The security created by this Deed, the Mortgage and the other
Security Documents shall constitute and be continuing security notwithstanding
any intermediate payment by the Owner of the Obligations or any part thereof,
any settlement of accounts or other matter or thing whatsoever and shall be in
addition to and not in substitution for or in derogation of any other security
which the Mortgagee may now or at any time hereafter hold for or in respect of
the Obligations.
18.2 The Mortgagee shall not be obliged before taking steps to enforce
the security created by the Mortgage or this Deed to exercise any of the rights,
powers and remedies conferred upon it hereby or thereby (i) to take action or
obtain judgment in any court against any person bound by or party to a Related
Security Document or (ii) to enforce or seek to enforce the Loan Agreement or
any Related Security Document and shall be at liberty at any time to grant any
time or indulgence to any such person, and to exchange, release and renew any
securities, and to compound in any way it may think fit with any such person for
or in respect of any part of the Obligations with or without the knowledge of
the Owner, without affecting the rights of the Mortgagee hereunder or under the
Mortgage.
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19. Power of Attorney
19.1 The Owner hereby irrevocably (so long as the Obligations remain
unpaid) appoints the Mortgagee its attorney:
(a) for and on behalf of the Owner and in its name and as its
act and deed to execute, seal and deliver and otherwise perfect any
such document as is mentioned in Section 9 hereof;
(b) for and on behalf of the Owner and in its name and as its
act and deed to execute and deliver to any purchaser of the Vessel from
the Mortgagee in exercise of its powers under Section 13 hereof a bill
of sale or other assurance in respect of the Vessel;
(c) for and on behalf of the Owner and in its name and as its
act and deed to do all acts and execute, seal and deliver and otherwise
perfect all documents which the Owner itself could do in reference to
the Vessel or in connection with any of the matters dealt with in the
Security Documents.
Provided that the Mortgagee shall not exercise the power contained in this
Section unless and until the security hereby constituted shall have become
enforceable as aforesaid. The exercise of such power by the Mortgagee shall not
put any person dealing with it upon any enquiry as to whether the security
hereby constituted shall have become enforceable as aforesaid, nor shall any
such person be in any way affected by notice to the contrary and the exercise by
the Mortgagee of this power shall be conclusive evidence of its right to
exercise the same.
20. Indemnity
20.1 The Mortgagee and every receiver, attorney, manager, agent or
other person appointed by the Mortgagee hereunder shall be entitled to be
indemnified out of the security created by the Security Documents in respect of
all liabilities and expenses incurred by it, him or them in the proper execution
or purported execution of any powers, authorities or discretions vested in it,
him or them pursuant to any Security Document.
21. Notices
21.1 All notices, requests, consents, demands, and other communications
provided for or permitted hereunder shall, except as otherwise expressly
provided herein, be given in accordance with Section 7.8 of the Loan Agreement
to the parties at the addresses set forth below:
Owner: R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: Steven Webster
Facsimile No. (281) 496-0285
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Mortgagee: RBF Finance Co.
901 Threadneedle
Houston, Texas 77079
Attention: Leighton Moss
Facsimile No. (281) 496-0285
unless another address shall be furnished in writing by the party to receive
such notice to the party giving such notice.
22. Jurisdiction
22.1 For the exclusive benefit of the Mortgagee the parties hereto
irrevocably agree that the courts of the Commonwealth of The Bahamas are to have
jurisdiction to settle any disputes which may arise out of or in connection with
the Mortgage and this Deed and that accordingly, any suit, action or proceeding
(together in this Section referred to as "Proceedings") arising out of or in
connection with the Mortgage or this Deed may be brought in such courts.
22.2 Without prejudice to Section 22.1 hereof, the Owner further
irrevocably agrees that any Proceedings arising out of or in connection with
this Deed or the Mortgage may be brought in any place wherein the Vessel may be
situated, and submits to the non-exclusive jurisdiction of each such court.
22.3 The Owner agrees that any writ, judgment or other notice of legal
process in the courts of the Commonwealth of The Bahamas shall be sufficiently
served on it if delivered by it at the following address:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: Steven Webster
22.4 The Owner irrevocably waives any objection which it may now or
hereafter to the laying of the venue of any proceedings in any such court as is
referred to in this Section or claim that any such Proceedings have been brought
in an inconvenient forum and further irrevocably agrees that a judgment in any
Proceedings brought in the courts of the Commonwealth of The Bahamas or any
place wherein the Vessel may be situated shall be conclusive and binding upon
the Owner and may be enforced in the courts of any other jurisdiction.
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23. Successors in Title
23.1 The obligations on the part of the Owner contained herein shall
bind it and its successors and permitted assigns and the rights of the Mortgagee
shall enure to the benefit of its successors and assigns, whether so expressed
or not.
24. Invalidity of Provision
24.1 If any provision hereof is or becomes invalid or unenforceable for
any reason under the laws of any jurisdiction, such provision shall be invalid
and unenforceable as to that jurisdiction only and such invalidity or
unenforceability shall not (and shall not be construed so as to) invalidate or
make unenforceable any other provision hereof.
25. Law
25.1 This Deed shall be governed by and construed in accordance with
the laws of the Commonwealth of The Bahamas.
Owner:
R&B FALCON CORPORATION, a corporation
organized under the laws of the State of
Delaware
By: /s/ ROBERT F. FULTON
----------------------------------------
Name: Robert F. Fulton
--------------------------------------
Title: Vice President
-------------------------------------
IN WITNESS whereof this Deed has been
executed by the duly authorized officer of
the Owner hereto the day and year first
before written.
Mortgagee:
RBF FINANCE CO., a corporation organized
under the laws of the State of Delaware
By: /s/ LEIGHTON E. MOSS
----------------------------------------
Name: Leighton E. Moss
--------------------------------------
Title: Vice President
-------------------------------------
IN WITNESS whereof this Deed has been
executed by the duly authorized officer of
the Mortgagee hereto the day and year first
before written.
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<PAGE> 1
EXHIBIT 10.21
DEED OF COVENANTS
THIS DEED OF COVENANTS is made the 21st day of April, A.D. 1999 by and
between R&B Falcon Corporation, a corporation organized under the laws of the
State of Delaware, United States of America, with its business address at 901
Threadneedle, Houston, Texas 77079 (the "Owner") and RBF Finance Co., a
corporation organized under the laws of the State of Delaware, with its business
address at 901 Threadneedle, Houston, Texas 77079 (the "Mortgagee").
This instrument, as supplemented or amended, is hereinafter referred to
as "this Deed".
WHEREAS:
1. The Owner is the sole legal, unencumbered and registered owner of
Sixty-four Sixty- fourth shares in the following diving support vessel (the
"Vessel"):
NAME OFFICIAL NO.
---- ------------
PEREGRINE II 730928
which Vessel is registered in the Owner's name in the Ships Registry of the
Commonwealth of The Bahamas at the Port of Nassau with the Official Number
indicated above and having been built by Rauma Repola, Finland.
2. By the Loan Agreement, dated as of March 26, 1999 (the "Loan
Agreement"), among the Owner as borrower and the Mortgagee as lender, the
Mortgagee has agreed to make a Loan to the Owner up to an aggregate amount of
USD 28,500,000 (the "Loan"). The obligations of the Owner under the Loan
Agreement are evidenced by the two Promissory Notes of the Owner (collectively,
the "Note") in the form attached as Exhibit A to the Loan Agreement (such
obligations under the Loan Agreement and the Note referred to herein as the
"Obligations"). Capitalized terms used herein but not otherwise defined shall
have the meaning given them in the Loan Agreement.
3. This Deed is collateral to the Bahamian Statutory Mortgage (the
"Mortgage") of even date herewith on the Owner's Vessel given by the Owner to
the Mortgagee to secure to the Mortgagee the due and punctual payment and the
due and punctual observance (a) by the Owner pursuant to and of all the terms,
covenants and conditions contained in the Loan Agreement, the Note and the other
Loan Documents to which it is a party and (b) by the Owner pursuant to and of
all the terms, covenants and conditions contained in this Deed.
<PAGE> 2
NOW, THEREFORE, THIS DEED WITNESSETH:
Part I - General
1. General Definitions
1.1 In this Deed:
(a) any term defined in the Loan Agreement and not otherwise
defined herein means what it means therein;
(b) "Permitted Liens" means:
(i) liens for current operating expenses incurred in
the ordinary course of business (payment for which is not
overdue); and
(ii) liens covered (in excess of approved
deductibles) by insurance.
(c) "Related Security" means any security now or from time to
time hereafter held or to be held by the Mortgagee in respect of or in
connection with some or all of the obligations of the Owner under the
Loan Agreement or some or all of the obligations of a person under a
guarantee of some or all of the obligations of the Owner under the Loan
Agreement;
(d) "Related Security Document or Security Document" means any
document creating, evidencing or regulating the terms of any Related
Security;
(e) "Requisition Compensation" means the sums of money or
other compensation from time to time payable or paid by any person in
connection with or by reason of requisition for title or other
compulsory acquisition of the Vessel otherwise than requisition for
hire;
(f) "the Vessel" means the Vessel and includes its boilers,
engines, machinery, masts, spars, rigging, boats, anchors, chains,
cranes, tackle, apparel, furniture, fittings and all computer and other
equipment and all other appurtenances (including without limitation
drilling masts, rotary tables, substructures, draw work, engines,
pumps, blowout prevention equipment, drill pipe and drill bits)
belonging or appertaining to the Vessel (whether owned at the date of
this Deed or acquired later and whether or not on board) and all
additions, replacements and improvements thereto;
(g) "arrest" (as a noun) includes any arrest, detention,
distraint, restraint, impounding or filing of a libel and "arrest" as a
verb shall be construed accordingly;
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(h) "encumbrance" means any mortgage, charge, pledge, lien or
other encumbrance;
(i) "law" means any law, order, statutory instrument,
regulation, decree, directive or instrument of equivalent effect;
(j) "requisition for title" (as a verb) includes, in relation
to an asset, compulsorily acquire, expropriate, nationalize, seize,
capture, forfeit, condemn as prize or otherwise act so as to divest the
owner thereof of title thereto and noun forms of the verb shall be
construed accordingly;
(k) the singular includes the plural and vice versa so far as
the context permits;
(l) any reference to a subsection is (unless otherwise stated)
to the designated subsection of the Section in which the reference
appears; and Section headings are for ease of reference and are not
(nor to be construed so as to be) restrictive of or otherwise intended
to affect the meanings of the Sections to which they refer;
(m) in the Mortgage (i) references to "interest" mean interest
covenanted to be paid as part of the Obligations in accordance with
Section 2.1 hereof and references to "principal" mean all other sums of
money for the time being comprised in the Obligations and (ii) the
expression "all sums for the time being owing to the Mortgagee" means
the whole of the Obligations;
(n) This Deed shall be read together with the Loan Agreement
but in case of any conflict between the two instruments the provisions
of the Loan Agreement shall prevail.
2. Security
2.1 The Owner confirms that it has undertaken and hereby undertakes to
pay to the Mortgagee all of the Obligations according to the Loan Agreement and
the Note and the Owner undertakes at all times to observe, perform and comply
with all the terms, covenants and conditions of each Security Document to which
it is a party on its part to be observed, performed and complied with.
2.2 The Owner hereby assigns and agrees to assign to the Mortgagee all
of its right, title and interest in and to any Requisition Compensation to which
it may be or at any time become entitled and will upon the request of the
Mortgagee from time to time give notice to any person by whom any such
Requisition Compensation may be payable requesting such person to pay any such
Requisition Compensation directly to the Mortgagee or as the Mortgagee may from
time to time direct.
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2.3 The security created by the Mortgage and this Deed and by the
terms, covenants and conditions hereof shall be held by the Mortgagee as a
continuing security for (i) the due and punctual payment by the Owner to the
Mortgagee of the Obligations and (ii) the due and punctual performance and
observance by the Owner in favor of the Mortgagee of all the terms, covenants
and conditions of each Security Document to which it is a party, provided that
if at any time (a) the Owner has paid to the Mortgagee the Obligations in full
and (b) the Owner is under no further actual or contingent liability towards the
Mortgagee under any Security Document to which it is party and has otherwise
performed and observed each of the terms, covenants and conditions on its part
to be performed and observed under each such Security Document the Mortgagee
will, at the request and cost of the Owner, discharge the security created by
the Mortgage and this Deed.
2.4 All payments to be made by the Owner hereunder or under any
Security Document shall be made without set-off or counterclaim and free and
clear of and without deduction or withholding for or on account of any present
or future taxes of any nature now or hereafter imposed, levied, collected or
assessed by any taxing or governmental authority whatsoever unless the Owner is
compelled by law to deduct such taxes. In that event all such taxes shall be
borne by the Owner, or if under the provisions of any applicable law this
stipulation cannot be applied, then the Owner shall increase the payment to the
Mortgagee so that the net amounts paid to the Mortgagee shall be equal to the
full amounts which the Mortgagee would have received had payment not been made
subject to such deduction or withholding.
3. Representations and Warranties
3.1 The Owner represents and warrants to the Mortgagee that:
(a) the Owner is duly organized and validly existing under the
laws of the State of Delaware, United States of America and has power
and has obtained all necessary consents for the execution and
performance of this Deed and each Security Document to which it is a
party;
(b) it is the sole, lawful and beneficial owner of all
Sixty-four Sixty-fourth shares in the Vessel free and clear of all
encumbrances except Permitted Liens or any commitment to make the
Vessel available to any governmental authority for charter, or sale or
use, and the Vessel is duly registered as a Bahamian Ship at the Port
of Nassau;
(c) the Vessel is not (i) under arrest or (ii) in the
possession of any person (other than its master and crew);
(d) the Vessel is not, save as has been disclosed by the Owner
to the Mortgagee in writing, subject to, or contracted to perform
under, any charter;
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(e) it has not assigned or otherwise created any encumbrance
over its or any part of its right, title and interest in and to
Earnings of the Vessel or any Requisition Compensation except Permitted
Liens;
(f) the Vessel is insured on the date hereof in compliance
with the requirements of Section 5 hereof;
(g) the Vessel is classified as a [drilling rig] [drillship]
diving support vessel with [the American Bureau of Shipping] (or to
such other classification or with such other classification society as
the Mortgagee may have approved in writing);
(h) except for registration of the Mortgage pursuant to
Section 33 of the Merchant Shipping Act, Chapter 246 of the Bahamas,
all consents, licenses and approvals of, declarations to or
registrations with courts or government agencies required to make the
Mortgage and this Deed its valid and binding obligations or to enable
the Owner lawfully to enter into and perform the obligations undertaken
by it in the same have been obtained or made and are in full force and
effect;
(i) except for registration of the Mortgage pursuant to
Section 33 of the Merchant Shipping Act, Chapter 246 of the Bahamas, it
is not necessary to ensure the legality, validity, enforceability or
admissibility in evidence of the Mortgage or this Deed in any
jurisdiction in which the Owner is incorporated, owns assets or carries
on business that such document be filed, recorded, registered or
enrolled with any court or government agency of or in that
jurisdiction;
(j) neither its entry into nor the performance by it of the
obligations undertaken by it in the Mortgage and this Deed (a) give
rise to, cause to crystallize or oblige any person to create any
encumbrance other than one in favor of the Mortgagee, (b) vest in any
person any right to require premature payment or repayment of any
indebtedness of it or to terminate or withdraw the Vessel from service
under any charter party to which it is a party or (c) is or will
necessarily result in any breach of or default under its memorandum and
articles of association (or documents of equivalent effect) , any
provision of law or any agreement to which it is party or by which it
may be bound; and
(k) the obligations undertaken by it in the Mortgage and this
Deed are its legal, valid and binding obligations, enforceable against
the Owner in accordance with their terms, subject, as to enforcement,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
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Part II - Insurance
4. Insurance Definitions
4.1 In this Deed:
(a) "Insurers" means the underwriters or insurance companies
with whom any Insurance is effected and any protection and indemnity or
war risks association in which the Vessel may at any time be entered;
(b) "Insurances" means all policies and contracts of insurance
(which expression includes all entries in a protection and indemnity or
war risks association) which are now or may hereafter be taken out or
effected in respect of the Vessel or its increased value or its
earnings or profits, and all the benefits thereof including all claims
thereunder and returns of premium;
(c) "required insurance amount" means the amounts of insurance
coverage described in Section 5 hereof;
(d) "total loss" includes (1) any actual or constructive or
arranged or agreed or compromised total loss (2) any requisitioning for
title and (3) the capture, seizure, arrest, detention, or confiscation
of the Vessel by any government, or by persons purporting to act on
behalf of any government, unless the Vessel be released and restored to
the Owner from such capture, seizure, detention or confiscation within
one month after the date thereof;
(e) "war risks" includes the risk of mines and all risks
excluded from the standard form of English marine policy by the free of
capture and seizure clause.
5. Obligatory Insurances
5.1 The Owner covenants that:
(a) The Owner will cause to be carried and maintained on or in
respect of the Vessel without expense to the Mortgagee, all risk
equivalent Hull and Machinery and Protection and Indemnity insurance
with responsible and reputable insurance companies, underwriters,
associations, clubs or funds reasonably acceptable to the Mortgagee in
an amount not less than the greater of (X) 110% of the amount of the
outstanding Indebtedness hereby secured or (Y) the fair market value of
the Vessel's hull and machinery (the "agreed value"), war risk and
protection and indemnity and insurances in such amounts (with such
deductibles or franchises), against such risks (including but not
limited to, loss of or damage to hull or machinery; protection and
indemnity; war risks in the event the Vessel is located outside United
States territorial waters or waters above the outer Continental Shelf
of the United States; pollution risks); in such form (including,
without limitation, the form of the
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loss payable clause) and in U.S. currency as the Mortgagee shall from
time to time reasonably require or approve and as provided hereafter;
and providing for deductibles no greater than USD 1,000,000.00 per
occurrence. The Owner shall maintain liability insurance including crew
liability, cargo liability, pollution liability, contractual liability
and removal of wreck insurance in amounts similar to that maintained by
owners of similar vessels and reasonably acceptable to the Mortgagee
or, without expense to the Mortgagee, have the Vessel fully entered in
a responsible and reputable Protection and Indemnity Association or
club in good standing and reasonably acceptable to the Mortgagee. The
Owner will cause such association or club to issue to the Mortgagee a
Letter of Undertaking or certificate or cover note, noting the
Mortgagee's interest in such insurance in a form reasonably
satisfactory to the Mortgagee. The Owner will furnish the Mortgagee
from time to time on request and in any event at least annually a
detailed report (including a list showing the insured value of the
Vessel) signed by a firm of marine insurance brokers reasonably
acceptable to the Mortgagee with respect to the insurance carried and
maintained on the Vessel, together with its report as to the compliance
of such insurance with the requirements of this Section 5. The Owner
agrees that, unless the insurances by its terms provide that they
cannot cease without the Mortgagee being informed and having the right
to continue the insurances by paying any premiums not paid by the
Owner, receipts showing payment of premiums for required insurance paid
shall be in the hands of the Mortgagee at least two (2) days before the
risk in question commences.
(b) The Owner shall, at its own expense, furnish to the
Mortgagee a breach of warranty endorsement, including Additional Perils
Pollution, providing coverage for the Mortgage in an amount equal to at
least 110% of the amount of the Indebtedness hereby secured. Such
mortgagee's breach of warranty endorsement insurance shall be
maintained in the broadest form available in the American or British
markets for vessels of the same type as the Vessel through underwriters
reasonably acceptable to the Mortgagee. The Vessel shall not undertake
any construction operations, carry any cargoes or proceed in an area
then excluded by trading warranties under its marine or war risk
policies (including protection and indemnity) without obtaining all
necessary additional coverage, reasonably satisfactory in form and
substance to the Mortgagee; and evidence of which additional insurance
shall be furnished to the Mortgagee.
(c) The Owner will cause the relevant insurance brokers to
agree to, and the Owner hereby covenants and agrees that it will,
advise the Mortgagee of any expiration, termination, nonrenewal,
alteration or cancellation of any policy, any default in the payment of
any premium and of any other act or omission on the part of the Owner
of which it has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Vessel. To the
extent obtainable from underwriters or brokers, all policies required
hereby shall provide for not less than thirty (30) days prior written
notice (ten (10) days with respect to non-payment of premiums and seven
(7) days with respect to war risks) to be received by the Mortgagee of
the termination or cancellation of the insurance evidenced thereby. All
policies of insurance maintained pursuant to this Part II, Section 5
shall contain
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provisions waiving underwriters' rights of subrogation thereunder
against any assured named in such policy and any assignee of said
assured.
(d) Unless the Mortgagee shall otherwise agree, all insurance
(other than any Protection and Indemnity Association or Club) must name
the Mortgagee as an additional insured but without liability for
premiums, club calls, assessments, warranties or representations, and
all amounts of whatsoever nature payable under any insurance must be
payable to the Mortgagee for distribution first to itself and
thereafter to the Owner or others as interest may appear. Nevertheless,
unless an Event of Default shall have occurred and is continuing (i)
amounts payable under any insurance on the Vessel with respect to
protection and indemnity risks may be paid directly to the Owner to
reimburse it for any loss, damage or expense incurred by it and covered
by such insurance or to the person to whom any liability covered by
such insurance has been incurred; provided, however, if the Mortgagee
shall give notice that the Owner is in default hereunder, all such
payments shall be made to the Mortgagee (with the exception of payments
made under employers liability, workman's compensation and similar
insurances) until the Indebtedness hereby secured has been fully
discharged, and (ii) unless an Event of Default has occurred or is
continuing amounts payable under any insurance with respect to the
Vessel involving any damage to the Vessel not constituting an actual or
constructive total loss, the underwriters may pay direct for the
repair, salvage or other charges involved or, if the Owner shall have
first fully repaired the damage or paid all of the salvage or other
charges, may pay the Owner as reimbursement therefor; provided,
however, that if such amounts (including any franchise or deductible)
are greater than USD 1,000,000.00 the underwriters shall not make such
payment without first obtaining the written consent thereto of the
Mortgagee.
(e) All amounts paid to the Mortgagee in respect of any
insurance on the Vessel shall be disposed of as follows:
(i) any amount which might have been paid at the
time, in accordance with the provisions of paragraph (d)
above, directly to the Owner or others shall be paid by the
Mortgagee to, or as directed by, the Owner;
(ii) all amounts paid to the Mortgagee in respect of
an actual or constructive or arranged total loss or
requisition shall be applied by the Mortgagee to the payment
of the Indebtedness hereby secured in full;
(iii) so long as no Event of Default shall have
occurred and be continuing all other amounts paid to the
Mortgagee in respect of any insurance on the Vessel shall be
applied to the making of needed repairs or other work on the
Vessel, or to the payment of other claims incurred by the
Owner relating to the Vessel, or may be paid to the Owner or
whosoever may be entitled thereto;
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(iv) all other amounts paid to the Mortgagee in
respect of any insurance on the Vessel may, in the Mortgagee's
sole discretion, be held and applied to the prepayment of the
indebtedness hereby secured.
(f) In the event that any claim or lien is asserted against
the Vessel for loss, damage or expense which is covered by insurance
required hereunder and it is necessary for the Owner to obtain a bond
or supply other security to prevent arrest of the Vessel or to release
the Vessel from arrest on account of such claim or lien, the Mortgagee,
on request of the Owner, may, in the sole discretion of the Mortgagee,
assign to any person, firm or corporation executing a surety or
guarantee bond or other agreement to save or release the Vessel from
such arrest, all right, title and interest of the Mortgagee in and to
said insurance covering said loss, damage or expense, as collateral
security to indemnify against liability under said bond or other
agreement.
(g) The Owner shall deliver to the Mortgagee certified copies
or originals whenever so requested by the Mortgagee in writing, of all
certificates of entry, cover notes, binders, evidences of insurance and
policies for the purpose of inspection or safekeeping, or,
alternatively, satisfactory letters of undertaking from the broker
holding the same.
(h) The Owner agrees that it will not execute or permit or
willingly allow to be done any act by which any insurance may be
suspended, impaired or canceled, and that it will not permit or allow
the Vessel to undertake any construction operations or run any risk or
transport any cargo which may not be permitted by the policies in
force, without having previously insured the Vessel by additional
coverage to extend to such construction operations, risks or cargoes.
(i) In case any underwriter proposes to pay less on any claim
of total loss (whether actual, constructive or compromised) than the
amount thereof, the Owner shall forthwith inform the Mortgagee and the
consent of the Mortgagee shall be required for any compromise thereof;
and the Shipowner shall not agree to any adjustment or compromise of
any such loss except for the highest amount reasonably obtainable
thereon.
(j) The Owner will comply with and satisfy all of the
provisions of any applicable law, convention, regulation, proclamation
or order concerning financial responsibility for liabilities imposed on
the Owner or the Vessel with respect to pollution by any state or
nation or political subdivision thereof and will maintain all
certificates or other evidence of financial responsibility as may be
required by any such law, convention, regulation, proclamation or order
with respect to the trade which the Vessel is from time to time engaged
in and the cargo carried by it or the construction projects conducted
by it.
(k) Any provision of this Section 15 to the contrary
notwithstanding, all aspects of the insurances on the Vessel (including
risks covered, policy terms, deductibles, forms of loss payable
clauses, and underwriters or clubs) shall at all times be fully
satisfactory to and approved by the
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Mortgagee, acting in its sole discretion. The Owner shall cause any
insurance broker arranging the insurances required by this Mortgage
(who shall be approved by the Mortgagee) to issue its letter of
undertaking to the Mortgagee with respect to such insurance matters as
the Mortgagee shall request in accordance with usual commercial
practice.
Part III - Mortgage Covenants
6. Operation and Use
6.1 The Owner will:
(a) maintain the registration of the Vessel under the Bahamian
flag and not cause or permit to be done any act or omission whereby its
registration as such would or might be defeated or imperilled;
(b) not cause or permit the Vessel to be operated in any
manner contrary to the laws, regulations, treaties and conventions (and
all rules and regulations issued thereunder) from time to time
applicable to its operation or to the maintenance of its flag;
(c) maintain and preserve the Vessel in good working order and
repair in accordance with good commercial maintenance practices
employed in the offshore construction industry, ordinary wear and tear
excepted, and in any event in such condition as will entitle it to the
classification as a [drilling rig] drillship] or to the equivalent
classification in any other classification society of like standing
approved by the Mortgagee in writing and so as to comply with all
regulations and requirements (statutory or otherwise) from time to time
applicable to vessels registered as Bahamian ships and applicable to
vessels trading in any jurisdiction to which the Vessel may, subject to
the provision of this Deed, trade from time to time , and will annually
furnish to the Mortgagee a certificate by such classification society
that such classification is maintained;
(d) submit the Vessel regularly to such periodical or other
surveys as the classification society in which it is entered may
require and at the request of the Mortgagee provide the Mortgagee with
copies of all survey reports issued in connection therewith;
(e) not make, or permit to be made, any change in the physical
characteristics of the Vessel, which would, in the reasonable judgment
of the Mortgagee, materially interfere with the suitability of the
Vessel for normal commercial offshore construction operations without
first receiving the written approval thereof by the Mortgagee, which
approval shall not be unreasonably withheld;
(f) not knowingly cause or permit the Vessel to trade with, or
within the territorial waters of any country where the Insurances of
the Vessel would be jeopardized or imperilled;
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(g) until one or more Events of Default shall happen, have the
right, from time to time in its discretion and without application to
the Mortgagee, and without obtaining a release thereof by the
Mortgagee, to dispose of, free from the lien of this Deed and the
Mortgage, any boilers, engines, machinery, masts, spars, sails,
rigging, boats, anchors, chains, tackle, apparel, furniture, fittings,
pumps, racking, housing, spare parts and supporting inventory, vehicles
or living quarters or any other appurtenances of the Vessel that are no
longer useful, necessary, profitable or advantageous in the operation
of the Vessel, first or simultaneously replacing the same by boilers,
engines, machinery, masts, spars, sails, rigging, boats, anchors,
chains, tackle, apparel, furniture, fittings, pumps, racking, housing,
spare parts and supporting inventory, vehicles or living quarters or
other appurtenance with those of substantially equal value to the
Owner, which shall forthwith become subject to the lien of this Deed;
and
(h) not, without the prior written consent of the Mortgagee
(and subject to such conditions as the Mortgagee may impose) enter into
any agreement or arrangement whereby the Earnings from the Vessel may
be shared with any other person.
7. Maintenance of Security
7.1 The Owner will:
(a) do everything necessary under all applicable laws for the
purpose of perfecting and maintaining the Mortgage as a valid Mortgage,
carry on board the Vessel a certified copy of the Mortgage and this
Deed and place and maintain in a conspicuous space a framed printed
notice setting forth that the Vessel is mortgaged by the Owner to the
Mortgagee;
(b) not without the prior written consent of the Mortgagee (a)
assign or otherwise create or concur in the creation of or permit to
exist any encumbrance other than Permitted Liens on the Requisition
Compensation, and/or the Earnings, (b) except as permitted in Section
7.1(g) hereof, sell, transfer, abandon, (save in stress of weather) or
otherwise dispose of the Vessel or any share therein;
(c) not (nor authorize or permit the master or any charterer
of the Vessel or any other person to) create, incur or permit to be
placed or imposed upon the Vessel any encumbrance whatsoever other than
the Mortgage and Permitted Liens and any other Mortgage in favor of the
Mortgagee;
(d) do all such acts and execute all such documents as may be
reasonably required by the Mortgagee to ensure the payment to the
Mortgagee of any Requisition Compensation and any other moneys payable
to the Owner in respect of any compulsory requisition for use of the
Vessel by or on behalf of any government or other authority;
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(e) pay and discharge all dues, taxes, assessments,
governmental charges, fines and penalties lawfully imposed on the
Vessel; provided that the Mortgagee shall not be required to pay any
such dues, taxes, assessments, charges, fines or penalties if the
validity or amount thereof is concurrently contested in good faith by
appropriate proceedings and if the Mortgagee shall have set aside on
its books reserves in accordance with generally accepted accounting
principles in the United States deemed by it adequate with respect to
such tax, assessment or charge; and provided further, however, that the
Mortgagee will pay or cause to be paid all such dues, taxes,
assessments, charges, fines or penalties forthwith upon the
commencement of proceedings to foreclose any lien which is attached as
security therefor; and not cause or permit the Vessel to be employed in
any manner which will or may render it liable to confiscation,
forfeiture, seizure, condemnation as prize or destruction;
(f) take all steps necessary to prevent a threatened arrest of
the Vessel by the provision of bail, security or otherwise;
(g) forthwith notify the Mortgagee by telefax (confirmed by
letter) of the levy of any distress on the Vessel or its arrest,
detention, seizure, condemnation as prize, compulsory acquisition or
requisition for title or use and (save in the case of compulsory
acquisition or requisition for title or use) obtain its release within
thirty days by posting bond, posting alternative security or other
means.
8. Provision of Information
8.1 The Owner will:
(a) upon the execution hereof and annually thereafter upon the
anniversary date of the execution hereof, provide the Mortgagee with
copies of the classification certificates of the Vessel and of all
damage or survey reports on the Vessel and upon request by the
Mortgagee provide the Mortgagee with written authority from the Owner
addressed to the relevant classification society to inspect the class
records and request copies of the classification certificates of the
Vessel and all periodic damage or survey reports on the Vessel;
(b) ensure that the Mortgagee, its surveyors or other persons
appointed by it will be permitted on reasonable notice to inspect the
Vessel and its logs and furnish the Mortgagee from time to time, on
request, with certified copies of the logs;
(c) promptly furnish the Mortgagee with full information of
any casualty or other accident or damage to the Vessel involving an
amount in excess of USD 250,000; and
(d) notify the Mortgagee of any requirement or recommendation
made by any insurers or classification society or by any competent
authority which is not complied with
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within any time limit specified by such society or authority, or if no
such time limit is specified, as soon as may reasonably be practicable.
9. Further Assurance
9.1 The Owner will from time to time at the written request of the
Mortgagee do all such things and execute all such documents as the Mortgagee may
reasonably consider necessary or desirable for giving full effect to any
Security Document or for securing the rights of the Mortgagee thereunder.
10. Costs and Expenses
10.1 The Owner will reimburse the Mortgagee promptly, with interest at
a rate per annum equal to the rate provided in Section 2.2D of the Loan
Agreement, computed on the basis of a year of 365 days, or when applicable, 366
days, for any and all reasonable expenditures which the Mortgagee may, after any
required notice to the Owner has been given pursuant to the terms of the Loan
Agreement, from time to time make as provided herein, lay out or expend in
providing such protection in respect of insurance, discharge or purchase of
liens, taxes, dues, assessments, governmental charges, fines and penalties
lawfully imposed, repairs, attorneys' fees and expenses and other matters as the
Owner is obligated herein to provide, but fails to provide within the time
required. Such obligation of the Owner to reimburse the Mortgagee shall be an
additional indebtedness due from the Owner, secured by this Deed and the
Mortgage, and shall be payable by the Owner on demand. The Mortgagee, though
privileged to do so, shall be under no obligation to make any such expenditures,
nor shall the making thereof relieve the Owner of any default in that respect.
10.2 The Mortgagee (and each and every receiver, attorney, manager or
other agent appointed by the Mortgagee hereunder) shall, without prejudice to
the other rights and powers of the Mortgagee hereunder be entitled (but not
bound) at any time and as often as may be necessary to take any such action as
any of them may in their discretion think fit for the purpose of protecting the
security created by this Deed and the other Security Documents.
11. Duration of Covenants
11.1 Any covenants, terms or conditions herein contained which are not
expressly limited in point of time shall be construed as having effect from the
date hereof and until the Owner shall be under no further actual or contingent
liability under any Security Document to which it is party.
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Part IV - Default and Remedies
12. Events of Default
12.1 The security hereby constituted shall become enforceable if any
event of default specified in Section 6 of the Loan Agreement shall occur and be
continuing.
13. Enforcement of Security
13.1 If the security hereby constituted shall become enforceable as
herein provided, time shall be considered as of the essence of this contract,
and the Mortgagee shall be entitled to put into force and exercise all the
powers and remedies possessed by it according to law as mortgagee and chargee of
the Vessel, and in particular:
(a) to take possession of the Vessel;
(b) to recover and collect all freights, passage moneys,
remuneration for salvage or towage services, hire moneys and all other
income or earnings then due or to become due to the Owner in respect of
the Vessel and to give a good accounting therefor on behalf of the
Owner;
(c) to require that all policies, contracts, certificates of
entry and other records relating to Insurances (including details of
and correspondence concerning outstanding claims) be delivered
forthwith to such adjusters and/or brokers and/or other insurers as the
Mortgagee may nominate; however, the Owner makes no representation or
warranty as to the continuing effectiveness of such policies;
(d) to collect, recover, compromise and give a good discharge
for all claims then outstanding or thereafter arising under any policy
or contract of insurance relating to the Vessel and to take over or
institute all such proceedings in connection therewith as the Mortgagee
in its absolute discretion thinks fit and to permit the brokers through
whom collection or recovery is effected to charge and retain the usual
brokerage therefor;
(e) to discharge, compound, release or compromise claims in
respect of the Vessel which have given or may give rise to any charge
or lien on the Vessel having priority over the Mortgage or which are or
may be enforceable by proceedings against the Vessel;
(f) to sell the Vessel or any share therein, with or without
the benefit of any charterparty or other engagement, by public auction
or private contract, at any place in the world, with or without
advertisement, for cash or on Loan and otherwise and upon such terms as
the Mortgagee in its absolute discretion may determine so long as in
accordance with applicable laws, with power to postpone any such sale
and without being answerable for any loss occasioned by such sale or
resulting from postponement thereof, and at any such public sale to
purchase the Vessel and to set off the purchase price against the
Obligations;
(g) to manage the Vessel (and, for such purpose to appoint
and/or remove any manager of the Vessel) and to insure the Vessel on
such terms and with such insurers and
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against such risks as the Mortgagee may in its absolute discretion
think fit, and to maintain and repair the Vessel and to hold, lay up,
lease, contract, operate or otherwise use the Vessel in such manner and
for such period as the Mortgagee in its absolute discretion deems
expedient, accounting only for the net proceeds (if any) of such use,
and for the purposes aforesaid to do all acts and things incidental or
conducive thereto in all respects as if the Mortgagee were the owner of
the Vessel without being responsible for any loss thereby incurred;
provided, however, at such time as the Mortgagee enters upon and takes
possession of the Vessel, the Owner shall not be held responsible by
the Mortgagee for any damage to third parties resulting from or after
the Mortgagee's possession of the Vessel; and
(h) to recover from the Owner on demand all reasonable
expenses, payments and disbursements incurred by the Mortgagee in or
about or incidental to the exercise by it of any of the powers
aforesaid not otherwise reimbursed or recovered hereunder.
13.2 Upon any sale of the Vessel or any share therein by the Mortgagee
pursuant to this Section 13 the purchaser shall not be bound to see or enquire
whether the Mortgagee's power of sale has arisen in the manner herein provided,
the sale shall be deemed to be within the power of the Mortgagee and the receipt
of the Mortgagee for the purchase money shall effectively discharge the
purchaser who shall not be concerned with the manner of application of the
proceeds of sale or be in any way answerable therefor.
14. Application of Moneys in Default
14.1 All moneys received by the Mortgagee under or by virtue of the
Mortgage and this Deed after the security hereby constituted has become
enforceable as aforesaid shall be applied:
(a) first, in or towards payment of any costs, fees and
expenses of the Mortgagee, its agents or attorneys hereunder and to
provide adequate indemnity against liens claiming priority over or in
equality with the lien of this Deed and the Mortgage;
(b) second, in or towards payment of the Obligations pursuant
to Section 2.3 of the Loan Agreement, whether due or not, including
interest thereon to the date of such payment;
(c) third, to the Owner or to whomsoever may be entitled
thereto.
15. Substitute Performance
15.1 If at any time the Owner fails to do any act which it is obliged
to do hereunder or to make any payment which it is obliged to make hereunder
(other than a payment to the Mortgagee) the Mortgagee may, after any required
notice to the Owner has been given pursuant to the terms of the Loan Agreement,
(but shall not be bound to) do such act or procure its doing or make such
payment itself for the purpose of maintaining its security under the Mortgage
and this Deed and
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<PAGE> 16
under all other Security Documents. The Owner will pay to the Mortgagee on
demand the amount of any payment made and/or reasonable costs and expenses
incurred by the Mortgagee in doing any act pursuant to this Section together
with interest thereon at a rate per annum equal to the rate provided in Section
2.2D of the Loan Agreement, computed on the basis of a year of 365 days or, when
applicable, 366 days, from the date such cost or expense was incurred until the
date of reimbursement in full. The exercise by the Mortgagee of its rights under
this Section shall not affect the operation of Section 13 hereof.
16. Receiver
16.1 At any time and from time to time after the security hereby
constituted has become enforceable as aforesaid, the Mortgagee may appoint by
writing any person to be a receiver of the Vessel and of all or part of any
other property assigned or charged to the Mortgage hereby or by any other
Security Document and may from time to time by writing remove any receiver so
appointed and appoint another in his place.
16.2 A receiver appointed as aforesaid shall be the agent of the Owner
(who shall be solely responsible for his acts and defaults and remunerations)
and shall have power on behalf of and at the cost of the Owner to do or omit to
do anything which the Owner could do or omit to do by this Deed and generally
shall have power to exercise all or any of the powers conferred on the Mortgagee
by law and by each Security Document (subject to the proviso in Section 19
hereof).
16.3 The Owner irrevocably appoints any receiver appointed as aforesaid
its attorney for and in its name and on its behalf and as its act and deed to
execute, seal and deliver and otherwise perfect any assurance, agreement,
instrument or act which may be required or may be deemed proper for any of the
purposes hereof.
16.4 The net proceeds of sale and all other moneys received by any
receiver shall be applied by him (subject to the claims of all secured and
unsecured lenders (if any) ranking in priority to the security created by the
relevant Security Document):
(a) first, in payment of remuneration of such receiver at such
rate as may be specified in the instrument of appointment and of all
reasonable costs, charges and expenses of and incidental to the
appointment of such receiver and the exercise of all or any of the
powers aforesaid; and
(b) second, any balance remaining in the hands of such
receiver to be applied according to Section 14 hereof.
17. Extension of the Mortgagee's Powers
17.1 Each and every power and remedy conferred on the Mortgagee by the
Security Documents shall be cumulative and in addition to every other power and
remedy thereby specifically
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<PAGE> 17
conferred or now or hereinafter existing at law, in equity, in admiralty or by
statute. Each and every such power and remedy may be exercised from time to time
and as often and in such order as may be deemed expedient by the Mortgagee. 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 delay or omission by the Mortgagee in the exercise
of any right or power or in the pursuit or any remedy shall impair any such
right, power or remedy or be construed to be a waiver of any default on the part
of the Owner or to be an acquiescence therein.
17.2 The Mortgagee may from time to time and at any time,
unconditionally or on such terms and conditions as may seem expedient, waive any
of the covenants, conditions and obligations on the part of the Owner contained
herein or any breach thereof by the Owner. Every such waiver by the Mortgagee
shall be deemed to have been made without prejudice to its rights and powers as
mortgagee and chargee of the Vessel which shall at all times thereafter remain
exercisable whenever the Mortgagee shall think fit and as if such waiver had not
been made.
17.3 The Owner hereby agrees that its obligations hereunder or under
the Mortgage or any other Security Document shall not be in any way discharged
or impaired by any forbearance, whether as to payment, time, performance or
otherwise, or other indulgence being given to the Owner relating to all or any
of the obligations secured hereby or by the Mortgage or by any other Security
Document, or by any act, thing, omission or means whatever (other than payment
in full of the Obligations), which but for this provision might constitute a
legal or equitable discharge or defense of the Owner.
Part V - Mortgage Conditions
18. Continuing Security
18.1 The security created by this Deed, the Mortgage and the other
Security Documents shall constitute and be continuing security notwithstanding
any intermediate payment by the Owner of the Obligations or any part thereof,
any settlement of accounts or other matter or thing whatsoever and shall be in
addition to and not in substitution for or in derogation of any other security
which the Mortgagee may now or at any time hereafter hold for or in respect of
the Obligations.
18.2 The Mortgagee shall not be obliged before taking steps to enforce
the security created by the Mortgage or this Deed to exercise any of the rights,
powers and remedies conferred upon it hereby or thereby (i) to take action or
obtain judgment in any court against any person bound by or party to a Related
Security Document or (ii) to enforce or seek to enforce the Loan Agreement or
any Related Security Document and shall be at liberty at any time to grant any
time or indulgence to any such person, and to exchange, release and renew any
securities, and to compound in any way it may think fit with any such person for
or in respect of any part of the Obligations with or without the knowledge of
the Owner, without affecting the rights of the Mortgagee hereunder or under the
Mortgage.
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<PAGE> 18
19. Power of Attorney
19.1 The Owner hereby irrevocably (so long as the Obligations remain
unpaid) appoints the Mortgagee its attorney:
(a) for and on behalf of the Owner and in its name and as its
act and deed to execute, seal and deliver and otherwise perfect any
such document as is mentioned in Section 9 hereof;
(b) for and on behalf of the Owner and in its name and as its
act and deed to execute and deliver to any purchaser of the Vessel from
the Mortgagee in exercise of its powers under Section 13 hereof a bill
of sale or other assurance in respect of the Vessel;
(c) for and on behalf of the Owner and in its name and as its
act and deed to do all acts and execute, seal and deliver and otherwise
perfect all documents which the Owner itself could do in reference to
the Vessel or in connection with any of the matters dealt with in the
Security Documents.
Provided that the Mortgagee shall not exercise the power contained in this
Section unless and until the security hereby constituted shall have become
enforceable as aforesaid. The exercise of such power by the Mortgagee shall not
put any person dealing with it upon any enquiry as to whether the security
hereby constituted shall have become enforceable as aforesaid, nor shall any
such person be in any way affected by notice to the contrary and the exercise by
the Mortgagee of this power shall be conclusive evidence of its right to
exercise the same.
20. Indemnity
20.1 The Mortgagee and every receiver, attorney, manager, agent or
other person appointed by the Mortgagee hereunder shall be entitled to be
indemnified out of the security created by the Security Documents in respect of
all liabilities and expenses incurred by it, him or them in the proper execution
or purported execution of any powers, authorities or discretions vested in it,
him or them pursuant to any Security Document.
21. Notices
21.1 All notices, requests, consents, demands, and other communications
provided for or permitted hereunder shall, except as otherwise expressly
provided herein, be given in accordance with Section 7.8 of the Loan Agreement
to the parties at the addresses set forth below:
Owner: R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: Steven Webster
Facsimile No. (281) 496-0285
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<PAGE> 19
Mortgagee: RBF Finance Co.
901 Threadneedle
Houston, Texas 77079
Attention: Leighton Moss
Facsimile No. (281) 496-0285
unless another address shall be furnished in writing by the party to receive
such notice to the party giving such notice.
22. Jurisdiction
22.1 For the exclusive benefit of the Mortgagee the parties hereto
irrevocably agree that the courts of the Commonwealth of The Bahamas are to have
jurisdiction to settle any disputes which may arise out of or in connection with
the Mortgage and this Deed and that accordingly, any suit, action or proceeding
(together in this Section referred to as "Proceedings") arising out of or in
connection with the Mortgage or this Deed may be brought in such courts.
22.2 Without prejudice to Section 22.1 hereof, the Owner further
irrevocably agrees that any Proceedings arising out of or in connection with
this Deed or the Mortgage may be brought in any place wherein the Vessel may be
situated, and submits to the non-exclusive jurisdiction of each such court.
22.3 The Owner agrees that any writ, judgment or other notice of legal
process in the courts of the Commonwealth of The Bahamas shall be sufficiently
served on it if delivered by it at the following address:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: Steven Webster
22.4 The Owner irrevocably waives any objection which it may now or
hereafter to the laying of the venue of any proceedings in any such court as is
referred to in this Section or claim that any such Proceedings have been brought
in an inconvenient forum and further irrevocably agrees that a judgment in any
Proceedings brought in the courts of the Commonwealth of The Bahamas or any
place wherein the Vessel may be situated shall be conclusive and binding upon
the Owner and may be enforced in the courts of any other jurisdiction.
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<PAGE> 20
23. Successors in Title
23.1 The obligations on the part of the Owner contained herein shall
bind it and its successors and permitted assigns and the rights of the Mortgagee
shall enure to the benefit of its successors and assigns, whether so expressed
or not.
24. Invalidity of Provision
24.1 If any provision hereof is or becomes invalid or unenforceable for
any reason under the laws of any jurisdiction, such provision shall be invalid
and unenforceable as to that jurisdiction only and such invalidity or
unenforceability shall not (and shall not be construed so as to) invalidate or
make unenforceable any other provision hereof.
25. Law
25.1 This Deed shall be governed by and construed in accordance with
the laws of the Commonwealth of The Bahamas.
Owner:
R&B FALCON CORPORATION, a corporation
organized under the laws of the State of Delaware
By: /S ROBERT F. FULTON
--------------------------------------------
Name: Robert F. Fulton
------------------------------------------
Title: Vice President
-----------------------------------------
IN WITNESS whereof this
Deed has been executed by
the duly authorized officer
of the Owner hereto the day
and year first before
written.
Mortgagee:
RBF FINANCE CO., a corporation organized under
the laws of the State of Delaware
By: /S/ LEIGHTON E. MOSS
------------------------------------------
Name: Leighton E. Moss
------------------------------------------
Title: Vice President
-----------------------------------------
IN WITNESS whereof this
Deed has been executed by
the duly authorized officer
of the Mortgagee hereto the
day and year first before
written.
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<PAGE> 1
EXHIBIT 10.22
FIRST NAVAL MORTGAGE
on the Vessel
DEEPWATER MILLENNIUM
executed by
R&B FALCON CORPORATION,
as Shipowner
and
RBF FINANCE CO.,
as Mortgagee
FIRST NAVAL MORTGAGE dated April 12, 1999 by R&B Falcon Corporation, a
corporation organized and existing under the laws of the State of Delaware with
offices at 901 Threadneedle, Houston, Texas 77079, U.S.A. (the "Shipowner") to
RBF Finance Co., a corporation organized and existing under the laws of the
State of Delaware, with offices at 901 Threadneedle, Houston, Texas 77079,
U.S.A. (the "Mortgagee").
FIRST: The Shipowner represents, warrants and covenants that:
A. The Shipowner is the sole owner of the whole of the vessel DEEPWATER
MILLENNIUM, duly documented in the name of the Shipowner under the laws and flag
of the Republic of Panama with Provisional Patente No. 28090-PEXT, Radio Call
Letters 3FJA9, of 60,083.00 gross tonnage, 18,025.00 net tonnage, and 205.69
meters in length, 42.00 meters in width and 20.00 meters in depth (the
"Vessel").
B. The Shipowner has entered into a Loan Agreement (the "Loan
Agreement") dated as of March 26, 1999 with the Mortgagee providing for advances
to up to an aggregate amount of USD 209,900,000.
Pursuant to the Loan Agreement, the Shipowner has executed and
delivered to the Mortgagee its promissory notes in the aggregate amount of USD
209,900,000 (collectively, the "Note") and is justly indebted to the Mortgagee
therefor. The Loan Agreement and Note, in the form of Exhibit A hereto evidences
the obligation of the Shipowner under the Loan Agreement.
C. The Shipowner has heretofore agreed to execute and deliver this
First Naval Mortgage (the "Mortgage") on the Vessel to secure the Shipowner's
indebtedness pursuant to the Loan Agreement
<PAGE> 2
and under the Note in the original principal amount of USD 209,900,000 and
interest thereon and all other amounts payable hereunder and to secure as well
the performance and observance of all agreements, covenants and conditions
contained herein and contained in the Loan Agreement and the Note. The formula
for the calculation of interest and the terms of its payment together with the
terms of the repayment of principal are provided in the Loan Agreement.
SECOND: In consideration of the premises and of other good and valuable
consideration, the receipt whereof is hereby acknowledged, and in order to
secure the payment of the indebtedness pursuant to the Loan Agreement and the
Note according to the terms thereof and the payment of all other sums that may
hereafter be secured by this Mortgage in accordance with the terms hereof (all
such indebtedness, interest and other sums being hereinafter sometimes
collectively called the "Indebtedness hereby secured") and to secure as well the
performance and observance of all agreements, covenants and conditions contained
herein and contained in the Loan Agreement and the Note, the Shipowner hereby
constitutes a first naval mortgage in accordance with the provisions of Chapter
V Title IV of Book Second of the Code of Commerce and other pertinent
legislation of the Republic of Panama in favor of the Mortgagee, its successors
and assigns, upon one hundred percent (100%) of the Vessel, together with all of
the boilers, engines, machinery, masts, spars, boats, anchors, cables, chains,
rigging, tackle, capstans, outfit, tools, pumps and pumping equipment, apparel,
furniture, fittings, equipment, spare parts and all other appurtenances
(including without limitation drilling masts, rotary tables, substructures, draw
work, engines, pumps, blowout prevention equipment, drill pipe and drill bits)to
said Vessel appertaining or belonging, whether now owned or hereafter acquired,
whether on board or not, and also any and all additions, improvements and
replacements in general effected subsequently on or to the Vessel, or any part
thereof, or appurtenance thereto, but always excluding therefrom leased
equipment and equipment owned by third parties;
PROVIDED, HOWEVER, and these presents are upon the condition, if the
Shipowner or its successors or assigns shall pay or cause to be paid to the
Mortgagee the Indebtedness hereby secured, as and when the same shall become due
and payable in accordance with the terms of this Mortgage, the Note and the Loan
Agreement, and shall duly perform the agreements, covenants and conditions
herein and in the Loan Agreement and the Note contained, then this Mortgage and
the rights hereby granted shall cease and be void, otherwise to remain in full
force and effect.
THIRD: The Shipowner certifies that a true form of the Loan Agreement
(including the Note) is attached to this Mortgage as Exhibit A and that the
terms and conditions of the Loan Agreement
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<PAGE> 3
and the Note are incorporated by reference into this Mortgage and
form a part hereof.
FOURTH: The Shipowner represents, warrants, covenants and
agrees with the Mortgagee as follows:
ARTICLE I.
Covenants of the Shipowner
Section 1. The Shipowner agrees that it will promptly and faithfully
pay or cause to be paid the Indebtedness hereby secured and that it will perform
and observe all agreements, covenants and conditions express or implied
contained herein and in the Loan Agreement and the Note.
Section 2. The Shipowner is duly organized and validly existing as a
corporation under the laws of the State of Delaware; it is duly authorized to
mortgage the Vessel; all corporate action necessary as required by law for the
execution and delivery of this Mortgage has been duly and effectively taken; and
the Mortgage, the Note and the Loan Agreement are and will be valid obligations
of the Shipowner enforceable in accordance with their terms.
Section 3. The Shipowner lawfully owns and is lawfully possessed of the
Vessel free from any lien or encumbrance whatsoever other than for current
operating expenses incurred in the ordinary course of business (payment for
which is not overdue) and for liens covered (in excess of approved deductibles)
by insurance (collectively, the "Permitted Liens") or any commitment to make the
Vessel available to any governmental authority for charter, or sale or use, and
will warrant and defend the title and possession thereto and to every part
thereof for the benefit of the Mortgagee against the claims and demands of all
persons whomsoever.
Section 4. The Shipowner will comply with and satisfy all of the
provisions of applicable law of the Republic of Panama in order to establish and
maintain this Mortgage as a first naval mortgage thereunder upon the Vessel and
upon all renewals, replacements and improvements made in or to the same.
Section 5. The Shipowner will not cause or permit the Vessel to be
operated in any manner contrary to applicable law and the Shipowner will not
engage in any unlawful trade or operations or violate any applicable law or
carry any cargo that will unreasonably 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 registration of the Vessel under the laws and
regulations of Panama and will at all times keep the Vessel duly documented
thereunder.
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<PAGE> 4
Section 6. The Shipowner will pay and discharge when due and payable,
from time to time, all taxes, assessments, governmental charges, fines and
penalties lawfully imposed on the Vessel or any income therefrom; provided,
however, that the Shipowner shall not be required to pay and discharge any such
tax, assessment, governmental charge, fine or penalty so long as the legality
thereof shall be contested in good faith and by appropriate proceedings or other
acts and the Shipowner shall set aside on its books adequate reserves with
respect to any such tax, assessment, charge, fine or penalty so contested, and
the Vessel shall not have been arrested or detained therefor.
Section 7. Neither the Shipowner, any charterer, 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 upon the Vessel, its freights,
profits or hire, any lien whatsoever other than this Mortgage and Permitted
Liens.
Section 8. The Shipowner will place, and at all times and places will
retain, a properly certified copy of this Mortgage on board the Vessel with her
papers and will cause such certified copy and the Vessel's marine document to be
exhibited to any and all persons having business therewith which might give rise
to any lien thereon other than liens for crew's wages and salvage, and to any
representative of the Mortgagee; and will place and prominently display in the
chart room and in the Master's cabin of the Vessel a framed printed notice in
plain type reading as follows:
"NOTICE OF MORTGAGE
This Vessel is owned by R&B Falcon Corporation ("the Owner") and is
subject to a First Naval Mortgage (the "Mortgage") in favor of RBF
Finance Co., Mortgagee. Under the terms of said Mortgage neither the
Owner, any Charterer, 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 or continued upon this Vessel any lien whatsoever
other than said Mortgage and liens permitted by said Mortgage and liens
for crew's wages, general average and salvage, a copy of which is
available on board for inspection upon the request of any party having
business with the Vessel."
Section 9. Except for the lien of this Mortgage and Permitted Liens,
the Shipowner will not suffer to be continued any lien, encumbrance or charge on
the Vessel, and in due course and in any event within thirty (30) days after the
same becomes due and payable will pay or cause to be discharged or make adequate
provision for the satisfaction or discharge of all such claims or demands, or
will cause the Vessel to be released or discharged from any lien, encumbrance or
charge therefor.
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<PAGE> 5
Section 10. If a libel or complaint be filed against the Vessel or the
Vessel is otherwise attached, levied upon or taken into custody or sequestered
by virtue of any legal proceeding in any court, the Shipowner will promptly
notify the Mortgagee thereof by telefax or telex confirmed by letter, at its
address specified in this Mortgage, and within thirty (30) days will cause the
Vessel to be released and all liens thereon (other than the lien of this
Mortgage and Permitted Liens) to be discharged and will promptly notify the
Mortgagee thereof in the manner aforesaid. The Shipowner will notify the
Mortgagee within forty-eight (48) hours after it has become known to the
Shipowner of any average or salvage incurred by the Vessel.
Section 11. (a) The Shipowner will at all times and without cost or
expense to the Mortgagee upgrade, maintain and preserve, or cause to be
upgraded, maintained and preserved, the Vessel in good running order and repair,
so that the Vessel shall be, insofar as due diligence can make it so, tight,
staunch, strong, in good condition, working order and repair and in all respects
seaworthy and fit for its intended service; and will keep the Vessel, or cause
it to be kept in such condition as will entitle it to the highest classification
and rating for vessels of the same age and type with American Bureau of
Shipping, or other classification society which is a member of the International
Association of Classification Societies and approved by the Mortgagee, and will
at the time of execution of this Mortgage, and annually thereafter on the
anniversary of the date of execution hereof will furnish to the Mortgagee a
certificate by such classification society that such classification is
maintained. The Vessel shall, and the Shipowner covenants that it will, at all
times comply with all applicable laws, treaties and conventions to which the
Republic of Panama is a party and rules and regulations issued thereunder, and
shall have on board as and when required thereby valid certificates showing
compliance therewith. The Shipowner will not make, or permit to be made, any
substantial change in the structure type or speed of the Vessel or change in its
rig without first receiving the written approval thereof by the Mortgagee.
(b) The Shipowner agrees, following receipt of written request by the
Mortgagee, to give the Mortgagee at least ten (10) days notice of the actual
date and place of any survey of the Vessel in order that the Mortgagee may have
representatives present if desired. The Shipowner agrees that at the Mortgagee's
request it will satisfy the Mortgagee that the expense of such survey or work to
be done thereat is within the Shipowner's financial ability and will not result
in a claim or lien against the Vessel in violation of the provisions of this
Mortgage.
Section 12. (a) The Shipowner will at all reasonable times afford the
Mortgagee or its authorized representatives full and complete access to the
Vessel for the purpose of inspecting the Vessel and its cargo and papers,
subject only to receipt of all
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<PAGE> 6
necessary governmental approvals and consents of oil company operators, and, at
the request of the Mortgagee, the Shipowner will deliver for inspection copies
of any and all contracts and documents relating to the Vessel, whether on board
or not.
(b) The Shipowner hereby appoints the Mortgagee attorney-in-fact of the
Shipowner, whether or not an event of default shall have occurred or is
continuing, to appear before governmental bodies, classification societies and
insurers and to demand and receive to the same extent that the Shipowner itself
might, all information and certificates respecting (i) the corporate status of
the Shipowner under the laws of its jurisdiction of incorporation or any other
jurisdiction in which it may have qualified to do business, (ii) the status of
the Vessel under the laws and regulations of its country of registration and its
compliance with the requirements thereof, and (iii) the state of the records of
the Vessel or of the Shipowner in respect of the Vessel in any classification
society with which the Vessel may be classed or of any company, association or
club by whom the Vessel or the Shipowner in respect of the Vessel may be
insured; and the Shipowner hereby agrees that the Mortgagee may execute its
powers as attorney-in-fact as aforesaid through its agents, representatives and
attorneys. This power of attorney is coupled with an interest and shall be
irrevocable as long as any indebtedness from the Shipowner to the Mortgagee
remains outstanding.
Section 13. The Shipowner will not transfer or change the flag or port
of documentation of the Vessel without the prior written consent of the
Mortgagee and any such written consent to any one transfer or change of flag or
port of documentation shall not be construed to be a waiver of this provision
with respect to any subsequent proposed transfer or change of flag or port of
documentation.
Section 14. The Shipowner will not sell, mortgage, demise charter
(other than to an affiliate) for a period longer than six (6) months, transfer
or change the management of the Vessel without the prior written consent of the
Mortgagee, and any such written consent to any one sale, mortgage, demise
charter or transfer, shall not be construed to be a waiver of this provision
with respect to any subsequent proposed sale, mortgage, demise charter or
transfer of the Vessel. Any such sale, mortgage, demise charter (other than to
an affiliate) or transfer of the Vessel shall be subject to the provisions of
this Mortgage and the lien hereof.
Section 15. (a) The Shipowner will cause to be carried and maintained
on or in respect of the Vessel without expense to the Mortgagee, all risk
equivalent Hull and Machinery and Protection and Indemnity insurance with
responsible and reputable insurance companies, underwriters, associations, clubs
or funds reasonably acceptable to the Mortgagee in an amount not less than the
greater
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<PAGE> 7
of (X) 110% of the amount of the outstanding Indebtedness hereby secured or (Y)
the fair market value of the Vessel's hull and machinery (the "agreed value"),
war risk and protection and indemnity and insurances in such amounts (with such
deductibles or franchises), against such risks (including but not limited to,
loss of or damage to hull or machinery; protection and indemnity; war risks in
the event the Vessel is located outside United States territorial waters or
waters above the outer Continental Shelf of the United States, and pollution
risks); in such form (including, without limitation, the form of the loss
payable clause) and in U.S. currency as the Mortgagee shall from time to time
reasonably require or approve and as provided hereafter; and providing for
deductibles no greater than USD 1,000,000.00 per occurrence. The Shipowner shall
maintain liability insurance including crew liability, cargo liability,
pollution liability, contractual liability and removal of wreck insurance in
amounts similar to that maintained by owners of similar vessels and reasonably
acceptable to the Mortgagee or, without expense to the Mortgagee, have the
Vessel fully entered in a responsible and reputable Protection and Indemnity
Association or club in good standing and reasonably acceptable to the Mortgagee.
The Shipowner will cause such association or club to issue to the Mortgagee a
Letter of Undertaking or certificate or cover note, noting the Mortgagee's
interest in such insurance in a form reasonably satisfactory to the Mortgagee.
The Shipowner will furnish the Mortgagee from time to time on request and in any
event at least annually a detailed report (including a list showing the insured
value of the Vessel) signed by a firm of marine insurance brokers reasonably
acceptable to the Mortgagee with respect to the insurance carried and maintained
on the Vessel, together with its report as to the compliance of such insurance
with the requirements of this Section 15. The Shipowner agrees that, unless the
insurances by its terms provide that they cannot cease without the Mortgagee
being informed and having the right to continue the insurances by paying any
premiums not paid by the Shipowner, receipts showing payment of premiums for
required insurance paid shall be in the hands of the Mortgagee at least two (2)
days before the risk in question commences.
(b) The Shipowner shall, at its own expense, furnish to the Mortgagee a
breach of warranty endorsement, including Additional Perils Pollution, providing
coverage for the Mortgagee in an amount equal to at least 110% of the amount of
the Indebtedness hereby secured. Such mortgagee's breach of warranty endorsement
insurance shall be maintained in the broadest form available in the American or
British markets for vessels of the same type as the Vessel through underwriters
reasonably acceptable to the Mortgagee. The Vessel shall not undertake any
construction operations, carry any cargoes or proceed in an area then excluded
by trading warranties under its marine or war risk policies (including
protection and indemnity) without obtaining all necessary additional coverage,
reasonably satisfactory in form and substance to the Mortgagee; and evidence of
which additional insurance shall be furnished to the Mortgagee.
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<PAGE> 8
(c) The Shipowner will cause the relevant insurance brokers to agree
to, and the Shipowner hereby covenants and agrees that it will, advise the
Mortgagee of any expiration, termination, nonrenewal, alteration or cancellation
of any policy, any default in the payment of any premium and of any other act or
omission on the part of the Shipowner of which it has knowledge and which might
invalidate or render unenforceable, in whole or in part, any insurance on the
Vessel. To the extent obtainable from underwriters or brokers, all policies
required hereby shall provide for not less than thirty (30) days prior written
notice (ten (10) days with respect to non-payment of premiums and seven (7) days
with respect to war risks) to be received by the Mortgagee of the termination or
cancellation of the insurance evidenced thereby. All policies of insurance
maintained pursuant to this Article I, Section 15 shall contain provisions
waiving underwriters' rights of subrogation thereunder against any assured named
in such policy and any assignee of said assured.
(d) Unless the Mortgagee shall otherwise agree, all insurance (other
than any Protection and Indemnity Association or Club) must name the Mortgagee
as an additional insured but without liability for premiums, club calls,
assessments, warranties or representations, and all amounts of whatsoever nature
payable under any insurance must be payable to the Mortgagee for distribution
first to itself and thereafter to the Shipowner or others as interest may
appear. Nevertheless, unless an Event of Default shall have occurred and is
continuing (i) amounts payable under any insurance on the Vessel with respect to
protection and indemnity risks may be paid directly to the Shipowner to
reimburse it for any loss, damage or expense incurred by it and covered by such
insurance or to the person to whom any liability covered by such insurance has
been incurred; provided, however, if the Mortgagee shall give notice that the
Shipowner is in default hereunder, all such payments shall be made to the
Mortgagee (with the exception of payments made under employers liability,
workman's compensation and similar insurances) until the Indebtedness hereby
secured has been fully discharged, and (ii) unless an Event of Default has
occurred or is continuing amounts payable under any insurance with respect to
the Vessel involving any damage to the Vessel not constituting an actual or
constructive total loss, the underwriters may pay direct for the repair, salvage
or other charges involved or, if the Shipowner shall have first fully repaired
the damage or paid all of the salvage or other charges, may pay the Shipowner as
reimbursement therefor; provided, however, that if such amounts (including any
franchise or deductible) are greater than USD 1,000,000.00 the underwriters
shall not make such payment without first obtaining the written consent thereto
of the Mortgagee.
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(e) All amounts paid to the Mortgagee in respect of any insurance on
the Vessel shall be disposed of as follows:
(i) any amount which might have been paid at the time, in
accordance with the provisions of paragraph (d) above, directly to the
Shipowner or others shall be paid by the Mortgagee to, or as directed
by, the Shipowner;
(ii) all amounts paid to the Mortgagee in respect of an actual
or constructive or arranged total loss or requisition shall be applied
by the Mortgagee to the payment of the Indebtedness hereby secured in
full;
(iii) so long as no Event of Default shall have occurred and
be continuing all other amounts paid to the Mortgagee in respect of any
insurance on the Vessel shall be applied to the making of needed
repairs or other work on the Vessel, or to the payment of other claims
incurred by the Shipowner relating to the Vessel, or may be paid to the
Shipowner or whosoever may be entitled thereto;
(iv) all other amounts paid to the Mortgagee in respect of any
insurance on the Vessel may, in the Mortgagee's sole discretion, be
held and applied to the prepayment of the Indebtedness hereby secured.
(f) In the event that any claim or lien is asserted against the Vessel
for loss, damage or expense which is covered by insurance required hereunder and
it is necessary for the Shipowner to obtain a bond or supply other security to
prevent arrest of the Vessel or to release the Vessel from arrest on account of
such claim or lien, the Mortgagee, on request of the Shipowner, may, in the sole
discretion of the Mortgagee, assign to any person, firm or corporation executing
a surety or guarantee bond or other agreement to save or release the Vessel from
such arrest, all right, title and interest of the Mortgagee in and to said
insurance covering said loss, damage or expense, as collateral security to
indemnify against liability under said bond or other agreement.
(g) The Shipowner shall deliver to the Mortgagee certified copies or
originals whenever so requested by the Mortgagee in writing, of all certificates
of entry, cover notes, binders, evidences of insurance and policies for the
purpose of inspection or safekeeping, or, alternatively, satisfactory letters of
undertaking from the broker holding the same.
(h) The Shipowner agrees that it will not execute or permit or
willingly allow to be done any act by which any insurance may be suspended,
impaired or canceled, and that it will not permit or allow the Vessel to
undertake any construction operations or run any risk or transport any cargo
which may not be permitted by the policies in force, without having previously
insured the Vessel by additional coverage to extend to such construction
operations, risks or cargoes.
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(i) In case any underwriter proposes to pay less on any claim of total
loss (whether actual, constructive or compromised) than the amount thereof, the
Shipowner shall forthwith inform the Mortgagee and the consent of the Mortgagee
shall be required for any compromise thereof; and the Shipowner shall not agree
to any adjustment or compromise of any such loss except for the highest amount
reasonably obtainable thereon.
(j) The Shipowner will comply with and satisfy all of the provisions of
any applicable law, convention, regulation, proclamation or order concerning
financial responsibility for liabilities imposed on the Shipowner or the Vessel
with respect to pollution by any state or nation or political subdivision
thereof and will maintain all certificates or other evidence of financial
responsibility as may be required by any such law, convention, regulation,
proclamation or order with respect to the trade which the Vessel are from time
to time engaged in and the cargo carried by it or the construction projects
conducted by it.
(k) Any provision of this Section 15 to the contrary notwithstanding,
all aspects of the insurances on the Vessel (including risks covered, policy
terms, deductibles, forms of loss payable clauses, and underwriters or clubs)
shall at all times be fully satisfactory to and approved by the Mortgagee,
acting in its sole discretion. The Shipowner shall cause any insurance broker
arranging the insurances required by this Mortgage (who shall be approved by the
Mortgagee) to issue its letter of undertaking to the Mortgagee with respect to
such insurance matters as the Mortgagee shall request in accordance with usual
commercial practice.
Section 16. The Shipowner will reimburse the Mortgagee promptly for any
and all expenditures which the Mortgagee may, from time to time, make, lay out
or expend in providing such protection in respect of insurance, discharge or
purchase of liens, taxes, dues, assessments, governmental charges, fines and
penalties lawfully imposed, repairs, attorneys' fees, necessary translation fees
for documents made in a language other than English and other matters as the
Shipowner is obligated herein to provide, but fails to provide. Such obligation
of the Shipowner to reimburse the Mortgagee shall be an additional indebtedness
due from the Shipowner, secured by this Mortgage, and shall be payable by the
Shipowner on demand. The Mortgagee, though privileged so to do, shall be under
no obligation to the Shipowner to make any such expenditures, nor shall the
making thereof relieve the Shipowner of any default in that respect.
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Section 17. The Shipowner will fully perform any and all charter
parties or contracts of affreightment which are, or may be, entered into with
respect to the Vessel.
Section 18. The Shipowner further covenants and agrees with the
Mortgagee that, so long as any part of the Indebtedness hereby secured remains
unpaid, there shall be no change in the ownership of the Vessel without the
prior written consent of the Mortgagee.
Section 19. (a) In the event of an actual or constructive or arranged
total loss or seizure or forfeiture or requisition or other taking, or any sale,
exchange, or other disposition of the Vessel by the Shipowner, whether or not
with the consent of the Mortgagee, then and in each such case the Shipowner
shall forthwith on demand prepay the Indebtedness hereby secured pursuant to
Section 2.3 of the Loan Agreement.
(b) This Mortgage shall extend to and constitute a lien upon, and the
Shipowner hereby grants the Mortgagee a security interest in, all proceeds
resulting from any of the events mentioned in subsection (a) above as security
for the Indebtedness hereby secured.
(c) The Shipowner hereby irrevocably authorizes the Mortgagee to file
and record financing statements under the Uniform Commercial Code in any
jurisdiction where the same may be in force or under any legislation having
similar effect for the purpose of perfecting or continuing the perfection of the
security interests granted by the Shipowner to the Mortgagee herein without
obtaining the signature of the Shipowner thereto. The Shipowner hereby
irrevocably authorizes the Mortgagee to execute any such financing statement or
similar document in the name of the Shipowner.
Section 20. In the event that this Mortgage or any provision hereof
shall be deemed invalidated in whole or in part by reason of any present or
future law or any decision of any authoritative court, or if the documents at
any time held by the Mortgagee shall be deemed by the Mortgagee for any reason
insufficient to carry out the true intent and spirit of this Mortgage, then from
time to time, the Shipowner will execute, on its own behalf, such other and
further assurances and documents as in the opinion of the Mortgagee may be
required more effectively to subject the Vessel to the payment of the
Indebtedness hereby secured, as in this Mortgage provided, and the performance
of the terms and provisions of this Mortgage, the Note and the Loan Agreement.
Section 21. From time to time on the request of the Mortgagee, the
Shipowner will furnish to the Mortgagee: (a) such favorable opinions of counsel,
including Panamanian and United States legal opinions, satisfactory in form and
substance to the Mortgagee and (b) such instruments executed by the Shipowner or
on
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its behalf or by any or all officers, shareholders or directors of the Shipowner
in each case relating to any of the transactions contemplated herein, including
this Mortgage, as the Mortgagee may reasonably request.
ARTICLE II.
EVENTS OF DEFAULT AND REMEDIES
Section 1. In case any one or more of the following events herein
termed "Events of Default" shall occur and be continuing:
(a) Any payment in respect of the Indebtedness hereby secured
has not been received by the Mortgagee when due after giving effect to
any applicable grace periods; or
(b) Any Event of Default has occurred under the Loan
Agreement; or
(c) The statements in Sections 2 and 3 of Article I above
shall prove to be untrue in a material way; or
(d) A default shall have occurred in the due and punctual
observance and performance of any of the provisions of Sections 4, 5,
6, 9, 10, 11, 13, 14, 15, 16, 18 or 19 of Article I hereof; or
(e) A default by the Shipowner in the observance or
performance of any other provision of this Mortgage unremedied for
thirty (30) days after written notice thereof shall have been given to
the Shipowner by the Mortgagee; or
(f) the Shipowner or any other obligor of any part of the
Indebtedness hereby secured: (i) is dissolved or its legal status is
lost or canceled by reason of any valid, judicial, extra-judicial, or
administrative proceeding shall have occurred, or (ii) dies or is
adjudicated a bankrupt, or (iii) shall admit in writing its inability
to pay its debts as they fall due, or (iv) shall make a general
assignment for the benefit of its creditors; or a receiver of the
property or business of the Shipowner or any obligor on or guarantor of
any part of the Indebtedness hereby secured is appointed by a court of
competent jurisdiction;
then, upon the occurrence and continuance of one or more Events of Default, (and
in each and every case), the Mortgagee shall have the right to:
(1) Declare the then unpaid Indebtedness hereby secured to be
due and payable immediately, and upon such declaration, the same,
including interest to the date of declaration, shall become and be
immediately due and payable.
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(2) Exercise all of the rights and remedies in foreclosure and
otherwise given to mortgagees by the laws and regulations of the
Republic of Panama or of any country wherein the Vessel may be found or
of any other applicable jurisdiction.
(3) Bring suit at law, in equity or in admiralty, in any court
of any nation of the world, as it may be advised, to recover judgment
for the Indebtedness hereby secured, and collect the same out of any
and all of the properties of the Shipowner, whether covered by this
Mortgage or otherwise.
(4) Take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process and without being
responsible for loss or damage, and the Shipowner or other person in
possession forthwith upon demand of the Mortgagee shall surrender to
the Mortgagee possession of the Vessel.
(5) Without being responsible for loss or damage, the
Mortgagee may hold, lay up, lease, charter, operate or otherwise use
the Vessel for such time and upon such terms as it may deem to be for
its best advantage, and demand, collect and retain all hire, day rates,
freights, earnings, issues, revenues, income, profits, return premiums,
salvage awards or recoveries, recoveries in general average, 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, accounting only
for the net profits, if any, arising from such use of the Vessel and
charging upon all receipts from the use of the Vessel or from the sale
thereof by court proceedings or pursuant to subsection (6) next
following, all costs, expenses, charges, damages or losses by reason of
such use; and if at any time the Mortgagee shall avail itself of the
right herein given it to take the Vessel, the Mortgagee shall have the
right to dock the Vessel, for a reasonable time at any dock, pier or
other premises of the Shipowner without charge, or to dock her at any
other place at the cost and expense of the Shipowner.
(6) Sell the Vessel without judicial process and without being
responsible for any loss or damage arising therefrom, except as may be
directly and proximately caused by its willful misconduct, recklessness
or gross negligence, in such place, time and manner as the Mortgagee
may, in its sole judgment, deem fit. In the event that the Vessel shall
be offered for sale by private sale, reasonable notice must be given to
the Shipowner but need not be more than twenty (20) days before the
private sale, and 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 the Mortgagee by notice may have specified, or may be
adjourned by
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the 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 the Mortgagee may make any such sale at the time
and place to which the same shall be so adjourned. At the sale, the
Mortgagee may acquire the Vessel in satisfaction of all or a portion of
the outstanding Indebtedness.
It is expressly agreed that upon payment of the purchase price, the
purchaser shall acquire good and peaceful title to the Vessel sold at any such
non-judicial sale, and shall not be affected by any claim or potential claim of
the Shipowner, whether or not such claim or potential claim comes to the
knowledge of the purchaser.
Any sale may be conducted without bringing the Vessel to the place
designated for such sale and in such manner as the Mortgagee may deem to be for
its best advantage.
Section 2. Any 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 the Shipowner therein and thereto, and shall bar the Shipowner, its
successors and assigns, and all persons claiming by, through or under them, from
asserting any claim or right, title or interest therein or thereto. 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 the application of
the proceeds thereof.
Section 3. The Mortgagee is hereby appointed attorney-in-fact of the
Shipowner to execute and deliver to any purchaser aforesaid, and is hereby
vested with full power and authority to make, in the name and in behalf of the
Shipowner, a good conveyance of the title to the Vessel so sold. In the event of
any sale of the Vessel, under any power herein contained, the Shipowner will, if
and when required by the Mortgagee, execute such form of conveyance of the
Vessel as the Mortgagee may direct or approve.
Section 4. The Mortgagee is hereby appointed attorney-in-fact of the
Shipowner upon the happening of any Event of Default, in the name of the
Shipowner 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 at the time of the happening of any Event of Default 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 the Shipowner
acquittances, receipts, releases or other discharges for the same, whether under
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seal or otherwise, all checks, notes, drafts, warrants, agreements and other
instruments in writing with respect to the foregoing.
Section 5. Whenever any right to enter and take possession of the
Vessel accrues to the Mortgagee, it may require the Shipowner to deliver, and
the Shipowner shall on demand, at its own cost and expense, deliver to the
Mortgagee the Vessel at the location designated by the Mortgagee.
Section 6. The Shipowner authorizes and empowers the Mortgagee or its
appointees or any of them to appear in the name of the Shipowner, its successors
and 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 and to take such
proceedings as to them or any of them may seem proper towards the defense of
such suit and the purchase or discharge of such lien, and all expenditures made
or incurred by them or any of them for the purpose of such defense or purchase
or discharge shall be a debt due from the Shipowner, its successors and assigns,
to the Mortgagee and shall be secured by the lien of this Mortgage in like
manner and extent as if the amount and description thereof were written herein.
Section 7. The Shipowner covenants that upon the happening of and
continuance of any one or more of the Events of Default, upon written demand of
the Mortgagee, the Shipowner will pay to the Mortgagee the whole amount due and
payable on the Indebtedness hereby secured together with any other amounts due
hereunder or under the Loan Agreement; and in case the Shipowner shall fail to
pay same forthwith upon such demand, the Mortgagee shall be entitled to recover
judgment for the whole amount so due and unpaid, together with such further
amounts as shall be sufficient to cover the reasonable compensation to the
Mortgagee's agents, attorneys and counsel and any necessary advances, expenses
and liabilities made or incurred by it hereunder. All moneys collected by the
Mortgagee under this Article II, Section 7 shall be applied by the Mortgagee in
accordance with the provisions of Article II, Section 11 below.
Section 8. Each and every right, power and remedy herein given to the
Mortgagee shall be cumulative and shall be in addition to every other right,
power and remedy herein given or now or hereafter existing at law, in equity, in
admiralty or by statute, and each and every right, power and remedy whether
herein given or otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by the Mortgagee, and the
exercise or the beginning of the exercise of any right, power or remedy shall
not be construed to be a waiver of the right to exercise at the same time or
thereafter any other right, power or remedy. No delay or omission by the
Mortgagee or by the holder of
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<PAGE> 16
any of the Indebtedness hereby secured in the exercise of any right or power or
in the pursuance of any remedy accruing upon any Event of Default shall impair
any such right, power or remedy or be construed to be a waiver of any such Event
of Default or to be an acquiescence therein; nor shall the acceptance by the
Mortgagee of any security or of any payment of or on account of the Indebtedness
hereby secured maturing after any Event of Default or of any payment on account
of any past default be construed to be a waiver of any right to take advantage
of any future Event of Default or of any past Event of Default not completely
cured thereby.
Section 9. If at any time after an Event of Default and prior to any
foreclosure action having been taken by the Mortgagee under any of the Loan
Documents to realize upon the security provided by such documents, the Shipowner
offers completely to cure all Events of Default and to pay all expenses,
advances and damages to the Mortgagee consequent to such Events of Default, with
interest at the rate provided for late payments herein, then the Mortgagee shall
be required to first time, and thereafter may, but shall not be required to,
accept such offer and payment and restore the Shipowner to its former position,
but such action shall not affect any subsequent Event of Default or impair any
rights consequent thereon.
Section 10. In case the Mortgagee shall have proceeded to enforce any
right, power or remedy under this Mortgage by foreclosure, entry or otherwise,
and such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Mortgagee, then and in every such
case the Shipowner and the Mortgagee shall 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 the Mortgagee
shall continue as if no such proceedings had been taken.
Section 11. The proceeds of any sale of the Vessel received by the
Mortgagee and the net earnings of any charter operation or other use of the
Vessel received by the Mortgagee under any of the rights, powers or remedies
herein specified and any and all other moneys received by the Mortgagee pursuant
to or under the terms of this Mortgage or in any proceedings hereunder, the
application of which has not elsewhere herein been specifically provided for,
shall be applied as follows:
FIRST: To the payment of all expenses and charges, including
the expenses of any sale, the expenses of any retaking, attorney's
fees, court costs, and any other expenses or advances made or incurred
by the Mortgagee in the protection of its rights or the pursuance of
its remedies hereunder;
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SECOND: To the payment of the Indebtedness hereby secured
whether due or not, including interest thereon to the date of
such payment;
THIRD: To the payment of any surplus thereafter remaining
to the Shipowner or to whomever may be entitled thereto.
Section 12. Until one or more of the Events of Default shall happen,
the Shipowner (a) shall be suffered and permitted to retain actual possession
and use of the Vessel and (b) shall have the right, from time to time, in its
discretion, and without application to the Mortgagee, and without obtaining a
release thereof by the Mortgagee, to dispose of, free from the lien hereof, any
boilers, engines, machinery, masts, spars, sails, rigging, boats, anchors,
chains, tackle, apparel, furniture, fittings or equipment, or any other
appurtenances of the Vessel that are no longer useful, necessary, profitable or
advantageous in the operation of the Vessel, first or simultaneously having
provided for the replacement thereof by new boilers, engines, machinery, masts,
spars, sails, rigging, boats, anchors, chains, tackle, apparel, furniture,
fittings, equipment or other appurtenances of substantially equal value to the
Shipowner, which shall forthwith become subject to the lien of this Mortgage as
a first naval mortgage thereon.
Section 13. If the entire Indebtedness hereby secured is paid as and
when the same becomes due and payable, and if the Shipowner also pays or causes
to be paid all other sums payable by the Shipowner hereunder and under the Loan
Agreement and the Note then this Mortgage and the lien, rights and interest
hereby granted shall cease, determine and become null and void, and the
Mortgagee shall, at the request of the Shipowner, execute and deliver such
reasonable instrument or instruments of satisfaction as may be necessary to
satisfy and discharge the lien hereof; and forthwith the estate, right, title
and interest of the Mortgagee in and to all property subject to this Mortgage
shall thereupon cease, determine and become null and void.
ARTICLE III.
Sundry Provisions
Section 1. The names, surnames, civil status, occupation and domicile
of the Mortgagee and Shipowner are as follows:
MORTGAGEE:
Name: RBF Finance Co.
Civil Status: Corporation organized under the laws of the
State of Delaware
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Occupation: Lending Corporation
Domicile: 901 Threadneedle
Houston, Texas 77079
Telephone No.: (281)496-5000
Telefax No.: (281) 496-0285
SHIPOWNER:
Name: R&B Falcon Corporation
Civil Status: Corporation organized under the laws of the
State of Delaware
Occupation: Shipowner
Domicile: 901 Threadneedle
Houston, Texas 77079
Telephone No.: (281)496-5000
Telefax No.: (281) 496-0285
Section 2. All of the covenants, promises, stipulations and agreements
of the Shipowner in this Mortgage contained shall bind the Shipowner and its
successors and assigns and shall inure to the benefit of the Mortgagee and its
successors and assigns. In the event of any assignment of this Mortgage, the
term "Mortgagee", as used in this Mortgage, shall be deemed to mean any such
assignee.
Section 3. Wherever and whenever herein any right, power or authority
is granted or given to the Mortgagee, such right, power or authority may be
exercised in all cases by the Mortgagee or such agent or agents as it may
appoint, and the act or acts of such agent or agents when taken shall constitute
the act of the Mortgagee hereunder.
Section 4. In the event that any provision of this Mortgage, the Loan
Agreement or the Note 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.
Section 5. The Shipowner agrees to pay all costs and expenses in
connection with the preparation, execution and delivery of the Loan Agreement,
the Note, this Mortgage and any other instrument contemplated thereby (including
the fees and out-of-pocket expenses of counsel to the holder of the Note, the
Loan Agreement, and to the Mortgagee and of local counsel selected by said
counsel in any jurisdiction involved in the transactions contemplated by the
Loan Agreement and this Mortgage) and costs and expenses, including counsel
fees, in connection with the enforcement of the Loan Agreement, the Note, this
Mortgage and any other instrument
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contemplated thereby, as well as costs for translations and any and all stamp
and other taxes of every character, if any, now or hereafter in effect, whether
foreign or domestic, not including taxes imposed on the income or assets of the
Mortgagee by the United States of America or any political subdivisions thereof,
which may be payable or determined to be payable in connection with the
execution, delivery, performance or enforcement of the Loan Agreement, the Note,
and this Mortgage, and any other instrument contemplated thereby and the
payments to be made thereunder, whether any such tax be imposed upon the
Mortgagee and to save the Mortgagee harmless from any and all liabilities with
respect to or resulting from any delay or omission to pay such taxes.
Section 6. This Mortgage may be executed in any number of counterparts,
and all such counterparts executed and delivered each as an original shall
constitute but one and the same instrument. In case of any discrepancy between
an English counterpart and the Spanish and the Notarial version thereof in
Spanish, as between the parties hereto, the English counterpart shall control.
Section 7. (a) Any notice or other communication to be given pursuant
hereto shall be sent by hand or by postage prepaid letter or by cable or
telegram or telefax or telex confirmed by letter and addressed:
To the Shipowner:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: President
Telephone No.: (281)496-5000
Telefax No.: (281) 496-0285
To the Mortgagee:
RBF Finance Co.
901 Threadneedle
Houston, Texas 77079
Attention: President
Telephone No.: (281)496-5000
Telefax No.: (281) 496-0285
(b) Any notice of communication sent by postage prepaid letter
shall be deemed to be received three days after mailing. Any notice or
communication sent by telex or facsimile shall be deemed received at
the opening of business the day after transmission. Any notice or
communication sent by hand shall be deemed to be received on the day
sent if sent during normal business hours and otherwise at the opening
of business on the day following delivery.
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Section 8. No provision of this Mortgage, the Loan Agreement or the
Note shall be deemed to constitute a waiver by the Mortgagee of the preferred
status of this Mortgage given to foreign flag Vessel by 46 U.S.C. ss. 31325 and
31326, of the United States of America or comparable legislation of any other
jurisdiction where this Mortgage may be enforced, and any provision of or
incorporated in this Mortgage which would otherwise constitute such a waiver
shall to such extent be of no force or effect.
Section 9. All capitalized terms used in this Mortgage and not defined
herein shall have the meanings given to them in the Loan Agreement.
FIFTH: The Mortgagee hereby accepts all of the terms and
conditions set forth in this First Naval Mortgage and the First
Naval Mortgage granted hereby.
SIXTH: The Mortgagee and the Shipowner declare that they hereby confer
a special Power of Attorney on Messrs. Arias, Fabrega & Fabrega, lawyers of
Panama, Republic of Panama, empowering each of them individually to take all
necessary steps to file and register this First Naval Mortgage in the
appropriate registries of the Republic of Panama.
IN WITNESS WHEREOF, the parties hereto have executed this Mortgage as
of the day and year first above written.
R&B FALCON CORPORATION
By: /s/ ROBERT FULTON
--------------------------------
Name: Robert Fulton
-------------------------------
Title: Executive Vice President
-----------------------------
RBF FINANCE CO.
By: /s/ STEVEN WEBSTER
--------------------------------
Name: Steven Webster
-------------------------------
Title: President
-----------------------------
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ACKNOWLEDGEMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On this 12th day of April, 1999, before me personally appeared Robert
Fulton known to me to be the Executive Vice President of R&B Falcon Corporation,
the party described in and that executed the foregoing instrument on behalf of
said corporation and acknowledged to me that he signed his name thereto by
authority of the Board of Directors of said corporation and as the free act and
deed of such corporation and that his signature on said instrument was set
thereon in my presence and is therefore authentic.
/s/ PHYLLIS A. DAVIS
--------------------------------------------
Notary Public
[Seal]
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ACKNOWLEDGEMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On this 12th day of April, 1999, before me personally appeared Steven
Webster known to me to be the President of R&B Falcon Corporation, the party
described in and that executed the foregoing instrument on behalf of said
corporation and acknowledged to me that he signed his name thereto by authority
of the Board of Directors of said corporation and as the free act and deed of
such corporation and that his signature on said instrument was set thereon in my
presence and is therefore authentic.
/S/ PHYLLIS A. DAVIS
--------------------------------------------
Notary Public
[Seal]
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<PAGE> 1
EXHIBIT 10.23
FIRST NAVAL MORTGAGE
on the Vessel
DEEPWATER MILLENNIUM
executed by
R&B FALCON CORPORATION,
as Shipowner
and
RBF FINANCE CO.,
as Mortgagee
FIRST NAVAL MORTGAGE dated April 12, 1999 by R&B Falcon Corporation, a
corporation organized and existing under the laws of the State of Delaware with
offices at 901 Threadneedle, Houston, Texas 77079, U.S.A. (the "Shipowner") to
RBF Finance Co., a corporation organized and existing under the laws of the
State of Delaware, with offices at 901 Threadneedle, Houston, Texas 77079,
U.S.A. (the "Mortgagee").
FIRST: The Shipowner represents, warrants and covenants that:
A. The Shipowner is the sole owner of the whole of the vessel DEEPWATER
MILLENNIUM, duly documented in the name of the Shipowner under the laws and flag
of the Republic of Panama with Provisional Patente No. 28090-PEXT, Radio Call
Letters 3FJA9, of 60,083.00 gross tonnage, 18,025.00 net tonnage, and 205.69
meters in length, 42.00 meters in width and 20.00 meters in depth (the
"Vessel").
B. The Shipowner has entered into a Loan Agreement (the "Loan
Agreement") dated as of March 26, 1999 with the Mortgagee providing for advances
to up to an aggregate amount of USD 209,900,000.
Pursuant to the Loan Agreement, the Shipowner has executed and
delivered to the Mortgagee its promissory notes in the aggregate amount of USD
209,900,000 (collectively, the "Note") and is justly indebted to the Mortgagee
therefor. The Loan Agreement and Note, in the form of Exhibit A hereto evidences
the obligation of the Shipowner under the Loan Agreement.
C. The Shipowner has heretofore agreed to execute and deliver this
First Naval Mortgage (the "Mortgage") on the Vessel to secure the Shipowner's
indebtedness pursuant to the Loan Agreement
<PAGE> 2
and under the Note in the original principal amount of USD 209,900,000 and
interest thereon and all other amounts payable hereunder and to secure as well
the performance and observance of all agreements, covenants and conditions
contained herein and contained in the Loan Agreement and the Note. The formula
for the calculation of interest and the terms of its payment together with the
terms of the repayment of principal are provided in the Loan Agreement.
SECOND: In consideration of the premises and of other good and valuable
consideration, the receipt whereof is hereby acknowledged, and in order to
secure the payment of the indebtedness pursuant to the Loan Agreement and the
Note according to the terms thereof and the payment of all other sums that may
hereafter be secured by this Mortgage in accordance with the terms hereof (all
such indebtedness, interest and other sums being hereinafter sometimes
collectively called the "Indebtedness hereby secured") and to secure as well the
performance and observance of all agreements, covenants and conditions contained
herein and contained in the Loan Agreement and the Note, the Shipowner hereby
constitutes a first naval mortgage in accordance with the provisions of Chapter
V Title IV of Book Second of the Code of Commerce and other pertinent
legislation of the Republic of Panama in favor of the Mortgagee, its successors
and assigns, upon one hundred percent (100%) of the Vessel, together with all of
the boilers, engines, machinery, masts, spars, boats, anchors, cables, chains,
rigging, tackle, capstans, outfit, tools, pumps and pumping equipment, apparel,
furniture, fittings, equipment, spare parts and all other appurtenances
(including without limitation drilling masts, rotary tables, substructures, draw
work, engines, pumps, blowout prevention equipment, drill pipe and drill bits)to
said Vessel appertaining or belonging, whether now owned or hereafter acquired,
whether on board or not, and also any and all additions, improvements and
replacements in general effected subsequently on or to the Vessel, or any part
thereof, or appurtenance thereto, but always excluding therefrom leased
equipment and equipment owned by third parties;
PROVIDED, HOWEVER, and these presents are upon the condition, if the
Shipowner or its successors or assigns shall pay or cause to be paid to the
Mortgagee the Indebtedness hereby secured, as and when the same shall become due
and payable in accordance with the terms of this Mortgage, the Note and the Loan
Agreement, and shall duly perform the agreements, covenants and conditions
herein and in the Loan Agreement and the Note contained, then this Mortgage and
the rights hereby granted shall cease and be void, otherwise to remain in full
force and effect.
THIRD: The Shipowner certifies that a true form of the Loan Agreement
(including the Note) is attached to this Mortgage as Exhibit A and that the
terms and conditions of the Loan Agreement
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<PAGE> 3
and the Note are incorporated by reference into this Mortgage and form a part
hereof.
FOURTH: The Shipowner represents, warrants, covenants and agrees with
the Mortgagee as follows:
ARTICLE I.
Covenants of the Shipowner
Section 1. The Shipowner agrees that it will promptly and faithfully
pay or cause to be paid the Indebtedness hereby secured and that it will perform
and observe all agreements, covenants and conditions express or implied
contained herein and in the Loan Agreement and the Note.
Section 2. The Shipowner is duly organized and validly existing as a
corporation under the laws of the State of Delaware; it is duly authorized to
mortgage the Vessel; all corporate action necessary as required by law for the
execution and delivery of this Mortgage has been duly and effectively taken; and
the Mortgage, the Note and the Loan Agreement are and will be valid obligations
of the Shipowner enforceable in accordance with their terms.
Section 3. The Shipowner lawfully owns and is lawfully possessed of the
Vessel free from any lien or encumbrance whatsoever other than for current
operating expenses incurred in the ordinary course of business (payment for
which is not overdue) and for liens covered (in excess of approved deductibles)
by insurance (collectively, the "Permitted Liens") or any commitment to make the
Vessel available to any governmental authority for charter, or sale or use, and
will warrant and defend the title and possession thereto and to every part
thereof for the benefit of the Mortgagee against the claims and demands of all
persons whomsoever.
Section 4. The Shipowner will comply with and satisfy all of the
provisions of applicable law of the Republic of Panama in order to establish and
maintain this Mortgage as a first naval mortgage thereunder upon the Vessel and
upon all renewals, replacements and improvements made in or to the same.
Section 5. The Shipowner will not cause or permit the Vessel to be
operated in any manner contrary to applicable law and the Shipowner will not
engage in any unlawful trade or operations or violate any applicable law or
carry any cargo that will unreasonably 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 registration of the Vessel under the laws and
regulations of Panama and will at all times keep the Vessel duly documented
thereunder.
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Section 6. The Shipowner will pay and discharge when due and payable,
from time to time, all taxes, assessments, governmental charges, fines and
penalties lawfully imposed on the Vessel or any income therefrom; provided,
however, that the Shipowner shall not be required to pay and discharge any such
tax, assessment, governmental charge, fine or penalty so long as the legality
thereof shall be contested in good faith and by appropriate proceedings or other
acts and the Shipowner shall set aside on its books adequate reserves with
respect to any such tax, assessment, charge, fine or penalty so contested, and
the Vessel shall not have been arrested or detained therefor.
Section 7. Neither the Shipowner, any charterer, 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 upon the Vessel, its freights,
profits or hire, any lien whatsoever other than this Mortgage and Permitted
Liens.
Section 8. The Shipowner will place, and at all times and places will
retain, a properly certified copy of this Mortgage on board the Vessel with her
papers and will cause such certified copy and the Vessel's marine document to be
exhibited to any and all persons having business therewith which might give rise
to any lien thereon other than liens for crew's wages and salvage, and to any
representative of the Mortgagee; and will place and prominently display in the
chart room and in the Master's cabin of the Vessel a framed printed notice in
plain type reading as follows:
"NOTICE OF MORTGAGE
This Vessel is owned by R&B Falcon Corporation ("the Owner") and is
subject to a First Naval Mortgage (the "Mortgage") in favor of RBF
Finance Co., Mortgagee. Under the terms of said Mortgage neither the
Owner, any Charterer, 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 or continued upon this Vessel any lien whatsoever
other than said Mortgage and liens permitted by said Mortgage and liens
for crew's wages, general average and salvage, a copy of which is
available on board for inspection upon the request of any party having
business with the Vessel."
Section 9. Except for the lien of this Mortgage and Permitted Liens,
the Shipowner will not suffer to be continued any lien, encumbrance or charge on
the Vessel, and in due course and in any event within thirty (30) days after the
same becomes due and payable will pay or cause to be discharged or make adequate
provision for the satisfaction or discharge of all such claims or demands, or
will cause the Vessel to be released or discharged from any lien, encumbrance or
charge therefor.
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<PAGE> 5
Section 10. If a libel or complaint be filed against the Vessel or the
Vessel is otherwise attached, levied upon or taken into custody or sequestered
by virtue of any legal proceeding in any court, the Shipowner will promptly
notify the Mortgagee thereof by telefax or telex confirmed by letter, at its
address specified in this Mortgage, and within thirty (30) days will cause the
Vessel to be released and all liens thereon (other than the lien of this
Mortgage and Permitted Liens) to be discharged and will promptly notify the
Mortgagee thereof in the manner aforesaid. The Shipowner will notify the
Mortgagee within forty-eight (48) hours after it has become known to the
Shipowner of any average or salvage incurred by the Vessel.
Section 11. (a) The Shipowner will at all times and without cost or
expense to the Mortgagee upgrade, maintain and preserve, or cause to be
upgraded, maintained and preserved, the Vessel in good running order and repair,
so that the Vessel shall be, insofar as due diligence can make it so, tight,
staunch, strong, in good condition, working order and repair and in all respects
seaworthy and fit for its intended service; and will keep the Vessel, or cause
it to be kept in such condition as will entitle it to the highest classification
and rating for vessels of the same age and type with American Bureau of
Shipping, or other classification society which is a member of the International
Association of Classification Societies and approved by the Mortgagee, and will
at the time of execution of this Mortgage, and annually thereafter on the
anniversary of the date of execution hereof will furnish to the Mortgagee a
certificate by such classification society that such classification is
maintained. The Vessel shall, and the Shipowner covenants that it will, at all
times comply with all applicable laws, treaties and conventions to which the
Republic of Panama is a party and rules and regulations issued thereunder, and
shall have on board as and when required thereby valid certificates showing
compliance therewith. The Shipowner will not make, or permit to be made, any
substantial change in the structure type or speed of the Vessel or change in its
rig without first receiving the written approval thereof by the Mortgagee.
(b) The Shipowner agrees, following receipt of written request by the
Mortgagee, to give the Mortgagee at least ten (10) days notice of the actual
date and place of any survey of the Vessel in order that the Mortgagee may have
representatives present if desired. The Shipowner agrees that at the Mortgagee's
request it will satisfy the Mortgagee that the expense of such survey or work to
be done thereat is within the Shipowner's financial ability and will not result
in a claim or lien against the Vessel in violation of the provisions of this
Mortgage.
Section 12. (a) The Shipowner will at all reasonable times afford the
Mortgagee or its authorized representatives full and complete access to the
Vessel for the purpose of inspecting the Vessel and its cargo and papers,
subject only to receipt of all
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<PAGE> 6
necessary governmental approvals and consents of oil company operators, and, at
the request of the Mortgagee, the Shipowner will deliver for inspection copies
of any and all contracts and documents relating to the Vessel, whether on board
or not.
(b) The Shipowner hereby appoints the Mortgagee attorney-in-fact of the
Shipowner, whether or not an event of default shall have occurred or is
continuing, to appear before governmental bodies, classification societies and
insurers and to demand and receive to the same extent that the Shipowner itself
might, all information and certificates respecting (i) the corporate status of
the Shipowner under the laws of its jurisdiction of incorporation or any other
jurisdiction in which it may have qualified to do business, (ii) the status of
the Vessel under the laws and regulations of its country of registration and its
compliance with the requirements thereof, and (iii) the state of the records of
the Vessel or of the Shipowner in respect of the Vessel in any classification
society with which the Vessel may be classed or of any company, association or
club by whom the Vessel or the Shipowner in respect of the Vessel may be
insured; and the Shipowner hereby agrees that the Mortgagee may execute its
powers as attorney-in-fact as aforesaid through its agents, representatives and
attorneys. This power of attorney is coupled with an interest and shall be
irrevocable as long as any indebtedness from the Shipowner to the Mortgagee
remains outstanding.
Section 13. The Shipowner will not transfer or change the flag or port
of documentation of the Vessel without the prior written consent of the
Mortgagee and any such written consent to any one transfer or change of flag or
port of documentation shall not be construed to be a waiver of this provision
with respect to any subsequent proposed transfer or change of flag or port of
documentation.
Section 14. The Shipowner will not sell, mortgage, demise charter
(other than to an affiliate) for a period longer than six (6) months, transfer
or change the management of the Vessel without the prior written consent of the
Mortgagee, and any such written consent to any one sale, mortgage, demise
charter or transfer, shall not be construed to be a waiver of this provision
with respect to any subsequent proposed sale, mortgage, demise charter or
transfer of the Vessel. Any such sale, mortgage, demise charter (other than to
an affiliate) or transfer of the Vessel shall be subject to the provisions of
this Mortgage and the lien hereof.
Section 15. (a) The Shipowner will cause to be carried and maintained
on or in respect of the Vessel without expense to the Mortgagee, all risk
equivalent Hull and Machinery and Protection and Indemnity insurance with
responsible and reputable insurance companies, underwriters, associations, clubs
or funds reasonably acceptable to the Mortgagee in an amount not less than the
greater
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of (X) 110% of the amount of the outstanding Indebtedness hereby secured or (Y)
the fair market value of the Vessel's hull and machinery (the "agreed value"),
war risk and protection and indemnity and insurances in such amounts (with such
deductibles or franchises), against such risks (including but not limited to,
loss of or damage to hull or machinery; protection and indemnity; war risks in
the event the Vessel is located outside United States territorial waters or
waters above the outer Continental Shelf of the United States, and pollution
risks); in such form (including, without limitation, the form of the loss
payable clause) and in U.S. currency as the Mortgagee shall from time to time
reasonably require or approve and as provided hereafter; and providing for
deductibles no greater than USD 1,000,000.00 per occurrence. The Shipowner shall
maintain liability insurance including crew liability, cargo liability,
pollution liability, contractual liability and removal of wreck insurance in
amounts similar to that maintained by owners of similar vessels and reasonably
acceptable to the Mortgagee or, without expense to the Mortgagee, have the
Vessel fully entered in a responsible and reputable Protection and Indemnity
Association or club in good standing and reasonably acceptable to the Mortgagee.
The Shipowner will cause such association or club to issue to the Mortgagee a
Letter of Undertaking or certificate or cover note, noting the Mortgagee's
interest in such insurance in a form reasonably satisfactory to the Mortgagee.
The Shipowner will furnish the Mortgagee from time to time on request and in any
event at least annually a detailed report (including a list showing the insured
value of the Vessel) signed by a firm of marine insurance brokers reasonably
acceptable to the Mortgagee with respect to the insurance carried and maintained
on the Vessel, together with its report as to the compliance of such insurance
with the requirements of this Section 15. The Shipowner agrees that, unless the
insurances by its terms provide that they cannot cease without the Mortgagee
being informed and having the right to continue the insurances by paying any
premiums not paid by the Shipowner, receipts showing payment of premiums for
required insurance paid shall be in the hands of the Mortgagee at least two (2)
days before the risk in question commences.
(b) The Shipowner shall, at its own expense, furnish to the Mortgagee a
breach of warranty endorsement, including Additional Perils Pollution, providing
coverage for the Mortgagee in an amount equal to at least 110% of the amount of
the Indebtedness hereby secured. Such mortgagee's breach of warranty endorsement
insurance shall be maintained in the broadest form available in the American or
British markets for vessels of the same type as the Vessel through underwriters
reasonably acceptable to the Mortgagee. The Vessel shall not undertake any
construction operations, carry any cargoes or proceed in an area then excluded
by trading warranties under its marine or war risk policies (including
protection and indemnity) without obtaining all necessary additional coverage,
reasonably satisfactory in form and substance to the Mortgagee; and evidence of
which additional insurance shall be furnished to the Mortgagee.
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<PAGE> 8
(c) The Shipowner will cause the relevant insurance brokers to agree
to, and the Shipowner hereby covenants and agrees that it will, advise the
Mortgagee of any expiration, termination, nonrenewal, alteration or cancellation
of any policy, any default in the payment of any premium and of any other act or
omission on the part of the Shipowner of which it has knowledge and which might
invalidate or render unenforceable, in whole or in part, any insurance on the
Vessel. To the extent obtainable from underwriters or brokers, all policies
required hereby shall provide for not less than thirty (30) days prior written
notice (ten (10) days with respect to non-payment of premiums and seven (7) days
with respect to war risks) to be received by the Mortgagee of the termination or
cancellation of the insurance evidenced thereby. All policies of insurance
maintained pursuant to this Article I, Section 15 shall contain provisions
waiving underwriters' rights of subrogation thereunder against any assured named
in such policy and any assignee of said assured.
(d) Unless the Mortgagee shall otherwise agree, all insurance (other
than any Protection and Indemnity Association or Club) must name the Mortgagee
as an additional insured but without liability for premiums, club calls,
assessments, warranties or representations, and all amounts of whatsoever nature
payable under any insurance must be payable to the Mortgagee for distribution
first to itself and thereafter to the Shipowner or others as interest may
appear. Nevertheless, unless an Event of Default shall have occurred and is
continuing (i) amounts payable under any insurance on the Vessel with respect to
protection and indemnity risks may be paid directly to the Shipowner to
reimburse it for any loss, damage or expense incurred by it and covered by such
insurance or to the person to whom any liability covered by such insurance has
been incurred; provided, however, if the Mortgagee shall give notice that the
Shipowner is in default hereunder, all such payments shall be made to the
Mortgagee (with the exception of payments made under employers liability,
workman's compensation and similar insurances) until the Indebtedness hereby
secured has been fully discharged, and (ii) unless an Event of Default has
occurred or is continuing amounts payable under any insurance with respect to
the Vessel involving any damage to the Vessel not constituting an actual or
constructive total loss, the underwriters may pay direct for the repair, salvage
or other charges involved or, if the Shipowner shall have first fully repaired
the damage or paid all of the salvage or other charges, may pay the Shipowner as
reimbursement therefor; provided, however, that if such amounts (including any
franchise or deductible) are greater than USD 1,000,000.00 the underwriters
shall not make such payment without first obtaining the written consent thereto
of the Mortgagee.
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(e) All amounts paid to the Mortgagee in respect of any insurance on
the Vessel shall be disposed of as follows:
(i) any amount which might have been paid at the time, in
accordance with the provisions of paragraph (d) above, directly to the
Shipowner or others shall be paid by the Mortgagee to, or as directed
by, the Shipowner;
(ii) all amounts paid to the Mortgagee in respect of an actual
or constructive or arranged total loss or requisition shall be applied
by the Mortgagee to the payment of the Indebtedness hereby secured in
full;
(iii) so long as no Event of Default shall have occurred and
be continuing all other amounts paid to the Mortgagee in respect of any
insurance on the Vessel shall be applied to the making of needed
repairs or other work on the Vessel, or to the payment of other claims
incurred by the Shipowner relating to the Vessel, or may be paid to the
Shipowner or whosoever may be entitled thereto;
(iv) all other amounts paid to the Mortgagee in respect of any
insurance on the Vessel may, in the Mortgagee's sole discretion, be
held and applied to the prepayment of the Indebtedness hereby secured.
(f) In the event that any claim or lien is asserted against the Vessel
for loss, damage or expense which is covered by insurance required hereunder and
it is necessary for the Shipowner to obtain a bond or supply other security to
prevent arrest of the Vessel or to release the Vessel from arrest on account of
such claim or lien, the Mortgagee, on request of the Shipowner, may, in the sole
discretion of the Mortgagee, assign to any person, firm or corporation executing
a surety or guarantee bond or other agreement to save or release the Vessel from
such arrest, all right, title and interest of the Mortgagee in and to said
insurance covering said loss, damage or expense, as collateral security to
indemnify against liability under said bond or other agreement.
(g) The Shipowner shall deliver to the Mortgagee certified copies or
originals whenever so requested by the Mortgagee in writing, of all certificates
of entry, cover notes, binders, evidences of insurance and policies for the
purpose of inspection or safekeeping, or, alternatively, satisfactory letters of
undertaking from the broker holding the same.
(h) The Shipowner agrees that it will not execute or permit or
willingly allow to be done any act by which any insurance may be suspended,
impaired or canceled, and that it will not permit or allow the Vessel to
undertake any construction operations or run any risk or transport any cargo
which may not be permitted by the policies in force, without having previously
insured the Vessel by additional coverage to extend to such construction
operations, risks or cargoes.
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(i) In case any underwriter proposes to pay less on any claim of total
loss (whether actual, constructive or compromised) than the amount thereof, the
Shipowner shall forthwith inform the Mortgagee and the consent of the Mortgagee
shall be required for any compromise thereof; and the Shipowner shall not agree
to any adjustment or compromise of any such loss except for the highest amount
reasonably obtainable thereon.
(j) The Shipowner will comply with and satisfy all of the provisions of
any applicable law, convention, regulation, proclamation or order concerning
financial responsibility for liabilities imposed on the Shipowner or the Vessel
with respect to pollution by any state or nation or political subdivision
thereof and will maintain all certificates or other evidence of financial
responsibility as may be required by any such law, convention, regulation,
proclamation or order with respect to the trade which the Vessel are from time
to time engaged in and the cargo carried by it or the construction projects
conducted by it.
(k) Any provision of this Section 15 to the contrary notwithstanding,
all aspects of the insurances on the Vessel (including risks covered, policy
terms, deductibles, forms of loss payable clauses, and underwriters or clubs)
shall at all times be fully satisfactory to and approved by the Mortgagee,
acting in its sole discretion. The Shipowner shall cause any insurance broker
arranging the insurances required by this Mortgage (who shall be approved by the
Mortgagee) to issue its letter of undertaking to the Mortgagee with respect to
such insurance matters as the Mortgagee shall request in accordance with usual
commercial practice.
Section 16. The Shipowner will reimburse the Mortgagee promptly for any
and all expenditures which the Mortgagee may, from time to time, make, lay out
or expend in providing such protection in respect of insurance, discharge or
purchase of liens, taxes, dues, assessments, governmental charges, fines and
penalties lawfully imposed, repairs, attorneys' fees, necessary translation fees
for documents made in a language other than English and other matters as the
Shipowner is obligated herein to provide, but fails to provide. Such obligation
of the Shipowner to reimburse the Mortgagee shall be an additional indebtedness
due from the Shipowner, secured by this Mortgage, and shall be payable by the
Shipowner on demand. The Mortgagee, though privileged so to do, shall be under
no obligation to the Shipowner to make any such expenditures, nor shall the
making thereof relieve the Shipowner of any default in that respect.
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Section 17. The Shipowner will fully perform any and all charter
parties or contracts of affreightment which are, or may be, entered into with
respect to the Vessel.
Section 18. The Shipowner further covenants and agrees with the
Mortgagee that, so long as any part of the Indebtedness hereby secured remains
unpaid, there shall be no change in the ownership of the Vessel without the
prior written consent of the Mortgagee.
Section 19. (a) In the event of an actual or constructive or arranged
total loss or seizure or forfeiture or requisition or other taking, or any sale,
exchange, or other disposition of the Vessel by the Shipowner, whether or not
with the consent of the Mortgagee, then and in each such case the Shipowner
shall forthwith on demand prepay the Indebtedness hereby secured pursuant to
Section 2.3 of the Loan Agreement.
(b) This Mortgage shall extend to and constitute a lien upon, and the
Shipowner hereby grants the Mortgagee a security interest in, all proceeds
resulting from any of the events mentioned in subsection (a) above as security
for the Indebtedness hereby secured.
(c) The Shipowner hereby irrevocably authorizes the Mortgagee to file
and record financing statements under the Uniform Commercial Code in any
jurisdiction where the same may be in force or under any legislation having
similar effect for the purpose of perfecting or continuing the perfection of the
security interests granted by the Shipowner to the Mortgagee herein without
obtaining the signature of the Shipowner thereto. The Shipowner hereby
irrevocably authorizes the Mortgagee to execute any such financing statement or
similar document in the name of the Shipowner.
Section 20. In the event that this Mortgage or any provision hereof
shall be deemed invalidated in whole or in part by reason of any present or
future law or any decision of any authoritative court, or if the documents at
any time held by the Mortgagee shall be deemed by the Mortgagee for any reason
insufficient to carry out the true intent and spirit of this Mortgage, then from
time to time, the Shipowner will execute, on its own behalf, such other and
further assurances and documents as in the opinion of the Mortgagee may be
required more effectively to subject the Vessel to the payment of the
Indebtedness hereby secured, as in this Mortgage provided, and the performance
of the terms and provisions of this Mortgage, the Note and the Loan Agreement.
Section 21. From time to time on the request of the Mortgagee, the
Shipowner will furnish to the Mortgagee: (a) such favorable opinions of counsel,
including Panamanian and United States legal opinions, satisfactory in form and
substance to the Mortgagee and (b) such instruments executed by the Shipowner or
on
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its behalf or by any or all officers, shareholders or directors of the Shipowner
in each case relating to any of the transactions contemplated herein, including
this Mortgage, as the Mortgagee may reasonably request.
ARTICLE II.
EVENTS OF DEFAULT AND REMEDIES
Section 1. In case any one or more of the following events herein
termed "Events of Default" shall occur and be continuing:
(a) Any payment in respect of the Indebtedness hereby secured
has not been received by the Mortgagee when due after giving effect to
any applicable grace periods; or
(b) Any Event of Default has occurred under the Loan
Agreement; or
(c) The statements in Sections 2 and 3 of Article I above
shall prove to be untrue in a material way; or
(d) A default shall have occurred in the due and punctual
observance and performance of any of the provisions of Sections 4, 5,
6, 9, 10, 11, 13, 14, 15, 16, 18 or 19 of Article I hereof; or
(e) A default by the Shipowner in the observance or
performance of any other provision of this Mortgage unremedied for
thirty (30) days after written notice thereof shall have been given to
the Shipowner by the Mortgagee; or
(f) the Shipowner or any other obligor of any part of the
Indebtedness hereby secured: (i) is dissolved or its legal status is
lost or canceled by reason of any valid, judicial, extra-judicial, or
administrative proceeding shall have occurred, or (ii) dies or is
adjudicated a bankrupt, or (iii) shall admit in writing its inability
to pay its debts as they fall due, or (iv) shall make a general
assignment for the benefit of its creditors; or a receiver of the
property or business of the Shipowner or any obligor on or guarantor of
any part of the Indebtedness hereby secured is appointed by a court of
competent jurisdiction;
then, upon the occurrence and continuance of one or more Events of Default, (and
in each and every case), the Mortgagee shall have the right to:
(1) Declare the then unpaid Indebtedness hereby secured to be
due and payable immediately, and upon such declaration, the same,
including interest to the date of declaration, shall become and be
immediately due and payable.
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(2) Exercise all of the rights and remedies in foreclosure and
otherwise given to mortgagees by the laws and regulations of the
Republic of Panama or of any country wherein the Vessel may be found or
of any other applicable jurisdiction.
(3) Bring suit at law, in equity or in admiralty, in any court
of any nation of the world, as it may be advised, to recover judgment
for the Indebtedness hereby secured, and collect the same out of any
and all of the properties of the Shipowner, whether covered by this
Mortgage or otherwise.
(4) Take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process and without being
responsible for loss or damage, and the Shipowner or other person in
possession forthwith upon demand of the Mortgagee shall surrender to
the Mortgagee possession of the Vessel.
(5) Without being responsible for loss or damage, the
Mortgagee may hold, lay up, lease, charter, operate or otherwise use
the Vessel for such time and upon such terms as it may deem to be for
its best advantage, and demand, collect and retain all hire, day rates,
freights, earnings, issues, revenues, income, profits, return premiums,
salvage awards or recoveries, recoveries in general average, 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, accounting only
for the net profits, if any, arising from such use of the Vessel and
charging upon all receipts from the use of the Vessel or from the sale
thereof by court proceedings or pursuant to subsection (6) next
following, all costs, expenses, charges, damages or losses by reason of
such use; and if at any time the Mortgagee shall avail itself of the
right herein given it to take the Vessel, the Mortgagee shall have the
right to dock the Vessel, for a reasonable time at any dock, pier or
other premises of the Shipowner without charge, or to dock her at any
other place at the cost and expense of the Shipowner.
(6) Sell the Vessel without judicial process and without being
responsible for any loss or damage arising therefrom, except as may be
directly and proximately caused by its willful misconduct, recklessness
or gross negligence, in such place, time and manner as the Mortgagee
may, in its sole judgment, deem fit. In the event that the Vessel shall
be offered for sale by private sale, reasonable notice must be given to
the Shipowner but need not be more than twenty (20) days before the
private sale, and 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 the Mortgagee by notice may have specified, or may be
adjourned by
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<PAGE> 14
the 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 the Mortgagee may make any such sale at the time
and place to which the same shall be so adjourned. At the sale, the
Mortgagee may acquire the Vessel in satisfaction of all or a portion of
the outstanding Indebtedness.
It is expressly agreed that upon payment of the purchase price, the
purchaser shall acquire good and peaceful title to the Vessel sold at any such
non-judicial sale, and shall not be affected by any claim or potential claim of
the Shipowner, whether or not such claim or potential claim comes to the
knowledge of the purchaser.
Any sale may be conducted without bringing the Vessel to the place
designated for such sale and in such manner as the Mortgagee may deem to be for
its best advantage.
Section 2. Any 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 the Shipowner therein and thereto, and shall bar the Shipowner, its
successors and assigns, and all persons claiming by, through or under them, from
asserting any claim or right, title or interest therein or thereto. 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 the application of
the proceeds thereof.
Section 3. The Mortgagee is hereby appointed attorney-in-fact of the
Shipowner to execute and deliver to any purchaser aforesaid, and is hereby
vested with full power and authority to make, in the name and in behalf of the
Shipowner, a good conveyance of the title to the Vessel so sold. In the event of
any sale of the Vessel, under any power herein contained, the Shipowner will, if
and when required by the Mortgagee, execute such form of conveyance of the
Vessel as the Mortgagee may direct or approve.
Section 4. The Mortgagee is hereby appointed attorney-in-fact of the
Shipowner upon the happening of any Event of Default, in the name of the
Shipowner 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 at the time of the happening of any Event of Default 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 the Shipowner
acquittances, receipts, releases or other discharges for the same, whether under
14
<PAGE> 15
seal or otherwise, all checks, notes, drafts, warrants, agreements and other
instruments in writing with respect to the foregoing.
Section 5. Whenever any right to enter and take possession of the
Vessel accrues to the Mortgagee, it may require the Shipowner to deliver, and
the Shipowner shall on demand, at its own cost and expense, deliver to the
Mortgagee the Vessel at the location designated by the Mortgagee.
Section 6. The Shipowner authorizes and empowers the Mortgagee or its
appointees or any of them to appear in the name of the Shipowner, its successors
and 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 and to take such
proceedings as to them or any of them may seem proper towards the defense of
such suit and the purchase or discharge of such lien, and all expenditures made
or incurred by them or any of them for the purpose of such defense or purchase
or discharge shall be a debt due from the Shipowner, its successors and assigns,
to the Mortgagee and shall be secured by the lien of this Mortgage in like
manner and extent as if the amount and description thereof were written herein.
Section 7. The Shipowner covenants that upon the happening of and
continuance of any one or more of the Events of Default, upon written demand of
the Mortgagee, the Shipowner will pay to the Mortgagee the whole amount due and
payable on the Indebtedness hereby secured together with any other amounts due
hereunder or under the Loan Agreement; and in case the Shipowner shall fail to
pay same forthwith upon such demand, the Mortgagee shall be entitled to recover
judgment for the whole amount so due and unpaid, together with such further
amounts as shall be sufficient to cover the reasonable compensation to the
Mortgagee's agents, attorneys and counsel and any necessary advances, expenses
and liabilities made or incurred by it hereunder. All moneys collected by the
Mortgagee under this Article II, Section 7 shall be applied by the Mortgagee in
accordance with the provisions of Article II, Section 11 below.
Section 8. Each and every right, power and remedy herein given to the
Mortgagee shall be cumulative and shall be in addition to every other right,
power and remedy herein given or now or hereafter existing at law, in equity, in
admiralty or by statute, and each and every right, power and remedy whether
herein given or otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by the Mortgagee, and the
exercise or the beginning of the exercise of any right, power or remedy shall
not be construed to be a waiver of the right to exercise at the same time or
thereafter any other right, power or remedy. No delay or omission by the
Mortgagee or by the holder of
15
<PAGE> 16
any of the Indebtedness hereby secured in the exercise of any right or power or
in the pursuance of any remedy accruing upon any Event of Default shall impair
any such right, power or remedy or be construed to be a waiver of any such Event
of Default or to be an acquiescence therein; nor shall the acceptance by the
Mortgagee of any security or of any payment of or on account of the Indebtedness
hereby secured maturing after any Event of Default or of any payment on account
of any past default be construed to be a waiver of any right to take advantage
of any future Event of Default or of any past Event of Default not completely
cured thereby.
Section 9. If at any time after an Event of Default and prior to any
foreclosure action having been taken by the Mortgagee under any of the Loan
Documents to realize upon the security provided by such documents, the Shipowner
offers completely to cure all Events of Default and to pay all expenses,
advances and damages to the Mortgagee consequent to such Events of Default, with
interest at the rate provided for late payments herein, then the Mortgagee shall
be required to first time, and thereafter may, but shall not be required to,
accept such offer and payment and restore the Shipowner to its former position,
but such action shall not affect any subsequent Event of Default or impair any
rights consequent thereon.
Section 10. In case the Mortgagee shall have proceeded to enforce any
right, power or remedy under this Mortgage by foreclosure, entry or otherwise,
and such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Mortgagee, then and in every such
case the Shipowner and the Mortgagee shall 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 the Mortgagee
shall continue as if no such proceedings had been taken.
Section 11. The proceeds of any sale of the Vessel received by the
Mortgagee and the net earnings of any charter operation or other use of the
Vessel received by the Mortgagee under any of the rights, powers or remedies
herein specified and any and all other moneys received by the Mortgagee pursuant
to or under the terms of this Mortgage or in any proceedings hereunder, the
application of which has not elsewhere herein been specifically provided for,
shall be applied as follows:
FIRST: To the payment of all expenses and charges, including
the expenses of any sale, the expenses of any retaking, attorney's
fees, court costs, and any other expenses or advances made or incurred
by the Mortgagee in the protection of its rights or the pursuance of
its remedies hereunder;
16
<PAGE> 17
SECOND: To the payment of the Indebtedness hereby secured
whether due or not, including interest thereon to the date of such
payment;
THIRD: To the payment of any surplus thereafter remaining to
the Shipowner or to whomever may be entitled thereto.
Section 12. Until one or more of the Events of Default shall happen,
the Shipowner (a) shall be suffered and permitted to retain actual possession
and use of the Vessel and (b) shall have the right, from time to time, in its
discretion, and without application to the Mortgagee, and without obtaining a
release thereof by the Mortgagee, to dispose of, free from the lien hereof, any
boilers, engines, machinery, masts, spars, sails, rigging, boats, anchors,
chains, tackle, apparel, furniture, fittings or equipment, or any other
appurtenances of the Vessel that are no longer useful, necessary, profitable or
advantageous in the operation of the Vessel, first or simultaneously having
provided for the replacement thereof by new boilers, engines, machinery, masts,
spars, sails, rigging, boats, anchors, chains, tackle, apparel, furniture,
fittings, equipment or other appurtenances of substantially equal value to the
Shipowner, which shall forthwith become subject to the lien of this Mortgage as
a first naval mortgage thereon.
Section 13. If the entire Indebtedness hereby secured is paid as and
when the same becomes due and payable, and if the Shipowner also pays or causes
to be paid all other sums payable by the Shipowner hereunder and under the Loan
Agreement and the Note then this Mortgage and the lien, rights and interest
hereby granted shall cease, determine and become null and void, and the
Mortgagee shall, at the request of the Shipowner, execute and deliver such
reasonable instrument or instruments of satisfaction as may be necessary to
satisfy and discharge the lien hereof; and forthwith the estate, right, title
and interest of the Mortgagee in and to all property subject to this Mortgage
shall thereupon cease, determine and become null and void.
ARTICLE III.
Sundry Provisions
Section 1. The names, surnames, civil status, occupation and domicile
of the Mortgagee and Shipowner are as follows:
17
<PAGE> 18
MORTGAGEE:
<TABLE>
<CAPTION>
Name: RBF Finance Co.
<S> <C>
Civil Status: Corporation organized under the laws of the
State of Delaware
Occupation: Lending Corporation
Domicile: 901 Threadneedle
Houston, Texas 77079
Telephone No.: (281)496-5000
Telefax No.: (281) 496-0285
SHIPOWNER:
Name: R&B Falcon Corporation
Civil Status: Corporation organized under the laws of the
State of Delaware
Occupation: Shipowner
Domicile: 901 Threadneedle
Houston, Texas 77079
Telephone No.: (281)496-5000
Telefax No.: (281) 496-0285
</TABLE>
Section 2. All of the covenants, promises, stipulations and agreements
of the Shipowner in this Mortgage contained shall bind the Shipowner and its
successors and assigns and shall inure to the benefit of the Mortgagee and its
successors and assigns. In the event of any assignment of this Mortgage, the
term "Mortgagee", as used in this Mortgage, shall be deemed to mean any such
assignee.
Section 3. Wherever and whenever herein any right, power or authority
is granted or given to the Mortgagee, such right, power or authority may be
exercised in all cases by the Mortgagee or such agent or agents as it may
appoint, and the act or acts of such agent or agents when taken shall constitute
the act of the Mortgagee hereunder.
Section 4. In the event that any provision of this Mortgage, the Loan
Agreement or the Note 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.
Section 5. The Shipowner agrees to pay all costs and expenses in
connection with the preparation, execution and delivery of the Loan Agreement,
the Note, this Mortgage and any other instrument contemplated thereby (including
the fees and out-of-pocket expenses of counsel to the holder of the Note, the
Loan Agreement, and to the Mortgagee and of local counsel selected by said
counsel in any jurisdiction involved in the transactions contemplated by the
Loan Agreement and this Mortgage) and costs and expenses, including counsel
fees, in connection with the enforcement of the Loan Agreement, the Note, this
Mortgage and any other instrument
18
<PAGE> 19
contemplated thereby, as well as costs for translations and any and all stamp
and other taxes of every character, if any, now or hereafter in effect, whether
foreign or domestic, not including taxes imposed on the income or assets of the
Mortgagee by the United States of America or any political subdivisions thereof,
which may be payable or determined to be payable in connection with the
execution, delivery, performance or enforcement of the Loan Agreement, the Note,
and this Mortgage, and any other instrument contemplated thereby and the
payments to be made thereunder, whether any such tax be imposed upon the
Mortgagee and to save the Mortgagee harmless from any and all liabilities with
respect to or resulting from any delay or omission to pay such taxes.
Section 6. This Mortgage may be executed in any number of counterparts,
and all such counterparts executed and delivered each as an original shall
constitute but one and the same instrument. In case of any discrepancy between
an English counterpart and the Spanish and the Notarial version thereof in
Spanish, as between the parties hereto, the English counterpart shall control.
Section 7. (a) Any notice or other communication to be given pursuant
hereto shall be sent by hand or by postage prepaid letter or by cable or
telegram or telefax or telex confirmed by letter and addressed:
To the Shipowner:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: President
Telephone No.: (281)496-5000
Telefax No.: (281) 496-0285
To the Mortgagee:
RBF Finance Co.
901 Threadneedle
Houston, Texas 77079
Attention: President
Telephone No.: (281)496-5000
Telefax No.: (281) 496-0285
(b) Any notice of communication sent by postage prepaid letter
shall be deemed to be received three days after mailing. Any notice or
communication sent by telex or facsimile shall be deemed received at
the opening of business the day after transmission. Any notice or
communication sent by hand shall be deemed to be received on the day
sent if sent during normal business hours and otherwise at the opening
of business on the day following delivery.
19
<PAGE> 20
Section 8. No provision of this Mortgage, the Loan Agreement or the
Note shall be deemed to constitute a waiver by the Mortgagee of the preferred
status of this Mortgage given to foreign flag Vessel by 46 U.S.C. ss. 31325 and
31326, of the United States of America or comparable legislation of any other
jurisdiction where this Mortgage may be enforced, and any provision of or
incorporated in this Mortgage which would otherwise constitute such a waiver
shall to such extent be of no force or effect.
Section 9. All capitalized terms used in this Mortgage and not defined
herein shall have the meanings given to them in the Loan Agreement.
FIFTH: The Mortgagee hereby accepts all of the terms and conditions set
forth in this First Naval Mortgage and the First Naval Mortgage granted hereby.
SIXTH: The Mortgagee and the Shipowner declare that they hereby confer
a special Power of Attorney on Messrs. Arias, Fabrega & Fabrega, lawyers of
Panama, Republic of Panama, empowering each of them individually to take all
necessary steps to file and register this First Naval Mortgage in the
appropriate registries of the Republic of Panama.
IN WITNESS WHEREOF, the parties hereto have executed this Mortgage as
of the day and year first above written.
R&B FALCON CORPORATION
By: /s/ ROBERT FULTON
---------------------------------
Name: Robert Fulton
-------------------------------
Title: Executive Vice President
------------------------------
RBF FINANCE CO.
By: /s/ STEVEN WEBSTER
---------------------------------
Name: Steven Webster
-------------------------------
Title: President
------------------------------
20
<PAGE> 21
ACKNOWLEDGEMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On this 12th day of April, 1999, before me personally appeared Robert
Fulton known to me to be the Executive Vice President of R&B Falcon Corporation,
the party described in and that executed the foregoing instrument on behalf of
said corporation and acknowledged to me that he signed his name thereto by
authority of the Board of Directors of said corporation and as the free act and
deed of such corporation and that his signature on said instrument was set
thereon in my presence and is therefore authentic.
/s/ PHYLLIS A. DAVIS
-------------------------------------
Notary Public
[Seal]
21
<PAGE> 22
ACKNOWLEDGEMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On this 12th day of April, 1999, before me personally appeared Steven
Webster known to me to be the President of R&B Falcon Corporation, the party
described in and that executed the foregoing instrument on behalf of said
corporation and acknowledged to me that he signed his name thereto by authority
of the Board of Directors of said corporation and as the free act and deed of
such corporation and that his signature on said instrument was set thereon in my
presence and is therefore authentic.
/s/ PHYLLIS A. DAVIS
-------------------------------------
Notary Public
[Seal]
22
<PAGE> 1
EXHIBIT 10.24
FIRST PREFERRED SHIP MORTGAGE
FIRST PREFERRED SHIP MORTGAGE, made the 26th day of March, 1999 by R&B
FALCON CORPORATION, a corporation organized and existing under the laws of the
State of Delaware with offices at 901 Threadneedle, Houston, Texas 77079 (the
"Shipowner") and RBF FINANCE CO., a corporation organized and existing under the
laws of the State of Delaware with offices at 901 Threadneedle, Houston, Texas
77079 (the "Mortgagee");
WHEREAS:
A. The Shipowner is the sole-owner of 100% of the following U.S. flag
vessel:
<TABLE>
<CAPTION>
Name Off. No. Hailing Port
--------- -------- ----------------
<S> <C> <C>
FALRIG 82 603881 New Orleans, La.
</TABLE>
which vessel has been duly documented in the name of the Shipowner in accordance
with the laws of the United States of America.
B. Pursuant to the Loan Agreement dated as of March 26, 1999 (the "Loan
Agreement") among the Shipowner and the Mortgagee, the Mortgagee has agreed to
loan up to USD 10,800,000.00 (the "Loan") to the Borrower.
C. The Borrower has delivered to the Mortgagee its Promissory Notes
(collectively, the "Note") dated the date hereof to evidence the Loan. A copy of
the form of the Loan Agreement and the Note are attached hereto as Exhibit A.
D. In order to secure the payment of all amounts due under the Loan
Agreement and the Note (including the principal of and interest thereon)
according to their terms, and the payment of all other such sums that may
hereinafter be secured by this Mortgage in accordance with the terms hereof, and
to secure the performance and observance of and compliance with all the
agreements, covenants and conditions of this Mortgage, the Shipowner has duly
authorized the execution and delivery of this First Preferred Ship Mortgage.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, and in order to secure the payment of all amounts due
under the Loan Agreement and the Note (including the principal of and interest
thereon) according to the terms of this Mortgage, the Loan Agreement and the
Note, and the payment of all other sums that may hereafter be secured by this
Mortgage in
<PAGE> 2
accordance with the terms hereof (all such principal, interest, and other sums
being hereinafter called the "Indebtedness hereby secured") and to secure the
performance and observance of and compliance with all of the agreements,
covenants and conditions of this Mortgage, the Loan Agreement and the Note, the
Shipowner has granted, conveyed, mortgaged, pledged, confirmed, assigned,
transferred and set over and by these presents does grant, convey, mortgage,
pledge, confirm, assign, transfer and set over, unto the Mortgagee, and its
successors and assigns the whole 100% of the above mentioned vessel, including,
without being limited to, all of the boilers, engines, machinery, masts, spars,
boats, anchors, cables, chains, rigging, tackle, capstans, outfit, tools, pumps
and pumping equipment, apparel, furniture, fittings, equipment, spare parts, and
all other appurtenances (including without limitation drilling masts, rotary
tables, substructures, draw work, engines, pumps, blowout prevention equipment,
drill pipe and drill bits) thereunto appertaining or belonging, whether now
owned or hereafter acquired, and also any and all additions, improvements,
renewals and replacements hereafter made in or to such vessel or any part
thereof, including all items and appurtenances aforesaid (such together with all
of the foregoing, being herein called the "Vessel").
TO HAVE AND TO HOLD all and singular the above mortgaged and described
property unto the Mortgagee and its successors and assigns, to its and to its
successors' and assigns' own use, benefit and behoof forever.
PROVIDED, and these presents are upon the condition, that, if the
Shipowner or its successors or assigns shall pay or cause to be paid the
Indebtedness hereby secured as and when the same shall become due and payable in
accordance with the Note, the Loan Agreement and this Mortgage, and all other
such sums as may hereafter become secured by this Mortgage in accordance with
the terms hereof, and the Shipowner shall duly perform, observe and comply with
or cause to be performed, observed, or complied with all the covenants, terms
and conditions of this Mortgage, the Loan Agreement and the Note expressed or
implied, to be performed, then this Mortgage and the estate and rights hereunder
shall cease, determine and be void, otherwise to remain in full force and
effect.
The Shipowner for itself, its successors and assigns, hereby covenants,
declares and agrees with the Mortgagee and its successors and assigns that the
Vessel is to be held subject to the further covenants, conditions, terms and
uses hereinafter set forth.
2
<PAGE> 3
ARTICLE I
Representations and Covenants of the Shipowner.
Section 1. (a) The Shipowner will pay the Indebtedness hereby secured
and will observe, perform and comply with the covenants, terms and conditions
herein and in the Loan Agreement and the Note on its part to be observed,
performed or complied with.
(b) The obligation of the Indebtedness hereby secured is an obligation
in Dollars of the United States of America and the term "USD" when used herein
shall mean such Dollars. Notwithstanding fluctuations in the value or rate of
Dollars in terms of gold, or any other currency, all payments hereunder or
otherwise in respect of the Indebtedness hereby secured shall be payable in
terms of Dollars when due, and if not paid when due, in terms of Dollars when
paid, whether such payment is made before or after the due date.
(c) If a payment falls due on a day which banks in Houston, Texas and
New York, New York are not open for business ("holiday"), such payment is due on
the next following business day unless it would fall in a new calendar month, in
which event it shall be the preceding business day.
Section 2. The Shipowner is a corporation duly incorporated and
existing under the laws of the State of Delaware. The Shipowner has full power
and authority to own and mortgage the Vessel; all action necessary and required
by law for the execution and delivery of this Mortgage has been duly and
effectively taken; and the Indebtedness hereby secured is and will be the valid
and enforceable obligation of the Shipowner in accordance with its terms. The
Shipowner is now, and shall so remain until this Mortgage is discharged, a
citizen of the United States pursuant to Section 2 of the Shipping Act of 1916,
as amended (46 USC ss.802), and is fully qualified to own and operate vessels
documented under the laws of the United States.
Section 3. The Shipowner lawfully owns and is lawfully possessed of the
Vessel free from any lien or encumbrance whatsoever other than for current
operating expenses incurred in the ordinary course of business (payment for
which is not overdue) and for liens covered (in excess of approved deductibles)
by insurance (collectively, the "Permitted Liens") or any commitment to make the
Vessel available to any governmental authority for charter, or sale or use, and
will warrant and defend the title and possession thereto and to every part
thereof for the benefit of the Mortgagee against the claims and demands of all
persons whomsoever.
Section 4. The Shipowner will cause this Mortgage to be duly recorded
at the U.S. Coast Guard National Vessel Documentation Center in accordance with
the provisions of 46 U.S.C. ss.31321, and will otherwise comply with and satisfy
all of the provisions of the U.S. Code, Tit. 46, Ch. 301 and 313, as amended in
order to establish and maintain this Mortgage as a first preferred mortgage
3
<PAGE> 4
lien thereunder upon the Vessel and upon all renewals, replacements and
improvements made in or to the same for the amount of the Indebtedness hereby
secured.
Section 5. The Shipowner will not cause or permit the Vessel to be
operated in any manner contrary to law, and the Shipowner will not engage in any
unlawful trade or 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 registration or
enrollment of the Vessel under the laws and regulations of the United States of
America and will at all times keep the Vessel duly documented thereunder.
Section 6. The Shipowner will pay and discharge when due and payable,
from time to time, all taxes, assessments, governmental charges, fines and
penalties lawfully imposed on the Vessel or any income therefrom; provided that
the Shipowner shall not be required to pay any such tax, assessment or charge if
the validity or amount thereof is concurrently contested in good faith by
appropriate proceedings and if the Shipowner shall have set aside on its books
reserves in accordance with generally accepted accounting principles in the
United States deemed by it adequate with respect to such tax, assessment or
charge; and provided further, however, that the Shipowner will pay or cause to
be paid all such taxes, assessments or charges forthwith upon the commencement
of proceedings to foreclose any lien which is attached as security therefor.
Section 7. Neither the Shipowner, any charterer, 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 any
lien whatsoever other than the lien of this Mortgage and Permitted Liens.
Section 8. The Shipowner will place, and at all times and places will
retain, a properly certified copy of this Mortgage on board the Vessel with her
papers and will cause each such certified copy to be exhibited to any and all
persons having business therewith which might give rise to any lien thereon
other than Permitted Liens, and to any representative of the Mortgagee; and will
place and keep prominently displayed in the chart room and in the Master's cabin
of the Vessel a framed printed notice in plain type reading as follows:
"NOTICE OF MORTGAGE
This Vessel is covered by a First Preferred Ship Mortgage in
favor of RBF Finance Co., under authority of Chapter 313 of Title 46 of
the United States Code. Under the terms of said Mortgage, neither the
owner, any charterer, the Master of this Vessel nor any other person
4
<PAGE> 5
has any right, power or authority to create, incur or permit to be
imposed upon this Vessel any other lien whatsoever except Permitted
Liens (as defined in the Mortgage), a copy of which is available on
board for inspection upon the request of any party having business with
the Vessel."
Section 9. Except for the lien of this Mortgage and Permitted Liens,
the Shipowner will not suffer to be continued any lien, encumbrance or charge on
the Vessel, and in due course and in any event within thirty (30) days after the
same becomes due and payable will pay or cause to be discharged or make adequate
provision for the satisfaction or discharge of all such claims or demands, or
will cause the Vessel to be released or discharged from any such lien,
encumbrance or charge therefor.
Section 10. If a libel or complaint is filed against the Vessel or the
Vessel is otherwise attached, levied upon or taken into custody by virtue of any
legal proceeding in any court, the Shipowner will promptly notify the Mortgagee
thereof by telex or telefax confirmed by letter, at its address, as specified in
this Mortgage, and within fifteen (15) days will cause the Vessel to be released
and all liens thereon other than this Mortgage and Permitted Liens to be
discharged and will promptly notify the Mortgagee thereof in the manner
aforesaid. The Shipowner will notify the Mortgagee within forty-eight (48) hours
after it has become known to the Shipowner of any average or salvage incurred by
the Vessel.
Section 11. (a) The Shipowner will at all times and without cost or
expense to the Mortgagee upgrade, maintain and preserve, or cause to be
upgraded, maintained and preserved, the Vessel and all its equipment, outfit and
appurtenances, tight, staunch, strong, in good condition, working order and
repair and in all respects seaworthy and fit for its intended service, and will
keep the Vessel, or cause it to be kept, in such condition as will entitle it to
the highest classification and rating for vessels of the same age and type in
Bureau Veritas or other classification society which is a member of the
International Association of Classification Societies and approved by the
Mortgagee, and will at the time of execution of this Mortgage, and annually
thereafter on the anniversary of the date of execution hereof will furnish to
the Mortgagee a certificate by such classification society that such
classification is maintained. The Vessel shall, and the Shipowner covenants that
it will, at all times comply with all applicable laws, treaties and conventions
to which the United States of America is a party, and rules and regulations
issued thereunder, and shall have on board as and when required thereby valid
certificates showing compliance therewith. The Shipowner will not make, or
permit to be made, any substantial change in the structure, type or speed of the
Vessel or change in its rig, without first receiving the written approval
thereof by the Mortgagee.
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(b) The Shipowner agrees, following request by the Mortgagee, to give
the Mortgagee at least ten (10) days notice of actual date and place of any
survey of the Vessel in order that the Mortgagee may have representatives
present if desired. The Shipowner agrees that at the Mortgagee's request it will
satisfy the Mortgagee that the expense of such survey or work to be done thereat
is within the Shipowner's financial ability and will not result in a claim or
lien against the Vessel in violation of the provisions of this Mortgage.
Section 12. (a) The Shipowner will at all reasonable times afford the
Mortgagee or its authorized representatives full and complete access to the
Vessel for the purpose of inspecting the Vessel and its cargo and papers and, at
the request of the Mortgagee, the Shipowner will deliver for inspection copies
of any and all contracts and documents relating to the Vessel, whether on board
or not.
(b) The Shipowner hereby appoints the Mortgagee attorney-in-fact of the
Shipowner, whether or not an event of default shall have occurred or is
continuing, to appear before governmental bodies, classification societies and
insurers and to demand and receive to the same extent that the Shipowner itself
might, all information and certificates respecting (i) the corporate status of
the Shipowner under the laws of its jurisdiction of incorporation or any other
jurisdiction in which it may have qualified to do business, (ii) the status of
the Vessel under the laws and regulations of its country of registration and its
compliance with the requirements thereof, and (iii) the state of the records of
the Vessel or of the Shipowner in respect of the Vessel in any classification
society with which the Vessel may be classed or of any company, association or
club by whom the Vessel or the Shipowner in respect of the Vessel may be
insured; and the Shipowner hereby agrees that the Mortgagee may execute its
powers as attorney-in-fact as aforesaid through its agents, representatives and
attorneys. This power of attorney is coupled with an interest and shall be
irrevocable as long as any indebtedness from the Shipowner to the Mortgagee
remains outstanding.
Section 13. The Shipowner will not transfer or change the flag or port
of documentation of the Vessel without the prior written consent of the
Mortgagee, and any such written consent to any one transfer or change of flag or
port of documentation shall not be construed to be a waiver of this provision
with respect to any subsequent proposed transfer or change of flag or port of
documentation.
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Section 14. The Shipowner will not sell, mortgage, demise charter for a
period longer than six (6) months, transfer or change the management of the
Vessel without the prior written consent of the Mortgagee, and any such written
consent to any one sale, mortgage, demise charter or transfer shall not be
construed to be a waiver of this provision with respect to any subsequent
proposed sale, mortgage, demise charter or transfer. Any such sale, mortgage,
demise charter or transfer of the Vessel shall be subject to the provisions of
this Mortgage and the lien hereof.
Section 15. (a) The Shipowner will cause to be carried and maintained
on or in respect of the Vessel without expense to the Mortgagee, all risk
equivalent Hull and Machinery and Protection and Indemnity insurance with
responsible and reputable insurance companies, underwriters, associations, clubs
or funds reasonably acceptable to the Mortgagee in an amount not less than the
greater of (X) 110% of the amount of the outstanding Indebtedness hereby secured
or (Y) the fair market value of the Vessel's hull and machinery, the "agreed
value"), war risk and protection and indemnity and insurances in such amounts
(with such deductibles or franchises), against such risks (including but not
limited to, loss of or damage to hull or machinery; protection and indemnity;
war risks in the event the Vessel is located outside United States territorial
waters; or waters above the outer Continental Shelf of the United States;
pollution risks) in such form (including, without limitation, the form of the
loss payable clause) and in U.S. currency as the Mortgagee shall from time to
time reasonably require or approve and as provided hereafter; and providing for
deductibles no greater than USD 1,000,000.00 per occurrence. The Shipowner shall
maintain liability insurance including crew liability, cargo liability,
pollution liability, contractual liability and removal of wreck insurance in
amounts similar to that maintained by owners of similar vessels and reasonably
acceptable to the Mortgagee or, without expense to the Mortgagee, have the
Vessel fully entered in a responsible and reputable Protection and Indemnity
Association or club in good standing and reasonably acceptable to the Mortgagee.
The Shipowner will cause such association or club to issue to the Mortgagee a
Letter of Undertaking or certificate or cover note, noting the Mortgagee's
interest in such insurance in a form reasonably satisfactory to the Mortgagee.
The Shipowner will furnish the Mortgagee from time to time on request and in any
event at least annually a detailed report (including a list showing the insured
value of the Vessel) signed by a firm of marine insurance brokers reasonably
acceptable to the Mortgagee with respect to the insurance carried and maintained
on the Vessel, together with its report as to the compliance of such insurance
with the requirements of this Section 15. The Shipowner agrees that, unless the
insurances by its terms provide that they cannot cease without the Mortgagee
being informed and having the right to continue the insurances by paying any
premiums not paid by the Shipowner, receipts showing payment of premiums for
required insurance paid shall be in the hands of the Mortgagee at least two (2)
days before the risk in question commences.
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(b) The Shipowner shall, at its own expense, furnish to the Mortgagee a
breach of warranty endorsement, including Additional Perils Pollution, providing
coverage for the Mortgagee in an amount equal to at least 110% of the amount of
the Indebtedness hereby secured. Such mortgagee's breach of warranty endorsement
insurance shall be maintained in the broadest form available in the American or
British markets for vessels of the same type as the Vessel through underwriters
reasonably acceptable to the Mortgagee. The Vessel shall not undertake any
construction operations, carry any cargoes or proceed in an area then excluded
by trading warranties under its marine or war risk policies (including
protection and indemnity) without obtaining all necessary additional coverage,
reasonably satisfactory in form and substance to the Mortgagee; and evidence of
which additional insurance shall be furnished to the Mortgagee.
(c) The Shipowner will cause the relevant insurance brokers to agree
to, and the Shipowner hereby covenants and agrees that it will, advise the
Mortgagee of any expiration, termination, nonrenewal, alteration or cancellation
of any policy, any default in the payment of any premium and of any other act or
omission on the part of the Shipowner of which it has knowledge and which might
invalidate or render unenforceable, in whole or in part, any insurance on the
Vessel. To the extent obtainable from underwriters or brokers, all policies
required hereby shall provide for not less than thirty (30) days prior written
notice (ten (10) days with respect to non-payment of premiums and seven (7) days
with respect to war risks) to be received by the Mortgagee of the termination or
cancellation of the insurance evidenced thereby. All policies of insurance
maintained pursuant to this Article I, Section 15 shall contain provisions
waiving underwriters' rights of subrogation thereunder against any assured named
in such policy and any assignee of said assured.
(d) Unless the Mortgagee shall otherwise agree, all insurance (other
than any Protection and Indemnity Association or Club) must name the Mortgagee
as an additional insured but without liability for premiums, club calls,
assessments, warranties or representations, and all amounts of whatsoever nature
payable under any insurance must be payable to the Mortgagee for distribution
first to itself and thereafter to the Shipowner or others as interest may
appear. Nevertheless, unless an Event of Default shall have occurred and is
continuing (i) amounts payable under any insurance on the Vessel with respect to
protection and indemnity risks may be paid directly to the Shipowner to
reimburse it for any loss, damage or expense incurred by it and covered by such
insurance or to the person to whom any liability covered by such insurance has
been incurred; provided, however, if the Mortgagee shall give notice that the
Shipowner is in default hereunder, all
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such payments shall be made to the Mortgagee (with the exception of payments
made under employers liability, workman's compensation and similar insurances)
until the Indebtedness hereby secured has been fully discharged, and (ii) unless
an Event of Default has occurred or is continuing amounts payable under any
insurance with respect to the Vessel involving any damage to the Vessel not
constituting an actual or constructive total loss, the underwriters may pay
direct for the repair, salvage or other charges involved or, if the Shipowner
shall have first fully repaired the damage or paid all of the salvage or other
charges, may pay the Shipowner as reimbursement therefor; provided, however,
that if such amounts (including any franchise or deductible) are greater than
USD 1,000,000.00 the underwriters shall not make such payment without first
obtaining the written consent thereto of the Mortgagee.
(e) All amounts paid to the Mortgagee in respect of any insurance on
the Vessel shall be disposed of as follows:
(i) any amount which might have been paid at the time, in
accordance with the provisions of paragraph (d) above, directly to the
Shipowner or others shall be paid by the Mortgagee to, or as directed
by, the Shipowner;
(ii) all amounts paid to the Mortgagee in respect of an actual
or constructive or arranged total loss or requisition shall be applied
by the Mortgagee to the payment of the Indebtedness hereby secured in
full;
(iii) so long as no Event of Default shall have occurred and
be continuing all other amounts paid to the Mortgagee in respect of any
insurance on the Vessel shall be applied to the making of needed
repairs or other work on the Vessel, or to the payment of other claims
incurred by the Shipowner relating to the Vessel, or may be paid to the
Shipowner or whosoever may be entitled thereto;
(iv) all other amounts paid to the Mortgagee in respect of any
insurance on the Vessel may, in the Mortgagee's sole discretion, be
held and applied to the prepayment of the Indebtedness hereby secured.
(f) In the event that any claim or lien is asserted against the Vessel
for loss, damage or expense which is covered by insurance required hereunder and
it is necessary for the Shipowner to obtain a bond or supply other security to
prevent arrest of the Vessel or to release the Vessel from arrest on account of
such claim or lien, the Mortgagee, on request of the Shipowner, may, in the sole
discretion of the Mortgagee, assign to any person, firm or corporation executing
a surety or guarantee bond or other agreement to save or release the Vessel from
such arrest, all right, title and interest of the Mortgagee in and to said
insurance covering
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said loss, damage or expense, as collateral security to indemnify against
liability under said bond or other agreement.
(g) The Shipowner shall deliver to the Mortgagee certified copies or
originals whenever so requested by the Mortgagee in writing, of all certificates
of entry, cover notes, binders, evidences of insurance and policies for the
purpose of inspection or safekeeping, or, alternatively, satisfactory letters of
undertaking from the broker holding the same.
(h) The Shipowner agrees that it will not execute or permit or
willingly allow to be done any act by which any insurance may be suspended,
impaired or canceled, and that it will not permit or allow the Vessel to
undertake any construction operations or run any risk or transport any cargo
which may not be permitted by the policies in force, without having previously
insured the Vessel by additional coverage to extend to such construction
operations, risks or cargoes.
(i) In case any underwriter proposes to pay less on any claim of total
loss (whether actual, constructive or compromised) than the amount thereof, the
Shipowner shall forthwith inform the Mortgagee and the consent of the Mortgagee
shall be required for any compromise thereof; and the Shipowner shall not agree
to any adjustment or compromise of any such loss except for the highest amount
reasonably obtainable thereon.
(j) The Shipowner will comply with and satisfy all of the provisions of
any applicable law, convention, regulation, proclamation or order concerning
financial responsibility for liabilities imposed on the Shipowner or the Vessel
with respect to pollution by any state or nation or political subdivision
thereof and will maintain all certificates or other evidence of financial
responsibility as may be required by any such law, convention, regulation,
proclamation or order with respect to the trade which the Vessel are from time
to time engaged in and the cargo carried by it or the construction projects
conducted by it.
(k) Any provision of this Section 15 to the contrary notwithstanding,
all aspects of the insurances on the Vessel (including risks covered, policy
terms, deductibles, forms of loss payable clauses, and underwriters or clubs)
shall at all times be fully satisfactory to and approved by the Mortgagee,
acting in its sole discretion. The Shipowner shall cause any insurance broker
arranging the insurances required by this Mortgage (who shall be approved by the
Mortgagee) to issue its letter of undertaking to the Mortgagee with respect to
such insurance matters as the Mortgagee shall request in accordance with usual
commercial practice.
Section 16. The Shipowner will reimburse the Mortgagee promptly, for
any and all expenditures which the Mortgagee may from
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time to time make, lay out or expend in providing such protection in respect of
insurance, discharge or purchase of liens, taxes, dues, assessments,
governmental charges, fines and penalties lawfully imposed, repairs, attorney's
fees, necessary translation fees for documents made in a language other than
English, and other matters as the Shipowner is obligated herein to provide, but
fails to provide. Such obligation of the Shipowner to reimburse the Mortgagee
shall be an additional indebtedness due from the Shipowner, secured by this
Mortgage, and shall be payable by the Shipowner on demand. The Mortgagee, though
privileged to do so, shall be under no obligation to the Shipowner to make any
such expenditures, nor shall the making thereof relieve the Shipowner of any
default in that respect.
Section 17. The Shipowner will fully perform any and all charter
parties or contracts of affreightment which are, or may be, entered into with
respect to the Vessel.
Section 18. The Shipowner further covenants and agrees with the
Mortgagee that, so long as any part of the Indebtedness hereby secured remains
unpaid, there shall be no change in the ownership of the Vessel, without the
prior written consent of the Mortgagee.
Section 19. (a) In the event of an actual or constructive or arranged
total loss or seizure or forfeiture or requisition or other taking, or any sale,
exchange, or other disposition of the Vessel by the Shipowner, whether or not
with the consent of the Mortgagee, then and in each such case the Shipowner
shall forthwith on demand prepay the Indebtedness hereby secured pursuant to
Section 2.3 of the Loan Agreement.
(b) This Mortgage shall extend to and constitute a lien upon, and the
Shipowner hereby grants the Mortgagee a security interest in, all proceeds
resulting from any of the events mentioned in subsection (a) above as security
for the Indebtedness hereby secured.
(c) The Shipowner hereby irrevocably authorizes the Mortgagee to file
and record financing statements under the Uniform Commercial Code in any
jurisdiction where the same may be in force or under any legislation having
similar effect for the purpose of perfecting or continuing the perfection of the
security interests granted by the Shipowner to the Mortgagee herein without
obtaining the signature of the Shipowner thereto. The Shipowner hereby
irrevocably authorizes the Mortgagee to execute any such financing statement or
similar document in the name of the Shipowner.
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ARTICLE II
Events of Default and Remedies.
Section 1. In case any one or more of the following events, herein
termed "Events of Default", shall have occurred and be continuing:
(a) any payment in respect of the Indebtedness hereby secured
has not been received by the Mortgagee when due after giving effect to
any applicable grace periods; or
(b) any Event of Default has occurred under the Loan
Agreement;
(c) the statements in Sections 2 and 3 of Article I shall
prove to be untrue in a material way; or
(d) a default shall have occurred in the due and punctual
observance and performance of any of the provisions of Sections 4, 5,
6, 9, 10, 11, 13, 14, 15, 16, 18 or 19 of Article I hereof; or
(e) a default by the Shipowner in the observance or
performance of any other agreement under this Mortgage shall have
occurred and shall remain unremedied for thirty (30) days after written
notice thereof shall have been given to the Shipowner by the Mortgagee;
or
(f) the Shipowner or any other obligor of any part of the
Indebtedness hereby secured: (i) is dissolved or its legal status is
lost or canceled by reason of any valid, judicial, extra-judicial, or
administrative proceeding shall have occurred, or (ii) dies or is
adjudicated a bankrupt, or (iii) shall admit in writing its inability
to pay its debts as they fall due, or (iv) shall make a general
assignment for the benefit of its creditors; or a receiver of the
property or business of the Shipowner or any obligor on or guarantor of
any part of the Indebtedness hereby secured is appointed by a court of
competent jurisdiction;
then, and in each and every such case, the Mortgagee shall have the
right to:
(1) Declare all the then unpaid Indebtedness hereby secured to
be due and payable immediately, and upon such declaration the same,
including interest to date of declaration, shall become and be
immediately due and payable (provided no declaration shall be required
if an event of default shall have occurred under subsection (f)
hereof);
(2) Exercise all of the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of the laws of the
United States of America or of any other jurisdiction where the Vessel
may be found;
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(3) Bring suit at law, in equity or in admiralty, as it may be
advised, to recover judgment for the Indebtedness hereby secured, and
collect the same out of any and all property of the Shipowner whether
covered by this Mortgage or otherwise;
(4) Take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process and without being
responsible for loss or damage, and the Shipowner or other person in
possession forthwith upon demand of the Mortgagee shall surrender to
the Mortgagee possession of the Vessel and the Mortgagee may, without
being responsible for loss or damage, hold, lay up, lease, charter,
operate or otherwise use the Vessel for such time and upon such terms
as it may deem to be for its best advantage, and demand, collect and
retain all hire, freights, earnings, issues, revenues, income, profits,
return premiums, salvage awards or recoveries, recoveries in general
average, 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, accounting only for the net profits, if any, arising from
such use of the Vessel and charging upon all receipts from the use of
the Vessel or from the sale thereof by court proceedings or pursuant to
Subsection (5) next following, all costs, expenses, charges, damages or
losses by reason of such use; and if at any time the Mortgagee shall
avail itself of the right herein given it to take the Vessel, the
Mortgagee shall have the right to dock the Vessel, for a reasonable
time at any dock, pier or other premises of the Shipowner without
charge, or to dock it at any other place at the cost and expense of the
Shipowner;
(5) Take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process, and if it seems
desirable to the Mortgagee and without being responsible for loss or
damage, sell the Vessel, at any place and at such time as the Mortgagee
may specify and in such manner as the Mortgagee may deem advisable,
free from any claim by the Shipowner in admiralty, in equity, at law or
by statute, at public or private sale, by sealed bids or otherwise, by
mailing, by air or otherwise, notice of such sale, whether public or
private, addressed to the Shipowner at its last known address, fourteen
(14) days prior to the date fixed for entering into the contract of
sale and by first publishing notice of any such public sale for ten
consecutive days, in a daily newspaper of general circulation published
in the City of Houston, State of Texas or if the place of sale should
not be in Houston, Texas then by publication of a similar notice at or
near the place of sale; 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; the sale may be held at
such place and
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at such time as the Mortgagee by notice may have specified, or may be
adjourned by the 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 the 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 the Mortgagee may deem
to be for its best advantage, and the Mortgagee may become the
purchaser at any judicial sale.
Section 2. Any 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 the Shipowner therein and thereto, and shall bar the Shipowner, its
successors and assigns, and all persons claiming by, through or under it. 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 the
application of the proceeds thereof. In case of any such sale, the Mortgagee, if
it is the purchaser, shall be entitled for the purpose of making settlement or
payment for the property purchased to use and apply the Indebtedness hereby
secured in order that there may be credited against the amount remaining due and
unpaid thereon the sums payable out of the net proceeds of such sale to the
Mortgagee after allowing for the costs and expense of sale and other charges;
and thereupon such purchaser shall be credited, on account of such purchase
price, with the net proceeds that shall have been so credited upon the
Indebtedness hereby secured. At any such judicial sale, the Mortgagee may bid
for and purchase such property and upon compliance with the terms of sale may
hold, retain and dispose of such property without further accountability
therefor.
Section 3. The Mortgagee is hereby appointed attorney in-fact of the
Shipowner, upon the happening of any Event of Default, to execute and deliver to
any purchaser aforesaid, and is hereby vested with full power and authority to
make, in the name and in behalf of the Shipowner, a good conveyance of the title
to the Vessel so sold. In the event of any sale of the Vessel, under any power
herein contained, the Shipowner will, if and when required by the Mortgagee,
execute such form of conveyance of the Vessel as the Mortgagee may direct or
approve.
Section 4. The Mortgagee is hereby appointed attorney in-fact of the
Shipowner upon the happening of any Event of Default, in the name of the
Shipowner to demand, collect, receive, compromise and sue for, so far as may be
permitted by law, all freight, 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,
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and all other sums due or to become due at the time of the happening of any
Event of Default 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 the Shipowner acquittances, receipts, releases or other discharges for the
same, whether under seal or otherwise, and to endorse and accept in the name of
the Shipowner all checks, notes, drafts, warrants, agreements and other
instruments in writing with respect to the foregoing.
Section 5. Whenever any right to enter and take possession of the
Vessel accrues to the Mortgagee, it may require the Shipowner to deliver, and
the Shipowner shall on demand, at its own cost and expense, deliver to the
Mortgagee the Vessel to a location designated by the Mortgagee as demanded. If
the Mortgagee shall be entitled to take any legal proceedings to enforce any
right under this Mortgage, the Mortgagee shall be entitled as a matter of right
to the appointment of a receiver of the Vessel and of the freights, hire,
earnings, issues, revenues, income and profits due or to become due and arising
from the operation thereof.
Section 6. The Shipowner authorizes and empowers the Mortgagee or its
appointees or any of them to appear in the name of the Shipowner, its successors
and 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 and to take such
proceedings as to them or any of them may seem proper towards the defense of
such suit and the purchase or discharge of such lien, and all expenditures made
or incurred by them or any of them for the purpose of such defense or purchase
or discharge shall be a debt due from the Shipowner, its successors and assigns,
to the Mortgagee, and shall be secured by the lien of this Mortgage in like
manner and extent as if the amount and description thereof were written herein.
Section 7. The Shipowner covenants that upon the happening of any Event
of Default, then, upon written demand of the Mortgagee, the Shipowner will pay
to the Mortgagee the whole amount due and payable in respect of the Indebtedness
hereby secured; and in case the Shipowner shall fail to pay the same forthwith
upon such demand, the Mortgagee shall be entitled to recover judgment for the
whole amount so due and unpaid, together with such further amounts as shall be
sufficient to cover the reasonable compensation to the Mortgagee's agents,
attorneys and counsel and any necessary advances, expenses and liabilities made
or incurred by it hereunder. All moneys collected by the Mortgagee under this
Article II, Section 7 shall be applied by the Mortgagee in accordance with the
provisions of Section 11 of this Article II.
Section 8. Each and every power and remedy herein given to the
Mortgagee shall be cumulative and shall be in addition to every
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other power and remedy herein given 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 otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by the 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 delay or omission by the Mortgagee in the exercise
of any right or power or in the pursuance of any remedy accruing upon any
default as above defined shall impair any such right, power or remedy or be
construed to be a waiver of any such Event of Default or to be an acquiescence
therein; nor shall the acceptance by the Mortgagee of any security or of any
payment of or on account of the Indebtedness hereby secured maturing after any
Event of Default or of any payment on account of any past default be construed
to be a waiver of any right to take advantage of any future Event of Default or
of any past Event of Default not completely cured thereby. No consent, waiver or
approval of the Mortgagee shall be deemed to be effective unless in writing and
duly signed by authorized signatories of the Mortgagee.
Section 9. If at any time after an Event of Default and prior to the
actual sale of the Vessel by the Mortgagee or prior to any enforcement or
foreclosure proceedings the Shipowner offers completely to cure all Events of
Default and to pay all expenses, advances and damages to the Mortgagee
consequent on such Events of Default, with interest with respect to the
Shipowner's obligations as provided herein or in the Loan Agreement as set forth
therein, then the Mortgagee may accept such offer and payment and restore the
Shipowner to its former position, but such action, if taken, shall not affect
any subsequent event of default or impair any rights consequent thereon.
Section 10. In case the Mortgagee shall have proceeded to enforce any
right, power or remedy under this Mortgage by foreclosure, entry or otherwise,
and such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Mortgagee, then and in every such
case the Shipowner and the Mortgagee shall 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 the Mortgagee
shall continue as if no such proceedings had been taken.
Section 11. The proceeds of any sale of the Vessel and the net earnings
of any charter operation or other use of the Vessel and any and all other moneys
received by the Mortgagee pursuant to or under the terms of this Mortgage or in
any proceedings hereunder, the application of which has not elsewhere herein
been specifically provided for, shall be applied as follows:
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First: To the payment of all expenses and charges, including
the expenses of any sale, the expenses of any retaking, attorney's
fees, court costs, and any other expenses or advances made or incurred
by the Mortgagee in the protection of its rights or the pursuance of
its remedies hereunder;
Second: To the payment of the Indebtedness hereby secured,
whether due or not, including interest thereon to the date of such
payment; and
Third: To the payment of any surplus thereafter remaining to
the Shipowner or to whomsoever may be entitled thereto.
Section 12. Until one or more Events of Default shall happen, the
Shipowner (a) shall be suffered and permitted to retain actual possession and
use of the Vessel and (b) shall have the right, from time to time, in its
discretion, and without application to the Mortgagee, and without obtaining a
release thereof by the Mortgagee, to dispose of, free from the lien hereof, any
boilers, engines, machinery, masts, spars, sails, rigging, boats, anchors,
chains, tackle, apparel, furniture, fittings or equipment or any other
appurtenances of the Vessel that are no longer useful, necessary, profitable or
advantageous in the operation of the Vessel, first or simultaneously replacing
the same by new boilers, engines, machinery, masts, spars, sails, rigging,
boats, anchors, chains, tackle, apparel, furniture, fittings, equipment, or
other appurtenances of substantially equal value to the Shipowner, which shall
forthwith become subject to the lien of this Mortgage as a preferred mortgage
thereon.
Section 13. (a) If any provision of this Mortgage should be
deemed invalid or shall be deemed to affect adversely the preferred status of
this Mortgage under any applicable law, such provision shall cease to be a part
of this Mortgage without affecting the remaining provisions, which shall remain
in full force and effect.
(b) In the event that the Note, the Loan Agreement or this Mortgage or
any of the documents or instruments which may from time to time be delivered
hereunder or thereunder or any provision hereof or thereof shall be deemed
invalidated by present or future law of any nation or by decision of any court,
or if any third party shall fail or refuse to recognize any of the powers
granted to the Mortgagee hereunder when it is sought to exercise them, this
shall not affect the validity or enforceability of all or any other parts of the
Note, the Loan Agreement or the Mortgage or such documents or instruments and,
in any such case, the Shipowner covenants and agrees that, on demand, it will
execute and deliver such other and further agreements, documents and instruments
and do such things as the Mortgagee in its sole discretion may deem to be
17
<PAGE> 18
necessary to carry out the true intent of this Mortgage, the Loan Agreement and
the Note.
(c) Anything herein to the contrary notwithstanding, it is intended
that nothing herein shall waive the preferred status of this Mortgage and that,
if any provision or portion thereof herein shall be construed to waive the
preferred status of this Mortgage, then such provision to such extent shall be
void and of no effect.
Section 14. In the event of any legal proceedings, the Shipowner
accepts for itself and subsequent owners of the Vessel, irrespective of domicile
or residence the nonexclusive jurisdiction of the Courts of the State of New
York and the United States District Court of the Southern District Court of New
York as venue with notice provided in the manner established for residents of
the venue served on the Shipowner or on the Shipowner's manager or managing
owner or the Vessel's master.
ARTICLE III
Sundry Provisions
Section 1. All of the covenants, promises, stipulations and agreements
of the Shipowner in this Mortgage contained shall bind the Shipowner and its
successors and assigns and shall inure to the benefit of the Mortgagee and its
respective successors and assigns. In the event of any assignment or transfer of
this Mortgage, the term "Mortgagee", as used in this Mortgage, shall be deemed
to mean any such assignee or transferee.
Section 2. Wherever and whenever herein any right, power or authority
is granted or given to the Mortgagee, such right, power or authority may be
exercised in all cases by the Mortgagee or such agent or agents as it may
appoint, and the act or acts of such agent or agents when taken shall constitute
the act of the Mortgagee hereunder.
Section 3. This Mortgage may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
Section 4. Any notice or other communication to be given pursuant
hereto shall be in the manner provided in Section 7.8 of the Loan Agreement and
addressed:
If to the Shipowner to:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: Steven Webster
18
<PAGE> 19
If to the Mortgagee to:
RBF Finance Co.
901 Threadneedle
Houston, Texas 77079
Attention: Leighton Moss
or at such other address as either party may notify to the other in writing.
Section 5. The maximum principal amount that may be
outstanding under this Mortgage is Ten Million Eight Hundred Thousand United
States Dollars (USD 10,800,000.00) and for the purpose of recording this
Mortgage, the total amount of this First Preferred Ship Mortgage is Ten Million
Eight Hundred Thousand United States Dollars (USD 10,800,000.00), and interest,
expenses and performance of mortgage covenants. The maturity date is March 15,
2009. The discharge amount is the same as the total amount.
IN WITNESS WHEREOF, the Shipowner has caused this First
Preferred Ship Mortgage to be duly executed the day and year first above
written.
R&B FALCON CORPORATION
By: /s/ ROBERT FULTON
--------------------------------
Name: Robert Fulton
Title: Executive Vice President
19
<PAGE> 20
STATE OF TEXAS )
) ss.:
COUNTY OF HARRIS )
On this 26th day of March, 1999, before me personally appeared Robert
Fulton , to me known, who, being by me duly sworn, did depose and say that he
resides at 901 Threadneedle, Houston, Texas 77079; that he is the Executive Vice
President of R&B Falcon Corporation, the corporation described in the foregoing
instrument; that he signed his name thereto by order of the Board of Directors
of said corporation and that the foregoing instrument is the act and deed of the
corporation.
/s/ KAY RASMUSSEN
--------------------------
Notary Public
[Seal]
20
<PAGE> 1
EXHIBIT 12.1
R&B FALCON CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
($ IN MILLIONS, EXCEPT RATIO AMOUNTS)
<TABLE>
<CAPTION>
For The Three
Months Ended March 31,
-----------------------
1999 1998
---------- -----------
<S> <C> <C>
Income (loss) from continuing operations before income
tax expense, minority interest and extraordinary gain....................... $ 9.3 $ 105.2
Add
Portion of rents representative of the interest factor ...................... 3.0 3.3
Interest on indebtedness inclusive of amortization
of deferred financing charges ....................................... 28.4 13.4
------ -------
Income as adjusted ........................................ $ 40.7 $ 121.9
------ -------
Fixed charges
Interest on indebtedness inclusive of amortization
of deferred financing charges ....................................... $ 28.4 13.4
Interest capitalized ...................................... 14.6 6.3
Portion of rents representative of the interest factor .... 3.0 3.3
------ -------
Fixed charges ............................................. $ 46.0(a) $ 23.0(a)
------ -------
Ratio of earnings to fixed charges ................................................. -(b) 5.3
------ -------
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Income (loss) from continuing operations before income
tax expense, minority interest and extraordinary gain ....................... $ 161.2 $ 123.9 $ 140.4
Add
Portion of rents representative of the interest factor ...................... 14.3 12.1 6.8
Interest on indebtedness inclusive of amortization
of deferred financing charges ....................................... 63.9(a) 41.6(a) 40.8
======== ======== ========
Income as adjusted ........................................ $ 239.4 $ 177.6 $ 188.0
======== ======== ========
Fixed charges
Interest on indebtedness inclusive of amortization
of deferred financing charges ....................................... $ 63.9 $ 41.6 $ 40.8
Interest capitalized ...................................... 39.1 13.7 7.6
Portion of rents representative of the interest factor .... 14.3 12.1 6.8
-------- -------- --------
Fixed charges ............................................. $ 117.3 $ 67.4(a) $ 55.2
======== ======== ========
Ratio of earnings to fixed charges ................................................. 2.0 2.6 3.4
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Income (loss) from continuing operations before income
tax expense, minority interest and extraordinary gain ....................... $ 32.6 $ (2.8)
Add
Portion of rents representative of the interest factor ...................... 3.2 5.9
Interest on indebtedness inclusive of amortization
of deferred financing charges ....................................... 34.6 26.4
======== ========
Income as adjusted ........................................ $ 70.4 $ 29.5
======== ========
Fixed charges
Interest on indebtedness inclusive of amortization
of deferred financing charges ....................................... $ 34.6 $ 26.4
Interest capitalized ...................................... 0.4 0.6
Portion of rents representative of the interest factor .... 3.2 5.9
-------- --------
Fixed charges ............................................. $ 38.2 $ 32.9
======== ========
Ratio of earnings to fixed charges ................................................. 1.9 -(b)
======== ========
</TABLE>
(a) Fixed charges for the three months ended March 31, 1999 and 1998 and for the
years ended December 31, 1998 and 1997 exclude interest cost of $3.7
million, $4.5 million, $22.5 million and $7.3 million, respectively, related
to the debt of joint venture companies guaranteed by R&B Falcon Corporation.
(b) As a result of the loss incurred in the three months ended March 31, 1999
and the year ended December 31, 1994, earnings did not cover fixed charges
by $5.3 million and $3.4 million, respectively.
COMPUTATION OF PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
($ IN MILLIONS)
The following computation reflects on a pro-forma basis, earnings available for
fixed charges and resultant ratio. The computation gives effect to the sale of
the senior notes.
<TABLE>
<CAPTION>
For The Three Year Ended
Months Ended December 31,
March 31, 1999 1998
---------------- ------------
<S> <C> <C>
Income as adjusted ........................................................................... $ 40.7 $ 239.4
====== ========
Fixed charges ................................................................................ $ 46.0 $ 117.3
Pro forma adjustments
Interest on portion of senior notes that will be used to retire existing debt .............. 12.0 36.3
Amortization of deferred financing charges on portion of senior notes that will be used
to retire existing debt .................................................................. .9 3.6
Interest requirements reduction attributable to substitution of proceeds from the sale of the
senior notes offered hereby for the debt that is to be retired ........................... (5.9) (22.4)
------ --------
Pro-forma fixed charges ...................................................................... $ 53.0 $ 134.8
------ --------
Pro-forma ratio of earnings to fixed charges ................................................. -(a) 1.8
====== ========
</TABLE>
(a) As a result of the pro forma loss for the three months ended March 31, 1999
pro forma earnings did not cover fixed charges by $12.3 million.
<PAGE> 1
EXHIBIT 12.2
RBF FINANCE CO.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
($ IN THOUSANDS, EXCEPT RATIO AMOUNTS)
<TABLE>
<CAPTION>
For The Three
Months Ended March 31,
-----------------------
1999
----------
<S> <C>
Income before income tax expense...................................................... $ 90
Add
Portion of rents representative of the interest factor ........................ --
Interest on indebtedness....................................................... 1,226
-------
Income as adjusted .......................................... $ 1,316
-------
Fixed charges
Interest on indebtedness....................................................... $ 1,226
Interest capitalized ........................................ --
Portion of rents representative of the interest factor ...... --
-------
Fixed charges ............................................... $ 1,226
-------
Ratio of earnings to fixed charges ................................................... 1.1
-------
</TABLE>
<PAGE> 1
EXHIBIT 15.1
LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION
R&B Falcon Corporation:
We are aware that R&B Falcon Corporation has incorporated by reference in this
registration statement on Form S-4, its Form 10-Q for the quarter ended March
31, 1999, which includes our report dated April 28, 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.
ARTHUR ANDERSEN LLP
Houston, Texas
May 25, 1999
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated March
26, 1999 included in R&B Falcon Corporation's Form 10-K for the year ended
December 31, 1998 and to all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN LLP
- -----------------------------------
Houston, Texas
May 25, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated May 25, 1999 in this registration statement on Form S-4 of our
audit of the financial statements of RBF Finance Co. at March 31, 1999 and for
the period from inception (March 19, 1999) to March 31, 1999 and to all
references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Houston, Texas
May 25, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement (Form S-4) and related Prospectus of R&B Falcon Corporation for the
registration of $800 million Senior Notes of our report dated February 13, 1998,
with respect to the consolidated financial statements of Cliffs Drilling Company
included in its Annual Report (Form 10-K) for the year ended December 31, 1997
and incorporated by reference in the R&B Falcon Corporation Current Report on
Form 8-K/A Amendment No. 1 dated January 20, 1999, both filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
Houston, Texas
May 25, 1999
<PAGE> 1
EXHIBIT 25.1
FORM T-1
==============================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2) _______
------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
------------------
RBF FINANCE CO.
(Exact name of obligor as specified in its charter)
Delaware 76-0599699
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
901 Threadneedle
Houston, TX 77079
(Address of principal executive offices) (Zip Code)
------------------
11% Secured Notes due 2006
11-3/8% Secured Notes due 2009
(Title of the indenture securities)
==============================================
<PAGE> 2
- 2 -
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
RBF Finance Co. currently is not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14
and 15 of Form T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
<TABLE>
<S> <C>
T-1.1 -- Organization Certificate, as amended, issued by
the State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
</TABLE>
<PAGE> 3
- 3 -
16. LIST OF EXHIBITS
(cont'd)
<TABLE>
<S> <C>
T-1.4 -- The By-Laws of United States Trust Company of New
York, as amended, is incorporated by reference to
Exhibit T-1.4 to Form T-1 filed on September 15,
1995 with the Commission pursuant to the Trust
Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.6 -- The consent of the trustee required by Section
321(b) of the Trust Indenture Act of 1939, as
amended by the Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the
trustee pursuant to law or the requirements of its
supervising or examining authority.
</TABLE>
NOTE
As of May 20, 1999, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 20th day
of May, 1999.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ CHRISTINE C. COLLINS
-------------------------------
Assistant Vice President
<PAGE> 4
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Gerard F. Ganey
---------------------
Senior Vice President
<PAGE> 5
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, 1999
--------------
($ IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash and Due from Banks $ 139,755
Short-Term Investments 85,326
Securities, Available for Sale 528,160
Loans 2,081,103
Less: Allowance for Credit Losses 17,114
----------
Net Loans 2,063,989
Premises and Equipment 57,765
Other Assets 125,780
----------
Total Assets $3,000,775
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 623,046
Interest Bearing 1,875,364
----------
Total Deposits 2,498,410
Short-Term Credit Facilities 184,281
Accounts Payable and Accrued Liabilities 126,652
----------
Total Liabilities $2,809,343
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 53,041
Retained Earnings 121,759
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 1,637
----------
Total Stockholder's Equity 191,432
----------
Total Liabilities and
Stockholder's Equity $3,000,775
==========
</TABLE>
I, Richard E. Brinkmann, Managing Director & Comptroller of the named bank do
hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory
authority and is true to the best of my knowledge and belief.
Richard E. Brinkmann, Managing Director & Controller
May 18, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RBF FINANCE CO. FOR THE THREE MONTHS ENDED MARCH 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001084287
<NAME> RBF FINANCE CO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> MAR-19-1999
<PERIOD-END> MAR-31-1999
<CASH> 303,101
<SECURITIES> 0
<RECEIVABLES> 1,316
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 304,417
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 801,317
<CURRENT-LIABILITIES> 1,258
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 59
<TOTAL-LIABILITY-AND-EQUITY> 801,317
<SALES> 0
<TOTAL-REVENUES> 1,316
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,226
<INCOME-PRETAX> 90
<INCOME-TAX> 32
<INCOME-CONTINUING> 58
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
RBF FINANCE CO.
OFFER TO EXCHANGE
11% SENIOR SECURED NOTES DUE 2006
FOR ALL OUTSTANDING
11% SENIOR SECURED NOTES DUE 2006
and
11 3/8% SENIOR SECURED NOTES DUE 2009
FOR ALL OUTSTANDING
11 3/8% SENIOR SECURED NOTES DUE 2009
PURSUANT TO THE PROSPECTUS DATED , 1999
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1999, UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer Is:
UNITED STATES TRUST COMPANY OF NEW YORK
By Mail By Hand or Overnight Delivery
United States Trust Company of New York United States Trust Company of New York
P.O. Box 843 770 Broadway, 13th Floor
Cooper Station New York, New York 10003
New York, New York 10276 Attention Corporate Trust Services
Attention Corporate Trust Services
By Facsimile Transmission Confirm by Telephone:
(212) 780-0592 (800) 548-6565
For Inquiries:
Ms. Christine C. Collins
(212) 852-1676
--------------------------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA A FACSIMILE NUMBER
OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
For purposes of this Letter of Transmittal, the outstanding 11% Senior
Secured Notes due 2006 shall be defined as the "7-Year Outstanding Notes" and
the outstanding 11 3/8% Senior Secured Notes due 2009 shall
<PAGE> 2
be defined as the "10-Year Outstanding Notes," and the 7-Year Outstanding Notes
and the 10-Year Outstanding Notes shall be defined collectively as the
"Outstanding Notes." All other capitalized terms used but not defined herein
shall have the same meanings given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders (which term, for
purposes of this Letter of Transmittal, shall include any participant in The
Depository Trust Company ("DTC")) either if (a) certificates are to be forwarded
herewith or (b) tenders are to be made pursuant to the procedures for tender by
book-entry transfer set forth under "The Exchange Offer--Procedures for
Tendering Outstanding Notes" in the Prospectus and an Agent's Message (as
defined below) is not delivered. Certificates, or book-entry confirmation of a
book-entry transfer of such Outstanding Notes into the Exchange Agent's account
at DTC, as well as this Letter of Transmittal (or a facsimile thereof or
delivery of an Agent's Message in lieu thereof), properly completed and duly
executed, with any required signature guarantees, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth herein on or prior to the Expiration Date. Tenders by
book-entry transfer may also be made by delivering an Agent's Message in lieu of
this Letter of Transmittal. The term "book-entry confirmation" means a timely
confirmation of a book-entry transfer of Outstanding Notes into the Exchange
Agent's account at DTC. The term "Agent's Message" means a message, transmitted
by DTC to and received by the Exchange Agent and forming part of a book-entry
confirmation, that states that DTC has received an express acknowledgment from
the tendering participant, which acknowledgment states that such participant has
received and agrees to be bound by this Letter of Transmittal and that RBF
Finance Co. may enforce this Letter of Transmittal against such participant.
Holders of Outstanding Notes whose certificates (the "Certificates") for
such Outstanding Notes are not immediately available or who cannot deliver their
Certificates and all other required documents to the Exchange Agent on or prior
to the Expiration Date or who cannot complete the procedures for book-entry
transfer on or prior to the Expiration Date must tender their Outstanding Notes
according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering Outstanding" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
2
<PAGE> 3
THE UNDERSIGNED HAS COMPLETED THE APPROPRIATE BOXES BELOW AND SIGNED THIS
LETTER OF TRANSMITTAL TO INDICATE THE ACTION THE UNDERSIGNED DESIRES TO TAKE
WITH RESPECT TO THE EXCHANGE OFFER.
--------------------------------------------
<TABLE>
- ----------------------------------------------------------------------------------------------------------------
DESCRIPTION OF 7-YEAR OUTSTANDING NOTES (CUSIP NO. 74925LAA8)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
TENDERED FOR
NAME(S) AND ADDRESS(ES) OF REGISTERED CERTIFICATE AGGREGATE EXCHANGE (MUST
HOLDER(S) OF 7-YEAR PRIVATE NOTE(S), EXACTLY NUMBER(S) PRINCIPAL AMOUNT BE IN INTEGRAL
AS NAME(S) APPEAR(S) ON CERTIFICATE(S) (PLEASE (ATTACH SIGNED LIST REPRESENTED BY MULTIPLES OF
FILL IN, IF BLANK) IF NECESSARY)(1) CERTIFICATE(S) $1,000)(2)
- ----------------------------------------------------------------------------------------------------------------
$ $
------------------- ------------------- ---------------
$ $
------------------- ------------------- ---------------
$ $
------------------- ------------------- ---------------
$ $
------------------- ------------------- ---------------
TOTAL AMOUNT OF 7-YEAR OUTSTANDING NOTES TENDERED: $ $
- ----------------------------------------------------------------------------------------------------------------
(1) NEED NOT BE COMPLETED BY BOOK-ENTRY HOLDERS. SUCH HOLDERS SHOULD CHECK THE APPROPRIATE BOX BELOW AND PROVIDE THE
REQUESTED INFORMATION.
(2) NEED NOT BE COMPLETED IF TENDERING FOR EXCHANGE ALL 7-YEAR OUTSTANDING
NOTES HELD. 7-YEAR OUTSTANDING NOTES MAY BE TENDERED IN WHOLE OR IN PART IN
INTEGRAL MULTIPLES OF $1,000 IN AGGREGATE PRINCIPAL AMOUNT. ALL 7-YEAR
OUTSTANDING NOTES HELD SHALL BE DEEMED TENDERED UNLESS A LESSER NUMBER IS
SPECIFIED IN THIS COLUMN.
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
DESCRIPTION OF 10-YEAR OUTSTANDING NOTES (CUSIP NO. 74925LAC4)
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
TENDERED FOR
NAME(S) AND ADDRESS(ES) OF REGISTERED CERTIFICATE AGGREGATE EXCHANGE (MUST
HOLDER(S) OF 10-YEAR PRIVATE NOTE(S), EXACTLY NUMBER(S) PRINCIPAL AMOUNT BE IN INTEGRAL
AS NAME(S) APPEAR(S) ON CERTIFICATE(S) (PLEASE (ATTACH SIGNED LIST REPRESENTED BY MULTIPLES OF
FILL IN, IF BLANK) IF NECESSARY)(1) CERTIFICATE(S) $1,000)(2)
- ----------------------------------------------------------------------------------------------------------------
$ $
------------------- ------------------- ---------------
$ $
------------------- ------------------- ---------------
$ $
------------------- ------------------- ---------------
$ $
------------------- ------------------- ---------------
TOTAL AMOUNT OF 10-YEAR OUTSTANDING NOTES TENDERED: $ $
- ----------------------------------------------------------------------------------------------------------------
(1) NEED NOT BE COMPLETED BY BOOK-ENTRY HOLDERS. SUCH HOLDERS SHOULD CHECK THE APPROPRIATE BOX BELOW AND PROVIDE THE
REQUESTED INFORMATION.
(2) NEED NOT BE COMPLETED IF TENDERING FOR EXCHANGE ALL 10-YEAR OUTSTANDING
NOTES HELD. 10-YEAR OUTSTANDING NOTES MAY BE TENDERED IN WHOLE OR IN PART
IN INTEGRAL MULTIPLES OF $1,000 IN AGGREGATE PRINCIPAL AMOUNT. ALL 10-YEAR
OUTSTANDING NOTES HELD SHALL BE DEEMED TENDERED UNLESS A LESSER NUMBER IS
SPECIFIED IN THIS COLUMN.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS
(DEFINED IN INSTRUCTION 1) ONLY)
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE
AGENT WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
------------------------------------------
DTC Account Number
-----------------------------------------------------
Transaction Code Number
------------------------------------------------
By crediting the Outstanding Notes to the Exchange Agent's account at DTC
in accordance with DTC's Automated Tender Offer Program ("ATOP") and by
complying with applicable ATOP procedures with respect to the Exchange Offer,
including transmitting an Agent's Message to the Exchange Agent in which the
holder of the Outstanding Notes acknowledges and agrees to be bound by the terms
of this Letter of Transmittal, the participant in ATOP confirms on behalf of
itself and the beneficial owners of such Outstanding Notes all provisions of
this Letter of Transmittal applicable to it and such beneficial owners as fully
as if it had completed the information required herein and executed and
transmitted this Letter of Transmittal to the Exchange Agent.
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name of Registered Holder
----------------------------------------------
Window Ticket Number (if any)
------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
---------------------
Name of Institution Which Guaranteed Delivery
--------------------------
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution
------------------------------------------
DTC Account Number
-----------------------------------------------------
Transaction Code Number
------------------------------------------------
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED
OUTSTANDING NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT
NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OUTSTANDING NOTES
FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name
-------------------------------------------------------------------
Address
----------------------------------------------------------------
Area Code and Telephone Number
-----------------------------------------
Contact Person
---------------------------------------------------------
4
<PAGE> 5
Ladies and Gentlemen:
The undersigned hereby tenders to RBF Finance Co., a Delaware corporation
(the "Company"), the above-described aggregate principal amount of its 7-Year
Outstanding Notes in exchange for a like aggregate principal amount of its 11%
Senior Secured Notes due 2006 (the "7-Year Exchange Notes") and its 10-Year
Outstanding Notes in exchange for a like aggregate principal amount of its 11
3/8% Senior Secured Notes due 2009 (the "10-Year Exchange Notes," and together
with the 7-Year Exchange Notes the "Exchange Notes"), which Exchange Notes have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), upon the terms and subject to the conditions set forth in the Prospectus
dated , 1999 (as the same may be amended or supplemented from time to time, the
"Prospectus"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, together with the Prospectus, constitutes the "Exchange
Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Outstanding Notes tendered herewith in accordance with the terms
and conditions of the Exchange Offer (including, if the Exchange Offer is
extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Company all right, title and interest in and to such Outstanding
Notes as are being tendered herewith. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent and attorney-in-fact
(with full knowledge that the Exchange Agent is also acting as agent of the
Company in connection with the Exchange Offer) with respect to the tendered
Outstanding Notes, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), subject only to the
right of withdrawal described in the Prospectus to (i) deliver Certificates for
Outstanding Notes to the Company together with all accompanying evidences of
transfer and authenticity to, or upon the order of, the Company, upon receipt by
the Exchange Agent, as the undersigned's agent, of the Exchange Notes to be
issued in exchange for such Outstanding Notes, (ii) present Certificates for
such Outstanding Notes for registration of transfer, and transfer the
Outstanding Notes on the books of the Company, and (iii) receive for the account
of the Company all benefits and otherwise exercise all rights of beneficial
ownership of such Outstanding Notes, all in accordance with the terms and
conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE
OUTSTANDING NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR
EXCHANGE, THE COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE
THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES,
AND THAT THE OUTSTANDING NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE
CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY
ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY
OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE
OUTSTANDING NOTES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS
OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ
AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) (which term, for
the purposes of this Letter of Transmittal, shall include any participant in
DTC) of the Outstanding Notes tendered hereby should be printed above, if they
are not already set forth above, as they appear on the Certificates representing
such Outstanding Notes. The Certificate number(s) of the Outstanding Notes that
the undersigned wishes to tender should be indicated in the appropriate boxes
above.
If any tendered Outstanding Notes are not exchanged pursuant to the
Exchange Offer for any reason, or if Certificates are submitted for more
Outstanding Notes than are tendered or accepted for exchange, Certificates for
such nonexchanged or nontendered Outstanding Notes will be returned (or, in the
case of Outstanding Notes tendered by book-entry transfer, such Outstanding
Notes will be credited to an account maintained at DTC), without expense to the
tendering holder, promptly following the expiration or termination of the
Exchange Offer.
The undersigned understands that tenders of Outstanding Notes pursuant to
any one of the procedures described under "The Exchange Offer--Procedures for
Tendering Outstanding Notes" in the Prospectus and in the instructions herein
will, upon the Company's acceptance for exchange of such tendered Outstanding
Notes, constitute a binding agreement between the undersigned and the Company
upon the terms and subject
5
<PAGE> 6
to the conditions of the Exchange Offer. The undersigned recognizes that, under
certain circumstances set forth in the Prospectus, the Company may not be
required to accept for exchange any of the Outstanding Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange Notes be
issued in the name of the undersigned or, in the case of a book-entry transfer
of Outstanding Notes, that such Exchange Notes be credited to the account
indicated above maintained at DTC. If applicable, substitute Certificates
representing Outstanding Notes not exchanged or not accepted for exchange will
be issued to the undersigned or, in the case of a book-entry transfer of
Outstanding Notes, will be credited to the account indicated above maintained at
DTC. Similarly, unless otherwise indicated under "Special Delivery Instructions"
below, please deliver Exchange Notes to the undersigned at the address shown
below the undersigned's signature.
BY TENDERING OUTSTANDING NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, OR
EFFECTING DELIVERY OF AN AGENT'S MESSAGE IN LIEU THEREOF, THE UNDERSIGNED HEREBY
REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN "AFFILIATE" OF THE
COMPANY WITHIN THE MEANING OF RULE 405 UNDER THE SECURITIES ACT, (II) ANY
EXCHANGE NOTES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE
ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR
UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE
MEANING OF THE SECURITIES ACT) OF EXCHANGE NOTES TO BE RECEIVED IN THE EXCHANGE
OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED IS
NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE
MEANING OF THE SECURITIES ACT) OF SUCH EXCHANGE NOTES. BY TENDERING OUTSTANDING
NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL,
OR EFFECTING DELIVERY OF AN AGENT'S MESSAGE IN LIEU THEREOF, A HOLDER OF
OUTSTANDING NOTES WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT
WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF
CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES,
THAT (A) SUCH OUTSTANDING NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A
NOMINEE OR (B) SUCH OUTSTANDING NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES AND IT
WILL DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME)
MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF
SUCH EXCHANGE NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A
PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN
"UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
THE COMPANY HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE REGISTRATION
RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME
TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER IN CONNECTION WITH RESALES
OF EXCHANGE NOTES RECEIVED IN EXCHANGE FOR OUTSTANDING NOTES, WHERE SUCH
OUTSTANDING NOTES WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES, FOR A PERIOD
ENDING 180 DAYS AFTER THE EXPIRATION DATE (SUBJECT TO EXTENSION UNDER CERTAIN
LIMITED CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS) OR, IF EARLIER, WHEN ALL SUCH
EXCHANGE NOTES HAVE BEEN DISPOSED OF BY SUCH PARTICIPATING BROKER-DEALER. IN
THAT REGARD, EACH PARTICIPATING BROKER-DEALER, BY TENDERING SUCH OUTSTANDING
NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, OR EFFECTING DELIVERY OF AN
AGENT'S MESSAGE IN LIEU THEREOF, AGREES THAT, UPON RECEIPT OF NOTICE FROM THE
COMPANY OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT THAT MAKES
ANY STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE IN
ANY MATERIAL RESPECT OR THAT CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL
FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR INCORPORATED BY
REFERENCE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT
MISLEADING, OR OF THE OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE
REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE
SALE OF EXCHANGE NOTES PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY HAS AMENDED
OR SUPPLEMENTED THE PROSPECTUS
6
<PAGE> 7
TO CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF THE AMENDED
OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER, OR THE COMPANY
HAS GIVEN NOTICE THAT THE SALE OF THE EXCHANGE NOTES MAY BE RESUMED, AS THE CASE
MAY BE. IF THE COMPANY GIVES SUCH NOTICE TO SUSPEND THE USE OF THE PROSPECTUS,
IT SHALL EXTEND THE 180-DAY PERIOD REFERRED TO ABOVE DURING WHICH PARTICIPATING
BROKER-DEALERS ARE ENTITLED TO USE THE PROSPECTUS IN CONNECTION WITH THE RESALE
OF EXCHANGE NOTES BY THE NUMBER OF DAYS DURING THE PERIOD FROM AND INCLUDING THE
DATE OF THE GIVING OF SUCH NOTICE TO AND INCLUDING THE DATE WHEN PARTICIPATING
BROKER-DEALERS SHALL HAVE RECEIVED COPIES OF THE AMENDED OR SUPPLEMENTED
PROSPECTUS NECESSARY TO PERMIT RESALES OF THE EXCHANGE NOTES OR TO AND INCLUDING
THE DATE ON WHICH THE COMPANY HAS GIVEN NOTICE THAT THE USE OF THE PROSPECTUS
MAY BE RESUMED, AS THE CASE MAY BE.
AS A RESULT, A PARTICIPATING BROKER-DEALER WHO INTENDS TO USE THE
PROSPECTUS IN CONNECTION WITH RESALES OF EXCHANGE NOTES RECEIVED IN EXCHANGE FOR
OUTSTANDING NOTES PURSUANT TO THE EXCHANGE OFFER MUST NOTIFY THE COMPANY, OR
CAUSE THE COMPANY TO BE NOTIFIED, ON OR PRIOR TO THE EXPIRATION DATE, THAT IT IS
A PARTICIPATING BROKER-DEALER. SUCH NOTICE MAY BE GIVEN IN THE SPACE PROVIDED
ABOVE OR MAY BE DELIVERED TO THE EXCHANGE AGENT AT THE ADDRESS SET FORTH IN THE
PROSPECTUS UNDER "THE EXCHANGE OFFER--EXCHANGE AGENT."
The exchange notes will bear interest from March 26, 1999. Holders of
outstanding notes that we accept for exchange will not have the right to receive
any payment of interest on those notes accrued from March 26, 1999 to the date
of the issuance of the exchange notes. Consequently, holders who exchange their
outstanding notes for exchange notes will receive the same interest payment on
September 15, 1999 (the first interest payment date) that they would have
received had they not accepted the exchange offer.
The undersigned agrees that acceptance of any tendered Outstanding Notes
and transfer of tendered Outstanding Notes in exchange therefor shall constitute
performance in full by the Company of its obligations under the Registration
Rights Agreement.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Outstanding Notes tendered hereby. All
authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING THE BOXES ENTITLED "DESCRIPTION OF
OUTSTANDING NOTES" ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED
TO HAVE TENDERED THE OUTSTANDING NOTES AS SET FORTH IN EACH SUCH BOX.
7
<PAGE> 8
- --------------------------------------------------------------------------------
HOLDERS SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) (which term, for purposes of this
Letter of Transmittal, shall include any participant in DTC) exactly as name(s)
appear(s) on Certificate(s) for the Outstanding Notes hereby tendered or on the
register of holders maintained by the Company, or by any person authorized to
become the registered holder by endorsements and documents transmitted herewith
(including such opinions of counsel, certifications and other information as may
be required by the Company for the Outstanding Notes to comply with the
restrictions on transfer applicable to the Outstanding Notes). If signature is
by an attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary or representative capacity, please
set forth the signer's full title. See Instruction 5.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE OF HOLDER(S) OR AUTHORIZED SIGNATORY)
Date: , 1999
---------------
Name(s):
------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
----------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
-------------------------------------------------
Tax Identification or Social Security Number(s):
--------------------------------
SIGNATURE(S) GUARANTEE
(IF REQUIRED--SEE INSTRUCTIONS 2 AND 5)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
Date: , 1999
----------------
Name of Eligible Institution Guaranteeing Signatures:
---------------------------
Capacity (full title):
----------------------------------------------------------
(PLEASE PRINT)
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
-------------------------------------------------
8
<PAGE> 9
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the Exchange Notes or any Outstanding Notes that
are not tendered are to be issued in the name of someone other than the
registered holder of the Outstanding Notes whose name appears above
Issue
[ ] Exchange Notes and/or
[ ] Outstanding Notes not tendered
Designate Series
to: -----------------------------------------------------------
Name
----------------------------------------------------------------------------
(Please Print)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Phone Number)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number(s))
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the Exchange Notes or any Outstanding Notes that
are not tendered are to be sent to someone other than the registered holder of
the Outstanding Notes whose name appears above, or to such registered holder at
an address other than that shown above.
Mail
[ ] Exchange Notes and/or
[ ] Outstanding Notes not tendered
Designate Series
to: -----------------------------------------------------------
Name
----------------------------------------------------------------------------
(Please Print)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Phone Number)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number(s))
- --------------------------------------------------------------------------------
9
<PAGE> 10
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth under "The
Exchange Offer--Procedures for Tendering Outstanding Notes" in the Prospectus
and an Agent's Message is not delivered. Certificates, or book-entry
confirmation of a book-entry transfer of such Outstanding Notes into the
Exchange Agent's account at DTC, as well as this Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message in lieu thereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein on or prior to the Expiration
Date. Outstanding Notes may be tendered in whole or in part in integral
multiples of $1,000 in aggregate principal amount.
Holders who wish to tender their Outstanding Notes and (i) whose
Outstanding Notes are not immediately available or (ii) who cannot deliver their
Outstanding Notes, this Letter of Transmittal and all other required documents
to the Exchange Agent on or prior to the Expiration Date or (iii) who cannot
complete the procedures for delivery by book-entry transfer on or prior to the
Expiration Date, may tender their Outstanding Notes by properly completing and
duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed
delivery procedures set forth under "The Exchange Offer--Procedures for
Tendering Outstanding Notes" in the Prospectus. Pursuant to such procedures: (a)
such tender must be made by or through an Eligible Institution (as defined
below); (b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Company, must be
received by the Exchange Agent on or prior to the Expiration Date; and (c) the
Certificates (or a book-entry confirmation (as defined in the Prospectus))
representing all tendered Outstanding Notes, in proper form for transfer,
together with a Letter of Transmittal (or facsimile thereof or Agent's Message
in lieu thereof), properly completed and duly executed, with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within three New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in "The Exchange Offer--Procedures for Tendering
Outstanding Notes" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Outstanding Notes
to be properly tendered pursuant to the guaranteed delivery procedure, the
Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to the
Expiration Date. As used herein and in the Prospectus, "Eligible Institution"
means a firm or other entity identified in Rule 17Ad-15 under the Exchange Act
as "an eligible guarantor institution," including (as such terms are defined
therein) (i) a bank; (ii) a broker, dealer, municipal securities broker or
dealer or government securities broker or dealer; (iii) a credit union; (iv) a
national securities exchange, registered securities association or clearing
agency; or (v) a savings association that is a participant in a Securities
Transfer Association recognized program.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER,
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY ON OR PRIOR TO THE
EXPIRATION DATE. NO DOCUMENTS SHOULD BE SENT TO THE COMPANY. DELIVERY OF
DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by executing a Letter of Transmittal (or
facsimile thereof or Agent's Message in lieu thereof), waives any right to
receive any notice of the acceptance of such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this Letter of Transmittal, shall include any
participant in DTC whose name appears on a security position listing as the
owner of the Outstanding Notes) of Outstanding Notes tendered herewith,
unless such holder has completed either the box entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions" above, or
(ii) such Outstanding Notes are tendered for the account of a firm
that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature on
this Letter of Transmittal. See Instruction 5.
10
<PAGE> 11
3. INADEQUATE SPACE. If the space provided in the boxes captioned
"Description of Outstanding Notes" is inadequate, the Certificate numbers and/or
the principal amount of Outstanding Notes and any other required information
should be listed on a separate signed schedule that is attached to this Letter
of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Outstanding Notes will
be accepted only in integral multiples of $1,000 in aggregate principal amount.
If less than all the Outstanding Notes evidenced by any Certificate submitted
are to be tendered, fill in the principal amount of Outstanding Notes that are
to be tendered in the box entitled "Principal Amount of Outstanding Notes
Tendered (If Less than All)." In such case, a new Certificate for the remainder
of the Outstanding Notes that were evidenced by the old Certificate will be sent
to the holder of the Outstanding Notes promptly after the Expiration Date,
unless the appropriate boxes on this Letter of Transmittal are completed. All
Outstanding Notes represented by Certificates delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective on or prior to that time, a written or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at its address set forth above or in the Prospectus on or prior
to the Expiration Date. Any such notice of withdrawal must specify the name of
the person who tendered the Outstanding Notes to be withdrawn, the aggregate
principal amount of Outstanding Notes to be withdrawn, and (if Certificates for
Outstanding Notes have been tendered) the name of the registered holder of the
Outstanding Notes as set forth on the Certificate for the Outstanding Notes, if
different from that of the person who tendered such Outstanding Notes. If
Certificates for the Outstanding Notes have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such
Certificates for the Outstanding Notes, the tendering holder must submit the
serial numbers shown on the particular Certificates for the Outstanding Notes to
be withdrawn and the signature on the notice of withdrawal must be guaranteed by
an Eligible Institution, except in the case of Outstanding Notes tendered for
the account of an Eligible Institution. If Outstanding Notes have been tendered
pursuant to the procedures for book-entry transfer set forth under "The Exchange
Offer--Procedures for Tendering Outstanding Notes," the notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawal of Outstanding Notes, in which case a notice of withdrawal will be
effective if delivered to the Exchange Agent by written or facsimile
transmission on or prior to the Expiration Date. Withdrawals of tenders of
Outstanding Notes may not be rescinded. Outstanding Notes properly withdrawn
will not be deemed validly tendered for purposes of the Exchange Offer, but may
be retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described in the Prospectus under "The Exchange
Offer--Procedures for Tendering Outstanding Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, which determination shall be final and binding on all parties.
None of the Company, any affiliates or assigns of the Company, the Exchange
Agent or any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Outstanding Notes that have been
tendered but are withdrawn on or prior to the Expiration Date will be returned
to the holder thereof without cost to such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the
Outstanding Notes tendered hereby, the signature(s) must correspond exactly with
the name(s) as written on the face of the Certificate(s) or on a security
position listing without alteration, enlargement or any change whatsoever.
If any of the Outstanding Notes tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Outstanding Notes are registered in different names on
several Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or facsimiles thereof or Agent's Messages in
lieu thereof) as there are different registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and must submit proper evidence
satisfactory to the Company, in its sole discretion, of such persons' authority
to so act.
When this Letter of Transmittal is signed by the registered owner of the
Outstanding Notes listed and transmitted hereby, no endorsement of Certificates
or separate bond powers are required unless Exchange Notes are to be issued in
the name of a person other than the registered holder. Signatures on such
Certificates or bond powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner of the Outstanding Notes listed, the Certificates must be
endorsed or accompanied by appropriate bond powers, signed exactly as the name
of the registered owner appears on the Certificates, and also must be
accompanied by such opinions of counsel, certifications
11
<PAGE> 12
and other information as the Company or the Exchange Agent may require in
accordance with the restrictions on transfer applicable to the Outstanding
Notes. Signatures on such Certificates or bond powers must be guaranteed by an
Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If Exchange Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if Exchange Notes are to be sent to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Outstanding Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC unless the appropriate boxes on this Letter of Transmittal are
completed. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time of
receipt) and acceptance for exchange of any tender of Outstanding Notes, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance of which, or exchange for, may, in the view of
counsel to the Company, be unlawful. The Company also reserves the absolute
right, subject to applicable law, to waive any of the conditions of the Exchange
Offer set forth in the Prospectus under "The Exchange Offer--Certain Conditions
to Exchange Offer," or any conditions or irregularities in any tender of
Outstanding Notes of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders. The Company's
interpretation of the terms and conditions of the Exchange Offer (including this
Letter of Transmittal and the instructions hereto) will be final and binding. No
tender of Outstanding Notes will be deemed to have been validly made until all
irregularities with respect to such tender have been cured or waived. The
Company, any affiliates or assigns of the Company, the Exchange Agent, or any
other person shall not be under a duty to give notification of any
irregularities in tenders or incur any liability for failure to give such
notification.
8. LOST, DESTROYED OR STOLEN CERTIFICATES. The holder should promptly
notify the Exchange Agent if any Certificates representing Outstanding Notes
have been lost, destroyed or stolen. The holder will then be instructed as to
the steps that must be taken in order to replace the Certificates. This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost, destroyed or stolen Certificates have been followed.
9. SECURITY TRANSFER TAXES. Holders who tender their Outstanding Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, Exchange Notes are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the
Outstanding Notes tendered, or if a transfer tax is imposed for any reason other
than the exchange of Outstanding Notes in connection with the Exchange Offer,
then the amount of any such transfer tax (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. The amount
of such transfer taxes will be billed directly to such tendering holder if
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with this Letter of Transmittal.
10. INCORPORATION OF LETTER OF TRANSMITTAL. This Letter of Transmittal
shall be deemed to be incorporated in and acknowledged and accepted by any
tender through the DTC's ATOP procedures by any participant in DTC on behalf of
itself and the beneficial owners of any Outstanding Notes so tendered.
11. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus.
12. NO CONDITIONAL TENDERS. No alternative, conditional or contingent
tenders will be accepted. All tendering holders of Outstanding Notes, by
executing this Letter of Transmittal, shall waive any right to receive notice of
the acceptance of Outstanding Notes for exchange.
Questions and requests for assistance may be directed to the Exchange Agent
at its address and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and this Letter of Transmittal may be obtained from the Exchange Agent
or from the holder's broker, dealer, commercial bank, trust company or other
nominee.
None of the Company, the Exchange Agent or any other person is obligated to
give notice of any defect or irregularity with respect to any tender of
Outstanding Notes nor shall any of them incur any liability for failure to give
any such notice.
- --------------------------------------------------------------------------------
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF OR AN AGENT'S MESSAGE
IN LIEU HEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
EXCHANGE AGENT AT OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
- --------------------------------------------------------------------------------
12
<PAGE> 13
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder whose tendered Outstanding Notes are
accepted for exchange is required by law to provide the Exchange Agent with such
holder's correct taxpayer identification number ("TIN") on the Substitute Form
W-9 included herein or otherwise establish a basis for exemption from backup
withholding. If such holder is an individual, the TIN is his or her social
security number. If the Exchange Agent is not provided with the correct TIN, the
Internal Revenue Service may subject the holder or transferee to a $50 penalty.
In addition, delivery of such holder's Exchange Notes may be subject to backup
withholding. Failure to comply truthfully with the backup withholding
requirements also may result in the imposition of severe criminal and/or civil
fines and penalties.
Certain holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt holders should furnish their TIN, write "Exempt" on the
face of the Substitute Form W-9, and sign, date and return the Substitute Form
W-9 to the Exchange Agent. A foreign person, including entities, may qualify as
an exempt recipient by submitting to the Exchange Agent a properly completed
Internal Revenue Service Form W-8, signed under penalties of perjury, attesting
to that holder's foreign status. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the holder or other transferee. Backup withholding
is not an additional federal income tax. Rather, the federal income tax
liability of persons subject to backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund may
be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to Outstanding
Notes exchanged in the Exchange Offer, the holder is required to provide the
Exchange Agent with either: (i) the holder's correct TIN by completing the form
included herein, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such holder is awaiting a TIN) and that (a) the holder has not
been notified by the Internal Revenue Service that the holder is subject to
backup withholding as a result of failure to report all interest or dividends or
(b) the Internal Revenue Service has notified the holder that the holder is no
longer subject to backup withholding; or (ii) an adequate basis for exemption.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60-day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60-day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60-day period,
amounts withheld will be remitted to the Internal Revenue Service as backup
withholding. In addition, 31% of all payments made thereafter will be withheld
and remitted to the Internal Revenue Service until a correct TIN is provided.
NUMBER TO GIVE THE EXCHANGE AGENT
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered holder of
the Outstanding Notes or of the last transferee appearing on the transfers
attached to, or endorsed on, the Outstanding Notes. If the Outstanding Notes are
held in more than one name or are held not in the name of the actual owner,
consult the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional guidance on which number to
report.
13
<PAGE> 14
PAYOR'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part I -- PLEASE PROVIDE YOUR TIN IN
THE BOX AT RIGHT AND CERTIFY BY -------------------------------
FORM W-9 SIGNING AND DATING BELOW Social Security Number
OR
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE -------------------------------
PAYER'S REQUEST FOR Employer Identification Number
TAXPAYER IDENTIFICATION -------------------------------------------------------------------------------------------------
NUMBER ("TIN") Part II -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me); and
(2) I am not subject to backup withholding because: (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am
subject to backup withholding as a result of failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding.
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are currently subject
to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the
IRS that you are subject to backup withholding, you received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out such item (2).
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURE DATE
---------------------------------------------------------- --------------------- Part III --
Awaiting TIN [ ]
NAME (please print)
-------------------------------------------------------------------------
ADDRESS (please print)
----------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART III OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within sixty (60) days, 20
percent of all reportable payments made to me thereafter will be withheld until
I provide a number. In addition, I understand that if, after seven business days
after this certification is received, the Company is required to make a payment
to me which, in its judgment, will close my account, or cause the cessation of
my relationship, with the Company, then such payment may be subject to backup
withholding.
- ------------------------- -----------------------------------------
Date Signature
- --------------------------------------------------------------------------------
14
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
for
11% SENIOR SECURED NOTES DUE 2006
and
11 3/8% SENIOR SECURED NOTES DUE 2009
of
RBF FINANCE CO.
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the Company's (as defined below) 11% Senior Secured Notes due
2006 (the "7-Year Outstanding Notes") and 11 d% Senior Secured Notes due 2009
(the "10-Year Outstanding Notes," and together with the 7-Year Outstanding
Notes, the "Outstanding Notes"), are not immediately available, (ii) Outstanding
Notes, the Letter of Transmittal and all other required documents cannot be
delivered to U.S. Trust Company of New York, National Association (the "Exchange
Agent") on or prior to the Expiration Date (as defined in the Prospectus defined
below), or (iii) the procedures for delivery by book-entry transfer cannot be
completed on a timely basis. This Notice of Guaranteed Delivery may be delivered
by hand, overnight courier or mail, or transmitted by facsimile transmission, to
the Exchange Agent. See "The Exchange Offer--Procedures for Tendering
Outstanding Notes" and "--Guaranteed Delivery Procedures" in the Prospectus. In
addition, in order to utilize the guaranteed delivery procedure to tender
Outstanding Notes pursuant to the Exchange Offer, a completed, signed and dated
Letter of Transmittal relating to the Outstanding Notes (or facsimile thereof)
must also be received by the Exchange Agent on or prior to the Expiration Date.
Capitalized terms used but not defined herein have the meanings assigned to them
in the Prospectus.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1999, UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer Is:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C>
By Mail By Hand or Overnight Delivery
United States Trust Company of New York United States Trust Company of New York
P.O. Box 843 770 Broadway, 13th Floor
Cooper Station New York, New York 10003
New York, New York 10276 Attention Corporate Trust Services
Attention Corporate Trust Services
By Facsimile Transmission Confirm by Telephone:
(212) 780-0592 (800) 548-6565
</TABLE>
For Inquiries:
Ms. Christine C. Collins
(212) 852-1676:
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA A
FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to RBF Finance Co., a Delaware corporation
(the "Company"), upon the terms and subject to the conditions set forth in the
Prospectus dated , 1999 (as the same may be amended or supplemented from
time to time, the "Prospectus"), and the related Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, the aggregate principal amount of Outstanding Notes set forth
below pursuant to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer-Procedures for Tendering Outstanding
Notes" and "-Guaranteed Delivery Procedures."
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
7-YEAR OUTSTANDING NOTES (CUSIP NO. 74925LAA8)
--------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S) AGGREGATE PRINCIPAL PRINCIPAL AMOUNT TENDERED
(IF AVAILABLE) AMOUNT REPRESENTED BY FOR EXCHANGE (MUST BE IN
CERTIFICATE(S) INTEGRAL MULTIPLES OF
$1,000)*
<S> <C> <C>
--------------------------------------------------------------------------------------
$ $
--------------------------------------------------------------------------------------
$ $
--------------------------------------------------------------------------------------
$ $
--------------------------------------------------------------------------------------
$ $
--------------------------------------------------------------------------------------
TOTAL AMOUNT OF 7-YEAR
OUTSTANDING NOTES TENDERED: $ $
--------------------------------------------------------------------------------------
* NEED NOT BE COMPLETED IF TENDERING FOR EXCHANGE ALL 7-YEAR OUTSTANDING NOTES HELD.
7-YEAR OUTSTANDING NOTES MAY BE TENDERED IN WHOLE OR IN PART IN INTEGRAL MULTIPLES
OF $1,000 IN AGGREGATE PRINCIPAL AMOUNT. ALL 7-YEAR OUTSTANDING NOTES HELD SHALL
BE DEEMED TENDERED UNLESS A LESSER NUMBER IS SPECIFIED IN THIS COLUMN.
--------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
10-YEAR OUTSTANDING NOTES (CUSIP NO. 74925LAC4 )
--------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S) AGGREGATE PRINCIPAL PRINCIPAL AMOUNT TENDERED
(IF AVAILABLE) AMOUNT REPRESENTED BY FOR EXCHANGE (MUST BE IN
CERTIFICATE(S) INTEGRAL MULTIPLES OF
$1,000)*
<S> <C> <C>
--------------------------------------------------------------------------------------
$ $
--------------------------------------------------------------------------------------
$ $
--------------------------------------------------------------------------------------
$ $
--------------------------------------------------------------------------------------
$ $
--------------------------------------------------------------------------------------
TOTAL AMOUNT OF 10-YEAR
OUTSTANDING NOTES TENDERED: $ $
--------------------------------------------------------------------------------------
* NEED NOT BE COMPLETED IF TENDERING FOR EXCHANGE ALL 10-YEAR OUTSTANDING NOTES
HELD. 10-YEAR OUTSTANDING NOTES MAY BE TENDERED IN WHOLE OR IN PART IN INTEGRAL
MULTIPLES OF $1,000 IN AGGREGATE PRINCIPAL AMOUNT. ALL 10-YEAR OUTSTANDING NOTES
HELD SHALL BE DEEMED TENDERED UNLESS A LESSER NUMBER IS SPECIFIED IN THIS COLUMN.
--------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH, INCAPACITY, OR DISSOLUTION OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE
UNDERSIGNED HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES,
SUCCESSORS AND ASSIGNS OF THE UNDERSIGNED.
If Outstanding Notes will be tendered by book-entry
please provide the following information:
Name of Tendering Institution
- ------------------------------------------------------
The Depository Trust Company
Account No.
- ------------------------------------------------------
- ------------------------------------------------------
PLEASE SIGN HERE transfer,
- ------------------------------------------------------
Signature(s)
- ------------------------------------------------------
Name(s) (Please Print)
- ------------------------------------------------------
- ------------------------------------------------------
Address (Include Zip Code)
- ------------------------------------------------------
(Area Code and Phone Number)
- ------------------------------------------------------
Date
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Outstanding Notes exactly as its (their) name(s) appear on
certificates for Outstanding Notes, or by person(s) authorized to become
registered holder(s) by endorsements and documents transmitted with this Notice
of Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es):
Name(s)
-------------------------------------------------------------------------
Capacity
------------------------------------------------------------------------
Address(es)
---------------------------------------------------------------------
3
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in a Recognized Signature Guarantee
Medallion Program, guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or facsimile thereof), together with the Outstanding Notes tendered
hereby in proper form for transfer, or confirmation of the book-entry transfer
of such Outstanding Notes into the Exchange Agent's account at the Depository
Trust Company, pursuant to the procedure for book-entry transfer set forth in
the Prospectus, and any other required documents, all by 5:00 p.m., New York
City time, on the third New York Stock Exchange trading day following the
Expiration Date (as defined in the Prospectus).
<TABLE>
<S> <C>
- ------------------------------------- -------------------------------------
Name of Firm Authorized Signature
- ------------------------------------- -------------------------------------
Name (please print)
- ------------------------------------- -------------------------------------
Address Title
- ------------------------------------- -------------------------------------
Area Code and Telephone No. Date
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OUTSTANDING NOTES WITH THIS FORM.
CERTIFICATES FOR OUTSTANDING NOTES SHOULD ONLY BE SENT WITH YOUR LETTER
OF TRANSMITTAL.
4
